Page 257 - DMGT401Business Environment

Business Environment

Notes By 1350, networks of trade which involved frequent movement of people, animals, goods,
money, and micro-organisms ran from England to China, through France and Italy, across the
Mediterranean to the Levant and Egypt, and then across Central Asia (the Silk Road) and along
sea lanes down the Red Sea, across the Indian Ocean, and through the Straits of Malacca to the
China coast.
Between 1492 and 1498: Columbus and Vasco da Gama travel west and east to the Indies,
inaugurating an age of European sea-borne empires.
In South Asia, it should be noted, the Delhi Sultanate and Deccan states provided a system of
power that connected the inland trading routes of Central Asia with the coastal towns of Bengal
and the peninsula and thus to Indian Ocean trade for the first time.

The commodities trade continued well into the seventeenth century, concentrating on local
products from each region of the Eurasian system – Chinese silk and porcelain, Sumatra spices,
Malabar cinnamon and pepper, etc. – but by the 1600s, long - distance trade was more deeply
entrenched in the production process. An expansion of commercial production and commodities
trade was supported by the arrival into Asia of precious metals from the New World, which
came both from the East and West (the Atlantic and Pacific routes – via Palestine and Iran, and
also the Philippines and China).

Liberalisation of the 19th century is often called "The First Era of Globalisation". The "First Era of
Globalisation" is said to have broken down in stages, beginning with the First World War, and
then collapsing with the crisis of gold standard in the late 1920s and early 1930s. Countries that
engaged in that era of globalisation, including the European core, some of the European periphery
and various European offshoots in the Americas and Oceania, prospered. Inequality between
those states fell, as goods, capital and labour flowed remarkably freely between nations.

12.1 International Monetary Fund (IMF)

The International Monetary Fund was established by an international treaty in 1945 to help
promote the health of the world economy. Headquartered in Washington, D.C., it is governed
by its almost global membership of 184 countries.
The IMF is the central institution of the international monetary system – the system of international
payments and exchange rates among national currencies that enable business to take place
between countries.

12.1.1 The Origins of the IMF

The IMF was conceived in July 1944 at an international conference held at Bretton Woods, New
Hampshire, U.S.A., when delegates from 44 governments agreed on a framework for economic
cooperation partly designed to avoid a repetition of the disastrous economic policies that had
contributed to the Great Depression of the 1930s.

During that decade, as economic activity in major industrial countries weakened, countries
attempted to defend their economies by increasing restrictions on imports; but this just worsened
the downward spiral in world trade, output, and employment. To conserve dwindling reserves
of gold and foreign exchange, some countries curtailed their citizens' freedom to buy abroad,
some devalued their currencies, and some introduced complicated restrictions on their citizens'
freedom to hold foreign exchange.
These fixes, however, also proved self-defeating, and no country was able to maintain its
competitive edge for long. Such "beggar-thy-neighbour" policies devastated the international

250 LOVELY PROFESSIONAL UNIVERSITY