Week10 - Week 10:Reading Study Guide Jeffrey Frieden,...

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Week 10:Reading Study Guide Jeffrey Frieden, Global Capitalism , 339-412 When and how did the Bretton Woods system end? (pp. 339-342)? (Aug 5 th , 1971) The ´golden window´ closed (the gold standard finished.) The monetary system of the golden dollar would require the U.S. to sacrifice its domestic stance in order to maintain the international economy. For this to occur, Nixon would have to cause a recession by reducing wages and raising interest rates. Also at that time, imports were greater than exports and since dollars were losing value, American goods were expensive compared to other abroad. Due to all the factors mentioned above, Nixon decided to abolish the golden dollar system, and place an import tax in order to aid the U.S. economy during the coming adjustment period. What were the trends that undermined the system? (pp. 342-346) Deficit spending during the 1960´s lowered dollar value (lack of capital, lead to bill overprinting which causes inflation), so interest rates were raised: causing recession. Inflation remained high because of military spending (Vietnam War) and large social spending projects (ex: ¨anti poverty war¨) These actions artificially strengthened the purchasing power, but the dollar´s value remained low, so foreigners began to cash in large sums of dollars in exchange for gold. This became a problematic trend, that if left to continue would resolve in a lack of gold reserves. What were the forces challenging international trade and investment in the 1960s and 1970s? (pp. 346-351) Protectionism favored local firms that competed with multinationals. In Europe, skepticism of U.S. corporations lead to an increase in gov. limitations for foreign companies. Other challenges included: skeptics of F.D.I. (foreign direct investment) among many nations, unionized workers demanding better wages, and the breakdown of the Bretton Woods system. People´s reaction to the situation in Chile with Allende, along with ¨the American Challenge¨ served as negative sentiments towards large multinational corporations. What was Import-Substitution Industrialization (ISI), and what kind of nations pursued it? Mostly pre-industrialized nations similar to Brazil, Mexico, India, favored ISI. This system was an economical one comprising of an industry maximizing mentality. ISI intended to develop the economy through industrial development with minimal imports while reducing the nation´s dependency on global trade. The main problem was the need for basic materials required in industrial production that needed to be imported. Yet without an export counterbalance, money would be lost. What were the desirable and undesirable effects of ISI? How did the East Asian model differ from ISI? (pp. 351-356) DESIRABLE: Fast growth of industry and output Industrial investment was subsidized by the government
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Heavy tax breaks for industry ¨rationalization of protection¨ reduction of some trade barrier to encourage exporting.
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This note was uploaded on 05/12/2010 for the course GENB GENB 3353 taught by Professor Ruxendraprodan during the Spring '10 term at University of Houston.

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Week10 - Week 10:Reading Study Guide Jeffrey Frieden,...

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