End of Bretton Woods and the Beginning of ‘Globalisation’
The latter half of the 20th century marks a transformative shift in the international economic landscape, particularly with the decline of the Bretton Woods system that had provided stability post-World War II. By the 1960s, the significant overseas expenses of the U.S. undermined the dollar's strength as the worldwide reserve currency, resulting in a lack of confidence and an inability to sustain its gold-pegged value.
As a consequence, the system of fixed exchange rates crumbled, paving the way for floating exchange rates in the 1970s. This financial upheaval significantly impacted developing nations, which faced increasing debt as they turned to commercial banks for loans, leading to a series of crises especially pronounced in Latin America and Africa.
Additionally, unemployment rates began to rise within industrialized countries, prompting multinational corporations (MNCs) to relocate operations to low-wage countries, primarily in Asia, thus fueling globalization processes. Notably, as China entered the world economy post-reform in 1978, it attracted substantial foreign investment due to comparatively lower labor costs, intensifying international competition.
This period signifies the transition to a more interconnected global economy, characterized by complex trade relationships and new economic dynamics influenced heavily by multinational entities.