JC History Tuition Online - What is the role of multinational corporations in the global economy - Global Economy Notes

What is the role of multinational corporations in the global economy?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

Find out what are multinational corporations (MNCs) and how they affect host countries. [Video by Mr. Sinn]

What are multinational corporations?
By definition, a multinational corporation (MNC) is a company that operates businesses in two or more countries. In contrast with corporations that operate strictly in their country of origin, MNCs expand their scale of operations to other countries. In the post-WWII period, the United States took the lead in establishing MNCs based in different parts of the world, such as Western Europe and Japan.

The Post-War Years
In the 1950s and 1960s, the United States contributed to nearly half of the world’s manufacturing output. American MNCs made their way to host countries like Great Britain, facilitating the transfer of technology and technical know-how. In return, host countries benefited from job creation and improvement of living standards.

By 1966 US multinationals accounted for more than 80 per cent of sewing machines, typewriters, and color film, more than 60 per cent of the calculating machines, razor blades, breakfast cereals, and spark plugs, and more than 50 per cent of the automobiles made in Britain. More than 80 per cent of the computers sold in West Germany and Italy were produced by American multinationals.

An excerpt from “Transnational Corporations and the Global Economy” by Richard Kozul-Wright and Robert Rowthorn.

The meteoric rise of Western Europe and Japan: New competitors
With the continued American support, economies in Western Europe and Japan recovered quickly. MNCs from these two parts of the world began to secure a foothold in the international landscape. By the 1980s, the American firms acknowledged the remarkable feats of their innovative counterparts in Europe and Japan.

In the 1970s, Japanese electronic multinationals moved their investments into Asia, exporting popular consumer electronics like televisions. Host countries like Singapore, Hong Kong and Taiwan benefited from the influx of Foreign Direct Investment (FDI). Similarly, Japanese automakers have gained global recognition due to its fuel-efficiency, even challenging the dominance of veteran American companies like General Motors and Ford.

The oil shocks of 1973 and 1979 increased the demand for more fuel-efficient cars, and the Japanese were well-positioned to capture an initial portion of the U.S. market. The ensuing growth during the 1980’s of foreign competition in the domestic market marked several significant transformations of the domestic automobile industry. Japanese producers priced their automobiles very competitively and consumers placed increasing emphasis on product quality and value in their purchase decisions. By 1990, Japanese firms had captured 33 percent of all U.S. car sales; European firms 5 percent; and Korean companies, 2 percent.

An excerpt from “Monthly Labour Review” by the U.S. Government Printing Office, 1992.

Vehicles of foreign investment and international trade
In addition to the role of governments in advanced economies driving the growth of the world economy, MNCs support FDI flows to accelerate the economic development of different countries. In the 1960s, Third World nations attracted nearly half of the entire world’s FDI. However, the proportion of FDI in developing countries has declined to nearly one-third by the 1970s.

An increasing proportion of world trade occurs within transnational corporations, that is, from one branch or plant of a corporation to another branch in a different country. In 1970, more than a quarter of US manufactured exports were sold by multinational corporations to a majority-owned foreign affiliate.

… Almost all foreign direct investment originates in the developed world. In 1978, the USA alone provided 41.4% of the total stock of accumulated foreign direct investment; Japan 6.8%; and Canada 3.5%. A mere 3.2% derived from developing countries.

An excerpt from “The Golden Age Illusion: Rethinking Postwar Capitalism” by Michael John Webber.

What can we learn from this article?
Consider the following question:
– Assess the view that the multinational corporations were necessary in advancing the growth of the global economy after the Second World War.

Join our JC History Tuition to learn more about this enriching topic. Our H2 and H1 History Tuition offer online and physical classes to match your learning preferences. Additionally, you will receive concise study notes that explore various themes based on the syllabus requirements. Join our free writing practices to improve your knowledge application skills within a limited time.

We have other JC tuition classes, such as GP TuitionEconomics TuitionJC Chemistry TuitionJC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to find out more.

JC History Tuition Online - How did Japan emerge as a developed economy - Global Economy Notes

How did Japan emerge as a developed economy?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

Take a look at the history of Toyota’s 2000GT that was released in the 1960s. [Video by Garage Dreams]

Rapid industrialisation
After experiencing defeat during the Second World War, the Japanese government focused its efforts on post-war reconstruction. Under the ‘Reverse Course’ policy, Japan was backed by the USA to rebuild its industries.

