Chapter2_Postwar Development Theory(bis)

Chapter2_Postwar Development Theory(bis) - Chapter 2...

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Chapter 2 Summary Introduction -world war 2 entered its fnal stage -allied leaders held conFerence to discuss structure to give to the world economy -split oF the economy into 2 blocs (Western capitalist + Eastern state-socialist b/c Soviet Union was absent at the Bretton Woods conFerence -Keynes made important contributions -desire to create Favorable (stable and Freely ±owing) international trading environment -rise oF the International Monetary ²und (IM²)+ International Bank For Reconstruction and Development (aka World Bank) to have protectionist policies when gov ! t could not pay For their imports -General Agreement on TariFFs and Trade (GATT) was created to reduce tariFFs and tax on imports (lowers barriers to trade amongst member states) -IM²: to give short-term loans to gov ! ts with balance-oFF-payments problems due to imports, capital ±ows and spending abroad so that trade activities will not be reduced -member govern ! ts pay into IM² and draw on its deposits when needed (later credits were extended beyond the members ! resources) -iF gov ! ts continued to have defcits, IM² could demand gov ! t reForms (IM² was world economy ! s conservative and parsimonious banker) -World Bank created to invest money in reconstruction oF the war-ravaged Europe (later turned its Focus on third world development) -US dollar was the universal medium oF exchange (the dollar was as good as gold and all gov ! ts accepted US dollars) -Bretton Woods conFerence Failed to create an international trade organization that can stabilize commodity prices + enForce compliance oF member states -no institution could discipline any gov ! t into improving its trade practices -GATT couldn ! t end protectionism (could only discourage it and give it come order) -GATT didn ! t deal with nontariFF barriers (ex: quotas) -tariFF barriers began to Fall so gov ! t started using nontariFF barriers to block trade (this undermined GATT) -Keynes recommended IM² be able to pressure balance-oFF-payment surplus countries to open up to trade -but IM² could only pressure countries it made loans to -pressure on surplus countries beneft the world economy by expanding trade, but pressure on defcit ones to curtail their spending slows the world economy The Impact of Keynes in the First World -Bretton Woods conFerence ! s concern was establishing Favorable international environment For economic growth -Keyne ! s ideas For economic development was used For the international system and domestic economies -he suggested to move away From classical and neoclassical economic models to a capitalist one -classical political economy stressed the role oF the Free market + individual liderty in economic success
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-division and specialization of labour allows resources to be used in the most efFcient + productive way -state interventions to relieve poverty would inhibit initiative and sti±e investment b/c of their reliance on increased taxes (so role of the state in the economy was minimal) -Smith identiFed 3 functions for the state: defense of national sovereignty, protection of
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This note was uploaded on 08/26/2010 for the course IDS 200 taught by Professor Pushkar during the Fall '10 term at McGill.

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Chapter2_Postwar Development Theory(bis) - Chapter 2...

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