Lecture 2b Political economy trade

Post-War Reconstruction and Global Order

• Post-war reconstruction was aided by US investment.
• International organizations were established to promote international trade, but the IMF and similar institutions prioritized free trade, limiting membership to countries committed to it.
• Regional economic institutions emerged, like the EU and NATO.
• The EU has grown into an economic force balancing US dominance.

Decolonization

• European empires rapidly dissolved after World War II.
• European states realized the difficulty of governing foreign territories, and violent anti-colonial movements forced them to reconsider their empires.
• The French were more aggressive in retaining their empire than the British, leading to bloody conflicts in Algeria and Vietnam.
• The US supported decolonization, granting independence to the Philippines in 1946 and urging other European nations to release their colonies. It opposed the British, Israeli, and French invasion of Egypt during the Suez Crisis.
• Many post-colonial states faced economic development challenges in the 20th century, with only a few becoming industrialized (Ireland, South Korea, Taiwan). Latin America and Africa witnessed weaker economic growth and remained heavily reliant on primary sectors like agriculture and raw materials.

US Economic Expansion

• The US economy experienced significant growth after World War II.
• By the war's end, the US accounted for half of global output.
• It dominated international finance, extending massive loans to Europe during the war.

Emergence of the Welfare State

• European countries established welfare states after the war.

The Three-World Structure

• The emergence of the three-world structure:
  • First World: Western Europe, US, Canada, Australia, New Zealand, Japan
  • Second World: Communist states of Eastern Europe and Soviet Russia
  • Third World: Developing countries

The Cold War

• Continued conflict with Russia evident from the war's final years.
• The concept of "Mutually Assured Destruction" emerged with the development of nuclear weapons by Russia.

Post-Cold War Developments

• The post-Cold War period saw the rise of new global threats:
  • Conflicts in the former Yugoslavia and Rwanda
  • The threat of fundamentalist Islam
  • The emergence of new economic powers like China.
• The idea of Western ideology triumphing (capitalism over communism) was prevalent for a time.
• Francis Fukuyama (1992) argued that there would be no new societal models, and everyone would adopt a liberal democratic model.
• As the 21st century approached, some analysts began to refer to the US as a "hyperpower" due to its military might, economic dominance, and cultural influence.
• However, the 21st century witnessed a decline in US power.
• Key features of the new global order included liberalism, legalism, and materialism (Ravenill, 2020).

State Transformation

• The post-World War II period was characterized by an active state role in safeguarding citizens from market fluctuations through extensive welfare programs.
• A shift from the welfare state to the competition state occurred near the end of the 20th century.
• This shift involved a move away from supporting failing industries and sectors towards a more globally competitive economy.
• Welfare-to-work initiatives replaced universal social policies of earlier generations.
• Different economic responses to the Great Recession and the COVID-19 pandemic emerged.

International Organizations and Globalization

• The second half of the 20th century saw the growth of international organizations:
  • United Nations (UN)
  • Economic organizations
  • Corporate and civic associations
• Multinational corporations dominated trade innovation in the late 20th century.
• In the 21st century, production shifted from assembly lines to sophisticated technologies and computer-based production, leading to customized products and globalized production processes.
• New products emerged and disappeared rapidly, sparking questions about sustainability.
• This led to outsourcing and specialization in trade, contributing to the rise and challenges of globalization and deglobalization.
• The emergence of artificial intelligence presents additional challenges.

Patterns in Economic Activity

• Across centuries, recurring patterns in economic activity can be recognized.
• The global economy of the early 21st century is a product of developments from previous centuries.