Tag Archive for: global economy

JC History Tuition Singapore - What are Special Economic Zones of China - Economic Transformation Notes

What are Special Economic Zones of China?

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Topic of Study [For H2 History 9174 Students]: 
Paper 1: The Development of the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 2: Transformation of East Asian Economies (China, 1978-2000)

Learn more about the Special Economic Zones like Shenzhen, Zhuhai and Xiamen [Video by CGTN].

Vanguards and forerunners: Introducing the SEZs
Between 18 and 22 December 1978, the 3rd Plenary Session of the 11th Central Committee of the Chinese Communist Party was held. During this session, the Chinese government began its pivotal journey in undergoing ambitious economic reforms to correct the errors of the Maoist economic system.

As part of Deng Xiaoping‘s economic reform that began in 1979, the government designated four Special Economic Zones (SEZs): Shenzhen (深圳), Zhuhai (珠海), Shantou (汕头) and Xiamen (厦门).

These SEZs were economically open areas that promoted technology transfer, foreign investment and export activities. China sought to harness its large pool of labour to produce labour-intensive goods for export. By doing so, it can accumulate foreign exchange earnings to meet the demands of its capital-starving economy.

In addition, SEZs were important in accessing foreign technology to stimulate growth. With the influx of foreign direct investment, these SEZs could then utilise foreign technology and production techniques to enhance the processes of domestic enterprises.

The designation of the above-mentioned four SEZs was intentional. Their locations were identified given their proximity to external economies, namely Taiwan, Macau and Hong Kong. There were contemplations of using these SEZs to integrate with these external economies that may eventually lead to ‘political reunification’. Besides, there was limited capital investment, thus the open-door policy could not be implemented nation-wide from the outset.

Case Study: Shenzhen
Among the four SEZs, Shenzhen became the largest and most successful zone (see Table 1.1). Its success could be attributed to its unique geographic location, given that it functioned as a channel between the mainland and Hong Kong. Furthermore, Shenzhen has abundant land resources that gave it much potential for industrial development.

Source: Pioneering Economic Reform in China’s Special Economic Zones: The Promotion of Foreign Investment and Technology Transfer in Shenzhen (Weiping Wu, 1999)

Three major work conferences were held to finetune the development strategies for Shenzhen (1981, 1985 and 1990). For example, the 1990 work conference emphasised the importance of the SEZs as the core of the coastal development strategy as well as the generation of foreign exchange. At that time, the central government directly supervised policymaking and appointments for Shenzhen.

Since the 1990s, Shenzhen’s industrial growth contributed to half of the growth in Gross Domestic Product. In 1994, contribution by the industry was 43 percent compared 11.8 percent in 1979 (see Table 2.2).

Source: Building Engines for Growth and Competitiveness in China: Experience with Special Economic Zones and Industrial Clusters (Directions in Development – Countries and Regions) by Douglas Zhihua Zeng.

In fact, Shenzhen has become one of the political battlefields between the reform and conservative factions in the central government. Its success or failure, at least in the early 1980s, would determine the fate of the reform. The SEZ promoters hoped to use Shenzhen not only to promote foreign investment and technology transfer, but also to learn how to adopt selected features of a market system into the socialist reform. Shenzhen, as well as other SEZs, represented in miniature the very essence of the new reforms.

An excerpt taken from “Pioneering Economic Reform in China’s Special Economic Zones: The Promotion of Foreign Investment and Technology Transfer in Shenzhen” by Weiping Wu.

In 1984, fourteen more coastal cities were designed as SEZs, such as Yantai (烟台), Tianjin (天津) and Shanghai (上海). These SEZs prioritised the promotion of foreign investment.

Join our JC History Tuition to learn more about the economic transformation of China and Japan under the theme of 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 Singapore - What is the Four Pests Campaign - China Economic Transformation Notes

What was the Four Pests campaign?

