Reading Global Economy through Key Events

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Reading Global Economy through Key Events

• From Commanding Heights on PBS Website
• http//www.pbs.org/wgbh/commandingheights/lo/timem
  ap/index.html

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Global Economy in the 1940s

• Everlasting Battle of Ideas
• State-Driven Keynesian Economy vs. Market Economy
• 1945 Establishment of Key Institutional
  Arrangements in the postwar Economy Bretton
  Woods
• 1945 Pottsdam Division of West-East in Europe

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Global Economy in the 1940s

• 1945-1950 UK A Labor government turns Britain
  into a socialist democracy. It nationalizes
  industries, builds the welfare state, and
  establishes a mixed economy, which has wide
  appeal around the world. After decades of demands
  for self-government, India is declared
  independent in 1947, setting in motion a rapid
  unraveling of the British Empire. Almost all the
  colonies will be independent by the late 1960s.

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Global Economy in the 1940s

• For France the response to the challenge of
  reconstruction after World War II was also to
  be found in another form of expansion of the
  state's power over the economy -- through
  "planification," the implementation of a national
  economic plan that became France's postwar
  trademark. This process -- focusing,
  prioritizing, and pointing the way -- was dubbed
  indicative planning, to differentiate it from the
  Soviet system, with its highly directive and
  rigid central planning. It was very much intended
  to be a middle way between free markets and
  socialism.

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Global Economy in the 1940s

• 1949-1960 The Allied sectors form the Federal
  Republic of Germany (FRG, or West Germany) and
  the Soviet Zone becomes East Germany. Under
  Chancellor Konrad Adenauer, Ordoliberal
  economists in the West create a "social market
  economy," mixing free markets and generous social
  programs. With the new Deutsche Mark (DM) and
  growing world trade, the West German "miracle"
  begins, helping to drive the European economy.

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Global Economy in the 1940s

• 1947-1955 The British colony of India is
  partitioned into India and Pakistan, and India
  becomes an independent republic with a new
  constitution. Gandhi is assassinated. Under
  Jawaharlal Nehru, India's first prime minister,
  the country embarks on a course of rapid
  industrialization in a highly protective
  environment. The state plays a massive role in
  the economy as its planner and main participant.

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Global Economy in the 1940s

• 1949 Chiang Kai-shek resigns in January and
  retreats to Taiwan two million Nationalists soon
  follow. The Communists move into Beijing and
  establish the People's Republic of China on
  October 1. They create political structures that
  reach down to every village in country, and
  receive limited aid and a defense treaty from the
  Soviet Union.

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Global Economy in the 1950s

• The Rise of European Union and Jean Monnet The
  European Coal and Steel Community, first proposed
  by French foreign minister Robert Schuman was
  largely conceived by Monnet. He envisioned the
  ECSC as a single economic market for these key
  sectors of the economy, exempt from national
  regulations, tariffs, or quotas. Together with
  Schuman and German Chancellor Konrad Adenauer,
  Monnet saw the ECSC established in 1952. With the
  signing of the Treaty of Rome in 1957 the various
  institutions within the ECSC would become the
  core institutions of the nascent European
  Economic Community.

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Global Economy in the 1950s

• China, 1958 Great Leap Forward
• the campaign undertaken by the Chinese Communists
  between 1958 and early 1960 to organize its vast
  population, especially in large-scale rural
  communes, to meet China's industrial and
  agricultural problems. The Chinese hoped to
  develop labor-intensive methods of
  industrialization, which would emphasize manpower
  rather than machines.
• The inefficiency of the communes and the
  large-scale diversion of farm labor into
  small-scale industry disrupted China's
  agriculture so seriously that about 20 million
  people died of starvation between 1958 and 1962.

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Global Economy in the 1960s

• South Korea,1961-1970 Maj. Gen. Park Chung Hee
  leads a coup and declares martial law. He assumes
  the presidency and cements power in successive
  elections. He rules free of legislative oversight
  and institutes economic planning and controls
  geared to achieve industrialization and exports.
  The economy achieves stellar growth.

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Global Economy in the 1960s

• US, 1964-1968 Lyndon Johnsons administration
  combats poverty, increases social opportunities,
  and entrenches civil rights. But the deepening
  Vietnam War and increasingly visible unrest in
  the South and the inner cities spark the rise of
  violent protest movements and a counterculture
  of 1960s. In a year marked by assassinations and
  upheavals, Johnson withdraws from the 1968
  presidential race Richard Nixon is elected.

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Global Economy in the 1960s

• China, 1966-1968 Mao launches the Great
  Proletarian Cultural Revolution. He sends
  millions of Red Guards through China to attack
  the "Four Olds" culture, ideas, customs, and
  habits. Top Party leaders are purged as
  "capitalist roaders," exiled, and killed. The
  cult of Mao reaches new heights. At the peak of
  chaos Mao disbands the Red Guards, sending them
  to the countryside for reeducation.

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Global Economy in the 1960s

• Czechoslovakia, 1968--Prague Spring Moderate
  reformer Alexander Dubcek becomes the Czech
  Communist Party's first secretary. Enjoying
  popular support, he espouses a "democratic
  socialism" that will guarantee freedom of
  religion, press, assembly, and speech and also
  continue economic reform. Anti-reformists press
  for intervention from Moscow. On August 20,
  troops from the USSR and other Warsaw Pact
  countries occupy Czechoslovakia.