The Cold War climate proved to be fortuitous as Japan gained from the surge of demand during the Korean War in 1950. The increased US involved in the conflict became an opportunity for Japan to raise production of war supplies.

Additionally, the Japanese government turned to the Americans for access to foreign technology. The purchase of technology then aided the private firms’ efforts to raise the efficiency of production, as seen by the rise of prominent companies like Toyota and Honda.

Japanese companies in the 1950s and 1960s spent one-quarter to one-half of all their research and development budgets to buy foreign technology.

… Over the next few years [Sony] made cheap copies of the tape recorders American occupiers had brought to Japan. In 1953 it licensed from Western Electric the right to produce the new transistors that Bell Labs had recently invented. Sony turned out its first transistor radio – the world’s second – in 1955 and brought a miniaturized “pocket radio” to market two years later.

An excerpt from “Global Capitalism” by Jeffry A. Frieden.

Better lives: Impacts of industrialisation
Strong state intervention was recognised as a major contributing factor for the Japanese ‘economic miracle’. Subsidies and loans were granted to the private firms to accelerate industrial production. Over time, living standards in Japan have improved tremendously. By 1970, almost every Japanese household owned a television, refrigerator and washing machine, ushering the ‘electronics age’.

Practically every household in Japan is now in possession of a radio while the dissemination rate of television sets is 87.8 per cent, that of electric washing machines 61.4 per cent and electric refrigerators 38.2 per cent, indicating that the standard of living in Japan has been raised considerably.

An excerpt from Japan Report, Volume 10 Number 19 – by Japan Information Center, Consulate of Japan, 15 May 1964.

By the 1970s, Japan had caught up with the USA, becoming the second-largest market economy in the world.

What can we learn from this article?
Consider the following question:
– How far do you agree that the government was responsible for the phenomenal growth in Japan after the post-war years?

Join our JC History Tuition to learn more about the developments of the global economy. Our H2 and H1 History Tuition feature live-streamed classes for thematic discussion and online practices to improve your answering techniques. Find out how you can enhance your writing skills for essay and source based case study questions.

We have other JC tuition classes, such as GP TuitionEconomics TuitionJC Chemistry TuitionJC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to find out more.

JC History Tuition Online - What is NAFTA and what is its purpose - Global Economy Notes

What is NAFTA and what is its purpose?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Examine the contributions of the NAFTA to the affordability of goods and services [Video by Vox]

The North American Free Trade Agreement (NAFTA)
On 1 January 1994, the NAFTA was signed by three members – the United States, Mexico and Canada. Its purpose was to eliminate tariffs between the signatories, facilitating market integration. Furthermore, the agreement required all parties to support the gradual elimination of trade barriers over a course of fifteen years to enhance cross-border investment and the flow of goods and services.

Before the signing, the Mexican government sought US investment in the wake of the Latin American debt crisis. In June 1990, Mexican President Carlos Salinas de Gortari and the American President George H. W. Bush announced the creation of a free trade area between the United States and Mexico.

Impacts on involved parties
It turns out that the NAFTA yielded tremendous benefits to the trading partners. NAFTA amounted to a $6 trillion economy with a population of 360 million. By 2004, the NAFTA area expanded to a $12.5 trillion economy.

Wonnacott believes, that in one important way, the NAFTA is superior to treaties like the GATT, which allows developing countries to maintain many of their own barriers to liberalized imports. The NAFTA has effectively told Mexico and other future participants that if they want to participate in the agreement, they must be prepared to remove their own trade barriers.

An excerpt from “Nafta As a Model of Development: The Benefits & Costs of Merging High-And Low-Wage” by Richards S. Belous and Jonathan Lemco.

From the US perspective, the NAFTA was seen as a significant step forward to achieve encourage international trade. The agreement was meant to be a signal to other participating members of the GATT to re-affirm their commitment to achieve freer trade.

I am gratified that, as Vice President Gore and Chief of Staff Mack McLarty announced 2 weeks ago when they met with President Salinas, next year the nations of this hemisphere will gather in an economic summit that will plan how to extend the benefits of trade to the emerging market democracies of all the Americas.

