JC History Tuition Online - What is the Triffin Dilemma - Global Economy Notes

What is the Triffin dilemma?

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 Triffin Dilemma that explains the development of the global economy in the 1960s. [Video by George Gammon]

Historical background: An international creditor
In the post-WWII phase, the USA provided substantial financial aid to facilitate post-war economic reconstruction. One key example is the Marshall Plan, which amounted to about $13.2 billion (1948-1952) that benefited Western Europe.

In addition, the USA supported the establishment of the Bretton Woods System (BWS). By pegging the US dollar (USD) to gold, the USA helped to set up a system of fixed exchange rates, in which one ounce of gold was equivalent to USD35. Both foreign governments and central banks could exchange dollars for gold. Given that the USD was ‘as good as gold’, the monetary system enabled international transactions denominated in the greenback.

The Dollar Glut & The Gold Pool
With the globalisation of the Cold War by the late 1950s, the USA stepped up its efforts to form alliances with other countries, exerting its economic might to convince foreign leaders to join its ideological cause. However, the outflow of USD to foreign economies eventually exceeded the amount of gold that backed the monetary system.

For instance, the central banks of Western European nations and Japan had accumulated USD, building up their currency reserves. Central banks in turn could exchange these dollars for gold, threatening the stability of the system.

Monetary gold and dollar holdings - IMF, US Congress, Barry Eichengreen
Learn more about the changes to monetary gold stock held by the UA and other monetary authorities. [Source: Global Imbalances and the Lessons of Bretton Woods by Barry Eichengreen]

But as these ratios began to shift, confidence began to erode in the credibility of the American commitment to dollar convertibility and thus in the structure of the Bretton Woods system. By the end of 1959, the United States’ money gold stock had been surpassed in value by foreign-held external dollar liabilities. By 1965, America’s stock of gold reserves had been surpassed by the external dollar liabilities held by foreign monetary authorities. Foreign investors, both official and private, had growing grounds for questioning the ability of the United States to continue honoring its commitment to convert these liabilities into gold at a fixed price.

An excerpt taken from “Global Imbalances and the Lessons of Bretton Woods” by Barry Eichengreen.

On 1 November 1961, the central banks of the USA and seven other European nations (Germany, United Kingdom, Switzerland, Netherlands, Belgium, Italy and France) created the London Gold Pool. By doing so, the fixed exchange rate system under the Bretton Woods could be maintained by keeping the price of gold stable.

However, the Gold Pool eventually collapsed in March 1968 as the pegged price of gold remained low such that France withdrew from the collaboration.

The Dilemma
Belgian-American economist Robert Triffin revealed a flaw in the international monetary system.

If the USA stopped running its balance of payment deficits, the global economy would face a liquidity crunch. This would then plunge the economy into a contractionary spiral.

If the USA continued to run its balance of payment deficits, the global economy would continue to grow. However, the dollar glut problem would gradually erode confidence in the US dollar. Over time, the view of the US as a reliable reserve currency would fade, thus causing the gold-dollar fixed exchange rate system to collapse.

One the one hand, US spending in the rest of the world was viewed as a positive thing as it provided a pool of dollars outside the US which could be used to finance trade and fuel economic growth the world over; the dollar was the world’s key currency and uniquely acceptable everywhere.

However, on the other hand, the size of the dollar pool raised questions about the currency’s convertibility into gold and suggested a growing confidence problem for the dollar that could only be eased if US spending overseas was dramatically reduced. Thus there was a dollar confidence crisis looming if US spending overseas continued, and a world liquidity crisis likely if US spending was curtailed: a dilemma indeed.

An excerpt taken from “The Euro Its Origins, Development and Prospects” by Chris Mulhearn and Howard R. Vane.

True enough, the fears of an impending collapse of the international monetary system were realised on 15 August 1971.

What can we learn from this article?
Consider the following question:
– How far do you agree that the USA was a driving force in shaping the development of the global economy in the 20th century?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition and JC Chemistry Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - How did South Korea grow so fast - Asian Tigers Notes

How did South Korea grow so fast?

Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 3: Rise of Asian Tigers from 1970s to 1990s [South Korea and Taiwan] 

Find out more about the railway development in South Korea. [Video by Railways Explained]

Historical background
Before South Korea transformed to an advanced economy, it was in a desolate and backward state. Between the 1950s and 1960s, South Korea was largely dependent on agriculture. Unfortunately, the Korean War further set the nation back as the destruction wrought by conflict left much of its infrastructure in ruins.

