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Growth in the Global Economy The Mathematician Matthias Production

Factor Evidence Impact Evaluation

USA Role Provision of liquidity through MarshallPlan:3-6% of recipients NY

Opening up of market to absorb WesternEuropeans and Japaneses exports

Provided Western European and Japanwith military as well as security

arrangement via NATO

Facilitated rapid recoveryStimulated recovery

Sustained demand to thepoint where by there is a

export led boom (e.g.Western European export

revenue:$8-$16 billion)

Increased productivity Fall in militarily spending

thus more resources can

be channelled to the

consumer sectors

State Intervention - Investing heavily on infrastructure(domestic economies)

- Smoothen out cycles of boom and bust- Stimulus spending in times of growth

- Reduce inflation- Developed industries- Brought about political

and economic stability

USA

- This concept originated by theIsa during the Great depression

and this was one of the mainfocus by many European nation

to boost EG

Bretton Woods

System

IMF

- System of fixed exchange rate- Stabilized other countries BOP

GATT

- Promote freer trade(trade Liberalization)

- Stability and predictabilityin the exchange rate

system thus creating a

favourable climate for

trade as well as

investment

- Tariff cuts allow thepeople to trade at a low

cost

USA

- Lion share of contribution toIMF and World Bank

- Initiated GATT and all thenegotiation that GATT

underwent

- Indirectly forces their allies tofollow their currencies as having

USD then was like having Gold

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Growth in the Global Economy The Mathematician Matthias Production

Factor Evidence Impact Evaluation

Liberalisation of

Western Europe

Labour

- Increased the number of migration fromthe less productive economy to more

productive economy

MNCs- Brought FDI into Western Europe and

these FDI usually provided capital goods

Labour

- Promoted internationaldivision of labour which in

turn increase productivity

MNCs

- Capital + Skills + Jobs +Technological imports

promote productivity and

thus increasing the

countrys nation income

These control and stabilising force on

increasingly liberalising and globalising

world economy was provided by

international coordination, led by the

USA.

Most MNCs are US based and that by

1974, there are 125 US-based banks

aboard. This shows how much the world

rely on US for Investment especially so

because the US-based MNCs provided

these nations with $172 billion worth of

goods and services.

Availability of Cheap

Oil

Oil is the main of energy since it is cheaper as

compared to petroleum

- Middle East supplied 43% of European oilimports and by 1950 the figure was 85%

- Consumption level (W.E) increased from13.5% in 1950 to 32.3% in 1960

- Consumption level (Japan) increased from6.5% to 39.6%

Reduce COP and thus fuelled the

expansion of advanced industries

USA

- Political and diplomatic clout ofthe Americansthe Americansmaintain good relations with the

Middle Eastern Countries

especially those in the OPEC so

that these nations will helped

them by providing cheap oils to

these nations

- This fuelled Western prosperityand enabled the US to promote

the reconstruction of Western

Europe and Japan

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Growth in the Global Economy The Mathematician Matthias Production

Factor Evidence Impact Evaluation

European Economic

Recovery

- Coordinate the post-war recovery inEurope ($1.6 billion flowed into Germany

in the form of US credit for purchase of

food and industrial raw material as part of

Marshall Plan)- Expand market to sell products- Economic integration (allow the people in

W.E to enjoy EOS)

- Reduction of tariffs andquotas

- Increased competitiveness- Sustain the gold standard

USA

- Economic clout of the USA- USA used their economic

abilities to close up the

economic gaps between themand the Western Europe so that

they can gain trade benefit in

the long run.