3.2 Political and Economic Decision Making Flashcards
Name three IGOs
World bank (WB)
International Monetary Fund (IMF)
World Trade Organisation (WTO)
What are the aims of the WB
- aims to tackle world poverty
- reduce inequalities
- encourage social reforms to attract TNCs
How does the WB accelerate globalisation
- encourages governments to privatise
- provide low interest loans / grants / technological help
Why did Senegal need a loan
- main export was groundnuts (very dependent on them)
- they lacked funding for infrastructure and facilities to help operate trade
- other countries supplied groundnuts too so supply exceeded demand
- cost decreased
Who supplied Senegal with a loan and what were the conditions
- world bank
- taxes on imports of foreign nuts were removed
- state programmes helping farmers buy supply’s had to be cut so all money would go into infrastructure development
Consequence on WB in Senegal
- became one of the worlds most indebted nations
- they spend more money on paying off debt than on health care and education combined
Why did Mozambique need a loan
- dependent on cashew nuts as a main export
- they were produced in factories which employed large amounts of people
- cost was decreasing so government imposed taxes on foreign nuts
Who supplied Mozambique with a loan and what were the conditions
- IMF
- open fire market of cashew nuts (gov disagreed but were overruled)
Consequences of IMF in Mozambique
- price temporarily rose so high that factories couldn’t afford them
- this forced them to close and 9,000 people lost their jobs
- market was monopolised
- farmers couldn’t control their selling price
- cashews were sold for less than they were originally worth
Why did Bolivia need a loan
- Brazil nuts only grow in the amazon, mostly in Bolivia (75%)
- most of Bolivia’s export nuts were harvested naturally
- processing industry is encouraged due to toxins in the nut
Who supplied Bolivia with a loan and what were the conditions
- WTO
- funded industrial processes
- industry increased standard of living for 80% of households who previously lived in poverty
What were the consequences of the WTO in Bolivia
- EU (biggest market for the nuts) changed health and safety regulation of a toxin in Brazil nuts from 20 parts per billion to 4
- only industrial produced Brazil nuts could meet this requirement so Bolivia lost a large section of its market
- WTO didn’t interfere
What are the aims of the IMF
- maintain financial stability
- channel money from rich nations to poor, indebted ones
How does IMF accelerate globalisation
- force recipient to accept free market economy
- structural agreement plans
What are the main aims of the WTO
- facilitate trade without barriers
- encourage growth
- resolve conflict
How does the WTO accelerate globalisation
- promotes removal of trade restrictions
- encourages trade without quotas
- negotiates free trade deals without tariffs or subsidies
What strategies can national governments use to accelerate globalisation
- free trade blocs
- SEZs
- tax incentives
- free market liberalistation
- privatisation
- business start ups
What do trade blocs involve
free trade between neighbouring countries and allies
What are the benefits of free trade blocs
- companies gain access to more customers
- bigger market increases demand for products and services
- smaller companies merge with TNCs which reducing production costs
Examples of free trade blocs
- North America Free Trade Agreement
- EU
- Arab League
- ASEAN free trade area agreement
How do government policies encourage globalisation - free market liberalisation
- lifts restrictions for companies and banks
- reduced costs for TNCs to locate and operate in the country
How do government policies encourage globalisation - privatisation
- allows companies to take over national services
- ran more efficiently
- attracts TNCs as they gain a stake in vital services
How do government policies encourage globalisation - encouraging business start ups
- increased profits for businesses
- lower taxes and accommodating laws attract TNCs
- eg Sunday trading
What are special economic zones (SEZs)
Industrial areas (typically near the coast) where favourable conditions have been created to attract TNCs
What are advantages of free trade blocs
- helps poorer countries who experience barriers
- makes trade cheaper and easier therefore more happens
- protection from foreign competitors and political instability
How did SEZs help China’s economic growth
- open door policy under Deng Xiaoping in 1978
- opened four SEZs in 1980
- exports initially worth $2billion
- in 2000 exports were worth $200billion
What global regions are benefitting most from FDI
Asian tigers
- Hong Kong
- Singapore
- South Korea
- Taiwan
Tiger cubs
- Indonesia
- Thailand
- Philippines
- Vietnam
Why are the Asian tigers / tiger cubs growing so rapidly
- many countries chose to be independent economically following decolonisation
- the tiger economies chose export-led growth so they grew faster
- the Asian tigers now invest in the tiger cub economies