Under the regime of President Syngman Rhee (이승만), South Korea relied on foreign aid and assistance, which mainly came from its Cold War ally, the USA. Even so, South Korea experienced high unemployment and widespread poverty, thus the aim of economic transformation seemed improbable at that time.

[…] Korea’s GDP per capita in 1950 was $156, lagging against Ghana and the Philippines. In many ways, it was the poster child of an underdeveloped and fragile state among the lowest income group of nations, according to the World Bank. Income levels were lower than that of most Asian countries, similar or lower than that of most African countries in those days, and much lower than many South American countries such as Brazil and Argentina.

An excerpt taken from “The Economic Development of South Korea” by Seung-hun Chun.

Phases of Economic Development
In summary, the economy of South Korea went through three key phases:

  1. 1954-1960: Import-substitution industrialisation
  2. 1961-1979: Export-oriented industrialisation
  3. 1980-1990: Stabilisation and diversification

On 16 May 1961, General Park Chung-hee (박정희) launched a military coup d’état, replacing President Yun Po-sun (윤보선) with himself at the apex of the political structure. Afterwards, Park declared martial law, which lasted for 29 months until October 1963. The military government pursued two key aims: poverty elimination and political stabilisation.

State-guided industrialisation under Park
The Park regime then introduced its very first Five-Year Economic Development Plan (1962-1966) to transform South Korea. As a result, the Economic Planning Board (EPB) was established. The EPB, which was initially known as the Ministry of Construction, was tasked with planning, budgeting and the attraction of foreign capital. In essence, the EPB focused on policy coordination through budget allocation.

In addition, two think-tanks were set up to support the government’s economic policies in the late 1960s, such as the Korea Institute of Science and Technology (KIST). Formed in 1966, the KIST’s main role was to undergo research and development (R&D) to support national efforts to achieve economic growth. This institute helped with the process of industrial modernisation, as seen by technological breakthroughs like the development of Korea’s first colour television in the early 1970s.

KIST made important contributions to growth of the shipbuilding, steel, chemical and electronic industries in Korea. The success of KIST led the Korean government to set up subsequent state-funded research institutes dedicated to research relevant to specific knowledge-intensive industries, including the Korea Institute of Machinery and Materials, the Korea Institute of Chemical Technology, and the Electronics and Telecommunications Research Institutes. In 1970, these state-funded institutes accounted for 58.51% of total nation R&D expenditures.

An excerpt taken from “Routledge Handbook of Science, Technology, and Society” by Daniel Lee Kleinman and Kelly Moore.

An exemplary model: Enter POSCO
The Park administration realised the self-sufficiency in steel was vital to kickstart economic development in the 1960s. As such, the Pohang Iron and Steel Company Limited (POSCO) was formed in 1968 with Park Tae-Joon (박태준) at the helm. In 1973, POSCO began production. Notably, the state-owned PSCO was ranked the world’s six-largest steel producer in 1986, commanding an annual output of 11.3 million tonnes. With technical support from Nippon Steel, POSCO became one of South Korea’s most profitable enterprise.

The Korean steel industry became the catalyst and linchpin for a number of industries, such as automobiles, shipbuilding, containers, railroads, construction, and appliances, which complemented one another in a virtuous vicious circle of economic growth over the last three decades. POSCO and importance of the state development in economic development as one of the good and significant examples.

An excerpt taken from “Designing Public Procurement Policy in Developing Countries: How to Foster Technology Transfer and Industrialization in the Global Economy” by Murat A. Yülek and Travis K. Taylor.

Likewise, other private businesses contributed to the economic transformation of South Korea, such as Hyundai. These chaebols defined the economic development of South Korea.

What can we learn from this article?
Consider the following question:
– How far do you agree that the economic miracle in South Korea was result of Park Chung-hee’s leadership?

Join our JC History Tuition to learn more about the Global Economy and the Asian Tiger economies. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - Why did Nixon end the Bretton Woods system - Global Economy Notes

Why did Nixon end the Bretton Woods system?

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 historical significance of the Gold Standard [Video by Economics Explained].

Historical background
In 1944, an international monetary agreement was signed in 1944 at the Bretton Woods Conference. Under this agreement, foreign currencies were defined in terms of the US dollar (USD). A new system was established in the post-WWII period to replace the Gold Standard that ended in 1993 following the Great Depression.

