International Bank for Reconstruction and Development.
Primary mission: assist in the rebuilding of post-War Europe by providing cheap credit.
But: Marshall Plan from the US soon overshadowed this agenda.
IBRD turned its focus to assisting developing nations in the Third World.
Assisting in raising funds for development:
- IBRD scheme: sales of bonds in the international capital markets;
- IDA [International Development Agency] scheme: raising loans for wealthy subscriber countries.
Collapse of Bretton Woods
By late 1960ís the system was under serious strain.
Collapsed in 1973.
US are blamed.
Lyndon B Johnsonís funding of Vietnam War and welfare programmes.
Worsening inflation and bad US trade position [by spring 1971 US was importing more than it was exporting].
Dollar was going to be devalued.
DM would have to be revalued.
Nixon suspended Dollar convertibility into gold.
Conclusion; system could NOT work with KEY currency, the US dollar, under speculative attack.
Floating exchange rate regime
Jamaica Agreement formalised it in 1976.
- Floating exchange rates were deemed acceptable;
- Gold was abandoned;
- IMF quotas were increased;
Exchange rate volatility since 1973 is due to:
- Oil crisis in 1971, i.e. OPEC quadrupling price of oil [worsening US position, inflation=>devaluation of US dollar];
- Loss of confidence in the dollar after US inflation in 1977, 1978;
- Oil crisis of 1979, i.e. OPEC doubling the price of oil;
- Unexpected rise in the dollar between 1980-85;
- Dramatic fall in dollar against Yen and DM, 1985-87, and against the Yen, 1993-95;
Globalisation is generally understood to be a process of worldwide economic integration. BUT--there IS a lot more to it.
Factors that have contributed to globalisation include:
- increasingly sophisticated communications and transportation technologies and services;
- mass migration and the movement of peoples;
- a level of economic activity that has outgrown national markets through industrial combinations and commercial groupings that cross national frontiers;
- international agreements that reduce the cost of doing business in foreign countries.
Globalisation offers huge potential profits to companies and nations, but has been complicated by widely differing expectations, standards of living, cultures and values, and legal systems as well as unexpected global cause-and-effect linkages.
Date: 2015-01-29; view: 162