Intl economic and political challenges 1970s 90s Lesson

What did the fixed exchange rate of the dollar cause?

US companies became less competitive

During the 1960s, who became increasingly competitive, challenging the US?

Europe and Japan

What did the cost of the Vietnam War cause?

significant increase in US deficit and a soaring inflation

When and what was the ‘Nixon Shock’

August 1971

ended the convertibility of the $ into  gold

When and why did Nixon devaluate the dollar?

December 1971 and in 1973, to boost US  firms’ competitiveness. 

What caused major global financial insecurity in the early 1970s?

* US monetary decisions
* coupled with the impacts of the oil shock of  1973

When was the Bretton Woods System terminated? Meaning?

By 1976

Exchange rates were no longer fixed but kept floating,  following the markets, which means that the financialization of the economy grew.

Why did this strategy benefit the US?

massive devaluation of the dollar enabled it to finance public  spending and commercial imbalance.

When was the first oil crisis and who caused it? How? What did it lead to

* 1973, OAPEC (Organization of Arab Petroleum Exporting Countries)


* announced a 5% cut in oil production + additional cuts of 5 % each month until Israel surrendered the lands it occupied since 1967
* Later on, the OAPEC increased the prices of oil by 70%, and then again by  more than 110%, as members decided that oil prices would be set by the producing nations  and not by the Western oil companies. Most middle-eastern oil companies were nationalized.

What is stagflation?

prices are rising, currency is losing value, and no real growth in the economy is occurring to create jobs.

When, by what was caused and what was the second oil shock?

* 1979


* Iranian Revolution
* Members of the OPEC doubled the prices of oil over the next 18 months. The spike in price  caused fuel shortages similar to the 1973 oil crisis

How many petrol stations had no fuel in 1979?

half

What were solutions put forward to deal with the economic crisis?

* NIDL, TNCs outsourced their production in Asia
* low labour cost with the GATT
* revoluition of tranportation means (container ships)

What happened in Western countries ? What were some solutions found?

* celeration of the de-industrialization of Western countries, increase of unemployment,  with massive social consequences as in the North of France or in the Manufacturing Belt  (then Rust Belt). + Workers demonstrated Ex. Winter of Discontent (1978-79) in the UK. - Western
* began to  adopt Keynesian policies to limit the social  effects of the crisis, but it didn’t solve the economic crisis and aggravated the States’ deficits. Ex. Gerald Ford and Jimmy Carter in the US, Chirac in France 1974-76.

What are Keynesian policies?

massive public investments in the economy

What did neo-liberal economists think?

the State has to intervene less in the economy  to reduce its debt, to favor of the self-regulation of the financial markets, and to reduce the  money supply to reduce the inflation. 

Who applied neo-liberal economy theories? How?

* UK with Prime Minister Margaret Thatcher (1979-1990), and the US with President  Reagan (1980-1988)


* Reduction of taxes and of social expenses, deregulation to suppress all the rules deemed harmful for the economy, privatization of national companies in the UK

What are ‘Reaganomics’ based on?

the Trickle-down theory: tax cuts for the wealthiest economic strata would indirectly  benefit the broad population, and ultimately the poorest.

What pillars were Reaganomics built on?

* Reducing Government spending
* Trimming taxes
* Deregulating the market
* Reduce inflation

Which countries adopted neoliberal policies, following US’ relative success adopting these policies?

France and Latin American countries like Chile

What did the IMF and the World Bank do regarding communist or previously communist countries?

set conditions for their loans with requirements to privatize state-run industries, devalue their  currency, decrease trade barriers, and restrict governmental spending

Who began reforms in 1978 and what were they?

* Deng Xiaoping
* reforms meant to  develop China’s economy while maintaining the Chinese Communist Party in power. Deng introduced some elements of liberal capitalism in China’s economy, mainly through four sectors

What were the four elements of liberal capitalism introduces into China’s economy?

4 modernisations:

* Agriculture (de-collectivisation)
* Industry (Allowed private businesses and foreign companies to open in China)
* Defense ( Modernized the military and built more nuclear weapons)
* Technology (Invested in education, built a space program, and welcomed foreign  technological ideas and Investments (FDIs) from TNCs)

Where were modernisations in industry and technology concentrated?

Special Economic  Zones (SEZ) in Southeastern coastal China then the entire coastline opened to free trade and foreign investments.