Under this system, a fixed exchange rate was established, in which one ounce of gold is equivalent to 35 USD.

When nations participate in a pegged exchange-rate system, they agree to fix the value of their currencies relative to another currency rather than to a commodity such as gold. The US dollar was chosen as the base currency and all the countries agreed to keep the value of their currency within plus or minus 1 percent of a specific value of the dollar. […] In contrast to all other nations, the US currency maintained a relationship with gold fixed at $35/ounce. Thus, because the US dollar remained fixed to gold, this was an indirect gold standard, but nations used US dollars rather than gold to settle international transactions.

An excerpt taken from “International Business: Strategy and the Multinational Company” by K. Praveen Parboteeah and John B. Cullen.

With support from the International Monetary Fund (IMF), an automatic adjustment helped nations to avoid the onset of deflation, thereby maintaining stable exchange rates. By the late 1950s, key trading nations loosened exchange restrictions to accept the international gold standard.

Dollar shortage & the Gold Pool
Following the Second World War, governments in Western Europe imported US-made machinery and merchandise. Consequently, there was a surge in demand for USD, given that more nations underwent post-war economic reconstruction. During the Presidential polls in August 1960, US Senator John F. Kennedy declared his plan to “get America moving again“, giving rise to a ‘gold rush’.

As a result, the increase in market price of gold in London to $40 sparked fears of an unstable USD-gold parity. As such, a “Gold Pool” was created in November 1961, in which eight central banks agreed to buy and sell gold only at the official price of $35. Seven other central banks agreed to provide half of the gold supply to keep the market price of gold stable.

The spike in the London market price sparked fears that governments, seeing the writing on the wall, might demand wholesale conversion of their dollars into gold. In response, the US Treasury provided the Bank of England with gold to be used to bring the price of gold on the London gold market, where the metal was bought and sold by private investors (some would say “speculators”), back down to $35, and the governments of principal industrial countries agreed to refrain from buying gold at a higher price.

[…] What the left hand gave, the right hand taketh away, in other words, in a classic instance of a collective-action problem. As a result, the Gold Pool did little to resolve the internal contradictions of what was now referred to as the Bretton Woods gold-dollar system.

An excerpt taken from “The Bretton Woods Agreements: Together with Scholarly Commentaries and Essential Historical Documents” by Naomi Lamoreaux and Ian Shapiro.

Overvaluation of the USD: A currency crisis and a gold glut
However, the USA faced problems with the system. In the early 1960s, the USA experienced rising inflation. As a result of inflation, the increase in silver prices made it difficult for the USA to ensure adequate circulation of coins and silver certificates. In response, the Congress repealed the Silver Purchase Act in 1963 and enabled the Federal Reserve to produce notes in $1 and $2 denominations. At the same time, silver certificates were gradually retired, thus freeing up the silver holdings for use as coins.

Yet, inflation persisted. In 1968, the Congress repealed the requirement to hold gold reserves against Federal Reserve notes. This led to the collapse of the “Gold Pool”.

By the late 1960s, the inflationary condition exacerbated by the large spending to finance the ‘Great Society’ and the Vietnam War strained the international monetary system. Although a two-tier gold market was created in March 1968, foreign governments viewed it with much skepticism. Central banks were unwilling to accept USD in settlement.

The Bretton Woods was based on gold, but the global gold stock could not meet the world’s demand for international reserves, without which pegged exchange rates were impossible. Consequently, the United States provided dollar reserves by running a persistent balance of payments deficit and promised to redeem those dollars for gold at $35 per ounce. By 1961, however, the amount of dollar claims outstanding began to exceed the US government’s stock of gold. The deficit of gold implied that the United States might not be able to keep its pledge to convert dollars for gold at the official price.

[…] The prospect of a dollar devaluation created strong incentives to exchange dollars for US gold. The US Treasury and the Federal Reserve tried to keep this from happening through stop-gap measures, but they could not solve the underlying paradox: Without additional dollar reserves, the system was unworkable; with additional dollar reserves, the system was unstable.

An excerpt taken from “Currency Stability and a Country’s Prosperity: “Does a Mandatory Currency Stability Law Determine the Stability and or Prosperity of a Country?” by John E. Baiden.

As a result, US President Richard Nixon ‘closed the gold window‘ in August 1971, thereby disallowing foreign central banks from exchanging USD for the US Treasury’s gold. Notably, Nixon blamed other countries for their reluctance to share the military burden of the Cold War, which in turn contributed to the persistent balance of payments deficit.

