How have changes in the world economy since 1945 affected room for Essay

How have changes in the world economy since 1945 affected room for manoeuvre of multinational firms - Essay Example The years 1945 and the early 1950 have experienced a fall in the multinational investments. One of the prominent reasons behind a fall in the foreign direct investments was spread of communism combined with the harsh impacts of World War II. There was a spread of Communism in the Eastern Europe in the late 1940’s, and China experienced it in 1949 (Jones, 2005, p.30). During the war, USA was the only country in which experienced a significant increase in foreign direct investments. However, there was an eventual fall in the investments followed by a dramatic growth of the domestic economy. After the World War II, there was a major geo-political division of the world. This division was between the capitalist West, the communist East and the Third World (Dicken, 2010, p.16). This division proved to be very important for the multinationals. This is because it was through this division that the companies determined their strategies to expand or to internationalize. An independent economic system was made by the Eastern Block, as it drew boundaries around itself and the Eastern European Satellites. This boundary was made so that the foreign companies could remain outside, hence they were entirely excluded (Jones, 2005, p.31). The Western Economic order was seen to be much dominated by the US. Western dominance advocated for liberalism at the same time they maintained strict protectionist policies. Moreover, the previously decolonized countries from the 1950’s were being colonized and this led to an unprecedented beginning of internationalization and the emergence of a global economy (Hewitt, 2000, p.289). Most of the countries consider themselves to have observed resurrection from the early 1950’s, when the USA was left in a unique powerful position. It was because of Bretton Woods’s system that dollar was set as gold convertible, which made it a major reserve currency of the world. Majority of