The United States must seek nothing less than a new trading system that benefits all nations through robust commerce but that protects our middle class and gives other nations a chance to grow one, that lifts workers and the environment up without dragging people down, that seeks to ensure that our policies reflect our values.

An excerpt from US President Bill Clinton’s speech on the NAFTA, 8 December 1993.

What can we learn from this article?
Consider the following question:
– How far do you agree that the USA played a crucial role in the resurgence of trade in the 1990s?

Join our JC History Tuition to learn more about the development of the global economy. Our H2 and H1 History Tuition classes are conducted online to broaden your knowledge of diverse issues and enhance your writing skills.

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JC History Tuition Online - What caused Japan's lost decade - Global Economy Notes

What caused Japan’s Lost Decade?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Examine the impacts of the ‘Lost Decade’ that led to the commercialisation of ‘closeness’ [Video by Polygon]

The geese ahead of the flock
Before the ‘Lost Decade‘, Japan’s economic progress have continued until it was the second largest in the world, after the United States. In fact, the ‘flying geese paradigm’ was used to refer to Japan as the frontrunner of economic development in Southeast Asia (contrast with the ‘Four Asian Tigers’).

The pattern was one in which first Japan, followed by its former colonies, achieved miracles of growth. They left such bastions of U.S. influence as the Philippines in the dust. South Korea, Taiwan, Hong Kong, and Singapore, followed by Thailand, Malaysia, and Indonesia were all members of Japan’s flock. Even China took its turn.

An excerpt from “How Asia Got Rich: Japan, China and the Asian Miracle” by Edith Terry.

Speculative activities: A growing asset bubble
After the Plaza Agreement was signed, Japanese Yen was twice the value of US dollar between 1985 and 1987, spurring speculators to plough their funds in assets and stocks. Additionally, borrowers could obtain funds from banks in Japan easily, fueling more speculative activities. Over time, stock and land prices surged.

Between January 1985 and December 1989 the real value of the Nikkei 225 stock price index tripled. By the middle of 1992, the index in real terms was less than 20% above its January 1985 level. Land prices have behaved similarly. An index of land prices in Japan’s six largest cities almost tripled in real terms between 1985 and 1990.

An excerpt from “Japan’s Bubble, Deflation, and Long-term Stagnation” by Kōichi Hamada, A. K. Kashyap, David E. Weinstein.

The Bank of Japan viewed the growing bubble as a threat. As such, it raised interest rates from 2.5% to 6% to discourage speculation. Consequently, borrowers were alarmed by higher interest rates as they anticipated their inability to finance their loans. Panic selling took place, causing the value of shares to plunge drastically.

By August 1990, the discount rate reached 6%. meanwhile, starting in 1990, the Bank of Japan sharply reduced the growth in the supply of money. Although Japanese officials were trying to engineer a soft landing by gradually deflating the speculative bubble, it burst with surprising speed. By October 1990, the Nikkei had fallen to nearly 20,000 yen. The price of real estate began its descent in 1991… Non-performing loans piled up at banks. Economic growth virtually ground to a halt, as it averaged only 1% per year from 1990-2003.

An excerpt from “Japan’s ‘Lost Decade’: Causes, Legacies and Issues of Transformative Change” by Miles Fletcher III, Peter W. von Staden.

What can we learn from this article?
Consider the following question:
– How far do you agree that the Japanese government was responsible for the ‘Lost Decade’?

Join our JC History Tuition to learn more about the development of the global economy. We conduct H1 and H2 History Tuition Online classes, featuring thematic discussion and writing workshops.

We have other JC tuition classes, such as GP TuitionEconomics TuitionJC Chemistry TuitionJC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to learn more.

JC History Tuition Online - What was the Plaza Accord - Global Economy Notes

What was the Plaza Accord?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Learn more about the economic challenges faced by the United States that prompted the Reagan administration to introduce the Plaza Accord of 1985 [Video by Danieljbmitchell]

New competitors; Trade deficits
Following the abandonment of the ‘gold standard’ in 1971, the United States (US) continued to experience severe trade deficits vis-à-vis Japan and West Germany. The Japanese Yen and German Deutsche Mark were relatively weaker than the US Dollar. This meant that these two advanced economies’ exports were cheaper than the American exports, fueling demand for the former group’s.

In the US, heavy manufacturers and automobile firms called for their politicians to embark trade protectionism. With American jobs at stake, the Reagan administration had to step in to manage this worrying trend.