What can we learn from this article?
Consider the following question:
– How far do you agree that the problems of the Crisis Decades were the result of American economic policies?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - How did the Gulf states dominated the global oil market - Global Economy Notes

How did the Gulf states dominate the global oil market?

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; Chapter 2: Reasons for problems of the global economy 

How will the future of petrostates in the Persian Gulf be? Find out more. [Video by Al Jazeera English]

The value of ‘Black Gold’: Oil
As the Allied powers concluded the Second World War (WWII) with the help of the USA, the latter recognised the strategic and economic value of oil, given its relevance to enable the continuation of war efforts then.

After the Yalta Conference, US President Franklin Roosevelt met the Saudi King Abdel Aziz on the cruiser USS Quincy on 14 February 1945. The Saudi King agreed to let the USA carry out port visits and build an airfield. At the same time, concession was given to the oil production by the Saudi-American Oil Company (Aramco). Notably, this collaborative relationship continued after WWII.

Since then, a special relationship between the two countries has evolved, due not only to mutual interest in reliable supplies of oil flowing to the West but also to their close cooperation in Middle East regional security. During the Cold War, Saudi Arabia considered atheistic Soviet Communist ideology to be the greatest threat to Muslim hearts and minds. Thus, the kingdom also opposed radical Arab leaders such as President Gamal Abdel Nasser of Egypt, who established cordial relations with the Soviet Union.

An excerpt taken from “Government and Politics of the Middle East and North Africa: Development, Democracy, and Dictatorship” by Mark Gasiorowski and Sean Yom.

During the Cold War, the USA rose to prominence by acting as a security guarantor for the six Arab states in the Persian Gulf (Bahrain, Oman, Qatar, Kuwait, Saudi Arabia and the United Arab Emirates). Having a reliable access to oil supply was vital in facilitating post-war economic reconstruction. As such, the USA was a key importer of oil, thereby keeping the Middle Eastern powers relevant.

US interest in the Gulf was also a by-product of the postwar economy in the developed world. Postwar reconstruction, a growing western consumer power, and the mass hydrocarbons at the centre of the world’s wealthier economies, and created an explosion in demand, with the unsurprising result that ensuring secure and reliable access to oil supplies became a central pillar of US and western foreign policies. […] From that time, the sheer size and quality of the Middle East’s reserves meant that the region could probably never have avoided becoming entangled in international politics as it did during and after the Cold War.

An excerpt taken from “The Economy of the Gulf States” by Matthew Gray.

Jockeying for position: Claiming ownership rights and petrodollars
Before the Organisation of Petroleum Exporting Countries (OPEC) was formed in 1960, the “Seven Sisters” dominated the global oil industry. In 1908, the British discovered oil in western Persia (which later came to be known as Iran). Six years later, the Anglo-Persian Oil Company (APOC) was formed, with the British holding 51% stake in it.

In the 1950s, in line with developments in the international oil business, companies were compelled to shift to 50:50 profit-sharing agreements. For the first time, oil revenues were truly substantial: the Bahraini ruler received oil revenues of about £2.5 million in the mid-1950s. In Kuwait, the 50:50 agreement of 1950 generated £60 million from the Al Sabah in the mid-1950s, while the Qatari rulers received about £5 million per year. The Saudi oil income reached about £20 million in 1950, but rose faster than that of any other country in the region.

An excerpt taken from “The Emergence of the Gulf States: Studies in Modern History” by John Peterson.

Initially, the OPEC was formed as a result of the Baghdad Conference of September 1960 to ensure stable oil prices in the markets. However, as its membership size grew (15 in the 1970s), the organisation began to challenge the “Seven Sisters”.

In 1968, the regional group similar to OPEC, known as the Organisation of Arab Petroleum Exporting Countries (OAPEC) was formed. Its rising dominance in the oil markets was made known when an oil embargo was imposed against the USA during the Yom Kippur War, thus triggering the Energy Crisis of the 1970s.

What can we learn from this article?
Consider the following question:
– How far do you agree that oil was the most important factor that shaped the global economy in the 20th century?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - What is the Generalised System of Preferences - Global Economy Notes

What is the Generalised System of Preferences?

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

Historical context: Disagreements over the MFN
Before the Generalised System of Preferences (GSP) was introduced in 1971, member nations in the developing world had concerns over the “most favoured nation” (MFN) concept. In particular, these countries argued that the MFN disincentivised more advanced counterparts from supporting tariff reductions and eliminations.

