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Friday, May 11, 2012

Just how Did the Actual Worldwide Overall Economy Get over World War 2? - Education

From your geopolitical and socioeconomic perspective, the final of WWII marked a first time of your new era in which the international community showed great resolve to be effective together in restoring the international economy. That is evident through international institutions that developed over the period 1944 to 1947 with broad goals of reconstruction in Europe, removing barriers to trade, and exchange rate stability. These initiatives had varying levels of success, but were all effective in one outstanding regard: instilling overarching faith and reliance on the market system.

Negotiations between Britain along with the U.S. were happening through the war. The immediate result was the Mutual Aid Agreement in 1941, which handled lend-loan agreements plus an exchange of ideas for collaborating among nations when peace was restored to rebuild a correctly functioning economy.

In April 1944, delegates from 44 nations met to draw economic policies to fulfill this goal in Bretton Woods, NH. Two international institutions were developed, in turn: the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) - now the World Trade Organization (WTO).

The objective of this meeting of delegates from the world's leading economies during the time was to provide stable monetary policy by fixing the exchange rates of member nations when it comes to either gold or dollars. Additionally, it sought to supply loans for reconstruction in Europe and, later, for economic growth initiatives in developing countries. In the process, an economic standard was developed that today is historically termed as the "Bretton Woods System."

Two other international institutions were developed in 1947 to stimulate world trade and investment: the General Agreement on Tariffs and Trade (GATT) and the European Recovery Aid (ERA). Twenty-three nations met in Geneva, Switzerland to devise GATT - the World Trade Organization since 1995 - and negotiated the decrease in tariffs on over 45,000 items, which represented nearly 50% of world trade. In 1949, GATT had 34 members, representing 80% of world trade. Inroads were created to move more detailed a free of charge trade system with the reinforcement with the Most-Favored Nation (MFN) clause, first seen under the Gold Standard from the late Nineteenth century.

A robust resolve in the international community as well as the formation of international institutions to support market processes played a huge role within this recovery from WWII. However, policymakers did not foresee the dollar gap that happened the mid-1940s, due to the running of trade surpluses by the U.S. as well as the resulting difficulty for Europe to export its goods, along with challenges in coming up with the dollars to purchase U.S. imports.

The IMF was essentially useless in their initial years as the financial crisis in individual nations prevented this supranational organization from fixing fx rates within specific par values towards the dollar or gold. Nonetheless, one modest success was its role in allowing 19 countries in Europe to devalue their currency in 1949 by approximately 30% to revive their balance of trade and improve its international competitiveness.

The achievements of GATT was limited, too. After 1949, there are no further meetings for the next five-years due in large part to disagreements from the U.S. stemming through the proven fact that Europe was allegedly reaping substantially more of the benefits from trade agreements.

Economic reconstruction occurred rapidly in Europe following WWII and led toe the Golden Age era in Europe. This remarkable duration of rapid growth and productivity is attributable, to some extent, towards the formation of international institutions that focused on stable monetary and trade policy. High levels of investment, full employment, and low inflation because of Keynesian policies drilled into these supranational institutions also played a predominant role inside economic recovery. Technological spill-overs from trade boosted labor productivity and, hence, real incomes throughout Western Europe.

Even though catch-up period was generally a Western European phenomenon and significant areas of Eastern Europe was under Soviet rule, the state the international economy after WWII ended was good overall. Japan had approximately 8% real GDP growth and Africa, 2.5%. Worth noting can be the fact that the IMF, the IBRD (World Bank), and GATT (WTO) all still play a crucial role in economic development today.

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