Notesale: Turn your study into money

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Disorganised Capitalism and Neoliberalism’s Crisis
The End of Organised Capitalism
• In the 1960s and 1970s several things happened that would change the world
economy

• Led to the breakdown of the ‘embedded liberalism’ of Keynesianism - managed
Capitalism - leaving an ideological vacuum

• Enabled the rise of new political-economic ‘ideologies’ - such as neoliberalism

• Heralded in the most recent phases of the world economy

The Three Triggers
1
...
Collapse of BWS

• Strained by emergence of EC markets

• $ speculation grew due to declining confidence

• Domestic inflation fuelled this

3
...
The Eurocurrency Boom
• At the height of the Cold War in the 1960s, the USSR invested $ reserves into
European banks (often in London) - wouldn’t invest in the USA for fear of the USA
taking them

• European banks realised that they could lend these reserves out

• The market in the trading of these reserves boomed

• Banks could avoid regulation as they were dealing in FOREX (foreign exchange)

• Many banks opened branches in London to cash in

Explaining the Eurocurrency Bo om
• US companies also invested foreign earnings in European banks to avoid regulation

• Liquidity meant large loans could be raised

• Massive infrastructure projects were funded by this (railways, airports, etc
...
Pressures on BWS
1
...
Increasing speculative trading of the dollar due to…

3
...
High rates of inflation in the USA and…

5
...
1973 Oil Crisis
• Oil was priced in dollars, which became an issue for the oil market due to
uncertainties and the devaluing of currency

• OPEC countered by increasing price of oil by 400%

• Oil exporters did well (always a market for oil regardless of price) and invested in
money markets

• $50 billion dollars ‘recycled’

• Invested in developing countries

• Increased the intensity and extensity of global financial flows

• Increased innovation and speculation in commodity markets

Impacts - Recession
USA:

• Crisis in production (overseas [NIC] competition)

• Stock market crash

• High inflation

• Rising unemployment

• The usual recession story

UK:

• The ‘3-Day Week’ - businesses only allowed to open for 3 days/week due to oil
rationing (1973)

• Inflation reached 20%

• Widespread strikes by miners

• Culminated in the Winter of Discontent in 1978

By the Mid-1970s…
• Bretton Woods had collapsed

• Oil prices had rocketed

• Increased global competition from NICs (problematic for countries that specialised
in manufacturing)

• Rise of mass unemployment (highest rate = 11
...
)

• Saturation of markets - consumer becoming more important, with rising levels of
consumer choice, no longer wanted mass produced goods that were the same as
everyone else’s

• Fiscal crisis of welfare states

The Big Contradiction
• Nation States still tried to act as though their economies were organised and
managed

• The reality had changed drastically

• Heralded a new way of thinking that erode

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