Unit 1: Historical
and Contemporary Overview of Globalization
Part 3: Following
World War II
In addition to providing
a theory compatible with the market skepticism between the
wars, Keynes, somewhat ironically, helped lay the foundations
of the current “global” order. After the Second
World War, at a conference in Bretton Woods, New Hampshire,
Keynes helped found the World Bank and International Monetary
Fund. The Global Agreement on Tariffs and Trade soon followed,
and so were born today’s three most talked about international
financial institutions.
WEBSITES:
Click on the following websites for more information about
these institutions and agreements:
World
Bank
http://web.worldbank.org/
International Monetary Fund
http://www.imf.org/external/pubs/ft/exrp/origins
Global Agreement on Tariffs and Trade
http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr01_e.htm
Right after the Second World
War the Bretton Woods institutions did not look like they
look today. At that point, although the world was off of
the gold standard, the dollar was still pegged to gold,
and other currencies were pegged to the dollar. This put
the US in the unenviable position of being creditor of last
resort for the world: in order for the world to grow, the
US had to run balance of payments deficits either through
lending capital or borrowing in order to consume. The official
vision of world growth saw it depending on the health of
the West and more specifically, the US.
In the 1970s this picture
changed somewhat. The US let its currency float against
other world currencies—it was no longer linked in
value to other currencies through the price of gold. The
IMF and World Bank began to suggest more in the way of neo-liberal,
free-market policies to developing economies and the poor.
Indeed, the “structural adjustment” policies
that the IMF has advocated universally insist on a laundry
list of liberal remedies, frequently without regard to country
particulars: tight money, less government regulation, privatization
of public amenities, government budget surpluses, export-driven
development.
Such advice has not always been entirely well-received;
especially in the 1960s and ’70s, national autonomy
for some meant adopting import substitution rather than
free trade development policies. Import substitution meant
raising barriers to imported goods that could be produced
at home in order to protect and foster nascent national
industries. As the experience of Latin America has shown,
ISI hasn’t been terribly successful; there is too
much opportunity for corruption, too little incentive to
develop efficient, competitive industry. By the late 1970s
and early 1980s such policies were generally acknowledged
to have failed.
The single bright spot in the development picture as of
the 1980s was South East Asia, which followed neither the
neo-liberal IMF-World Bank advice nor import substitution
policies. The “Tiger” economies of Japan, Korea,
Taiwan, Singapore, and Hong Kong all raised tariff barriers
to foreign imports in order to support local industry. But
their aim was export-led growth, rather than import substitution.
That has proved to be among the important differences between
developing economies that succeed and those that fail, and
it also helps explain Asian economies’ recent positions
on trade. (More on this in Unit 2.)