The most-favored-nation (MFN) clause embodied in article I of the General Agreement on Tariffs and Trade (GATT) was the defining principle for a system that emerged in the post-World War II era, largely in reaction to the folly of protectionism and managed trade that contributed to the global economic depression of the 1930s.

An excerpt taken from “Trade Preference Erosion: Measurement and Policy Response” by Bernard M. Hoekman, Will Martin and Carlos Alberto Primo Braga.

About the Generalised System of Preferences
In 1971, the GSP was introduced as part of the General Agreement on Tariffs and Trade (GATT). It functions as a system that grants products that came from developing countries lower tariff rates than those enjoyed under the MFN status. Ideally, the GSP was meant to boost export growth of developing countries and thereby advance economic development.

Unlike trading partners under the MFN status, the GSP features preferential tariffs that apply not only to countries with distinct historical and political relationships, but also to developing nations in general. Examples of such relationships can be observed in the case of US pro-trade policies with its Cold War allies in Asia, such as Japan.

Japan’s GSP
On 1 August 1971, Japan established the GSP, a month after the European Community had done so. The GSP scheme featured two regimes, namely the general preferential regime and a special preferential regime. The first type applies to preferential tariffs on import of designated items that originated from GSP beneficiaries. The second type focuses on duty-free treatment granted to import of designated items that came from least developed countries.

In principle, GSP preferences are not granted in the agricultural-fishery sector, given the weak competitiveness of Japan’s domestic industries. Items that are covered under the GSP are enumerated in a Positive List. Safeguards enable the government to suspend preferential treatment for items on the Positive List under certain conditions.

An excerpt taken from “Trade Preference Erosion: Measurement and Policy Response” by Bernard M. Hoekman, Will Martin and Carlos Alberto Primo Braga.

What can we learn from this article?
Consider the following question:
– How far do you agree that the Generalised System of Preferences have worked effectively in promoting trade liberalisation?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - What is the steel trigger price mechanism - Global Economy Notes

What is the steel trigger price mechanism of 1978?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 2: Reasons for problems of the global economy

Find out more about the protectionist policies set by past administrations in the USA that affected the steel industry [Video by MarketWatch].

Historical background: Intensified competition
In the post-WWII years since the 1950s, world steel exports have increased tremendously. Yet, the key exporter USA faced a decline. One possible reason raised by steel producers is traced to ‘dumping‘.

According to the Word Trade Organisation (WTO), ‘dumping’ refers to a practice in which the “price of a product when sold in the importing country is less than the price of that product in the market of the exporting country”. It is arguably a destructive policy that undermines the trading partner’s industry-specific interests.

Yet dumping is more often perceived as being harmful to the importing country. At its worst, price discrimination in international trade may be a weapon of economic warfare. An exporter may sell goods cheaply in a foreign market with the intent to drive out competition or to prevent the establishment of a rival industry. After competition has been eliminated, the exporter may raise prices to the detriment of the same consumers who had temporarily benefited from bargain prices.”

An excerpt taken from “The Reinstated Steel Trigger Price Mechanism: Reinforced Barrier to Import Competition” by Garry P. McCormack.

The ‘steel’ problem worsened as the world entered a decade of high oil prices in the 1970s. As a result of the twin oil shocks, inflation contributed to higher steel prices, which forced businesses to explore alternative materials like plastic and aluminum to replace steel in the production of appliances and cars. Consequently, the demand for steel declined.

As early as 1959, the United States imported more steel than it exported. By 1970, the U.S. share of world steel production had plummeted to 20 percent, down from 50 percent in 1945. Steel production then fell from 130 million tons in 1970 to 88 million tons in 1985.

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

The Eagle Strikes Back: Steel trigger price mechanism
In response to the American steel industry’s claim that foreign producers were ‘dumping’ steel in the US market, the Carter administration introduced the trigger price mechanism (TPM) in 1978. The TPM sought to identify steel imports sold at unfairly low prices, prompting legal intervention.

There were three aims of the TPM:

  • Support the enforcement of existing anti-dumping laws
  • Promote higher import prices and lower import volume to stimulate the domestic steel industry
  • Avoid the use of undesirable protectionist policies

True enough, the price of imported steel increased by 10% a year later. At the same time, US steel exports rose by 3.1 million tons and employment of steel workers increased by 12400.

