Describe the factors responsible for the end of the Bretton Woods system and the beginning of ‘Globalisation’.
The factors or circumstances leading to the end of the Bretton Woods system and the beginning of ‘Globalisation’ are as given below : From the 1960s, US finances and competitive strength weakened due to rising costs of its overseas involvements. US dollar was no longer a principal currency in the world. It could not maintain its value in relation to gold. Weakening of US position led to the collapse of fixed exchange rates. Its place was taken up by floating exchange rates. From mid-1970s, the developing countries were forced to borrow from Western Commercial banks and private lending institutions. This resulted in debt-crises, lower income and increase in poverty in Africa and Latin America. The industrial countries were also hit by unemployment from the mid-1970s and remained high until the early 1990s. MNCs began to shift production operations to low-wage Asian countries to earn more profits. Low wages in China made that country an attractive destination for investment by MNCs to capture world markets. Some other incidents like new economic policies in China, the collapse of Soviet Union and Soviet-style communism in Eastern Europe brought many countries into the fold of the world economy.These activities increased world trade and capital flows.
