CW - Cold War Economics (Lesson)

Cold War Economics

  • Bretton Woods Conference (1944): created International Monetary Fund (IMF) which lays the foundation for a modern monetary system; is based on the U.S. dollar.
  • IMF (World Bank) is designed to loan money to struggling countries to prevent economic crises and anarchy; it is instrumental in the 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 the U.S. off the gold standard effectively ending 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 the U.S. in retaliation for their support of Israel in the Yom Kippur War against Egypt and Syria.
  • The second price increase in 1979 during Iranian Revolution hurt the modest progress seen since 1976.
  • The price revolution in energy, coupled with the upheaval in the international monetary system, plunged the world into the worst economic decline since the 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 conditions for the collapse of communism in the late 1980s.
    • Pessimism replaced optimism in society in general.
    • The welfare system created in the postwar era prevented mass suffering and degradation.
    • Total government spending in most countries rose during the 1970s and 1980s.
    • Conservative resurgence in the late 1970s and early 1980s: Thatcher, Reagan, and Mitterand, by the late 1970s, exercised a powerful reaction against increased governments' role resulting 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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