At the beginning of the 1980s the American auto industry was reeling under pressure from foreign competition – deservedly so, as the quality of American-made autos from the Big Three was noticeably inferior to that of imports from Europe and Japan.

…Unable to meet this quality competition head-on, and having lost $4.2 billion in 1980, the Big Three American automakers pressed for the predictable solution: trade protectionism.

…After a heated debate at the White House, Reagan passively agreed to seek a “voluntary export restraint agreement” with Japan.

An excerpt from “The Age of Reagan: The Conservative Counterrevolution: 1980-1989” by Steven F. Hayward.

In addition to the voluntary export restraint (VER) with Japan that limited the number of imported automobiles, the US government oversaw the meeting with the G5 nations. The G5 comprised of industrialised nations, namely United Kingdom, Japan, West Germany, France and the US.

The Plaza Accord
On 22 September 1985, the G5 nations met at the Plaza Hotel in New York. At main outcome was the formulation of an agreement to depreciate the US dollar relative to the Japanese Yen and German Deutsche Mark.

The main purpose of the accord, however, was to address the United States-Japan trade imbalance by making American goods less expensive and Japanese goods more expensive, so that Japanese customers would buy inexpensive American goods and Japanese companies would have to raise their prices in dollar terms and therefore lose customers.

… The time from 1986 until the middle of 1990 in Japan is often referred to as the ‘bubble economy‘. This period saw massive expansion, primarily due to a rapid surge in domestic demand – a growth in capital investments and in personal spending. Stocks and real estate prices skyrocketed.

An excerpt from “Government, International Trade, and Laissez-Faire Capitalism: Canada, Australia, and New Zealand’s Relations with Japan” by Carin L. Holroyd.

Although the Accord did manage to reduce trade deficits, the repercussion on the Japanese economy was severe. As the Japanese Yen appreciated relative to the US dollar, individuals and firms purchased real estate and stocks, pushing up the prices artificially. Speculators used their newly-purchased real estate as collateral to buy more. Eventually, the expanding asset bubble burst, ushering the ‘Lost Decade’ in Japan.

What can we learn from this article?
Consider the following question:
– Assess the view that the Plaza Accord of 1985 was key in explaining the decline of the Japanese economy in the 1990s.

Join our JC History Tuition to learn how to write essays effectively. Our online learning classes are suitable for JC students taking either H1 or H2 History. We conduct thematic discussions and written practices to improve your reading, thinking and writing techniques.

We have other JC tuition classes, such as GP TuitionEconomics TuitionJC Chemistry TuitionJC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to learn more.

JC History Tuition - Why did Nixon abandon the gold standard - Global Economy Notes

Why did Nixon abandon the gold standard in 1971?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Let’s take a look at the implications of the collapse of the ‘gold standard’ on the US economy and the rest of the world [Video by Ampleforth]

An unsustainable model
Ever since the Bretton Woods system was established in 1958, the convertibility of United States (US) dollars to gold was fixed at $35 an ounce. Initially, the US government held nearly 75 percent of the world’s official gold reserves, instilling confidence in the global monetary system.

However, demand for gold increased in the 1960s when exports from Western Europe and Japan became more competitive with the US. Additionally, the large Cold War expenditures contributed to excess supply of US dollars in circulation.

The economy falters
In the late 1960s, the US economy was hit by the increase in inflation (5.4%) and unemployment (6%) rates. An unexpected phenomenon has occurred – stagflation, which meant a combination of slow growth and high inflation.

In order to fight stagflation, US President Richard Nixon addressed the nation on 15 August 1971, declaring the end of the fixed exchange rate system that underpinned the Bretton Woods ‘gold standard’.

The Bretton Woods system of fixed exchange rates based on the free convertibility of the U.S. dollar into gold, which had been showing signs of strain for many years, came apart entirely on August 15, 1971. President Nixon’s announcement that the U.S. would no longer sell gold at $35 per ounce effectively set the dollar afloat. By December 1971, the dollar had fallen about 6% relative to a multilateral trade weighted average of currencies, as the world groped for a new international monetary system.

An excerpt from “Economic Policy and the Great Stagflation” by Alan S. Blinder.

