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Describe any five factors that led to the end of the Bretton Woods System and the beginning of globalisation.
Answer:
Points to Remember
The factors that led to the end of the Bretton Woods System and the beginning of globalisation.
- USA's economic power was declining .
- The international financial system was modified.
- Unemployment rises in industrialized nations.
- Migration of production Companies .
- Chinese Revolution attracted foreign companies to invest.
Answer to be written in the exam
Reasons behind the end of Bretton Wood Institutes were:
1. Decline in the economic power of the USA :
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- It was no longer the dominant currency in the world, the US dollar lost its credibility.
- The US dollar's value in relation to gold could not be maintained .
- Fixed Exchange rates were collapsed and the implementation of a floating exchange rate system.
2. Modification in the international financial system:
- To help industrialized nations with their financial needs, the World Bank and the International Monetary Fund were established .
- Because of changes in the global financial system, developing nations were compelled to borrow money from Western Commercial Bank .
- As a result, there were recurrent debt crises in developing nations, which intensified poverty in Latin America and Africa.
3. Unemployment in Industrialized countries:
- The industrial world was affected by unemployment.
- As the unemployment rate increased, people traveled far distances in search of employment.
4. Migration of production Companies :
- Because of the cheap labor and low pay in Asian nations, MNCs moved their production units there.
5. Chinese Revolution
- China became a desirable location for investment by foreign MNCs.
- Since its revolution in 1949, China has been cut off from the post-war global economy. however , it has recently reintegrated.
- Chinese products have flooded the global market due to low-cost structure of the Chinese economy and its cheap wages.