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Topic of Study [For H2 History 9174 Students]: 
Paper 1: The Development of the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 2: Transformation of East Asian Economies (China, 1978-2000)

Explore the historical significance of the Four Pests Campaign during Mao Zedong’s Great Leap Forward [Video by CNA Insider]

The second Five Year Plan: Great Leap Forward
In 1958, the Chairman of the Chinese Communist Party Mao Zedong (毛澤東) introduced the second Five Year Plan (1958-1962), also known as the Great Leap Forward. The ambitions Mao aspired to transform China from an agrarian society to a modern, industrial society. Mao even believed that China could outproduce Great Britain, the nation that experienced the Industrial Revolution.

Com[rade] Khrushchev told us that the Soviet Union will overtake America in fifteen years. Well, then, I can also say in a preliminary way that in fifteen years we, too, possibly, will overtake England.

[…] And what will China have in fifteen years’ time? China, possibly, will have 40 million tons. Calculate: doesn’t it show that the advantage is on our side? In this case, our camp already has two such countries: the Soviet Union, which will overtake America in fifteen years, and China, which will overtake England in fifteen years.

In the end, what is the bottom line of the speech? We need to have a fifteen year period of peace. Whatever one says, the aim is to use all means to strive for the fifteen year peaceful period. In this case, we’ll really be undefeatable in the whole world, and no one will dare to fight against us.

Excerpt from the unedited translation of Mao Zedong’s Speech at the Moscow Conference of Communist and Workers’ Parties, 18 November 1957.

Accelerated agricultural development and the ‘Four Pests’
Between 1958 and 1960, millions of Chinese citizens moved onto communes. The communes would function in a self-sufficient manner, covering key aspects like industry, agriculture, governance, education and even healthcare. The rural Chinese toiled day and night, in hopes of raising crop yield to impress their leaders.

As the Great Leap Forward was underway, Mao launched the ‘Four Pests’ campaign, also known as the ‘Four Evils’. It was a hygiene campaign to exterminate rats, mosquitoes, flies and sparrows. By doing so, the Chinese leader believed that the grains produced would be kept safe. The extermination of these ‘pests’ was also meant to keep out infectious diseases.

Four Pests Campaign - Poster 2 - JC History Tuition Singapore - China's Economic Transformation Notes
A poster calling for the Chinese youths to kill the sparrows and protect the grains.
https://www.theworldofchinese.com/2017/09/chinas-serial-sparrow-sorrows/
A poster that showed the four specific species targeted during the ‘Four Pests Campaign’, namely mosquitoes, flies, sparrows and rats.

For instance, the Chinese shot the sparrows and destroyed their nests. The farmers were asked to make as much noise as they could so that the sparrows were chased away. In doing so, these birds were forced to take flight for a sustained duration till they died of exhaustion. They also armed themselves with fly swatters, guns and gongs to kill these vermin. By the end of the Campaign, about 1.5 billion rats and 1 billion sparrows were decimated.

In 1958, the Chinese government established a bureau for the extermination of sparrows in Beijing and started a war on sparrows. Sticks, slingshots, and poison cookies were prepared, after which a large parade was held celebrating the extermination of the sparrows. As a result, over two thousand million sparrows were killed. This cull nearly annihilated the total sparrow population.

Did this campaign result in a successful rice harvest? No. As sparrows disappeared, as of 1959, the number of insects in China increased. In 1960, an attack of locusts caused half of the expected rice harvest to disappear.

An excerpt taken from “Platform Strategy: A New Paradigm For A Changing World” by Ki-chan Kim, Chang-seok Song and Il Im.

A disastrous consequence: Collapse of the ecosystem and Widespread Famine
Yet, there were serious repercussions as a result of this Campaign. Given the essential role of the sparrow in feeding on the locusts, the severe decline of the sparrow population allowed the locusts to thrive, devouring fields of grain. In addition to the use of questionable farming techniques, a mass famine hit China. An estimated of 30 million people died during the Great Leap Forward.

Join our JC History Tuition to learn more about the economic transformation of China and Japan under the theme of 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 Singapore - What was the Income Doubling Plan in Japan 1960 - Japan Notes

What was the Income Doubling Plan in Japan?

