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World Economy After Ii World War

World War II broke out in 1939; once again there was destruction and death in the world. Due to the aerial bombardment or artillery attacks, cities were destroyed which caused economic and social disruption. The post-war period witnessed the emergence of the US as the dominant economic, political and military power in the Western world. Soviet Union also came into dominance.

The main aim of the post-war international economic system was to preserve economic stability and full employment in the industrial world. The United Nations Monetary and Financial Conference was held in July 1944 at Bretton Woods in New Hampshire, US. The Bretton Woods Conference established the International Monetary Fund (IMF) to deal with external surpluses and deficits of its member nations.

The International Bank for Reconstruction and Development (popularly known as the World Bank) was set up to finance the post-war reconstruction.

The IMF and the World Bank are sometimes referred as the Bretton Woods twins. The post-war international economic system is often described as the ‘Bretton Woods System’. It commenced financial operations in 1947.

Decolonisation and Independence

The European colonial rule ended with World War II. Most of the countries in Asia and Africa emerged as independent nations. But they reeled in poverty due to the long periods of colonial rule and the drain of resources.

The IMF and World Bank began to shift their attention towards developing nations. The developing nations could not reap the benefit from these institutions. Therefore, they organised themselves as a group––the Group of 77 or G-77 to demand a New International Economic Order (NIEO). It meant a system that would give them real control over their natural resources, more development assistance, fairer prices for raw materials, and better access for their manufactured goods in developed countries.

End of Bretton Woods and Beginning of Globalization

From the 1960s, the rising costs and overseas involvements weakened the US’s finances and competitive strength. The US dollar no longer commanded confidence in the world’s principal currency. It failed to maintain its value in relation to gold. This led to the collapse of the system of fixed exchange rates and the introduction of a system of floating exchange rates.

The industrial world was hit by unemployment that began rising from 1970s. From the late 1970s, the MNCs (Multi-National Companies) began to shift production operations to low-wage Asian countries. The MNCs invested in the countries such as China, India and Brazil, where the wages were low. These countries have undergone rapid economic transformation.

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