Globalisation & the contemporary world order

From Bretton Woods to the WTO

Contemporary globalisation rests on institutions designed in the closing phase of the Second World War. At the United Nations Monetary and Financial Conference held at Bretton Woods, New Hampshire, in July 1944, 44 Allied nations established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (the World Bank), anchoring the system to a gold-convertible US dollar fixed at $35 per ounce. John Maynard Keynes and Harry Dexter White shaped its design. The General Agreement on Tariffs and Trade (GATT), signed in 1947 by 23 countries, institutionalised tariff reduction through successive 'rounds'.

The Bretton Woods fixed-exchange system collapsed when President Richard Nixon suspended dollar–gold convertibility on 15 August 1971 (the 'Nixon Shock'), ushering in floating exchange rates formalised by the IMF's Jamaica Accords of 1976. The decisive institutional leap came with the Uruguay Round (1986–1994), which created the World Trade Organization (WTO) on 1 January 1995, with binding dispute settlement and coverage extending to services (GATS) and intellectual property (TRIPS). India was a founding WTO member.

The Second Wave and Its Drivers

The phase scholars call 'hyper-globalisation' accelerated after 1989. The fall of the Berlin Wall on 9 November 1989 and the dissolution of the USSR on 26 December 1991 ended the bipolar Cold War order, opening former command economies to global markets. China's accession to the WTO on 11 December 2001 integrated the world's largest labour reserve into manufacturing supply chains. The containerised shipping revolution, the spread of the internet, and the collapse of communication costs compressed time and space—what Thomas Friedman popularised as a 'flat world'.

India's own pivot is dated to the balance-of-payments crisis of 1991, when the Narasimha Rao government, with Finance Minister Manmohan Singh, devalued the rupee and launched Liberalisation, Privatisation and Globalisation (the 'LPG reforms'), dismantling the licence-permit raj.

Regional Integration

Globalisation advanced alongside deep regional blocs. The European Coal and Steel Community (Treaty of Paris, 1951) and the European Economic Community (Treaty of Rome, 1957) culminated in the Maastricht Treaty (signed 7 February 1992), which created the European Union and the path to a single currency; the euro entered circulation on 1 January 2002. The North American Free Trade Agreement (NAFTA) took effect on 1 January 1994. The Association of Southeast Asian Nations (ASEAN, 1967) and later mega-deals such as the Regional Comprehensive Economic Partnership (RCEP, signed 2020) extended the logic to Asia. These structures embody the tension between national sovereignty and supranational rule-making that defines the contemporary order.

Why This Matters for the Exam

This lesson serves GS Paper I ('History of the world will include events from 18th century such as... effects of globalization on the society') and connects directly to GS Paper II (international relations, global groupings) and GS Paper III (Indian economy, effects of liberalisation, WTO and Indian agriculture). UPSC treats globalisation as the analytical capstone where world history meets the contemporary order, so questions demand synthesis rather than recall.

How It Is Tested

The PYQ pattern is explicit. The 2020 GS-1 paper asked: 'Has globalization led to the reduction of employment in the formal sector of the Indian economy? Depose your stand with arguments.' The 2017 paper asked candidates to evaluate the effect of globalisation on women's status. Earlier GS-1 questions probed the rise of mega-cities and the social effects of liberalisation. The examiner rewards a balanced ledger—gains (poverty reduction, technology diffusion, the lifting of an estimated 800 million Chinese above the poverty line) set against costs (informalisation, inequality measured by rising Gini coefficients, cultural homogenisation, and ecological strain).

High-Yield Facts to Retain

Memorise the institutional chronology and its authorities: Bretton Woods (1944) → GATT (1947) → Nixon Shock (1971) → WTO (1 January 1995) → China's WTO entry (2001). Pair these with India's LPG reforms (1991). Know the three WTO pillars—GATT (goods), GATS (services), TRIPS (intellectual property)—and India's defensive interests on the Agreement on Agriculture and the 'peace clause' won at Bali (2013) on public stockholding for food security.

Structuring a Top Answer

A distinction-grade answer adopts the multidimensional frame: economic, political, cultural, technological and ecological globalisation. It cites named instances and dates, acknowledges that globalisation is neither monolithic nor irreversible (the post-2016 backlash proves this), and—where the question is India-specific—lands a verdict grounded in evidence such as Economic Survey data or NSSO employment figures. Avoid one-sided polemics; the examiner is testing analytical balance, not ideological conviction. Always conclude with India's stake: a developing economy that gains from openness in services and capital but defends policy space in agriculture and digital sovereignty.