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Topic of Study [For H2 History 9174 Students]: 
Paper 1: The Development of the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 2: Transformation of East Asian Economies (Japan, 1947-1991)

Learn more about the economic transformation of Japan after the end of World War Two [Video by International Economics]

A political crisis: The Anpo protests
After Japan restored industrial production to pre-war levels in the 1950s, the Japanese government made thorough plans to embark on trade liberalisation. The leaders knew that reintegrating Japan into the world economy was next step forward.

However, the government was beset by socio-political unrest, particularly the Anpo protests (安保闘争) in 1959-1960. These protests were staged in opposition to the revised United States-Japan Security Treaty of 1952. This Treaty allowed the Americans to maintain military bases in Japan that allowed them to defend the nation in the event of an attack.

Although the protests had failed to prevent the Treaty from being revised, the Cabinet under Nobusuke Kishi (岸 信介) resigned on 15 July 1960. Even President Eisenhower’s planned visit to Japan was cancelled. The protests had far-reaching implications on Japan’s political landscape.

The protests were so extensive, and the issues at stake so deeply felt because actors on all sides – the U.S. government, Japanese conservatives and government leaders, and the expansive antitreaty movement – elevated the new security treaty as the key to enshrining or resisting visions of a Cold War democracy in Japan. Anpo became the ultimate clash between competing visions of Japanese democracy, which seemed irreconcilable.

An excerpt taken from “Cold War Democracy: The United States and Japan” by Jennifer M. Miller.

Economic renewal: Enter Ikeda
Kishi was succeeded by Hayato Ikeda (池田 勇人). As Prime Minister, Ikeda assumed a more conciliatory stance towards the political opposition, placing more focus on advancing the Japanese economy instead. On 27 December 1960, the Ikeda Cabinet reached a decision to launch the ‘Income Doubling Plan‘.

The Plan aimed to double the national income of Japan in ten years. To do so, several targets had to be reached. For instance, Japan had to reach 26 trillion yen in Gross National Product (GNP) [at the fiscal year 1958 price] within the next ten years. Also, Ikeda sought to attain full employment and raise the living standards of the Japanese population.

In summary, the ‘Income Doubling Plan’ was a long-term economic development plan to coordinate and systematise policies to facilitate industrial rationalisation, so as to achieve rapid economic growth.

The [Income Doubling Plan] was designed explicitly to quiet political protest after mass demonstrations against the government’s foreign policy. The Income Doubling Plan reaffirmed government responsibility for social welfare, vocational training, and education and increased spending considerably in these areas. It sought to eliminate low-wage jobs and regional income disparities. Yet the plan’s greatest innovation was to redefine growth and to include Japanese consumers as well as producers.

An excerpt taken from “Postwar Japan as History” by Andrew Gordon.

A force to be reckoned with: Japan as an economic powerhouse
True enough, the Ikeda Cabinet’s ambitions were realised. In the 1960s, Japan’s GNP grew at an annual rate of 10.6 percent in real terms. Evidently, Japan had surpassed the United States, which grew at an annual rate of 4.1 percent. In 1970, 30 percent of Japan’s GNP was attributed to the manufacturing sector, which was largely driven by the rise of the heavy and chemical industries. By the late 1960s, Japan became the world’s second largest economy, outpacing West Germany.

From being about a third of the American economy, measured in terms of GDP, in 1973 (and just over a tenth in 1950), the Japanese economy had become 40 percent as large by 1989. Japan first emerged as an industrial giant, with particular strength in electronic products, cameras, motorcycles and later motor cars, iron and steel, and shipbuilding; and a huge surplus in its manufactured goods trade balance, overtaking West Germany in the 1970s. The rise of Japan as a financial power, and of Tokyo as an international financial centre, was thus above all due to Japan’s rise to the rank of economic superpower.

An excerpt taken from “Crises and Opportunities: The Shaping of Modern Finance” by Youssef Cassis.

Join our JC History Tuition to learn more about the economic transformation of Japan and China under the theme of 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 Singapore - What is the steel trigger price mechanism - Global Economy Notes

What is the steel trigger price mechanism?

