market. Investors who wished for returns, would sell their shares. People
would gather on Amsterdam streets in these sales, then city built stock
market where people could trade the shares. Dutch bankers began accepting
these shares as guarantees for loans and lending money and credit occurred.
Origin of free capitalism was highly intertwined with state power.
•In France shortly after, bankruptcy of John Lowe made French financial
Expansion of trade and empires: constraints of state power on first wave of
economic activities, restricting trade flows among European countries
through monopolies and international payment became more and more
difficult. Mercantilist policies did not last forever… mid-19th c. mercantilist
practices dwindled. Globalization was a reality for Europe and Atlantic.
First wave of globalization:
•By early 20th c. trade consisted mostly of manufactured goods from
developing south to Industrialized north; transnational production at this
time was rare, foreign indirect investment was rare. Ironically, first wave of
globalization produced more inequality among rich countries and less
inequality in poor countries. By WWI, economic globalization was a reality.
Changes following onset of WWI: higher tariffs, restricted immigration etc.
Post-WWI these elements were generalized, trade buyers in 1920s rose
dramatically. > This demonstrates that globalization can be reversed. State
policies can effect globalization.
•Post-WW2 financial institutions set out to solve previous mistakes: 1) avoid
great depression and its political consequences i.e. war and 2) reconstruct
-Bretton Woods: IMF created to ensure stable exchange rate mechanisms and
provide assistance to countries facing a crisis in their balance of payments.
Want to curb high inflation and it’s consequences.
-Created World Bank 1944; to help private investment, primarily in Europe.
Their mission today is to assist developing countries’ development.
-1947 GATT: General Agreement on Tariff and Trade; wished to stop high
tariff barriers and increase trade flows. Later became WTO; focus on trade
*Strong American influence i.e. first pillar was Marshall Plan (lend money to
European countries’ reconstruction) and second pillar was the dollar as a
reserve currency, exchange rates anchored to gold-backed dollar. 1971 US
decided to allow dollar to float freely, wanted to balance trade deficits. At the