CWB - Cold War Economics (Lesson)

Cold War Economics.

  • Bretton Woods Conference (1944): created International Monetary Fund (IMF), Lays foundation for modern monetary system; based on U.S. dollar
  • IMF (World Bank) designed to loan money to struggling countries to prevent economic crises and anarchy; instrumental in post-war economic boom
  • United Nations created in 1945: Security Council (12 nations including 5 permanent members had powers to act; General Assembly had powers to advise (included all nations of the world)

 

Economic crises of the 1970s.

  • Nixon takes U.S. off gold standard: effectively ended the "Bretton Woods" system of international currency stabilization
  • Fixed rates of exchange abandoned
  • Great uncertainty replaced postwar predictability in international trade and finance

 

Energy Crisis.

  • Postwar economic boom fueled by cheap oil, especially in western Europe
  • 1973, OPEC (Organization of Petroleum Exporting Countries) dramatically increased oil prices in Europe and U.S. in retaliation for their support of Israel in the Yom Kippur War against Egypt and Syria
  • Second price increase in 1979 during Iranian Revolution hurt the modest progress seen since 1976
  • Price revolution in energy, coupled with upheaval in international monetary system, plunged world into worst economic decline since 1930s
  • "Stagflation" hit in the mid 1970s: increased prices and increased unemployment
  • Debts and deficits piled up quickly in the 1970s and 1980s
  • There were social consequences of the 1970s economic crisis
    • Created condition for collapse of communism in late 1980s.
    • Pessimism replaced optimism in society in general
    • Welfare system created in postwar era prevented mass suffering and degradation
    • Total government spending in most countries rose during 1970s and 1980s
    • Conservative resurgence in late 1970s and early 1980s: Thatcher, Reagan, Mitterand, by late 1970s, powerful reaction against increased governments' role resulted in austerity measures to slow growth of public spending and the welfare state

 

 

Review.

Review what you've learned thus far by completing the activity below.

 

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