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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 steel industry in the United States [Video by Wall Street Education].

Historical background
By the late 1970s, the share of imports for steel in the United States (US) market rose to 18 percent. This was substantially higher than the 2 percent in the late 1950s. In response, there was mounting pressure on the White House for protectionist responses.

Led by US President Jimmy Carter, the US government launched a programme to advance the domestic steel industry. At the core of this programme was the ‘Trigger Price Mechanism’ (TPM). This mechanism was targeted at the prevention of ‘unfair’ price competition from imports.

How does the Trigger Price Mechanism work?
Given that Japan was being identified as the lowest cost producer of steel in the world, its production costs would be publicly declared as ‘Trigger Prices’. Should the price of an import shipment be below the ‘trigger price’, the US government was authorised to intervene and act against the foreign supplier on the grounds of suspected dumping practices (i.e. export priced below the market price of an importing country).

Notably, the TPM functioned well in industries that were guided by price leadership. Once a market leader sets its ‘leading price’, other competitors would follow voluntarily. In 1920, the Supreme Court made a decision in the United States Steel Corporation case, declaring price leadership as an acceptable practice under the US anti-trust law. In other words, if the White House declares the ‘fair prices’ to all producers, these prices will be observed. By doing so, price competition can then be minimised.

The TPM was in effect from 1978 to 1982.

With the recession of 1980, prices of imported steel fell by less than 1 percent, and the price of domestic steel declined by 5.5 percent. In the first quarter of 1980, U.S. Steel filed dumping complaints against five European producers. By basing the trigger prices on Japanese costs, the program gave the higher-cost European producers a license to dump. […]

Nevertheless, the real price of imported steel continued to decline, producing another round of complaints from the steel industry in 1982. In addition to allegations of dumping, the steel companies maintained that foreign steel companies were being subsidized by their governments and that countervailing duties should be imposed. This charge led to the permanent suspension of the trigger price mechanism.

An excerpt taken from “Has trade protection revitalized domestic industries?” by Daniel P. Kaplan.

Did the Trigger Price Mechanism benefit the US steel industry? Assessing its impacts on the world economy.
The TPM functioned as a form of trade protection to enhance the efficiency of the domestic steel industry. Since 1960, the steel industry has not been as profitable as manufacturing, on average. With rising debts and low profitability, the domestic steel producers struggled to accumulate finances. Even with the use of the TPM, the profits generated were inadequate.

In summary, efforts to modernise the steel industry under the Carter administration were disappointing. By 1984, employment in the steel industry fell by nearly fifty percent compared to 1968. Instead, the TPM contributed to an increase in the world price of steel, indicating an adverse impact on the global economy.

The trigger price mechanism has, however, altered the geographic pattern of imports, cutting into the Japanese share of the U.S. market to the advantage not only of European producers, which was part of the original intent, but of such fast-growing newcomers as Brazil, Korea, and Taiwan.

The most striking impact, however, of a trigger price mechanism based on Japanese costs, given the rapid appreciation of the yen, has been to raise prices. Trigger price levels rose by more than 10 percent in 1978, almost entirely as a result of the yen’s appreciation, and were scheduled to rise by another 7 percent on January 1, 1979. […] In the words of the EEC’s steel producers’ group, Eurofer, the trigger price mechanism “has raised steel prices all around the world.”

An excerpt taken from “The International Environment: Readings” by Eston T. White and Walter R. Milliken.

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 - What was the Bretton Woods gold standard system

What was the Bretton Woods gold standard system?

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Topic of Study [For H2 History Students]: 
Paper 1: The Development of the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Factors for the growth of the global economy (1945-1971)

Historical Context: The end of the Gold Standard
In 1913, the Federal Reserve introduced the Gold Standard. A law was passed, requiring the Federal Reserve to hold gold equal to forty percent of the value of the currency it issued. At the same time, it had to convert these dollars into gold at a fixed price of $20.67 per ounce of pure gold. Back then, the Federal Reserve held more gold to back the issued currency. This was known as ‘free gold’.

