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Global Economy
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Learning Objectives, Discuss the historical background of contemporary global economy;, Elaborate the role of the multilateral institutions;, Explain the emergence of multinational firms; and, Evaluate competing views on economic globalization., 2
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What is global economy?, 3
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Global Economy, It is the economy of all humans of the world, considered as the international exchange of goods and services that is expressed in monetary units of account., 4
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5, The global economy is the world economy or the worldwide economy., , It is all the economies of the world (the economy of every country) which we consider together as one economic system. , , Put simply; the GLOBAL ECONOMY is one giant entity
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6, It is also the system of trade and industry across the world that has emerged due to globalization., , In other words, the way in which countries’ economies have been developing to operate collectively as one system.
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7, What are the dimensions of global economy?, Globalization of trade of goods and services;, The globalization of financial and capital markets;, The globalization of technology and communication;, The globalization of production.
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8, Is economic globalization distinct from internationalization?, Internationalization is about the extension of economic activities of nation states across borders., Economic globalization is functional integration between internationally dispersed activities. That is, a qualitative transformation than just quantitative change.
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9, Is economic globalization a new phenomenon?, The existence of the same world system in which we live stretches back at least 5,000 years is the best-known example of archaic globalization, such as:, Silk road which connect Asia, Africa, and Europe;, Discovery of America by Christopher Columbus in 1492 and the discovery of the direct sea route to India by Vasco de Gama.
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10, Is economic globalization a new phenomenon?, Technological advances and organization methods of the British Industrialization;, Napoleonic wars, the industrial revolution spread to the continental Europe and North America., Founding of the first MNCs, British and Dutch East India Companies.
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11, HISTORICAL BACKGROUND OF CONTEMPORARY GLOBAL ECONOMY
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What’s going to happen if the global economy were to collapse?
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Great Depression, - worst economic downturn in the history of the industrialized world, - lasted from 1929 to 1939, 13
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What is Depression?, 14, A depression is a sustained, a long-term downturn in economic activity in on or more economies., Considered by some economists, a rare, and extreme form of recession.
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WHAT CAUSES THE GREAT DEPRESSION?, Over Production, High demand and prices during WWI, Demand and prices fall after war, Farmers could not pay back loans
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CAUSES, Decrease in consumer spending, Rising prices, low wages, Overbuying on credit, large debts had to, be paid off, Uneven distribution of income – Rich got richer and poor got poorer – many Americans could not afford to buy goods produced.
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CAUSES, Over speculation, Stocks bought on the hope of quick profit., Buying on Margin – paying a small % of stock’s price and borrowing the rest., High tariffs harm world trade.
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STOCK MARKET CRASH, , October 29, 1929 –, Black Tuesday, Stock market fell to all time low, Those who bought stocks on credit stuck with huge debts
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THE “BUBBLE BURSTS”, Banks fail – people withdrew funds, Banks invested in stock market – could not repay loans, 1933 – 11,000 of nation’s 25,000 banks had failed, Account not insured – millions lost their savings, Clip – It’s a Wonderful Life -, http://vimeo.com/89261487
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DOMINO EFFECT, People lose jobs, Businesses close down or lay off, More people lose jobs
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EXAMPLE, , , , , , , , 80,000 seat football stadium, “You are now unemployed”, 2/3 will still be unemployed, in four years, Next week – another 80,000, unemployed, Continues for 162 weeks = 13 million, unemployed
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World War II, a global war that lasted from 1939 to 1945, 23
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Portfolio Presentation, You can simply impress your audience and add a unique zing and appeal to your Presentations. Easy to change colors, photos and Text. Get a modern PowerPoint Presentation that is beautifully designed. You can simply impress your audience and add a unique zing and appeal to your Presentations., Simple PowerPoint Presentation, World, War 2
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World War 2 worsen the Great Depression, $, $, $, $, $, $, $, $, $
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Bretton Woods Conference, formally known as the United Nations Monetary and Financial Conference, 26
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Bretton Woods Conference, It was the gathering of 730 delegates from all 44 Allied nations to regulate the international monetary and financial order after the conclusion of World War II., 27
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Maps, Bretton Woods, New Hampshire, United States, 28
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Bretton Woods Conference, 29, John Maynard Keynes, Harry Dexter White
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Bretton Woods Conference, “A Joint Statement by Experts on the Establishment of an International Monetary Fund” was published on April 21, 1944, On May 25, 1944, invitation was sent from the US to the Allied countries, 30
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For the purpose of formulating definite proposals for an International Monetary Fund and possibly a Bank for Reconstruction and Development., - United States. Department of State. July 1-22, 1944. Proceedings and Documents of the United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire, July 1-22, 1944
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Bretton Woods Conference, Articles of Agreement to create the IMF, whose purpose was to promote stability of exchange rates and financial flows, 32, Articles of Agreement to create the IBRD, whose purpose was to speed reconstruction after the Second World War and to foster economic development, especially through lending to build infrastructure, Other recommendations for international economic cooperation
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Bretton Woods Conference, World Bank, International Monetary Fund, General Agreement on Tariffs and Trade, 33, Three institutions were created, namely:
