Making of a Global World: Decolonization and Independence

Within the two decades after the Second World War, many colonies became independent and emerged as new nations. These countries were in deep economic trouble because of their long history of exploitation.

During the initial phase, the Bretton Woods Institutions were not in a position to cope with the demands of these new nations. Meanwhile, Europe and Japan quickly rebuilt their economies and thus grew independent from the IMF and World Bank. From the late 1950s, the Bretton Woods Institutions began to shift their focus on developing economies of the world.

These institutions were under the control of former colonial powers. Hence, for most of the developing countries there was always the risk of exploitation by the former colonial powers in the name of development.

Birth of G-77

These countries organized themselves into G-77 (Group of 77) to demand new international economic order. They wanted real control over their natural resources, fairer price for raw materials and better access to the markets in the developed world.

End of Bretton Woods

Weakening Hold of USA

From the 1960s onwards, the US finances and competitive strength was weakening because of its rising cost of overseas involvement. The dollar could not maintain its value in relation to gold. Thus the system of fixed exchange rate collapsed and the new system of floating exchange rate began.

Borrowing from Commercial Banks

From the mid 1970s, the international financial system changed in many ways. Earlier, developing countries could turn to international institutions for financial assistance. Now they were forced to borrow from Western commercial banks and private lending institutions. This led to periodic debt crises, lower incomes and unemployment in the developing world. Many African and Latin American countries suffered from such crises.

China's New Economic Policy

China had been cut off from the world economy since its revolution in 1949. China began to follow new economic policies and came back into the fold of world economy. Collapse of the Soviet Union and that of Soviet style communism in many Eastern European countries brought many countries into the fold of world economy.

Business Process Outsourcing

Wages were quite low in countries; like China, India, Brazil, Philippines, Malaysia, etc. These countries became preferred sourcing destinations for many MNCs. India has also emerged as the most preferred hub for Business Process Outsourcing. In the last two decades, many third world countries have grown at a rapid pace and India, China and Brazil are their leading examples.