Bold actions
During Nixon’s historic speech on 15 August, he raised three points to protect the US economy – lower unemployment rates, curb inflation and minimise international speculation.

For the third point, Nixon claimed that the ‘gold standard’ was not sustainable as currency speculators have been ‘waging an all-out war’ on the US dollar even though it functioned as a ‘pillar of monetary stability’ on the global scale.

I have directed Secretary Connally to suspend temporarily the convertibility of the American dollar except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.

… If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today.

The effect of this action, in other words, will be to stabilize the dollar.

An excerpt from a speech by Richard Nixon, 15 August 1971.

Nixon defended his position by asserting that the devaluation of the dollar was to ensure fair competition between the American workers and the rest of the world. Furthermore, he imposed a 10 percent tax on imported goods into the US as a temporary measure to protect domestic jobs.

Fragmentation of markets
In response, the European governments were taken aback by the policy shifts of the US government. On 10 September 1971, The New York Times reported that the imposition of tariff barriers may affect nearly 90 percent of the European exports to the US, amounting to $7 billion.

What can we learn from this article?
Consider the following question:
– How far do you agree that the collapse of the Bretton Woods fixed exchange rate system was a turning point?

Join our JC History Tuition to comprehend the complexities of the global economy. Our online learning classes are suitable for students taking either H1 or H2 History. In preparation for the GCE A Level History examination, we provide thematic revision and writing practices.

We have other JC tuition classes, such as GP TuitionEconomics TuitionJC Chemistry TuitionJC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to learn more.

JC History Tuition - The Japanese Economic Miracle Revisited - Global Economy Notes

The Japanese Economic Miracle: Revisited

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

Examine the post-war economic development of Japan. [Video by Documentary Tube]

A global economic powerhouse: Japan
From 1968 to 2010, Japan gained international recognition as the world’s second largest economy. Before the devastating ‘Lost Decades’ of the 1990s, academics have sought to figure out the key factors that explained the remarkable growth of Japan. Notably, the keiretsu is well-known contributor of Japan’s economic growth.

Keiretsu: The Japanese business network
After World War Two, the United States dissolved the family-owned conglomerates known as the zaibatsu. Then, six major keiretsu (commonly known as the ‘Big Six’) were formed, such as Sumitomo, Fuyo, Sanwa and Mitsui. The keiretsu comprised of a group of large companies that connected different entities in the production line, like the manufacturers and distributors.

Thus, the Keiretsu can also be seen in practice as the major force behind the transformation of Japanese society from a postindustrial into a postmodern society, in close cooperation with powerful political and social influences.

An excerpt from “Keiretsu Economy – New Economy?: Japan’s Multinational Enterprises from a Postmodern Perspective” by R. Kensy.

These large business groups form interconnected networks to involve banks and industrialists to compete with local and foreign rival firms. Over time, the keiretsu accumulated market share, contributing to their economic dominance in Japan.

By the early 1970s, Japan became increasingly known in the global trade scene, such as the automobile industry. With support from the Japanese government, the keiretsu manufactured goods that rivalled competitors like the United States.

The government essentially closed the domestic market to foreign competition, to allow home-grown enterprises time to develop and prosper. Japanese businesses took the form of a series of keiretsu, vertically integrated companies that straddled virtually every facet of the Japanese economy. And the keiretsu, such as Mitsubishi, Matsui and others, enjoyed unbridled growth during the post-war period.

By the early 1970s, Japanese car makers were dominating even the once immune US market. The Japanese economic miracle was in full swing.

An excerpt from “The Routledge Companion to Global Economics” by Robert Beynon.

What can we learn from this article?
Consider the following question:
– Assess the importance of the state actors in causing the economic miracle of Japan in the post-war years.

Join our JC History Tuition and learn more about the Global Economy (1945-2000). We have online learning programmes to streamline your study of the topics tested during the GCE A Level History examination. Also, you will learn to develop and refine essential reading and writing skills, such as question analysis and perspective setting for essay and source based case study.

We have other JC tuition classes, such as GP TuitionEconomics TuitionJC Chemistry TuitionJC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to learn more.