The quantity of ‘free gold’ could be influenced by the prevailing interest rates. For instance, higher interest rate encouraged Americans to deposit in banks, facilitating movement of gold from households to the Federal Reserve.

However, the Great Depression of the 1930s saw substantial outflow of gold from the Federal Reserve. Both individuals and business owners preferred to hold gold instead of currency. This economic crisis even influenced foreign investors to reduce their demand for USD as well. Over time, the quantity of ‘free gold’ fell, making it difficult for the Federal Reserve to honour its commitment to convert currency to gold. As a result, the Roosevelt administration suspended the Gold Standard on 20 April 1933.

The reaction of the global currency markets was instantaneous. In one day the dollar lost 10 percent of its value relative to the pound sterling, and 8 percent relative to the French franc. […] Commodity markets also reacted with force, reflecting the sentiment among market participants and the general public that getting off gold, and implementing some (or all) of the policies in the Thomas Amendment, would help raise prices and bring deflation to an end.

An excerpt taken from “American Default: The Untold Story of FDR, the Supreme Court, and the Battle over Gold” by Sebastian Edwards.

Bretton Woods Conference: System Renewed
During the Bretton Woods Conference in July 1944, the USA contemplated on replacing the Gold Standard with a new international monetary system to achieve economic stability. In particular, a system that fixed the US dollar (USD) to gold at the parity of USD$35 per ounce. All other foreign currencies had fixed, but adjustable, exchange rates to the USD.

Historically, countries sought credibly to commit not to change the value of their currencies by pegging them to a particular amount of precious metals – either gold or silver or a combination of the two. As the volume of global trade increased in the late nineteenth century, more and more countries joined the club of advanced nations that fixed their currencies to a given quantity of gold. When they did so, they effectively promised to maintain reserve of gold (or of currencies like the British pound that were considered as good as gold) and allow holders of their currencies to redeem bills at will at the fixed exchange rate.

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

In 1958, the Bretton Woods System was functional. Countries used USD as the international currency for economic activities. The USA honoured its commitment to ensure gold convertibility. However, this commitment was later put to the test when the USA experienced twin deficits.

What can we learn from this article?
Consider the following question:
– How far do you agree that the Golden Age of Capitalism was mainly the result of the Bretton Woods System?

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 - Why did Nixon end the Bretton Woods system

Why did Nixon end the Bretton Woods system?

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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

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 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 the Gulf states dominate the global oil market

How did the Gulf states dominate the global oil market?

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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 

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 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 - Golden Age of Capitalism Revisited

Golden Age of Capitalism: Revisited

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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.

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 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 - What is the Monnet Plan - Global Economy Notes

What is the Monnet Plan?

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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 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 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 - What was the Marshall Plan - Cold War Notes

What was the Marshall Plan?

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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

Topic of Study [For H2 and H1 History Students]: 
Paper 1: Understanding the Cold War (1945-1991)
Section A: Source-based Case Study
Theme I Chapter 1: Emergence of Bipolarity after the Second World War II

A crisis like no other: Post-war economic conditions
By the end of the Second World War (WWII), most European nations in no shape to restart industrial production. The devastation wrought by aerial bombardment had destroyed many cities, turning citizens into refugees that were housed in temporary camps. Many turned to the United Nations Relief and Rehabilitation Administration (UNRRA) for aid and assistance, such as food and supplies.

Germany was one of those worst hit in the region. In West Germany, the economy was affected by the population change due to WWII. By 1945, death casualties amounted to 4 million by 1945. Additional millions were killed while in Soviet captivity. Even so, the West German population, which was less than 40 million in June 1939, grew to about 48 million by 1950.

The war had turned Germany into a land of refugees, for immigration from the East was preceded by the mass evacuation of urban dwellers during the Allied bombing campaign. By the end of the war, close to 9 million residents of German cities had taken refuge in the countryside. One- third of them were unable to return until 1947. One million residents had abandoned Berlin alone.

