Essay on Post-WW2 Economic Expansion: A Golden Age of Global Growth

Introduction

The post–World War II economic era, a period referred to as the golden age economic expansion, was a long era where global economic growth occurred. It commenced immediately after World War II and ended at the time of the 1973-1975 economic recession. The period was characterized by high economic growth in countries such as the US, Western Europe, East Asian, and the Soviet Republic. The countries earlier affected by the world war also experienced such growth. Such were countries like Greece, Austria, Japan, France, West Germany, and Belgium (Docquier et al, 2020). This essay will look at how the United States helped shape the post-World War II organization of the world economy in terms of development.

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Post World War II Economy

After World War II, the United States shaped its trade policies to focus on a turnaround of its economy and even that of the entire world. The Nation's resolve to engage with the rest of the world economically helped its economic revival a great deal. The opening up of its borders, which allowed in foreign goods at zero or very low import tax, helped check inflation occasioned by the global war. The move allowed the Federal Reserve to let these economical good times continue minus any increase in the interest rates. The move would later see an increase in both consumption and investment increase during the Asian financial crisis of 1997; hence no decline in the exports from America to Asia was realized (Lawton et al., 2018).

With the International Monetary Fund formation to offer emergency loans to nations with short-term balance-of-payment problems, and the World Trade Organization to help solve any trade dispute between countries, the US was keen to steer the world course of the world economy back to normalcy. The devastation of the Nation's physical and economic state by the war was so great, taking a toll even on the people's living standards. The ten years after the war registered very good economic growth and cultural prosperity (Docquier et al, 2020).

After winning the war, the US resolved to make people's lives better by raising their living standards, availing more business and job opportunities, and nurturing the new American culture. The unique culture that was emerging made the American people confident to take up its place and future in the global scene. A closer look at the happenings after the war will surely support the view that limited government intervention is the way to go for a country to prosper economically (Lawton et al., 2018).

The Economic Growth

The general opinion after the war was that the US would go into a depression. Some economists even predicted that at the end of the war, there would be unprecedented unemployment. Therefore, they advised that the government extend the wartime controls to help curb any incidence of unemployment and industrial dislocation. Some even predicted a case of noncompliance and violence among societies. Their opinion here was that the government should continue to play a leading role as the main driver of consumption and demand. That it should engage in such economic stimulus such as employing soldiers, buying in bulk from the factories, among others (Sankaran et al., 2019).

This view, however, did not materialize. The government, in 1944, pegged its spending at about 55 percent of the country's GDP. By the year 1947, government spending was just slightly above 16 percent of GDP (Scott, 2017). In the same period also, the federal tax earnings dropped by only 11 percent. This move, however, did not result in any collapse of private investment or consumption spending. Instead, there was realized a rise in consumption spending by almost 20 percent between 1944 and 1947. The spending on durable goods also recorded a more than double increase in real terms (Scott, 2017).

The Nation also realized a rise in gross private investment by 223 percent in real terms, which recorded a whopping six times increase in residential- housing expenditures. The Nation's private sector economy boomed, with the government halting the buying of arms and hiring security officers. Using the economic base, the war left behind as the foundation, and the US society unbelievably became wealthier after the war. Public policies, including the GI Bill of Rights that was passed in 1944, did approve veterans' financing to attend college, buy homes and farms. Such systems saw veterans make their livelihoods better and start and raise families (Sankaran et al., 2019).

The IMF and the WTO

To steer the world economy after the war, the United States fronted for the formation of the International Monetary Fund (IMF) in 1945, and the World Trade Organization (WTO) in 1995. The former was to ensure that the financial and the international monetary system were stable. The IMF was formed to facilitate the growth and expansion of foreign trade, strengthen the exchange stability, and ensure the correction of the nations' balance of payments issues. On its part, the World Trade Organization (WTO) was later formed in 1995 to formulate and oversee the obeisance of the rules that govern trade among the member nations. The WTO succeeded the General Agreement on Tariffs and Trade (GATT), formed in 1947 (Yoo, 2019). The WTO body helps to see a smooth trade flow by ensuring that countries have a fair and constructive outlet where they can solve their trade disagreements.

The IMF and the WTO complement each other in terms of the roles they play. A vibrant and functional internationals trade requires a strong financial system, while a smoothly flowing business will help lower the risks due to payment imbalances and economic crisis. These two bodies work in collaboration to see a vibrant system of foreign trade and payments open to all nations. With such a scenario, there is enabled economic growth, raised living standards, and reducing poverty among the world's nations (Hibben, 2020).

