3. How far do you agree with the view that the developing world’s underdevelopment was due to their overdependence on the industrialized countries? (AJC, 2010)
Introduction:
The rich and developed industrialized countries (most from the West) have been blamed for the lower growth rates found in the Third World developing states (Africa and Asia). It appears that the explanations for this could be the excessive reliance of the developing states upon the markets and the loans by the developed which could result in cycle of poverty. However, responsibility must also be put on the developing world for their poor economic policies. Moreover, it could also be due to international organizations that favoured developed to the developing countries, incurring damages for the latter. Thus, excessive dependence was not the cause of the underdevelopment.


Body:

S1: The overreliance on the markets of the developed states caused underdevelopment to the developing nations.
 Much of the developing world depended on sales to huge markets like the US and Japan.
 Collapse of the BWS resulted in instabilities as pegged exchange rate to the US dollar was prevalent globally
 Moreover as the US embarked on protectionism (such as 10% tariffs and retaliatory actions in trade) from the 1970s, it contributed to the nearly US$100 billion losses for the Third World in the mid 1980s.


S2: The overdependence of the developing states in using loans to develop their economies was responsible for the underdevelopment.
 Many developing states borrowed from the developed states to kick start their economy or to sustain their growth
 When the Debt Crisis hit in the 1980s, they found themselves unable to repay and became effectively bankrupt
 For Mexico, they had borrowed to pay for oil during the 1970s Oil Crises (where oil prices increased 400%) and by the 1982 defaulted. Its growth at its lowest was at -2% GDP.
 Rise in interest rates by the US meant that the debt amount for Mexico also increased which delayed repayment; from US$24.3billon in 1979 to US$41.8 billion in 1981 and US$86 billion by 1993


C1: On the other hand, the poor economic policies implemented by the developing states were also responsible for less than satisfactory growth.
 Their policies were ineffective and therefore contributed to slower or lower growth
 Examples of these include the building of infrastructure in Mexico which failed to produce significant returns in economic development. Particularly in many African countries, corruption led to ineffective policies in for instance education leading to ill trained workforce who could not produce higher value (more expensive) goods
 Protectionist measures carried out by Mexico through nationalizing of banks and imposed tariffs in early 1980s
 In Burma too, the country was shut off from world trade and many industries were nationalised and inefficient.
 Hence, the countries remained undeveloped or less developed with those in the lowest tier growing at just 1.1% GDP.


C2: International institutions that favoured developed to the developing countries, incurring damages for the latter
 International organizations GATT provided a useful forum to establish a code of conduct for trade. Dealt with industrial tariffs, manufactured goods and to increase trade through the principle of non-discrimination (MFN) E.g. Kennedy (Trade Barriers) and Tokyo (Non Trade Barriers) Round. But GATT was dubbed the ‘Rich Man’s Club’; developed countries tend to violate or sideline free trade policies to protect their own national interest resulting in trade tensions
 Even WTO, which replaced GATT was fraught with difficulties
 E.g. The Escape Clause in GATT; IMF provision of capital controls; abuse of terms such as the anti-dumping law by the developed nations
 Provided conditional lending E.g. Structural adjustment loans/Structural adjustment programs
 Demanded countries to adopt neo-liberal model of open markets and privatisation (stemmed from the Washington Consensus)
 Thus policies favored the developed at the expense of the developing



Conclusion:
 Reiterate main arguments
 Reaffirm Stand


4. Assess the significance of the Bretton Woods system in the development of the global economy after World War Two. (MJC, 2010)
Introduction:
Much has been stated about the global economic era brought about by the Bretton Woods system (henceforth BWS). It claims considerable credit in driving the Golden Age of Capitalism (4% per annum growth) in bringing about free trade and enabling financial stability. Nonetheless, these only created inactive conditions which needed to be activated by other factors like the Multinational Corporations (MNCs), the US and the general focus on economic development. This means that the BWS only played a secondary role.


Body:

GA1: The BWS encouraged free trade that developed the global economy.
 The Bretton Woods Agreement was ratified in 1946. Member states would minimise trade barriers and protectionism for both physical products and financial capital. This facilitated post war growth which enabled countries to buy/sell more and led to long term development.
 Yet, countries like West Germany, Japan and various countries using import substitution strategies continued to grow in spite of contrary actions. Japan imposed quotas and tariffs in the shipbuilding and steel industries and was able to hit growth rates above the global average, reaching 11% in 1960-64. Hence, the BWS factor has been exaggerated.