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Global Economy in the 1970s

• 1971 Tanzania "Ujamaa" collectivist strategy for
  "African Socialism" is enforced will fail,
  bringing deprivation
• 1971 United States Nixon "goes Keynesian," but
  price and wage controls bring shortages instead
  of stopping inflation
• 1971 United States Nixon abandons gold standard,
  ends Bretton Woods system, sparks modern currency
  markets

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Global Economy in the 1970s

• The neat, classical world devised in 1944 at
  Bretton Woods had the dollar as its centerpiece,
  gold at 35 an ounce backing the dollar, and all
  the other currencies fixed in their relationship
  to the dollar. There were too many dollars for
  the gold. By May 1971 the German central banks
  could no longer take in dollars and give out
  Marks. The international monetary system did not
  break down, but it stopped for a while.

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Global Economy in the 1970s

• 1973 Oil Crisis 1973-1975 During the October
  1973 Arab-Israeli War, Faisal helps establish an
  oil embargo against countries that support
  Israel. Prices triple, increasing budgets for
  domestic programs. The government begins to take
  ownership stakes in Aramco and in 1975 announces
  plans to build two cities dedicated to non-oil
  industry. Also that year, Faisal is assassinated
  by a deranged nephew.

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Global Economy in the 1970s

• 1974 United Kingdom Coal miners' strike brings
  blackouts, forces election, Labor Party victory
  
• 1974 Sweden Friedrich von Hayek awarded the
  Nobel Prize in Economics Milton Friedman will
  follow in 1976
• 1975 United Kingdom Thatcher becomes leader of
  Conservative Party, with Keith Joseph seeks new
  economic vision
• 1978 United Kingdom "Winter of Discontent" marks
  nadir of Keynesian economic policies in Britain
  

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Global Economy in the 1970s

• The Rise of Deng Xiaoping in China Modernization
  and Open Market Policy
• Election of Thatcher as the first woman prime
  minister in British history
• 1979 Iran Revolution turns against
  Westernization, offers Islamic alternative,
  sparks second oil shock
• 1979 United States Inflation reaches 13.3
  percent Paul Volcker takes over Federal Reserve
  tight-money policy triggers recession
• 1980 Poland Solidarity movement begins in
  shipyards, will become main labor force in
  toppling communism

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Global Economy in the 1980s

• France, 1981-1982 A strong left elects Socialist
  Party leader François Mitterrand president. His
  predominantly Socialist government implements a
  sweeping program of reform, decentralizing
  government, nationalizing large industries, banks
  and insurance companies, and raising wages and
  social security benefits. But the resulting
  increase in public spending further hurts the
  economy.

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Global Economy in the 1980s

• Election of Reagan in 1981
• Four Principles of Reagonomics
• Sound Money
• Deregulation
• Modest Tax Rates
• Limited Government Spending

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Global Economy in the 1980s

• Third World Debt Crisis in 1982, starting with
  Mexico default
• 1983-1988, France Economic policy takes a U-turn
  as Mitterrand abandons protectionist measures for
  state-led growth. The right wins 1986
  parliamentary elections, and Jacques Chirac was
  appointed as prime minister. Chirac completes the
  economic policy shift with a denationalization
  and deregulation program

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Global Economy in the 1980s

• 1984, UK privatization of nationalized industry,
  British Telecom.
• In the mid-1980s, Latin American countries
  underwent shock-therapy. Colombia was the first
  country that adopted it with help of Jeffrey
  Sachs, economist at Harvard.
• In 1987, Single Market Act approved in Europe
• In 1988, Tokyo Stock Exchange capitalization
  matches NYSE (New York Stock Exchange).
• 1990, Jeffrey Sachs shock therapy was applied to
  Poland

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Global Economy in the 1990s

• In 1990, the burst of bubble in Japanese economy
  started a decade-long recession.
• Where were the bubble concentrated in Japanese
  economy?
• Spreading of Skepticism against State-oriented
  planned economy Russia and India
• What happened to Russia after implementation of
  free-market economy?

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Global Economy in the 1990s

• 1992 United States, NAFTA treaty passed over
  labor, environmental objections, launches decade
  of free-trade activism
• What are the benefits and costs of NAFTA?
• What are the emerging characteristics of the
  global economy in the 1990s?
• The rise of finance economy Pension fund
  capitalism
• Emerging economies as engine for global economic
  growth

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Global Economy in the 1990s

• US (1993-1999) Despite early missteps, Clinton
  scores a major achievement with rapid deficit
  reduction through spending cuts and tax
  increases. In the process, though, he loses his
  majority in Congress. But the economy booms, and
  the U.S. regains its luster. Rapid technology
  improvements and the explosion of the Internet
  transform economic life. The deficit is erased.
  But Clinton is tarnished by personal scandals.

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Global Economy in the 1990s

• Spread of Financial Crisis What do you think are
  the reasons why these countries experienced
  financial crises?
• 1997 Thailand, Indonesia, and South Korea
• 1998 Russia
• Financial crisis in the US Failure of Long-Term
  Capital Management in 1998

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Global Economy in the 1990s

• UK (1997-2000) Prime Minister Tony Blair's theme
  is New Labor, a different Labor Party eager for
  modernization. Under his leadership the party
  continues Thatcher's monetarist-style policies
  and agrees on harnessing the power of markets,
  but he restores full employment as a goal and
  aims to rebuild the spirit of community and
  social welfare damaged under Thatcher.
• Third Way?

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Global Economy in the 1990s

• The Rise of Anti-Globalization Movement
• Further Regionalization the coming of FTAA (Free
  Trade Area for Americas)

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Global Economy in the 21st Century

• Aging Economies
• Financial Capitalism
• New Economic Powers of Emerging Economies versus
  Old Economies
• Environment, Epidemics and Global Economic
  Integration