The Economic Consequences of World War I: Shattered International Trade and Payments, Slide di Storia Economica

Scarica The Economic Consequences of World War I: Shattered International Trade and Payments e più Slide in PDF di Storia Economica solo su Docsity! Economic History 04 – “All that’s solid melts in the air” 1 Agenda 1. Economic consequences of WWI 2. Macroeconomic performance in the interwar years 3. Monetary chaos 4. From monetary chaos to monetary stabilization 5. Troubled international trade relations 4 • International trade patterns were upended by WWI • European belligerents • prioritized production for the war effort • reallocated available factors of production, energy and raw materials, services from civilian to military uses • ceased to serve traditional export markets • relied massively on increased imports of foodstuffs, commodities, and munitions from neutral countries The economic consequences of WWI International trade 5 • As a result, overseas countries in Latin America, Asia, Africa • partly grabbed the opportunity to promote domestic industrialization • partly expanded production of agricultural commodities to supply Europe • partly replaced European supplies of manufactures in the region with their own supplies → US in LatAm; → Japan in East Asia • In the 1920s, Europeans will struggle to recover their lost markets • When Europe goes back to normal, there’ll be overcapacity in commodity markets The economic consequences of WWI International trade 6 • As European belligerents import more and more, they need to get the resources to pay for their imports • Where do they get the money ? • foreign loans • sales of foreign assets • Biggest lenders are GB and the US, who during WWI turns from net importer of capital to net exporter The economic consequences of WWI International payments 9 • The international gold standard is the first pillar of the global economy to fall victim to the Great War • The Bank of England suspended gold payments in August 1914 and most other countries did the same: the international gold standard ceased to exist until its reconstruction in the mid-1920s • But exchange rates remained nearly fixed throughout the war – thanks to state and central bank controls and intergovernmental loans The economic consequences of WWI International monetary system 10 • The US emerges from WWI as a leading international economic and financial power • Its diplomatic initiative contributes greatly to shaping the Paris peace conference → President Wilson’s Fourteen Points • free and non-discriminatory trade; open seas • self-determination for national minorities • open diplomatic relations • a League of Nations to maintain collective security • Congress however won’t ratify the Versailles Treaty and will refuse membership of the League of Nations: the US is not ready for international leadership The economic consequences of WWI 11 • The peace treaty signed at Versailles in 1919 made things even worse • dissolution of the Austro-Hungarian, German, Ottoman, and Russian empires ⟶many new political entities: Austria, Hungary, Czechoslovakia, Yugoslavia, Finland, Poland, Latvia, Lithuania, Estonia, Albania • as a rule, these countries were politically divided and adopted protectionist economic policies that made intra-European trade even more difficult • Germany was imposed exorbitant reparations (132bn gold marks), well beyond its ability to pay ⟶ international financial issues and political frictions throughout the 1920s The consequences of the Versailles Treaty 14 Macroeconomic performance, 1913-1950 1820–70 1870–1913 1913–50 1950–73 1973–98 Western Europe 0.95 1.32 0.76 4.08 1.78 Western Offshoots 1.42 1.81 1.55 2.44 1.94 Japan 0.19 1.48 0.89 8.05 2.34 Asia (excl. Japan) –0.11 0.38 –0.02 2.92 3.54 Latin America 0.10 1.81 1.42 2.52 0.99 Eastern Europe & former USSR 0.64 1.15 1.50 3.49 –1.10 Africa 0.12 0.64 1.02 2.07 0.01 World 0.53 1.30 0.91 2.93 1.33 GDP per capita, annual growth rate (cagr) 15 Macroeconomic performance, 1913-1950 Export volume, average annual growth rate 16 Macroeconomic performance, 1913-1950 boom & bust stabilization, growth recovery 1919 1922 1925 1929 1933 reconstruction, high inflation Great Depression 1919 high instability return of instability, de-globalization The international business cycle between the wars s #7 Condehrekin 10) tei ie vo K, Maguk LL Y so ESA o B-]& een BI Mt 100% Lone foba ibra id Belirgegia dica mots Sem i “as om 1.Ofitofet 1923-a$ 19 me MIT MA rit Pariimme n pe nin pani ci patetico idrato Mairtri TIA Fa Maino SUS mrnongi A se NA aalilb ite PIET batti pc ia fo tto pen Sat Dittimatt den Edita RIVD- 100 Fio dint Gus es ASINI Rodubani&ncicorm l: Mix Fo i a a fr Sie idioti PI N - prata Le elio VI LOTO RU 21 Monetary chaos • The German hyper-inflation culminated in November 1923 • Eventually, the President of the Reichsbank put an end to it by introducing a new currency unit worth 1 trillion old marks • Also the allied powers acknowledged the German predicament and supported the Dawes Plan (1924) • international loan of Rm800 million • restructuring of reparations payments (lower annuities) • reform of the Reichsbank 24 From monetary chaos to monetary stabilization • The restoration of the gold standard had been on governments’ agenda since the international conferences of Brussels (1920) and Genoa (1922) • The resumption of gold payments by Great Britain in 1925 marked the return of stability in monetary affairs • Many countries pegged their currency back to gold soon after GB: Scandinavia, FR, BE, IT • countries that had experienced mild inflation restored the prewar gold parity • others – like FR and IT – significantly reduced the gold content of the currency with respect to 1914 25 Monetary chaos So u rc e: C . F ei n st ei n , P . T em in , a n d G . T o n io lo (2 0 0 8 ), T h e w o rl d e co n o m y b et w ee n t h e w a rs , O xf o rd , p . 4 6 Instability sources 2- monetary chaos 26 From monetary chaos to monetary stabilization • Countries that devalued the currency adequately thrived in the years following stabilization • The countries that did not – like the UK – had a lackluster economic performance, with export problems, high unemployment and social conflict