Post-War Recovery and Economic Rebuilding

Introduction

In the gap of two decades, another World War broke out and it was between two major groups the Axis powers and Allied powers, this war went on for six years and it was fought on air, land, and sea. The casualties and deaths were more than the First World War and it is said to have crossed at least 60 million people or about 3 percent of the world’s population.

During World War 2, the battle was fought outside the battlefields and numerous cities were bombarded in Europe and Asia. After the war, there was a major change in the world order as it saw the emergence of the U.S. as the global power in militarily, economy, and politically and the dominance of Soviet Union which was transformed into a world power during the years of the great depression. Post- war the economic reconstruction began with Bretton woods conference.

Significance of Bretton Woods

Post-war economists came to a significant finding which is to have robust economic activity there should be a control in fluctuation of prices, output, and employment and this could be ensured by government intervention only. The other is to preserve the rate of full employment which could be done by controlling the flow of capital and labor by the governments. And to put these observations in motion, a framework was agreed upon at the United Nations Monetary and Financial Conference held at Bretton woods in New Hampshire, U.S.A. and under this conference, two institutions were set up namely International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank).

IMF and World Bank as monetary Institutions

The International monetary fund was instituted to manage the external surpluses and deficits of its member nations. The International Bank of reconstruction and development was created to assist nations financially so they could rebuild their economy post- war. Both of these institutions are at times known as Bretton woods institutions. They started their functioning in 1947 and their decision- making powers are largely concentrated with industrial powers such as the U.S. who has the right to veto over IMF and World Bank decisions.

Initial Post-War Years After Bretton Woods

The commencement of Bretton Woods gave a large boost to western nations and Japan trade. The world economy is said to be grown annually at over 8 per cent between 1950 and 1970. And it was observed that the unemployment rate as it averaged 5 percent in most industrial countries. The decades that followed witnessed the widespread of technology and development in enterprise. The developing countries wanted to catch up with industrial powers which made them invest in a vast amount of capital and import modern technology.

Decolonization and Independence of Nations Fuelled Economic Recovery

The next two decades were years of decolonization most of the nations attained independence and they started to dictate their economic development and ambitions but most of these nations were in poverty and they needed external financial help which was provided by the Bretton woods institutions. During these times, Japan and most of Europe had become self- sustainable and were less dependent on IMF and World Bank and this gave the Bretton woods institutions priority to focus on developing countries. But even though the former colonies are independent they are indirectly dependent on their former colonial masters’ ex: the US has the rights to exploit the natural resources and minerals of some developing countries.

What is the Group of 77 or G77?

When the economy was quickly recovering the most beneficiaries of the growth were the western nations and the developing countries were little benefited from growing economy. So they organized themselves into the group of 77 nations whose priorities were to address the growing concerns and to plan for their economy prioritizing the group member’s needs. They demanded a new international order (NIEO) which ensured their control over their natural resources, capital, labor, and investments.

Globalization and the extinction of Bretton woods

Even though the economies were on the path of recovery a change was taking place in the financial world. The US rising costs of overseas investments weakened its dollar strength and it was becoming less competitive compared to other currencies and it couldn’t sustain its value against gold. This situation led to the withdrawal of the fixed exchange system and it led to the system of floating exchange system.

During the 1970’s the overseas borrowings of nations from financial institutions reduced and they were supposed to borrow from Western commercial banks and private lending institutions which led increasing debt crisis and lower incomes, and poverty in the developing world. Unemployment began in industrial countries during the 1970s and the MNCs had to shift their manufacturing to low-wage countries.

China as The New Destination

China was cut out from the post-war world economy after its revolution in 1949. But China’s new economic policy and the collapse of Soviet Union made China the next big destination for overseas manufacturing industries because of the low wage and liberal policies in China it was a turning into a foreign industrial destination.

Conclusion

The world underwent unprecedented changes during the post -war economy reconstructing to the 1970s. The hegemony of major powers lessened and the world began to be dependent on each other for their domestic and foreign market countries like India, China, and Brazil going through rapid economic transformation and the capital flow from developed countries together made the world into adopting globalization as the new trend.

FAQs

Qns 1. List a few interesting facts about World Bank?

Ans.

• The World Bank is managed by a President and 25 Executives directors and the US, Japan, China, Germany, and the UK has the most voting power.

• Membership of 189 countries

• World Bank is working towards ending extreme poverty by 2030.-

• It is headquartered in Washington D.C.

• It is financially backed by subscriptions paid by member countries , earnings from its own assets

Qns 2. List a few facts about IMF.

Ans. IMF is an institution that works toward achieving growth and prosperity for all its 190 members. It supports the economic policies that promote financial stability across the world and help in monetary cooperation and encourages trade and increases productivity.

• IMF is the principal institution that advocates currency devolution for governments.

• The US contributes 20 percent of the total IMF budget.

• The largest borrowers from IMF are Portugal, Greece, Ukraine, and Pakistan.

• It is headquartered in Washington DC.