Yet, there were shortcomings for the use of the TPM. One such consideration was the legality of selling steel below the trigger price, which led to a large influx of European steel in 1981.

It was legal to sell at less than the trigger price as long as steel was not sold at less than fair value. Apparently, many firms decided to do just that, as shown by the European requests for preclearance. Depreciation of European currencies relative to the U.S. dollar lowered European production costs relative to trigger prices. […] European Economic Community (EEC) steel producers increased their tonnage sold in the United States by 63 percent.

An excerpt taken from “Economic Commentary: The Steel Trigger Price Mechanism” by Gerald H. Anderson.

In January 1982, the Commerce Department processed 132 anti-dumping and countervailing duty cases filed by 7 domestic firms. Subsequently, the TPM was suspended. Notably, US protectionist policies took other forms as well, such as the imposition of steel tariffs under the Reagan administration.

What can we learn from this article?
Consider the following question:
– How far do you agree that the rise of trade protectionism was the result of American policies in the 1970s?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - How did the 1973 Oil Crisis affect the United States - Global Economy Notes

How did the 1973 Oil Crisis affect the United States?

Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 2: Reasons for problems of the global economy

Learn more about the 1973 oil crisis that hit the USA adversely. [Video by WFAA]

Weaponisation of the ‘Black Gold’: Yom Kippur War
During the 1973 Yom Kippur War, the USA launched Operation ‘Nickel Grass’, which was a strategic operation to send military supplies to its ally, Israel. Between October and November 1963, the USA aided Israel to counter a coordinated attack from Egypt and the Syrian Arab Republic. Armed with Soviet weaponry, these two nations fought back after their defeat in the Six-Day War of 1967.

Neither as well known as the Berlin Airlift nor as large as Desert Storm, Operation Nickel Grass airlifted thousands of tons of materiel and restored the balance of power, helping Israel survive the Soviet-backed assault from Egypt and Syria.

[…] The Egyptian Third Army pretended to conduct exercises until the Israelis began to ignore their machinations. Choosing the most holy day in the Jewish calendar, Yom Kippur, the Day of Atonement, in hopes of catching the Israelis off-guard, the Egyptians attacked across the Suez Canal.

An excerpt taken from “Air Warfare: An International Encyclopedia” by Walter J. Boyne.

Viewed as an act of defiance, the oil-exporting Arab nations that were part of the Organisation of Petroleum Exporting Countries (OPEC) imposed an oil embargo on the United States and other countries that helped Israel (such as Britain).

Four days after President Nixon’s authorisation of US aid to Israel, OPEC announced its decision to raise oil price by 70%, which was over $5 per barrel. Later, a total embargo on shipments of oil to the USA caused the oil price hike to $12 per barrel.

Oil shortage
By the summer of 1973, the USA experienced shortages of refined petroleum products, which were used extensively in activities such as refueling of automobiles. In response to the serious problem, the Emergency Petroleum Allocation Act (EPAA) was passed on 27 November 1973. The EPAA oversaw the control of oil prices and even rationing.

The retail prices of gasoline rose by 40% in November 1973. Long lines of cars were a common sight back then during the gas shortage. Gas stations revised their prices multiple times per day. Unfortunate drivers were met with signs that wrote “Sorry, No Gas Today” in the fall months.

On 17 March 1974, the Arab petrostates announced the end of the oil embargo against the USA. However, the economic repercussions were widespread. The 1973 oil crisis has caused prolonged economic stagnation. The American economy shrank by 2.5% and increased unemployment rate.

The American economy was shedding jobs at the fastest rate since the Great Depression. The deficit was climbing. Inflation had roared to life. Consumers were cutting back on spending. The export sector had slumped because of falling demand for American goods overseas. Factories were closing down. A noxious economic phenomenon known as “stagflation”—high levels of unemployment and inflation—had taken root. If relief did not come soon, feared some economists, then a financial catastrophe on a par with the Great Crash of 1929 could not be ruled out.

An excerpt taken from “The Oil Kings: How the U.S., Iran, and Saudi Arabia Changed the Balance of Power in the Middle East” by Andrew Scott Cooper.

What can we learn from this article?
Consider the following question:
– Assess the view that the 1973 oil crisis devastated the American economy.

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - What is the Reverse Course Policy - Global Economy Notes

What is the Reverse Course policy?