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International Monetary Fund
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International Monetary Fund (IMF), is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world., 35
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International Monetary Fund (IMF), Conceived on July 1944 and came into formal existence on 27 December 1945 after the 29 countries ratified the Article of Agreement, By the end of 1946, IMF has grown to 39 members, March 1, 1947, the IMF began its financial operations and on 8th day of May, France became the first country to borrow from it., 36
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ROLE OF IMF, Two views on its role as a global economic , institution, 37
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Harry Dexter White, He foresaw an IMF that functioned more like a bank, making sure that borrowing states could repay their debts on time., 38
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John Maynard Keynes, He imagined that the IMF would be a cooperative fund upon which member states could draw to maintain economic activity and employment through periodic crises., 39
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IMF’s Fundamental Mission, Economic Surveillance, , Oversees the international monetary system and monitors the economic and financial policies of it’s 189 member countries., Lending, , Provides loans to member countries experiencing actual or potential balance of payments problems to help them rebuild their international reserves., Capacity Development, , To modernize economic policies and institutions and train people., 40
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IMF Resources, Member Quotas are the primary source of IMF financial resource. A member’s quota broadly reflects the size and position in the world economy. A members country’s quota determines its maximum financial commitment to IMF, voting power, and access to IMF financing., 41
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World Bank, Is designed to finance projects that enhance the economic development of member states, Provides technical assistance and policy advice and supervises—on behalf of international creditors—the implementation of free-market reforms, 43
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World Bank, Together with the International Monetary Fund (IMF) and the World Trade Organization, it plays a central role in overseeing economic policy and reforming public institutions in developing countries and defining the global macroeconomic agenda., 44
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The Multilateral Investment Agency, The International Development Association, World Bank, The International Bank for Reconstruction and Development, The International Finance Corporation, 45, The International Centre Settlement of Investment Disputes
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World Bank, “sustainable development,” which attempted to reconcile economic growth and environmental protection in developing countries. , Another feature of the concept was its use of capital flows to developing countries as a means of narrowing the income gap between rich and poor countries. The bank has expanded its lending activities and, with its numerous research and policy divisions, has developed into a powerful and authoritative intergovernmental body., 46
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General Agreement on Tariffs and Trade, Postwar Trade System, 47
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General Agreement on Tariffs and Trade (GATT), An interim agreement signed in 1947, WTO was not created until 1994, Served as forum for trade negotiations, 48
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Liberal vs. Protectionist Policies
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Liberal vs. Protectionist Policies, 50
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Liberal vs. Protectionist Policies, Neo-liberalism, (Free market policies), , Liberalization, Deregulation, Privatization, Neo-mercantilism, (Interventionist, protectionist policies), , Tariff and Non-tariff Barrier Imposition, Tight State Regulation, Subsidies, Import Quotas, Health and Environment Standardization, Import Substitution, 51
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Liberalization, Reduction of restrictions or barriers on the free exchange of goods between nations., 52
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Deregulation, Reduction and elimination of government power in a particular industry, usually enacted to create more competition within the industry., 53
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Deregulation, Reduction and elimination of government power in a particular industry, usually enacted to create more competition within the industry., 54
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Privatization, The transfer of ownership, property or business from the government to the private sector., 55
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Tariff and Non-tariff Barrier Imposition, Tariff Barrier, , is a barrier to international trade., Non-tariff Barrier, , includes quotas, embargoes, sanctions, levies, and other restrictions., 56, These are restrictions imposed on movement of goods between countries.
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Tight State Regulation, Economic Regulation, , refers to rules that limit who can enter a business and what prices they may charge (Price Controls), Social Regulations, , refers to the abroad category of rules governing how any business or individual carries out its activities, with a view to correcting one or more "market failures"., 57
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Subsidies, funds provided by a government to enable firms to reduce prices and encourage an increase price and demand., 58
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Import Quotas, are "non-tariff barriers" used to limit imports of a particular products., 59
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Health and Environment Standardization, branch of public health concerned with all aspects of the natural and build environment affecting human health., 60
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Import Substitution, A trade and economic policy which advocates replacing foreign imports with domestic production., 61
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62, END
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63, Sources:, McCulloch, R. (2012). “The International Trading System and Its Future.” In Oxford Handbook of International Commercial Policy, edited by Mordechai E. Kreinin and Michael G. Plummer. Oxford. Oxford University Press. , Krasner, S.D. (1985). Structural Conflict: Third World Against Global Liberalism. Berkeley: University of California Press., Bello,W. (2002). Deglobalization: Ideas for a New World Economy. London: Zed Books., Thomas, C. (2008).”Poverty, Development, and Hunger”. “In Globalization of World Politics: An Introduction to International Relations. Oxford. Oxford University Press, https://www.slideshare.net/williamhogan52/hogans-history-great-depression-the-new-deal?qid=ae133417-0959-481c-97da-16c9b6ebb245&v=&b=&from_search=6, https:www.nytimes.com/2015/08/14/business/dealbook/chinas-renminbi-devaluation-may-initiate-new-phase-in-global-currency-war.html
