The twentieth century was a very diverse time period for the
world's economic systems. The world suffered through two
shooting wars, a
Cold War between the
Super Powers, a
Depression, and a shifting of the balance of world economic
power. By the end of the century,
Communism had come and
gone in Russia, and the United States, Japan, and the
Union emerged as the leading economic strength behind strong
World War I, severe economic problems plagued Europe.
Many countries were forced to rebuild cities
destroyed by war, pay off huge a war debt, and
find jobs for the thousands of returning soldiers.
The United States enjoyed an economic boom as its
economy was bolstered by efforts to rebuild Europe.
However, the world's economy came to a near stop with the
stock market crash in the United States
The Great Depression
Stock Market Crash 1929
Financial panic became widespread as
stock brokers called in the loans they had made to stock
investors. This caused stock prices to fall, and
many people lost their entire life savings as many
financial institutions went bankrupt.
World War I, industrialized countries imported large
amounts of raw materials from Africa, Asia, and Latin
America. After the war, production fell and many of
these areas faced severe economic difficulty.
Industrialized nations increased their
levels of production to great levels during the war.
At the war's end, industrialists continued this high
production rate at a time when many consumers could not
afford their products
Millions of people lost their jobs as
banks and businesses closed around the world. Many
people were reduced to homelessness, and had to rely on
government sponsored soup kitchens to eat.
World trade also declined as many countries imposed
protective tariffs in an attempt to restore their
economies. This resulted in conditions worsening.
The Cold War is the period of time roughly
from the end of
World War II, until the collapse of
Communism in the
Soviet Union and Eastern Europe.
The Cold War was the conflict between the United States
and the Soviet Union. This conflict divided the
world between the two Superpowers, resulted in a
dramatic arms race, and led to numerous violent
conflicts around the world. However, the Cold War is
period of economic change around the globe, as nations aligned themselves with the
superpowers. New nations become economic
powerhouses, and global
interdependence becomes reality
in an ever shrinking market place.
vs. Command Economy
A large part of the Cold War was nations aligning
themselves economically with either the U.S. or the
Soviet Union. Capitalism, or a
Market Economy and Communism, or a
Command Economy came to dominate global
economics. The conflict became about which system
better provided for the people. In the end,
Capitalism won out, but only by a slim margin.
Market & Command Economies
||Private ownership of all property
and means of production
||Government control of all property
and means of production
||Little public control; private
citizens and business makes decisions.
||Government makes all economic
||Supply and demand control prices,
||Government planning of entire
economy. Focuses on industrial goods
Economic Recovery Post World War 2
& Japan Recover: After World War II, both Germany and Japan were politically,
socially, and economically devastated. The
occupied these nations and began a program of
Germany was divided among
the victorious Allies, with the Soviets holding the
eastern half, while France, Britain and the U.S. held
the western. The western half became the Federal
Republic of Germany, or West Germany. The western
Allies enacted reform that setup a
representative democracy, and put Germany on the road to
recovery. These programs were enacted using money
provided by the United States under the
which offered economic aid to rebuild after the
war. East Germany suffered for decades under the
control of the Soviet Union, who did little to improve
the war torn country.
Japan was occupied solely
by the United States. Like Germany, Japan formed a
representative democracy with a new
Japan also rebuilt their industries using aid from the
Occupation ended in 1952, and Japan has
since become the United State's strongest ally in the
East, and also its main economic competitor around the
During the Cold War the world became more
interdependent economically. Examples of this
include the European Union,
Union: The EU started as a small community in 1952
to regulate steel and coal production in Europe.
By 1957, the initial 6 nations, West Germany,
France, Belgium, Italy, the Netherlands, and Luxembourg,
formed the European Community, or EC. The EC was a
free trade association that lowered
economic barriers, such as
tariffs, between the
members. During the 1980s and 1990s,
the EC expanded and became the EU, and continues to work
toward a common economic infrastructure.
OPEC: The Organization
of Petroleum Exporting Countries was formed by Iraq,
Iran, Kuwait, Saudi Arabia, and Venezuela in 1960. Their
goal was to control the oil industry by
and production levels. Control of the majority of
the world's oil supply has given OPEC strong political
powers. In 1973, OPEC stopped the sale of oil to
certain countries, namely the U.S.. This caused a major
slow down of many western nation's economies, and made
them realize how dependent they were on foreign
oil. This continues today with OPEC limiting
production of oil, which in turn causes gas prices to
NAFTA: The North American Free Trade Association
was created by the United States, Mexico, and Canada in 1993.
Its purpose was to provide free trade between the three
nations, by eliminating trade barriers like tariffs.
The Pacific Rim is a group of nations in Asia
and the Americas that border the Pacific
Ocean. Economic interest in this area has grown
dramatically since the end of World War II. Many
predict that the Pacific Rim will come to dominate world
economics due to their large market size.
Many nations in this area, including, Taiwan, Singapore,
Hong Kong, and South Korea
(known as the Asian Tigers) have
experienced rapid economic growth and prosperity due to
industrialization. These nations were also aligned
both politically, and economically with the West throughout
the Cold War.
Developing nations such as those found in
Africa, Latin America, and some parts of
Asia faced many economic problems after the end of
Imperialism. Some nations chose to
follow the economic polices of the West, while others followed
the path of communism. While each nation had different
problems they all faced similar tasks such as building industry,
attracting investment capital, stabilizing their governments,
and controlling a growing population. These countries
continue to face economic difficulty due to these issues.