To date, the IMF and the WTO continue to play crucial roles in the globalization of the world economy. Globalization is the process through which more people, goods, capital, ideas, and services flow freely is today irreversible. This globalization process remains a vital tool in cross border economic integration and has been seen as a pillar in the entrenchment of democracy among nations. The two institutions hold the opinion that globalization is a major contributor to the economic growth necessary in the achievement of a sustained lowering of the world poverty levels (Yoo, 2019).

The Current State of Globalization

Globalization, which saw the United States push for the formation of the IMF and later the WTO, has lately been hit by a war featuring the policy threats and economic fundamentals. These happenings were witnessed during the Brexit in the United Kingdom and the Trump shocks, both in 2016. However, there are no signs that globalization will collapse anytime soon, even with the advancement of economic nationalism from certain quarters. For example, it was noted that 2017 was a year that ended with the world even more globalized. With new obstacles arising in 2018, which included tariff wars to blocked acquisitions, it was the battleground that shifted and not the globalization that fell (Sankaran et al., 2019).

Therefore, nations should observe the current global trend keenly to keep pace with the rest and ensure their economies are not left behind. The year 2017 saw strong growth in most of the world economies, which saw a rise in capital formation, trade proportions, people, and information crossing borders greatly increase. The year that followed saw major policy threats mature into realities. Political wars between the US and neighboring nations resulted in retaliatory tariff increases (Scott, 2017). Several countries heightened the screening of foreign corporate takeovers, stringent data localization policies, and tighter rules on immigration. A notable result was as an effect on international flows, reduced growth in trade, and Foreign Direct Investment (DFI). All these serving to reduce the gains made since the formation of the two bodies by the US (Hibben, 2020).

Conclusion

With the negative effects of World War II, the United States led a very noble and well-thought-out plan to establish a new global economic order by forming the International Monetary Fund. The move led to rapid economic development across economies, starting with the US, which saw its economy cushioned from the war's negative effects. Industrialization picked up again with the availability of loans in the US and all member countries. The predicted skyrocketing joblessness never materialized as there was an increased need for cross border trade, which pushed the nations into globalization.

In order, therefore, to curb trade wars, the United States again steered the World Trade Organization formation in 1995 to help avert trade disagreements among the trading partners. As much as the United States continues to lead the global economy, several changes and continue to be realized. The collapse of the Soviet Union in 1989 did not evoke a major restructuring of the world institutions. A combination of market economy and democracy was recognized as the foundation for nations' political and economic success going into the twenty-first century.

Decades later, things look very different. Contrary to the West (United States), after the collapse of communism, the western nations continue to look vulnerable. The vulnerability has led to increased insecurity, economic uncertainty, glaring domestic destabilization in previously stable countries, and intensified social unrest. The world order celebrated after World War II is slowly being overtaken by events. The obvious nations of Russia, China, Europe, and the USA may not even be the new world order pillars. Several countries are angling to acquire the ability to shake the existing power plans. Asymmetry and unfavorable effects of globalization may well be the background of a shift that will yield this new and polycentric world order. The challenge is how such a new arrangement can be effected amidst an array of regional powers all angling to edge each other.

References

Docquier, F., Turati, R., Valette, J., & Vasilakis, C. (2020). Birthplace diversity and economic growth: evidence from the US states in the Post-World War II period. Journal of Economic Geography, 20(2), 321-354.

Hibben, M. (2020). Martin S. Edwards. 2019. The IMF, the WTO, and the Politics of Economic Surveillance (New York, NY: Routledge).

Lawton, T. C., Rosenau, J. N., & Verdun, A. C. (2018). Introduction: Looking beyond the confines. In Strange Power: Shaping the parameters of international relations and international political economy (pp. 25-40). Routledge.

Sankaran, S., Haron, H., Ping, T. A., & Ganesan, Y. (2019). The Passage of Time to Develop Ethical Business Environment Through Malaysia’s Competition Act 2010 and Competition Agenda: Post World War II to Present Days. KnE Social Sciences, 459-471.

Scott, J. M. (2017). Invited essay: When global is local: The Great Plains, globalization, and the world economy. Great Plains Research, 27(1), 1-13.

Yoo, J. Y. (2019). Restructuring GATT Balance-of-payments Safeguard in the WTO System. Journal of World Trade, 53(4), 528-623.