JC History Tuition - What caused the post-war economic miracle in Western Europe - Global Economy Notes

What caused the post-war economic miracle in Western Europe?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

Learn more about the role of Ludwig Erhard, who was known as the architect of the German economic miracle. [Video by Public Broadcasting Service]

Picking up the pieces: Post-war reconstruction
By the time the World War Two had concluded, many European nations were badly damaged by the military campaigns, especially Germany. A 1953 United States report noted that the Allied bombing campaign in Dresden had destroyed at least 50 percent of its residential buildings and at least 23 percent of the city’s industrial buildings.

Government leaders sought to introduce domestic policies to re-build their economies. At the same time, they turned to foreign aid and assistance, such as the United States, to augment their post-war plans.

In this article, we will be examining the case study of West Germany. It is important to note that other parts of Western Europe also experienced rapid economic growth in the early post-war years, such as France (Les Trente Glorieuses).

Wirtschaftswunder: The German Economic Miracle
Enter Ludwig Erhard. From 1949 to 1963, Erhard assumed the role as Minister of Economic Affairs under Chancellor Konrad Adenauer to spearhead the post-war economic reforms in West Germany. Erhard embarked on a multi-pronged approach to revive West Germany’s economy.

For example, Erhard came up with the currency reform (Deutsche Mark) on 22 June 1948 to replace the old Reichsmark. The West German government also imposed price control measures to avert the hyperinflation and the expansion of a black market.

On 25 June 1948 currency reform was introduced in the Western zones. The old money would be exchanged at a rate of one-tenth of the new, though for a while the two currencies ran side by side. The SBZ (Soviet Occupation Zone) had been excluded from monetary reform because the Russians could not have been trusted to print the right amounts. By June 1948 Ludwig Erhard had made arrangements to print 500 tons of banknotes in the US and have them airlifted to Frankfurt. Virtually all rationing and price controls were abolished.

An excerpt from “After the Reich: The Brutal History of the Allied Occupation” by Giles MacDonogh.

As a result of Erhard’s guidance, the West Germany economy flourished. The Deutsch Mark had encouraged the citizens to use it as a new currency for consumption of goods and services. People reduced their reliance on barter trade and the black market. With greater access to essentials like food, the Germans increased their time spent on work. From 1948 to 1958, industrial production increased more than four times its annual rate.

Changing priorities: Foreign aid and assistance & the Marshall Plan
Following the United States Secretary of State James Byrnes’ speech on 6 September 1946, the Western powers changed its stance towards the West German zones, focusing on post-war economic recovery. They focused on the recovery of key industries that produced coal, iron and steel. The United States also announced the introduction of the Marshall Plan on 5 June 1947, offering financial aid to European nations for reconstruction.

The influx of Marshall Plan funds intensified the new faith in the Deutsche Mark and hastened the reconstruction of West German capital and fixed assets. Although the economy was still subject to various Allied controls and rationing, the West German people now possessed sufficient confidence in the economy to conduct normal business and participate in the free circulation of goods and money that is so critical to a healthy economy.

The combination of the currency reform, Marshall Plan funds, and the social market economy has been described as the foundation on which the expansion of the economic miracle was based. With the industrial boom prompted by the Korean War, the West German GNP (Gross National Product) gained 67 percent in real terms and industrial output rose by 110 percent between 1948 to 1952.

An excerpt from “Selling the Economic Miracle: Economic Reconstruction and Politics in West Germany, 1949-1957” by Mark E. Spicka.

What can we learn from this article?
Consider the following question:
– How far do you agree that the United States was chiefly responsible for the post-war economic miracle in Western Europe?

Join our JC History Tuition and learn more about the Global Economy (1945-2000). Our online learning programmes are effective in covering the key historical events through class discussions and writing practices. By doing so, you will develop the awareness to form persuasive arguments for the GCE A Level History essay questions.

We have other JC tuition classes, such as GP TuitionEconomics Tuition, JC Chemistry Tuition, JC Math Tuition and China Studies in English Tuition. For Secondary Tuition, we provide Secondary English TuitionSecondary Math tuitionSecondary Chemistry Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English Tuition. Call 9689 0510 to find out more.

JC H2 History Tuition - What is the Mexican debt crisis - JC History Essay Notes

What is the Mexican debt crisis?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Examine the former Mexican finance minister’s reflections on the Mexican Debt Crisis of 1982 [Video by CNN Business]

The Latin American debt crisis of the 1980s
The 1970s and 1980s were characterised by a series of devastating problems that hampered the growth of the global economy. Apart from the twin oil shocks in 1973 and 1979, a serious debt crisis affected developing nations, particularly in the Latin American region. This financial crisis was known as “The Lost Decade” (La Década Perdida) in Mexico and Guatemala.