When was the One Child Policy implemented in China?

1979

What were the consequences of Deng’s reforms?

* living standards rose but so did inequalities
* inflation+ corruption + lack of political freedom
* youth protests who asked for democracy and asked for political freedom -→ deaths during protests

What did the new form of capitalism that Deng approved associate?

economic liberalism and the authoritarian politic and economic  interventionism of the State

Who did China sign trade agreements with?

with the EEC, Japan and the US (1978), with the ASEAN in 2004

When did China emerge as an emergent country? How much growth did this represent?

* 1990s - 2000s
* more than 10% of economic growth a year

What was China’s nickname in the context of the NIDL?

 “workshop of the world”: key economic partner while the economy became globalized

In what year did China join the World Bank and IMF? And the WTO?

* 1980
* 2001

Which Southeuropean countries were considered as authoritarian regimes until 1974? Which term can qualify what they went through from 1974?

* Portugal, Spain, Greece
* democratisation

When and how was Greece democratised?

* November 1973
* students started mobilizing against the regime, and the former Prime minister, Constantine Karamanlis, came back from exile to support the reinstatement of democracy.

What was the Greek authoritarian regime nicknamed?

“Regime of the Colonels”, or “Greek junta”

When and how was Spain democratised?

* April 25th, 1974
* a coup was organized with the military, led by general Spinola. Salazar’s regime collapsed and the country gradually transitioned to democracy, adopting a formal Constitution in 1976.

When and how was Portugal democratised?

* Francisco Franco eventually died in 1975.
* King Juan Carlos and his Prime Minister Suarez crafted new democratic institutions, leading to the adoption of a Constitution in 1978. Spain became a parliamentary monarchy.

When was the EEC created and with who?

* European Economic Community created with the Treaty of Rome in 1957: creating a common market for a strong Europe
* France, Germany, Italy, Belgium, The Netherlands and Luxembourg

What were the 4 freedoms that the Treaty of Rome created?

* people
* capital
* goods
* services would move freely in the zone
* + any corporation could invest freely in another country.

Compromise had been found to balance national interests with federalism (strong European government):

* The Commission (Brussels), the executive arm of the EEC, represented the European interest.
* The Council of Ministers of the EEC (Brussels) acted as a legislative power.
* The Parliamentary Assembly, later renamed European Parliament (Strasburg).
* The Treaty also created a Court of Justice (Luxemburg): judiciary power

What was the role of the Commission in Brussels?

Each appointed member (1 per country) would represent the European interest and not their national’s. The Commission’s role was to draft legislation for the EEC, make sure EEC treaties were applied by members.

What was the role of the Parliamentary Assembly, later renamed European Parliament (Strasburg)?

Advisory role until the Single European Act (1986) granted it some legislative and budgetary powers. From 2008 (Treaty of Lisbon), the EP became a lower chamber of the EEC, on equal footing with the Council of Ministers.

When and what was the Hague summit?

* 1969
* a negotiation as to the admission of 4 new members: Denmark, the UK, Ireland and Norway

When were the UK, Ireland and Denmark admitted?

1973

When did Greece, Spain and Portugal join the EEC?

* Greece in 1981
* Spain and Portugal in 1986.

What did the EEC bring to new members of the EEC?

* EEC acted as a stable political framework for the three new democracies
* allowed for the catching up of poorer parts of Europe. (Financial aid by richer areas to deindustrialized or underdeveloped countries.)

When was the ERDF created ? What does the acronym stand for? What was its purpose?

* 1975
* European Regional Development Fund
* to improve roads and communications, attract investment and create jobs.

1979 brought two other major political innovations for the EEC

* Members of the European Parliament would be elected through direct suffrage, with an organization in European parties (Socialist, Conservative, Greens, etc), instead national parties
* European Monetary System (EMS), a regional monetary system, making national currencies interdependent.

When was the Schengen Area created? What is it?

* 1985
* common border control

When and what was the British rebate?

* Since 1985 to 2020
* financial mechanism that reduced the UK's contribution to the EU budget in effect since 1985. It was a reduction of approximately 66% of the UK's net contribution

What did the UK support and challenge in EEC economy?

* supported the completion of the Single Market
* challenged financial transfers and economic solidarity.

When did the USSR fall?

December 26, 1991

Reunification of Germany

October 3rd 1990

When did the Berlin wall fall?

