1st unbundling study guide Flashcards
Dating the start of 1st unbundling
What happened during this period?
- The drivers of this first unbundling are steam revolution and trade liberalization
- Economic globalization: integration of markets across space
- Start estimated at 1815 - 1820. How do we know this??? A good indicator of integration of markets across space is the convergence of international prices
Driven by steam revolution and trade liberalization (policies that encourage trade)
Instead of french market, we look at world market (economic globalization)
5 main changes of 1st unbundling
- Trade boomed
- Booming trade is triggered by Britain’s move towards free trade (1846: repel of the corn act, I.e free trade in grain)
- Free trade policies spread to continental Europe (1846 to 1879)
- Pro-industrialization protectionism rises in the continent from 1879 to 1914, in the name of “infant-industry argument” - Northern and G7 industrialization
- The UK industrialized first (Napoleonic wars make it difficult for Europe to industrialize)
- Industrialization spreads to Europe and North America post-Napoleon
- The US, Germany and France around 1850
- Canada, Italy and Japan industrialize later (late 1800s)
All countries Post Napoleon had increasing per capita industrialization
- Southern and A7 de-industrialization
- In 1750, the Ancient 7 (A7) accounted for 73% of world manufacturing output
- -50% in 1830
- -7.5% by 1913!
- Mainly China and India are de-industrializing - Urbanization
- Urbanization after the first unbundling was heavily based towards the Atlantic economies
- Strong correlation between urbanization and incomes
- Why? Ed Glaser: returns to “being smart” increased thanks to globalization and technological change, and humans get smart by hanging around smart people
- Knowledge, expertise, external economies of scale and cities go together
Agglomeration leads to urbanization
Strong correlation between urbanization and incomes
Talking to smarter people will make you smarter
- “The great divergence”
- The growth take-offs in G7 economies created the “great divergence”
- By 1970, the US income was almost 20 times higher than China’s
- The gap between the ancient South and the rest of industrialized nations almost as large
Post WWII: trade liberalization 2 waves but 3 in total
Wave 1: 1945-1985
Multilateralism (Common agreements) and regionalism advance together:
-June 1947: Marshall plans is launched -> requires European economic integration
-July 1947: the Council of European Economic Cooperation (CEEC)
-October 1947: GATT is signed
-November: First intra European clearing mechanism agreed by CEEC
-1951: European Coal and Steel Community (ECSC) is formed
Wave 2: 1986-2000
- Single European Act establish plan to form Single Market by 1992, and SPain and Portugal join the EU in 1986
- Canada and US launch FTA talks to deepen and widen the 1965 Auto Pact (CUSFTA signed in 1988)
- Uruguay round launch
- 1986-1990: deepening of North-North RTA
1990-2001: North-South regionalism is launched: - WHEN SECOND UNBUNDLING STARTS
- 1990: US-Mexico became NAFTA
- The fall of Berlin’s wall (1989( triggers Rtas between the EU and Eastern European countries; Euro-Med agreements with nations around the mediterranean sea; EC-Turket customs
- GATT deepens to WTO with the end of the Uruguay round in 1994 (effective 1995
Why is liberalization mostly bilateral or multilateral?
- Countries making decisions unilaterally leads to the least desirable outcome
- Based on the prisoner’s dilemma idea*
Summary of the outcome of the 1st unbundling
- G7 went from peripheral economies accounting for less than ⅕ of world production in 1500 to ⅔ by 1990
- Ancient Eurasian civilisations that dominated global economy for millenia saw their share plummet
- -In 1000, accounted for over 60% of global economic activity
- -By 1990, down to 6%….
After 1820, G7 increased, A7 decreased
Industrialization of North, Deindustrialization of South
