Geography Reference
In-Depth Information
rates backed by gold and the free convertibility of currencies. These were
designed to avoid unilateral competitive devaluations and the implemen-
tation of increasing tariff levels. With its many regulated markets at the
micro level, institutional labour negotiation at the national level, and
Keynesian fiscal policy to control aggregate demand at the macroeco-
nomic level, the reconstruction era economies were almost all character-
ized by stable growth, low inflation, and negligible unemployment. During
this period, US manufacturing and financial firms were largely independ-
ent of foreign markets, and the strong performance of their overseas
subsidiaries was largely reliant on the buoyant economies of their trading
partners (Piore and Sabel 1984). Similarly, the stable and strong perform-
ance of the US economy encouraged high levels of inward FDI into the
country from other Western economies. However, for the purposes of
domestic economic policy and regulation, within the Bretton-Woods
system these capitalist economies were still viewed as largely separate enti-
ties, each with its own distinct characteristics. In all European countries
the major clearing banks, mutual funds and building societies continued
to operate within a domestic system of cartels, and most of the Central
Banks acted both in a supervisory role and as representatives of industrial
interests in the government arena. These primarily domestic formal and
informal modes of governance were typical in all Western economies. For
nearly a quarter of a century, therefore, the stability of the Bretton-Woods
system appeared to insulate the domestic economies of Western countries
from the vagaries of international financial markets, thereby allowing a
primarily domestic focus for economic policy-making. At the same time,
the stability of the system was also providing a stable environment which
was ideal for FDI, and during this period American investment in Europe
increased rapidly in manufacturing industries.
Following the mass production developments of the inter-war period,
the industry structure of the post-war economy in Europe was principally
characterized by large industrial firms and a marked division between the
public and the private sectors. In the production sector wages in the large
firm, particularly in mass production industries, were set through bar-
gaining between corporate management and labour organizations. In the
public sector, wage bargaining tended to track these private sector wages.
Yet, there were also significant transatlantic differences in labour relations
systems. The role of national unions in wage setting was far more marked
in Europe than in the US, where the labour movement had always been
more fragmented, and the expansion of unemployment and social welfare
provisions in European countries along with widespread nationalization
had changed European labour relations. Pay bargaining in a wide range
of industrial sectors therefore became institutionalized at the national
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