EDWARD'S LECTURE NOTES:
More notes at http://tanguay.info/learntracker
C O U R S E
The Modern World: Global History since 1760
Prof. Philip Zelikow, University of Virginia
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C O U R S E L E C T U R E 1980s: Global Capitalism Transformed Notes taken on February 18, 2015 by Edward Tanguay |
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how the world's economic system became what it is today
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the history of the 70s and 80s were like a global election
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choosing among different sets of ideas
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how to solve problems of systemic crisis that seemed evident in the 70s
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which parts of the world would be the "swing states" in this global election?
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1. Europe
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2. China
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the fate of China
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1976 Mao Zedong died
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big question: what to do with the body?
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the precedent in the Soviet Union was to turn these iconic figures of communist hero worship literally into embalmed mummies on public display, objects of veneration in almost a way of quasi secular worship
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the bodies of both Lenin and Stalin had been mummified and were on display on Red Square, Stalin's until 1961 when it was removed during the period of de-stalinization, but Lenin's remained
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the question in China in 1976 was: what role should Mao Zedong play in Chinese culture in the years to come
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decision was to turn Mao into an embalmed mummy as well, also suitable for public display
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four visions for China
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1. revolutionary socialist vision
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renewed hard-line of communism
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Mao's widow and closest people around her were for this
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2. Soviet-style communism
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building up heavy industry
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stronger state planning
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3. national conservatives with Chinese characteristics
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national conservatives
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top-down modernizers
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often autocratic
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strong central management
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partnerships with entrepreneurs
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4. social democracy
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more liberal
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something like in Western Europe
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results
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group #1 was first loser
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Mao's widow was tried as enemies to the people and pushed out of the Chinese public life
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group #2 was second loser
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if you look around the world in late 1970s
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capitalist economies were doing much better than communist economies
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those close to China were doing well
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Japan
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Taiwan
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South Korea
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in mid 1970s were tempting, since they had economy growth but were all states with a high degree of top-down control
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1978/79
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two groups left:
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3. national conservatives
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4. social democrats
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1980s
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it was clear China was taking a new direction
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formally normalizing relations with the United States
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Deng Xiaoping
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leader from 1978 to 1992
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Time magazine: "banishing Mao's ghost"
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"I don't care if the cat is black or white, as long as it catches mice"
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pragmatism: confirms the firm authority of the central government
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Fang-Shou
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loosening and tightening
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constant experimentation
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stepping back
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this cycle continues all through the 1980s
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what was clear was that China was changing
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global capitalism in 1970s and 1980s
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impossibility theory
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from Robert Mundell
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you can only achieve two of these three goals:
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1. capital mobility
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ability to easily move large sums of money across borders
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2. stable exchange rates
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3. monetary independence
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goal standard
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1. high
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2. high
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3. low
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countries had to attract gold by changing interest rates
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highly interdependent to what other countries were doing
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Bretton Woods solution (40s)
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1. low
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controlled by governments
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2. high
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3. high
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1970s collapsed
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1970s went back to something like the gold exchange system
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to go back to this kind of global economic system is a politcal choices
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they had to do this with paper money instead of gold
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the capitalist revolution
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1970s two establishments for economic thinking
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national Keynesianism
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the nation-state should be able to use fiscal policy to change its macro-economic situation, i.e. change unemployment or inflation rate
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ISI (Import, Substitution, Industrialization)
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created a constant capital election, i.e. governments which compete for investors that loan the governments money in the form of buying their bonds
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money should be free to move
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middle of 1970s
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these ideas popular in Germany and France
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end of 70s
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these ideas come back from Europe to America
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lets coordinate in managing our money supplies
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the question: how do you have a gold-standard-like system with paper money that governments print
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how to make paper money hard?
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manage the amount of paper money you issue
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coordinate that between a few key government that supply the reserve currencies for global exchange
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tight monetary controls coordinated by U.S., European and Japanese central bankers
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create a world in the 1980s in which
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1. capital mobility gets higher and higher
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2. exchange rates go from being erratic to stable
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not fixed like a true gold system
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2. national independence gets very low
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countries are interlocked with each others' monetary planning
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central banks are coordinating more trying to make their money more like a hard gold standand that will attract investment
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but to tight the money supply, you have to raise interest rates
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Paul Volker
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federal reserve chairman
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Time magazine: the Squeeze of 1979
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by mid 1980s, benefits of new system are becoming evident
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new system is freeing up investment capital
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Goldman Sachs is becoming truly multinational investment banks
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billions of dollars are moving across borders
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has all kinds of effects that touches many businesses in the U.S., Europe, Japan
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rooted in basic political choices
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who will be in charge of driving the economic choices in key countries
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crises
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for worlds borrowers
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interest rates are going up
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lots of debt crises in the third world
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turns out to be a big problem for the socialist countries in the late 1980s
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what if you don't want to be controlled by international bankers
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if you want national independence to drive your economy the way you want
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even to have state ownership of the key banks
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France faced with the beginning of the 1980s
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Jacques Delors
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visionary for European economic integration
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supports the kind of vision of this interdependence
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Mitterrand had to go with him instead of pursuing the more independent path that many of the socialist and communists who supported him wanted
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supported the ECU or European Currency Unit