An unsustainable growth: A sticky situation
Before the Crisis Decades, most developed nations took loans from the World Bank to finance their infrastructural development. In view of the first oil crisis of 1973, commercial banks received a large inflow of funds from oil-exporting nations, particularly petrostates that belonged to the OPEC (Organization of the Petroleum Exporting Countries). In short, petrodollar recycling was carried out.

However, the loans did not translate into profitable investment activities. Some of these loans were mismanaged. For instance, President Mobutu Sese Seko stored $5 billion in personal Swiss bank accounts, which amounted to Zaire’s total foreign debt.

Additionally, in response to the oil shocks, the USA raised interest rates in 1979. This proved disastrous to the debtor nations as their loans originated from Western commercial banks in the USA and Europe.

When Paul Volcker, head of the Federal Reserve, raised U.S. interest rates in 1979 to fight inflation in the United States, he did not intend to create a global debt crisis. But rising U.S. interest rates, and the rising London Interbank Offered Rate (LIBOR), which set interest rates for Eurodollar lending, greatly increased the cost of southern loans, most of them now tied to floating rates set by the United States or LIBOR.

Rising interest rates had two important consequences. First, they increased interest payments on accumulated debt. “Mexico’s interest bill tripled from $2.3 billion in 1979 to $6.1 billion in 1982… for the region as a whole, interest payments more than doubled, from $14.4 billion in 1979 to $36.1 billion in 1982.” …

A second problem was that high U.S. interest rates acted like a magnet, attracting money from around the world… Massive capital flight created several problems for Latin American countries: it deprived them of money they might have used to invest in their own countries, pay for imports, repay debt, and it eroded their country’s tax base…

An excerpt from “Understanding Globalization: The Social Consequences of Political, Economic, and Environmental Change” by Robert K. Schaeffer.

The Trigger
In August 1982, the Mexican Finance Minister Jesús Silva Herzog announced that Mexico can no longer service its debt that amounted to $80 billion. Subsequently, other Latin American nations like Brazil, Chile and Argentina followed suit. Eventually, the International Monetary Fund (IMF) allowed sixteen Latin American countries to conduct debt rescheduling.

The threat of default by Mexico sent the first world bankers into panic. Many had lent more than 100 per cent of their shareholder capital to governments in Latin America and elsewhere. They knew that if the default was to be repeated across the developing world, it would lead to the collapse of the global financial system

IMF conditionality varied from country to country but generally contained a mix of the following policy ingredients: a cut in public spending, promotion of exports, the elimination of government subsidies, currency devaluation, privatization of state-owned enterprises, and the liberalization of foreign trade and investment…

This approach became known as structural adjustment and, over the course of the 1980s and early 1990s, most Latin American countries fell subject to IMF conditionality. The support for such policies from the US government and powerful institutions based in Washington, DC meant that the policy package became known as the Washington Consensus.

An Excerpt from “Latin American Development” by Julie Cupples.

What can we learn from this article?
Consider the following question:
– Assess the view that the Latin American debt crisis of the 1980s was a devastating problem that affected the global economy.

Join our JC History Tuition and learn how to write JC History Essays for topics like the Global Economy. Join our online learning classes and receive study notes for A Level History.

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JC H2 History Tuition - What is World Trade Organization and its function - JC History Essay Notes

What is World Trade Organization and its function?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapters 1: Reasons for growth of the global economy & Problems of economic liberalisation

Re-look at the contributions of the World Trade Organization ever since its inception in 1995 [Video by the World Trade Organization]

What is the World Trade Organization (WTO)?
The WTO is an inter-governmental organization that formalized international trade. Under the Marrakesh Agreement, the organization was formed on 1 January 1995, replacing the multilateral framework known as the General Agreement on Tariffs and Trade (GATT).

A Prelude to WTO: Trade Rounds under GATT
Before the WTO was established, GATT provided the essential guidelines on international trade from 1948 to 1994. During the Bretton Woods Conference, an International Trade Organization (ITO) was supposed to be formed alongside two other pillars (World Bank and the International Monetary Fund). Yet, the US Congress refused to ratify the Havana Charter. As such, the concept of an ITO was not realized.

