11 - Crisis of Fordism

ucla | GEOG 4 | 2023-11-12 22:37

Table of Contents

1960-1970s Causes

  • Rising cost of production
    • relative decline of productivity in core countries
    • higher wage bills (but relatively decreasing purchasing power)
  • Declining rates of profits for major corps
    • exhaustion of existing tech
    • wage costs & productivity issues
    • labor unrest and strikes
    • saturation of home markets (limited globalization of corps, each country had their own monopolies)
  • Removal of trade barriers
    • Kennedy and Tokyo rounds of the GATT (General Agreement on Tariffs and Trade)
      • During the GATT (General Agreement on Tariffs and Trade) years, eight rounds of tariff negotiations were held between 1947 and 1994: Geneva (1947), Annecy (1949), Torquay (1950-51), Geneva (1956), Geneva (1960-61) - also known as the Dillon Round, the Kennedy Round (1964-67), the Tokyo Round (1973-79) and the Uruguay Round (1986-94).
      • In the first rounds, negotiations were conducted on a product-by-product basis (known as the “request/offer” approach), whereby GATT contracting parties exchanged lists of requests and offers on products of interest to them in order to reach agreement on tariff concessions.
    • political decisions for US to favor free trade within its sphere of influence to compete in cold war
  • new transportation and telecommunication
    • reduced transport costs as a share of total costs of production
    • enabled global reach of trade
    • containerization, satellite transmission, fax, etc.

    • Politics of 1970s

  • 1971: US abrogation of 1944 Bretton Woods agreement
    • shift from fixed floating exchange rate for the US dollar
    • Nixon admin. wanted to make US exports more competitive before 1972 election
    • Beginning of financialization of world economy: forex, money markets, derivatives, loan securitization
  • 1973: OPEC oil price increases in place
    • OPEC - org. of petroleum exporting countries - Gulf countries & central America
    • price of basic resources, e.g., oil, are a major factor in world economy
    • Second spike in 1979
    • Until 1960s, US supplied most of its own oil, free trade of 70s -> imports of oil
  • Caused explosion of trade and FDI
  • initial dip in corp profits due to imports -> rapid recovery in 1980s w/ explosion of FDI
  • financialization of the world after abrogation (Abolition) of Bretton Woods