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

Historical context
On 15 August 1945, Japan surrendered to the Allied Powers, thus bringing the Second World War to an end. Under the leadership of the Supreme Command for the Allied Powers (SCAP), General Douglas MacArthur, Japan underwent a process of social and political reform. The USA aimed to ensure that Japan would not endanger international peace and security.

For instance, SCAP broke up the business conglomerates, also known as Zaibatsus, which used to support Japan’s warmongering conquests in Asia. In 1947, a new Constitution was established, which included a noteworthy Article 9 that prohibited Japan from maintaining a military force.

The postsurrender instructions given MacArthur recommended dissolution of “large Japanese industrial and banking combines or other large concentrations of private business control.” This concern reflected the fact that some ten zaibatsu families controlled nearly three fourths of Japan’s industrial, commercial, and financial resources. Obviously, any program to curb this power and redistribute the “ownership and means of production and trade” required a tremendous effort and will.

An excerpt taken from “The American Occupation of Japan: The Origins of the Cold War in Asia” by Michael Schaller.

The Red Menace: Cold War tensions in East Asia
However, the rise of Communist China in 1949 as well as the start of the Korean War a year later provoked the USA. Fearing the fall of Japan to Communism, the ‘Reverse Course’ (逆コース, gyaku kōsu) policy was launched, which implied a shift in American policies towards Japan from demilitarisation to economic reconstruction and remilitarisation.

The onset of the Cold War altered U.S. thinking about Japan, which suddenly took on a new strategic significance, and a “reverse course” was initiated in 1947. […] Behind the reverse course were concerns about the spread of communism. Global politics once again conspired to intervene in Japanese politics. The victory of Mao Zedong’s communist forces over the Kuomintang (the nationalists) in 1949, the outbreak of the Korean War in 1950, and the Soviet Union’s grip on Central and Eastern Europe created concern in Washington that communism could spread to a weak Japan.

An excerpt taken from “Comparative Politics: Interests, Identities, and Institutions in a Changing Global Order” by Jeffrey Kopstein, Mark Lichbach and Stephen E. Hanson.

From then on, the Japanese economy recovered and soon became one of the most prominent competitors in the global markets. Its economic miracle was heavily studied by academics.

What can we learn from this article?
Consider the following question:
– How far do you agree that the USA played a paramount role in realising the economic miracle of Japan after World War Two?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - Golden Age of Capitalism Revisited - Global Economy Notes

Golden Age of Capitalism: 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

A remarkable phase for the world economy: The Golden Age
Initially, the economic conditions were dire. Critical infrastructure, such as factories, schools and hospitals, were destroyed by bombing campaigns. People starved as food was scarce. Unemployment rates were high, giving rise to strikes in parts of Europe. Governments were in need of monetary assistance to begin their post-war recovery efforts.

Against the Cold War backdrop, the USA stepped up and offered financial aid (e.g. Marshall Plan) to countries affected by WWII. While its financial support to countries was mainly for economic recovery, the USA also capitalised on its economic might to counter the encroaching influence of the Communists led by the Soviet Union.

Between 1945 and 1973, the global economy grew rapidly. Many countries achieved pre-war industrial levels by the 1950s. In addition, the advent of international trade accelerated growth of the world economy.

Between 1950 and 1975 income per person in the developing countries increased on average by 3 per cent p.a., accelerating from 2 per cent in the 1950s to 3.4 per cent in the 1960s. This rate of growth was historically unprecedented for these countries and in excess of that achieved by the developed countries in their period of industrialization.

An excerpt taken from “The Golden Age of Capitalism: Reinterpreting the Postwar Experience” by Stephen A. Marglin and Juliet B. Schor.
Table - Golden Age of Capitalism - Maddison 1982
Table depicting the upward growth trend after World War Two [by Stephen A. Marglin and Juliet B. Schor].

Keep moving: The rise of automobiles
During the ‘Golden Age’, many American households reaped the benefits of post-war economic advancements. It became a norm for each household to own an automobile. Interestingly, Elvis Presley purchased a pink Cadillac in 1955. The Cadillac represented pinnacle of American automobile production.

The 1950s are seen by many as the “golden age” of the automobile in America, with absolute and per capita car sales hitting new heights, styling on a rampage, and the auto becoming a part of every aspect of American life, with drive-in restaurants, movies, churches, and funeral parlors.

[…] The post-World War II period also marks the beginning of a series of studies that attempt to analyze the hierarchical organization and managerial techniques that have been and are being applied in the automotive industry.

An excerpt taken from “The Automobile in American History and Culture: A Reference Guide (American Popular Culture)” by Michael L Berger.

