AP World History: Modern · Lesson 3 of 7 · Unit 9

Economics in the global age

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After 1900, the global economy shifted from state-directed responses to world wars and depression toward free-market globalization and a new international division of labor. The exam tests this topic through quantitative charts in Multiple Choice and Short Answer Questions, as well as Continuity and Change essays on Economic Systems (ECN) and Governance (GOV).

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Explain how, in a trend accelerated by the end of the Cold War, many governments encouraged free-market economic policies and economic liberalization in the late 20th century, such as the United States under Ronald Reagan, Britain under Margaret Thatcher, China under Deng Xiaoping and Chile under Augusto Pinochet.
Explain how revolutions in information and communications technology led to the growth of knowledge economies in some regions, while industrial production and manufacturing were increasingly situated in Asia and Latin America.

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Core ideas (continued)
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What the exam asks

Multiple Choice (Section I, Part A): Expect stimulus sets featuring GDP tables, trade volume graphs, or speeches by late-20th-century leaders. Questions ask you to link these sources to economic liberalization, the relocation of manufacturing, or regional trade blocs.
Short Answer (Section I, Part B): Often appears as Question 3 (non-text stimulus, such as a chart showing shifts in global manufacturing shares between 1950 and 2000) or Question 1 (secondary historian excerpt debating the impacts of globalization).
DBQ and LEQ (Section II): Frequently serves as the chronological endpoint for Continuity and Change Over Time (CCOT) prompts analyzing state intervention in economies from c. 1750 or c. 1900 to the present.

Core ideas

The shift to free-market liberalization

For much of the early and mid-20th century, states heavily directed their economies—through Soviet and Maoist communism, fascist corporatism, welfare states, or post-colonial state-led industrialization. Beginning in the 1970s and accelerating with the collapse of the Soviet bloc (1989–1991), many governments pivoted toward economic liberalization (neoliberalism): cutting tariffs, deregulating finance, privatizing state-owned industries, and reducing taxes and welfare spending.

State / Leader	Key Free-Market Policies (Late 20th Century)
United States (Ronald Reagan)	Deregulated banking, energy, and transportation; lowered top income and corporate tax rates; curbed labor union power.
United Kingdom (Margaret Thatcher)	Privatized state-owned utilities, telecommunications, and steel; deregulated London’s financial markets; weakened coal unions.
China (Deng Xiaoping)	Replaced Maoist communes with the Household Responsibility System; created Special Economic Zones (SEZs) like Shenzhen to attract foreign investment; opened to global trade while retaining single-party Communist rule.
Chile (Augusto Pinochet)	Advised by US-trained economists (“Chicago Boys”), the military dictatorship privatized social security and state industries, slashed tariffs, and curbed labor unions.

A new global division of labor

Revolutions in information and communications technology (ICT) and containerized shipping reshaped where different types of work occurred:

Knowledge economies: Post-industrial regions saw growth in high-tech research, software design, finance, and specialized services. Examples include Finland (transforming from forestry to mobile technology via Nokia), Japan (advanced electronics and robotics), and the United States (Silicon Valley).
Manufacturing shifts: Seeking lower wages and fewer regulations, companies moved industrial production and assembly to Asia (such as apparel in Bangladesh, electronics assembly in Vietnam and China) and Latin America (such as maquiladoras—tariff-free assembly plants along Mexico’s northern border).