November 9, 1989

How and when did the EEC become the EU?

With the signing of the Maastricht Treaty in February 1992

What did the Maastricht Treaty do?

* increased cooperation between EU countries in European citizenship, common foreign and security policy, Justice and Home Affairs.
* paved the way for the creation of a single European currency: the euro
* established the European Central Bank (ECB) whose main goal was to safeguard the value of the euro and the European System of Central Banks.

Why did it take time for the Treaty to be ratified?

* euro-skepticism had been growing
* treaty got a short majority in France, and the Danes first rejected it.

When was the Iranian Islamic revolution?

1979

Who was in power in Iran since 1953 and who were they an ally to?

* Shah Mohammed Reza Pahlavi was in power
* to the US in the Cold War

Who resisted the regime?

* the population
* socialists
* communists
* Islamists

What happened on April 1, 1979?

* referendum established the Islamic Republic of Iran
* Ayatollah Khomeini, a religious leader
* Political opponents were crushed, and a conservative regime based on a literate application of the Quran and Sharia was established, with a political police controlling behaviors, and the oppression of women.

What did Iran and the US’ relationship escalate to? What effect did this have on Iran?

* from an ally to the US to the target of economic sanctions (embargo on oil)
* decline in the development of the country

How did Khomeini politically consider the US? Which position manifested this?

* “the Great Satan”
* during the American Embassy hostage crisis (1979-1981), conflict lingered and tarnished Carter’s mandate

What was the American Embassy hostage crisis? How did it end, after how many days and in which year?

* militants seized 66 U.S. citizens in Tehrān and held 52 of them hostage for more than a year
* After the outbreak of the Iran-Iraq war, the hostages were finally released to the benefit of the new President Ronald Reagan
* after 444 days of captivity
* in January 1981

When was the Iran-Iraq war?

1980-1988

What were the reasons for troops led by Saddam Hussein to invade Iran?

* Religious & Political: The majority population of Iraq was Shia Muslims, but ruled by a Sunni elite who feared an upheaval of the Shia Iraqis, supported by Iran.
* Territorial: Iraqis claimed rights over the Iranian border province of Khuzestan.
* Economic: long-standing dispute over the Shatt-el-Arab oil deposit.
* Military: Saddam thought that the Iranian forces were weakened by the Revolution

The war dragged on and morphed into an endless trenched-war, with major international repercussions:

* Gulf monarchies, suspicious of Khomeini’s revolution, supported Iraq. This led to an increasing conflict between two regional leaders, Sunni Saudi Arabia and Shi’a Iran
* Attacks on oil exports threatened the energy supplies of Western countries
* The success of Iran’s Shi’a fundamentalist troops alarmed non-religious governments in the Middle East (Lebanon, Syria, Libya)
* France was the target of terrorist attacks by the Shia Iran-Sponsored Hezbollah (1985-86)

Which weapons were used from 1987 onwards? How many deaths did this lead to? Who won?

* both sides bombed one another, used chemical weapons
* 0.5 to 1 million lives on both sides
* stalemate in 1988

Why did the soviet economy struggle?

* the diminution of oil prices
* the reliance of wheat imported from the US and Europe
* cost of the support of communists in Afghanistan in 1979 ( had to withdraw in 1989.)

What did Reagan call the USSR in 1983 and what war ensued?

* the “Evil Empire”
* launched the Strategic Defense Initiative (SDI) or “Star Wars”, a space-based anti-missile system intended to defend the United States from Soviet attacks.

Who took over in the USSR in 1985? What reforms did he launch?

* Mikhail Gorbachev
* Reforms:
* Anti-alcoholism & anti-corruption campaigns in 1986
* Withdrawal of the Soviet troops from Afghanistan in 1989
* Perestroika (= economic restructuring): economic reforms to introduce some freemarket economic principles and scrap the planned economy. By 1990, the government had virtually given up control over the economy.
* Glasnost (= openness/transparency): increased freedom of speech and access to information. Censorship was loosened and many political prisoners were released.
* In 1988, Political reforms reduced the control of government by the communist party. The first free elections in the Soviet Union since 1917 happened in 1989. Gorbachev became Chairman of the Supreme Soviet (or head of state) in May 1989.

→ failed economically which frustrated people

What did the disaster of Chernobyl highlight? When was it?

* derelict state of the Soviet infrastructures
* 1986