Contemporary World

Contemporary World
Bretton Woods System-
World Leaders – global economic system to ensure longer-lasting

peace.
Network global fi nancial institution – economic independence and

prosperity.
Meynard Keynes (Keynesian
Economics)
Economic Crises occur NOT when a country does not have

enough money, but when money is not being spent and thereby
not moving.
Governments have to reinvigorate markets with infusions of

capital.
Active role of the government in managing the ‘spending’

Delegates of Bretton Woods agreed to create International Bank
for Reconstruction and Development (IBRD) – World Bank.
(rehabilitation)
International Monetary Fund (IMF) – global lender of last resort
After Bretton Woods ( countries = GAT T for reducing tariff s, and

Trade in 1947. Remove hindrances to Free Trade.
Neoliberalism and Its Discontent
Government poured money into their economies- high point of

global Keynesianism (1940’s to early 1970’s).
People purchase more goods and, in the process increase demand

for the products.
Theory: As prices increased, companies would earn more, and

would hire more money to hire workers.
In 1970’s – prices of oil rose sharply, as a result of Organization
of Arab Petroleum Exporting Countries (OAPEC)
The members of OAPEC - imposed embargo in response to the

decision of the US and other countries to re-supply military with
needed arms during the Yom Kippur War.
Embargo – an offi cial ban trade or other commercial activity with
a particular country.
Yom Kippur War – Arab-Israeli War

Oil Embargo
Economies that were reliant on oil were aff ected.
Keynesian Economics? -
Stagfl ation – decline in economic growth and employment --

sharp increase in prices.
Friedrich and Milton Friedman
Neoliberalism
A codifi ed strategy of the United States Strategy of the United

States Department, the World Bank, the IMF and eventually the
World trade Organization.
Tariff reduction under the GAT T – Washington Consensus

Washington Consensus
G loba l Economic Policies
-Advoca ted for m inima l g overn ment spen din g to reduc e gover nmen t debt
P ri vati za ti on of gover nment-c on trolled s er vices like water, power,

c ommu ni ca tion s, a nd tran spor t believing th at th e free m arket ca n
p rodu ce th e best results.
O pen Tari ff s a nd open u p their economies , argu ing th at it is the quickest

way to progress .
Certain industries will die – “shock therapy ” – necessary for
long-term growth.
Neoliberal politicians ( Reagan and Thatcher )

Defects of Washington Consensus
1. Post- Communist Russia – Collapsed of Communism in the

1990 s – IMF called for privatization of all government
industries. This move would free the industries from corrupt
bureaucrats and pass them on to the more dynamic and
independent private investors.
2. Groups who had accumulated wealth under the previous

communist order had the money to purchase the industries.
Economic elites relied on easy access to government funds to
take over the industries.
The Global Financial Crisis /Challenge to
Neoliberalism
Great Depression of 2007-2008
Traced to the US removing various banking and investment

restrictions.
Promotion of free market – authorities failed to regulate bad

investments occurring in the US housing projects. Cheap housing
loans.
Building homes beyond their fi nancial capacities.

Sometime in 2007 home prices stopped increasing – supply and
demand. Apparent that families could not pay off their loans.
Tipping point – 2008 – Lehman Brothers collapsed
Spread beyond United States – Investors were foreign

governments, corporations and individuals. The loss of their
money spread like wildfi re back to their countries.
Iceland’s banks – depended on foreign capital
Spain and Greece – heavily indebted (almost like 3 r d world

countries)
Greece has been forced by Germany and the IMF to cut back on
its social and public spending.
Pensions, health care, various forms of social security – felt by

the poor.
Obama’s stimulus package
Keynesian- style stimulus package of Obama during his fi rst

months in offi ce.
Europe – upheavals
Unfairly blaming immigrants – stealing jobs and leech on welfare

(Marine Le Pen’s Front)
Resentment and Racism.

Assignment
Based on our discussion, compare and contrast the principles of

Keynesian economics and Neoliberalism which was advocated by
Friedrich Hayek and Milton Friedman?
In word format, 12 font, double-space. Don’ t forget to write your

subject and section and time. Send it as an attachment to your
e-mail @[email protected]

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Bretton Woods System-

World Leaders – global economic system to ensure longer-lasting

Network global fi nancial institution – economic independence and

Economic Crises occur NOT when a country does not have

Governments have to reinvigorate markets with infusions of

Active role of the government in managing the ‘spending’

International Monetary Fund (IMF) – global lender of last resort

After Bretton Woods ( countries = GAT T for reducing tariff s, and

Government poured money into their economies- high point of

People purchase more goods and, in the process increase demand

Theory: As prices increased, companies would earn more, and

The members of OAPEC - imposed embargo in response to the

Yom Kippur War – Arab-Israeli War

Economies that were reliant on oil were aff ected.

Stagfl ation – decline in economic growth and employment --

A codifi ed strategy of the United States Strategy of the United

Tariff reduction under the GAT T – Washington Consensus

G loba l Economic Policies

P ri vati za ti on of gover nment-c on trolled s er vices like water, power,

O pen Tari ff s a nd open u p their economies , argu ing th at it is the quickest

Neoliberal politicians ( Reagan and Thatcher )

1. Post- Communist Russia – Collapsed of Communism in the

2. Groups who had accumulated wealth under the previous

Great Depression of 2007-2008

Traced to the US removing various banking and investment

Promotion of free market – authorities failed to regulate bad

Building homes beyond their fi nancial capacities.

Tipping point – 2008 – Lehman Brothers collapsed

Spread beyond United States – Investors were foreign

Spain and Greece – heavily indebted (almost like 3 r d world

Pensions, health care, various forms of social security – felt by

Keynesian- style stimulus package of Obama during his fi rst

Unfairly blaming immigrants – stealing jobs and leech on welfare

Resentment and Racism.

Based on our discussion, compare and contrast the principles of

In word format, 12 font, double-space. Don’ t forget to write your

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