From Empire to Chimerica: History of Economics Essay

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Introduction

In the recent past, the global economy was led by English-speaking countries: the USA, and England. But currently, the shift in the economic balance takes place. According to estimations, China will be able to take leadership in the market by 2040.

From the 18th to the midst of the 20th century, America experienced growth in per capita income. Meanwhile, during this period in China, there was an economic decline. The difference in the ways of development took place mainly because of the inequalities in attitude towards technology, culture, topography, etc.

Main body

In the period from the end of the 19th to the beginning of the 20th century, there was a golden age of Eastern investments. The gold standard was adopted, and the relative stability in the market encouraged many people. The possibility of high income of the overseas investments attracted many British businessmen. Along with China, investments also went to Argentina, Brazil, and other colonized countries. Investments in the countries with British rule made business much easier.

With globalization, Eastern economic and technological development gained pace. During the 20th century, the Western entrepreneurs invested in the business in the East, because the Eastern manufacture was much more profitable due to cheap labor and equipment. But the First World War interfered with international economic growth.

The economic situation began to lose sustainability with Balkan Crisis. Many intellectuals saw that possible war can cause many losses in the economy, in particular for the developed countries, but this evidence couldn’t stop the emergence of war. With the crisis, the exchange rates went higher, many companies’ stocks lost value. The Western business was under pressure.

To refine the disastrous economic conditions the International Monetary Fund and the World Bank were established. The new policy of the Bretton Woods system fixed exchange rates, the gold was replaced by dollars as an international reserve currency, the funds became able to cross borders. The system made the European economy flourish, but it didn’t help to avoid crises and debts in the Third World countries. Thus, the IMF and the World Bank are considered to be imperialistic institutions that were profitable only for Westerners but caused many troubles for leaders of undeveloped countries.

The IMF influenced the global market’s instability. Joseph Stiglitz, a former chief economist at the World Bank, claims that the IMF also had a severe impact on the Asian crisis of 1997. Lending money to the Asian countries by the IMF worsened the situation and increased the debts.

Unlike other Asian countries, China didn’t suffer from the crisis in 1998. With the liberalization, the Chinese economy began to prosper. The main reason for it is that the Chinese asked for direct investments from the West. Foreigners built the enterprises, which couldn’t just vanish in case of crisis. The incomes were increased. The flow of capitals has changed direction. Nowadays the profit flows are directed from West to East. The Chinese currency gained strength.

America also benefits through investments in China. The import of Chinese goods is very cheap and highly beneficial. Also, by selling bonds to the People’s Bank of China, the USA gained low-interest rates. Both countries balance the global economy. Nevertheless, this kind of economic relationship, though beneficial, caused the US crisis by 2007. The American currency lost its value by 25 percent compared to the currencies of trade partners.

Conclusion

Financial instabilities and inequalities always caused conflicts in the world. The wealthy and well-developing countries bear great losses and suffer from these conflicts more. The new capital markets emerge and vanish rapidly upsetting the economic balance. Throughout the financial history, it was observed that countries’ economies are interdependent, and the global economy has a subtle and complex structure, which requires thorough examination and study.

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IvyPanda. (2022, January 27). From Empire to Chimerica: History of Economics. https://ivypanda.com/essays/from-empire-to-chimerica-history-of-economics/

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"From Empire to Chimerica: History of Economics." IvyPanda, 27 Jan. 2022, ivypanda.com/essays/from-empire-to-chimerica-history-of-economics/.

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IvyPanda. (2022) 'From Empire to Chimerica: History of Economics'. 27 January.

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IvyPanda. 2022. "From Empire to Chimerica: History of Economics." January 27, 2022. https://ivypanda.com/essays/from-empire-to-chimerica-history-of-economics/.

1. IvyPanda. "From Empire to Chimerica: History of Economics." January 27, 2022. https://ivypanda.com/essays/from-empire-to-chimerica-history-of-economics/.


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IvyPanda. "From Empire to Chimerica: History of Economics." January 27, 2022. https://ivypanda.com/essays/from-empire-to-chimerica-history-of-economics/.

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