Even so, GATT had played its part in promoting multilateral discussions. In the post-war years, GATT contributed to tariff reductions of nearly 8 percent on average till the 1960s.

1. Kennedy Round (1964-1967)
During the Kennedy Round, an Anti-Dumping Agreement was passed. ‘Dumping’ refers to an unfair trade practice in which a firm sell its exports at a price below the price set in the domestic market. The Act was recognized as a success, especially for developing nations.

Recognizing that anti-dumping practices should not constitute an unjustifiable impediment to international trade and that anti-dumping duties may be applied against dumping only if such dumping causes or threatens material injury to an established industry or materially retards the establishment of an industry;

Considering that it is desirable to provide for equitable and open procedures as the basis for a full examination of dumping cases;

An excerpt from the Kennedy Round.

2. Tokyo Round (1973-1979)
In the 1970s, the Tokyo Round was held with the intention to manage the imposition of non-tariff barriers (NTBs). Although participating countries managed to agree on the reduction of tariffs on industrial goods, they were unable to accept the use of plurilateral agreements (they are trade agreements between more than two countries).

The Tokyo Round also led to the adoption of a range of specific new disciplines. These included the legalization of preferential tariff and nontariff treatment in favour of developing countries and among developing countries.

Codes were negotiated on subsidies and countervailing measures, technical barriers to trade (product standards), government procurement, customs valuation, import licensing, antidumping (a revision of a Kennedy Round code), bovine meat, dairy products and civil aircraft…

By negotiating a code, like-minded countries were able to agree to new, legally binding commitments, without having all GATT contracting parties on board.

An excerpt from “The Political Economy of the World Trading System” by Bernard M. Hoekman, Michel M. Kostecki

3. Uruguay Round (1986-1994)
The eighth and final round lasted nearly seven and a half years. In the wake of the twin oil shocks of the 1970s, the Uruguay Round was held as the largest multilateral trade negotiation. The main purpose of the round was to reduce agricultural subsidies, introduce the protection of intellectual property and liberalise trade services in the banking sector. It was a tricky issue due to the sensitivity of the agricultural and textile sectors that affected many developing countries. Furthermore, the round dragged on due to the lack of consensus between the USA and European Union (EU) [also known as the “European Community”, EC] over the reforms to agricultural trade.

For much of the Round the USA and the EC held their own mini-round and their mutual intransigence, especially over agriculture and specifically a long-running dispute over oil seeds, stalled the Uruguay Round for some time. Completion of the Round was in the end facilitated by the so-called Blair House (Washington) accords…

Negotiations on agriculture were among the most contentious of the Round, the final Agreement on Agriculture seeking reforms for a ‘fair and market-oriented agricultural trading system’, but with special consideration for poorer countries and for non-trade concerns such as food security, environmental protection or schemes for diversification from narcotic crops and the like.

An excerpt from “The Free Trade Adventure: The WTO, the Uruguay Round and Globalism–a Critique” by Graham Dunkley.

The WTO
As the Uruguay Round concluded in December 1993, the Marrakesh Agreement was signed on 15 April 1994 by 123 participating nations. Officially, the WTO was formed eight months later, ushering a new era for international trade. The WTO replaced GATT as the institutional framework for trade.

1. The WTO shall facilitate the implementation, administration and operation, and further the objectives, of this Agreement and of the Multilateral Trade Agreements, and shall also provide the framework for the implementation, administration and operation of the Plurilateral Trade Agreements.

2. The WTO shall provide the forum for negotiations among its Members concerning their multilateral trade relations in matters dealt with under the agreements in the Annexes to this Agreement. The WTO may also provide a forum for further negotiations among its Members concerning their multilateral trade relations, and a framework for the implementation of the results of such negotiations, as may be decided by the Ministerial Conference.

An excerpt from the Marrakesh Agreement – Article 3 “Functions of the WTO”, 15 April 1994.

What can we learn from this article?
Consider the following question:
– How far do you agree that trade liberalization was beneficial to the global economy from 1945 to 2000?

Join our JC History Tuition and find out more about the Bretton Woods System and other areas relating to the global economy. We provide summary notes for H2 History and H1 History as well as practices for essay writing and source based case studies. Attend our online learning classes to develop an analytical mind.

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