The OECD: Club of the Rich?
On 30 September 1961, the Organisation for Economic Co-operation and Development (OECD) was formed with the aim to promote economic progress and world trade. OECD members were considered advanced economies that occupied most of the world’s Gross Domestic Product (GDP).

However, the growth of the global economy was not entirely smooth sailing. As the post-war allies of the USA recovered, notably West Germany and Japan, the open markets had intensified trade competition. These growing economies then challenged the economic supremacy of the USA in the 1960s.

One of several ironies in these developments was that they were led by Germany and Japan, former enemies of the US and its allies, who are now major challengers to US economic power and serious competitors in world trade. By 1960, Germany and Japan together accounted for only 6.3 percent of world trade, but by 1970, after a decade of unprecedented growth and export expansion, their share of world trade had increased to 18.8 percent. Over the same period the US share of world trade fell from 20 percent to 15 percent, a situation reflected by a rapidly growing deficit on its national trade account.

An excerpt taken from “Empire with Imperialism: The Globalizing Dynamics of Neoliberal Capitalism” by James Petras, Henry Veltmeyer, Luciano Vasapollo and Mauro Casadio.

What can we learn from this article?
Consider the following question:
– Assess the view that the first three decades after the Second World War was truly a ‘Golden Age of Capitalism’.

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - What is the Monnet Plan - Global Economy Notes

What is the Monnet Plan?

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 ‘Father of Europe’ Jean Monnet [Video by SEAGoRM]

A historical background of the Trente Glorieuses: The French economic miracle
By the end of World War Two, France was badly devastated. Infrastructure such as bridges and railways were destroyed. Industrial output was at 44% of pre-war level. The French had to rely on rationing. Given the urgent need for post-war economic recovery, Charles de Gaulle formed the General Planning Commission on 3 January 1946.

This Commission aimed to raise productivity, improve living standards, restore national production and increase employment. Key sectors were being identified and targeted, namely coal mining, steel, rail transport, electricity, farm machinery and cement. Subsequently, other sectors were included in the Plan, such as fertilisers, oil, shipbuilding and chemicals.

Enter Jean Monnet, who was later known as the ‘Father of Europe’. Monnet was appointed the Commissioner of the French Plan Commission. He came up with the ‘Modernisation and Re-equipment Plan’, which was more commonly known as the ‘Monnet Plan‘.

And the French economic plan became a landmark in the history of postwar Europe, helping to shape the structure of the Marshall Plan, the European Coal and Steel Community, the abortive attempt to construct a European Defense Community, and the Common Market itself. There was a direct line from the Monnet Plan through the Marshall Plan to the Schuman Plan and the Pleven Plan. All of them were, in varying degrees, Monnet Plans.

An excerpt taken from “Jean Monnet: The Path to European Unity” by Douglas G. Brinkley and Clifford Hackett.

A giant leap for France: The Monnet Plan
The Plan aimed to restore France’s production levels to pre-war standards. For instance, Monnet aimed to restore output level that of 1929 by 1948. Notably, the Monnet Plan was not simply a plan to modernise France and bring it back on its feet economically. In addition, the Plan was meant to shape the minds of the French.

The Monnet Plan was integral in accelerating steel production in France. The Monnet Plan aimed to attain an output of 15 million tonnes of steel, which exceeded the peak level in 1929. This ambitious target was to increase France’s international competitiveness, particularly against Germany. In other words, increased French steel exports should replace German steel exports.

The Monnet Plan had become a guideline to French policy towards the reconstruction of Europe as well as to domestic reconstruction. The Ministry of Foreign Affairs had tried to make it so from the outset and to draw out its implications for French national security.

[…] In 1950, at a level of pig-iron output of 7.76 million tonnes the total consumption of coke for all purposes by the French steel industry was 8.14 million tonnes. Of this, 4.66 million tonnes were domestically produced and 3.48 million came from imports. By 1952 pig-iron output had reached 9.77 million tonnes.

An excerpt taken from “The Reconstruction of Western Europe, 1945-51” by Alan S. Milward.

Between 1951 and 1973, France’s growth averaged 5.4% per annum. Compared to West Germany, its economic growth rate was considerably high, thus explaining why its thirty years after World War Two were termed as the ‘Glorious Thirties‘.

What can we learn from this article?
Consider the following question:
– How far do you agree that the post-war reconstruction of Europe can be explained by American aid?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.