GA2: Underpinnings the above was the financial stability generated by the BWS in facilitating global growth.
 Preceding economic systems had used competitive devaluations of currencies to ensure the ability to sell products or to restore the balance of payments owed to other countries
 Pegged exchange rate to US through Gold Standard
 By fixing the currency to the US dollar (backed up by US gold reserves), the above problems were prevented and steady currency values attracted long term financial investment . The IMF was also set up to ensure trade imbalances were kept under control with emergency loans so there was little need for devaluation. In turn both enabled growth
 On the whole, the US agreement to play the leadership was critical as it was then the largest economy. Correspondingly, this diminishes the credit of the BWS.


GA3: Nevertheless, much of the funds that financed the global growth came from other sources.
 It was US government funds that sparked off the economic recovery in Europe through the US$ 17 billion Marshall Plan. It had stepped in after the IMF proved insufficient to achieve reconstruction.
 Further private capital investment from the US MNCs rose to US$ 1.7 trillion by the 1980s up from US$ 3.2 billion in earlier decades. Meanwhile, the setting up of Japanese and British firms overseas also contributed to the injection of funds. These were the funds that helped sustain global growth. Ergo, the other underlying factor of funding was more essential.


GA4: Also, the rise of new economies and their focus on economic development was an equally active factor in attain the Golden Age.
 With the decolonisation, more countries and markets were available. Some like Asia and African states chose to integrate into the global economy
 For example: Singapore’s high growth rate due to their strategy of EOI
 In addition, countries like Japan restricted their defence expenditure to 1% of their GDP. This allowed for the expansion of the global economy.



Conclusion:
 Reiterate main arguments
 Reaffirm Stand




























3. “The progress made in the development of the global economy was abruptly halted by the economic shocks of the 1970s.” Discuss. (NYJC, 2010)
Introduction:
The end of the Golden Age of Capitalism could be said to be during the 1970s. 1970s indeed pinpoints to various economic shocks; from the abolishment of the BWS and increased protectionism by US to the Oil shocks of the 1970s; these were seen as culprits in ending the phenomenal growth of 4% per annum. These shocks not only led to stagflation (the unprecedented double blow of low growth and high inflation) but also had wide scope and depth of impacts on both developed and developing countries. However, despite damages done, global economy did continue to develop and so it would be an exaggeration to say that it had been halted.


Body:

S1: US sudden decision to removed the pegged exchange rate system to the US dollar greatly altered the way global economy would function
 Nixon shock which devalued many currencies pegged to the US dollar
 Moreover as the US embarked on protectionism (such as 10% tariffs and retaliatory actions in trade) from the 1970s, it contributed to the nearly US$100 billion losses for the Third World in the mid 1980s.


S2: The impacts caused by the oil shocks greatly weakened the global economy
 Oil was the top energy source and therefore a necessity. The raising of prices raised transport and therefore product costs. Developed countries especially responded by cutting other expenditure to pay for oil and this likewise dampened world demand
 Raised the price by 70% on 16 and again in Dec such that crude oil price was increased from US$3 to US$11.65 per barrel
 Higher production costs in both developed and developing countries adding to high rates of inflation—inflationary pressure
 But more damaging for developing countries since they did not produce oil and they already could not afford the oil in the first place
 For the economic giant of Japan, it created the worst recession in the 20th century with the GDP contracting 0.8% in 1973 when in the earlier years it grew 11% from 1960-64
 However, the halt was not repeated in 1979 for Japan as it grew 5.6% that year and continued to grow thereafter. Also, the Latin American countries were able to continue growing at 5-6% as they received loans directly and indirectly from the sales receipts of oil producing countries. One can see that the shock were not as impact as suggested.


C1: From another perspective, the oil shocks were not the key determinants in affecting the economies of certain regions.
 For the case of Eastern Europe, economic growth had reached its peak of 4.8% in the 1960s. Without technological innovation and aggravated by economic inefficiency from low wages (because of nationalisation and focus on military equipment), the USSR fell into 2% annual growth by the 1970s. It was largely untouched by the oil crises as it was itself an oil producer. In this sense, the oil shocks were not responsible for economic decline in the region.
 China which had excluded itself from the global economy had grown at 5.3% from 1960 to 1978. It continued to grow at higher rates thereafter. Thus, again the oil shocks failed to hamper their economic progress.


C2: Also, the fact that Debt Crisis occurred in the 1980s reflected that progress was still ongoing after the 1970s before it culminated in another crisis. Moreover Debt crisis could be considered more damaging for world economic growth as the impact was longer lasting
 This time even the Latin American countries were affected. Mexico was unable to pay its debts in 1982 and growth fell to -2%. Scholars termed the 1980s the ‘lost decade’ with nearly all reaches of the world affected. Banks pulled out of the region and refused to lend loans which in effect brought economic activity (in some areas) to a screeching halt
 Huge increase in external debts
 US$636 billion in 1980 to US$1007 in 1985



Conclusion:
 Reiterate main arguments
 Reaffirm Stand