HIST363 Study Guide


Unit 10: Globalization and the Industrialization in the Late 20th Century

10a. Summarize the main developments in the global economy since 1945

  • What characterized German economic development and prosperity in the postwar period? Why was the German postwar economy dubbed an economic miracle?
  • What is meant by soziale Marktwirtschaft or a social market economy?
  • What accounts for the economic prosperity of the United States in the post World War II era? What social and economic changes characterized the 1950's and early 1960's.
  • Why did the economic growth of the postwar period result in economic stagnation and inflation in the late 1960's and 1970's and what remedies did governments attempt to kick start it again?
  • What was the impetus behind the creation of the Europe Economic Community or European Union? Has it been successful at creating an integrated European economy and society since its inception?

With the end of World War II, the United States experienced a huge, continuous economic boom and period of prosperity that lasted nearly 30 years. This resulted from the return of millions of servicemen and women from the war and the transition back to a consumer economy, along with the pent up demand for housing and goods and services after years of government rationing for the war effort. The demand for housing led to the growth of suburbs, the first shopping malls, and the creation of a thousands of miles of new roads and highways, which created the U.S. interstate highway system.

In Europe, economic growth and development resulted from the massive need to rebuild after the physical destruction of the war as well as the economic consequences of it. In countries like Germany, the Marshall Plan provided funds for rebuilding the country and similar funds were provided for Japan and other countries devastated by the war.

After difficulties in the early years, both Germany and Japan rebuilt their countries and economies and by the 1960's they were well on their way to economic recovery and prosperity. In Europe, the creation of the European Union helped pave the way for economic growth and development and in Asia, by the 1970's, Japan had become the major economic power, and a major exporter to the United States. By the 1980's and 90's more Asian countries began to experience dramatic economic growth as they shook off protectionist ideas and began to embrace free market solutions to their economic development and prosperity, contributing to the growth of a new global economy through the process of globalization.

Review Germany: The Social Market Economy, Germany: The Economic Miracle and Beyond, United States: The Postwar Economy: 1945–1960, Chicago against the Tide, The Specter of Stagflation, and A Mixed Economy Flounders.


10b. Connect the Western decline in manufacturing with the rise of new industrialization in Asia

  • How did the industrialization of Asia negatively impact manufacturing in the United States from the late 1960s and 1970s onward?
  • Why did import substitution industrialization in countries like India and, in Latin America and Africa, give way to free market capitalism and how has this contributed to the globalization of the world economy?
  • How did countries like Japan, Korea, and Taiwan transform their economies after societies and economies after World War II to become major industrial powers?
  • How did India's switch from protectionism and state regulated capitalism to free market capitalism propel its economic growth in the last several decades?

With the rise of industrialization and dramatic annual economic growth rates, Asia made inroads into American manufacturing beginning in the late 1960s and early 1970s – Japan led the way, followed by Hong Kong, Korea and China during the 1980s and 1990s, and India and Southeast Asia more recently.

Since the cost of labor is so significantly cheaper in Asia, especially China, many U.S. companies began to outsource their manufacturing and production lines in the 1990s. The United States saw the decline of entire industries, including the manufacture of automobiles, clothing, children's toys, and electronics.

In post-industrial America, manufacturing has declined as a percentage of its economic system, while the information processing and service sectors have grown. This shift has disrupted several industries and urban economies, such as Chicago, Detroit, Milwaukee and Pittsburgh for example, but created new ones such as the tech sector in places like Silicon Valley in California.

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10c. Explain the effect of the fall of the Soviet Union on the global economy

  • How did the collapse of the Soviet Union and its failed socialist economic model change the economic development policies of countries like India, as well as those in Latin America and Africa? 

The collapse of the Soviet Union is probably the most important dramatic event in recent world history. Until its dissolution in 1991, the Soviet Union seemed to offer an alternative model for economic organization and development with a state controlled economy and state capitalism. In the early years of the Soviet Union, especially with Stalin's Five Year Plans during the 1930's, the government seemed to demonstrate that central planning could allow a backward economy to catch up and surpass capitalist economies such as those of the United States.

During its final decades, the rigidly-controlled economy of the Soviet Union began to show its cracks with increased stagnation, a lack of consumer production, and a growing desire for political reform and political participation. With the fall of the Soviet Union, and its failed economy, the old model of central government planning and protectionism gave way to a general movement toward free markets and political, social, and economic changes, such as the free market capitalism China, India, and countries in Latin America adopted.

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10d. Identify the key features of the current global economy

  • Discuss the transition from protectionist state-controlled economies in the developing world, to the current model of free trade and free market globalization? What contributed to this dramatic change in economic policy, particularly in developing countries.
  • How did the General Agreement on Tariffs and Trade (GATT) evolve into the World Trade Organization (WTO) and what role does it play in the global economy?
  • What are some of the criticisms of how the WTO operates? Are they justified? Why or why not?
  • How has globalization changed the world? What are its benefits and its failures? Is a positive or negative development in the final analysis?

Since the early 1990's we have seen the emergence of a new era of globalization and the growth of what we call the global economy. While we saw similar examples in the past, such as the Silk Road trade system and Indian Ocean trade network, today's phenomenon is truly a global system. It is considerably more extensive and most, if not all, economies on the planet are connected in some way.

Economic interdependence is a key feature of this system. While many countries and economic sectors have benefited, others have been adversely impacted. However, in the broader sense, the global economy has improved the standard of living for people in countries around the globe. International trade organizations such as the WTO have helped expand the global economy, but its growth and development have been propelled by communications technologies, such as the Internet and cell phone technology. The global economy shows no sign of declining. It is helping create a new global consumer and social culture that most of us are able to participate in and share.

Review Profile: World Trade Organization and Timeline: World Trade Organization.


Unit 10 Vocabulary

  • GATT
  • Protectionism
  • Social Market Economy
  • European Union
  • Globalization
  • Marshall Plan
  • Keynesian Economics
  • WTO