[…] The catastrophic living conditions and the unwelcome presence of refugees and expellees not only invoked social conflict and public distress; the inadequate housing supply was an impediment to economic recovery, too. With the millions displaced by war trapped in rural communities, urban industry could not find sufficient labour to lift production. Much of the working time and energy of the existing urban workforce was diverted to rubble removal and reconstruction efforts, often in the context of administrative work assignments under the command of the occupation authorities.

An excerpt taken from “The Economic Consequences of the War: West Germany’s Growth Miracle after 1945” by Tamás Vonyó.

Rehabilitation and recovery:
In the words of British Prime Minister Sir Winston Churchill, Europe was a “rubble-heap, a charnel house, a breeding ground of pestilence and hate”. In his speech addressed to the audience at the United Europe Committee Meeting in 1947, Churchill called to “promote the cause of united Europe” to “sweep away the horrors and miseries”.

In response to this urgent need for aid, the United States launched the European Recovery Program, which later more commonly known as the Marshall Plan. It was a US-led program named after the Secretary of State George C. Marshall to give aid to Western Europe for post-war reconstruction.

As a four-year plan that ran from 1948 to 1951, recipient nations would have the finances and other forms of support to rebuild their industries and essential infrastructure.

Eventually, sixteen countries accepted the Marshall Plan (Austria, Belgium, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, The Netherlands, Norway, Portugal, Sweden, Turkey, the United Kingdom, and West Germany), which totaled $13.2 billion. In today’s dollars, the Plan would have amounted to a staggering $800 billion.

Between 1948 and 1952 (four and a quarter years), the United States transferred $13.2 billion to the sixteen Marshall Plan countries. Accounting for inflation over those years, the total was $14.3 billion (that is, in 1952 dollars). The aid was front-loaded, with 31 percent coming in 1948, 30 percent in 1949, 20 percent in 1950, 12 percent in 1951, and 8 percent in 1952. The largest recipients were the U.K. ($3.2 billion, or $32 billion today), France ($2.7 billion, or $27 billion today), Italy ($1.5 billion, or $15 billion today), and West Germany ($1.4 billion, or $14 billion today). Austria and Norway were the biggest beneficiaries per capita ($130, or $1,300 today).

An excerpt taken from “The Marshall Plan: Dawn of the Cold War” by Benn Steil.

Containment or recovery?
The Truman administration introduced the Marshall Plan not solely for the purpose of rehabilitating Europe. In addition, the support for post-war recovery was an effective approach to counter Soviet Communism.

The administration’s East European chiefs of mission would conclude that “any and all movements within world communism which tend to weaken and disrupt the Kremlin’s control within the communist world represent forces which are operating in the interests of the West and therefore should be encouraged and assisted.” These statements made clear that it was Soviet influence, rather than communism as such, that the United States would oppose through the use of economic and political levers.

An excerpt taken from “The Marshall Plan: Dawn of the Cold War” by Benn Steil.

Studying the importance of US aid
Although the Marshall Plan was no doubt significant in financing the post-war recovery of European nations, questions were raised over its extent of contributions as compared to other factors. As aptly described by Herbert C. Mayer, “like all economic miracles, the German Wirtschaftswunder (economic miracle) was the result of wise planning, hard work and well timed aid… the German recovery would not have been accomplished alone”.

Historical statistics suggest further that recovery had begun well before the currency reform and that it was not transformed into sustained growth until the early 1950s. […] the most important limiting factors of industrial expansion in post-war Germany, namely the urban housing shortage and the structural disproportions caused by the redrawing of borders, persisted for many years after 1948. Foreign aid did little to improve these conditions, for it was not substantial enough and it was not focused primarily on these critical bottlenecks.

[…] At the same time, fiscal policy was chiefly responsible for the price stability that made West Germany the object of envy in the Western world and which earlier accounts as well as most international observers considered to be the achievement of the German Bundesbank. In reality, and most of the time, monetary policy played second fiddle.

An excerpt taken from “The Economic Consequences of the War: West Germany’s Growth Miracle after 1945” by Tamás Vonyó.

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 and the Cold War. 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.