International Political Economy Research Paper Example | Topics and Well Written Essays - 1750 words

International Political Economy - Research Paper Example These included the entry of the Scandinavian monetary union and the Latin Monetary Union into the spectrum. In case a country was lacking in the membership of any of the international unions, trading operations were facilitated by common involvement in the gold systems by the international partners, regardless of their independence and colony status. Great Britain became top on the economic list of best performing countries. The country had developed massive economic, political, industrial influence, and was technically controlling more of the global market. According to Forbes (22), whereas capital controls similar to the Bretton Woods System had not yet been implemented, imbalances in capital flows were rarer than the post 1970 era. In light of its economic dominance, Britain's investment in other countries helped to control any imbalances across the world; the capital exports continued to grow when Britain's financial system hit a crisis, thus enabled other nations to recover reve nue lost from commodity exports. In light of this, this period witnessed mostly consistent economic growth and fairly infrequent economic crises. Unlike the Bretton Woods standards, the global financial order witnessed between 1870 and 1914 was not established at a common high level meeting; rather it underwent natural growth. In light of this, the Gilded Age that witnessed rapid economic development in North America squarely contributed to the stability of the monetary standard. After World War I The era between the two World Wars (1919-1939) witnessed a slump in the world economic status (White 411). Between 1919 and 1939, major economic players concentrated on their internal policies at the expense of global economy. Basically, both international business activities and capital flows reduced like never before. During the First World War nation-states had technically steered clear from the gold standard. Only the United States saw its significance, albeit temporarily, especially i n mid-1920s. Notably, within the first half of 1930s, the common standard was basically a disjointed system of using exchange rates. Forbes noted that in this period, major global economic powers such as Great Britain and the United States realized that the internationally accepted gold standard practically deviated from the widely acceptable national policy of retaining autonomy (23). To safeguard their gold reserves, nation-states, sometimes saw it wise to increase interest rates and adopt a general deflationary economic policy. This policy was aimed at averting a downturn, in cases where countries had reduced interest rates to trigger more investment and growth. Heston and Summers (97) argued that the need to reintroduce the gold standard in Britain may have been driven by the financial institutions to hurt the local working class. Great Britain emerged from the World War I financially weaker than the United States, allowing the latter to substitute her as the top-most financial giant in the world. America however was hesitant to take over her trading partner’s leadership role, because of isolationism and the need to concentrate on local issues. In contrast to Great Britain’s economic strength before the 1914, US capital exports were not counter cyclical. Fleming indicated that they grew faster in line with the America’s economic development until 1928, when the pangs of Great Depression began to bite (61). The intensification of the