BWR Terms Flashcards
Inflation
The prices of goods and services rise over time. This happens because the overall value of money decreases as prices go up.
2 Types of Exchange Rates
Fixed exchange rate
Floating exchange rate
Floating exchange rate
the value of a country’s currency is allegedly set by the foreign exchange market through supply and demand for that particular currency
Fixed exchange rate
A rate the central bank (government) sets and maintains the official exchange rate
Two implications for a currency devaluation
- A country’s exports are relatively less expensive for foreigners
- foreign products become relatively more expensive for domestic consumers, discouraging imports
Devaluation
may help reduce a country’s trade deficit (when a country imports more than it exports)
Trade deficit
when a country imports more than it exports
Protectionism
Government actions and policies that restrict or restrain international trade or allowing foreign goods to enter into a country
How is Protectionism implemented
Import tariffs
quotas
currency devaluations
Beggar-thy-neighbor
a policy where one country tries to improve its own economy by making things worse for other countries. This is usually done through things like raising tariffs (taxes on imports) or devaluing the country’s currency to make its products cheaper abroad. (fixing your problems by causing problems for your neighbors).
The Bretton Woods regime
an international financial system set up after World War II to stabilize the global economy. Countries agreed to fix the value of their currencies to the US dollar, and the US dollar was backed by gold
The General Agreement on Tariffs and Trade (GATT)
Was an international agreement aimed at promoting free trade by reducing tariffs (taxes on imports) and other trade barriers between countries. (trying to fight protectionism).
Fordism
about making things fast and efficient while ensuring workers are paid well enough to be customers.
Keynesianism
governments can help manage the economy by adjusting spending and taxes.
Import Substitution Industrialization (ISI)
aims to boost a country’s economy by producing goods locally instead of importing them from abroad via local production, reducing imports and creating jobs.
How is Import Substitution Industrialization (ISI) implemented
Substitute imports with locally produced goods and services. (type of protectionism)
Developmental States
countries where the government plays a big role in the economy to help it grow.
How does developmental states work
Strong Government Role, Stimulating Foreign Investment, Balancing Interests and Government Spending
2 Conceptual tools
regimen and power
regime in BWR
a specific type of government that is authoritarian, with centralized control and limited political freedoms.
4 Legs of Structural Power
Knowledge
Production
Finance
Security
3 core institutions
IMF
WB
GATT
Why is the US the most important country in the BWR
regime was established in US
US needed 15% to veto the regime
BWR =
global monetary + trade regime with 3 core institutions
International Monetary Fund (IMF)
an organization that helps countries manage their economies
P. McMichael vs R. Peet opinions
Both authors criticize global economic systems and their impacts on inequality and sustainability.
Peet focuses more on specific institutions, while McMichael looks at the broader history of development.
Both call for better alternatives that consider social and environmental needs.
Financial speculation
Investing in risky assets (e.g., third-world government bonds) hoping for high profits but risking big losses.
Euromarkets
Unregulated foreign currency markets (e.g., US dollars held outside the US).
-Euromarkets offered more borrowing freedom than in the US.
-Became a major borrowing source for indebted countries in the Global South.
Citicorp’s strategy
Focused on making money, not just making loans, unlike IMF and World Bank.
Debt-service ratios
The cost of repaying foreign debt as a portion of a country’s export earnings.
Ideal ratio
should not surpass 20% when lending money to the third world
Volcker Shock
A monetarist tool to control inflation by raising interest rates.
