Question

Analyse the developments that happened across the world with the dawn of Globalisation during the mid-1970s.

Answer 1

Instructions:

• Discuss the transition to a floating exchanging system.
• Describe the economical challenges faced by the developing and developed countries.
• Explain the rapid economic growth of the low-wage countries.

Solution:

The post-war world saw significant shifts with the dawn of Globalisation during the mid-1970s. The major developments of the period include:

• Floating economic system: From the 1960s, the finances and competitive strength of the United States declined due to its overseas involvements.As a result, the US dollar could not maintain its value in relation to gold. The fixed exchange rates collapsed and a system of floating exchange rates was introduced.
• Debt crisis in developing countries: Developing countries could earlier seek assistance from international financial institutions for loans and development. They were now forced to take loans from Western commercial banks and private lending institutions. This situation led to debt crises, lower incomes, and increased poverty in developing countries, particularly in Africa and Latin America.
• Shift in the world’s economic geography: Unemployment began to rise in the industrial world and remained high until the early 1990s. MNCs began shifting production operations to low-wage Asian countries such as China in the late 1970s. Low-wage countries, such as India, China, and Brazil, thus witnessed rapid economic transformation with increased global trade and capital flows.