Lecture 1B

Question 1

EU v US GDP

Answer 1

• “The Default Power” Josef Joffe’s
• while the European Union’s $18 trillion GDP exceeds that of the US at $14 trillion, it is an unwieldy conglomeration of 27 states
• hard to unit as a strategic player on the world stage
• the flaw is having 27 different governments but one monetary authority

Question 2

Europe’s population is bigger than the US. Will it soon dominate the US economically?

Answer 2

• US went through regional struggles in the 1800s that the European area is going through now
• states had trade taxes; barriers to business so businesses didn’t do business there
• built up Washington DC to counter states power; American corporations wanted a strong central government originally

Question 3

Has the US lost its military power and hence losing its economic leverage abroad?

Answer 3

• the US spent $607 billion on its military in 2008, more than 1/2 of the world’s total and far more than Europe’s $288 billion
• in 2005, the US Navy’s tonnage exceeds that of the next 17 largest navy fleets combined

Question 4

British Collapse

Answer 4

• similar to British collapse in early 1900s
• Great Britain had been the world hedgemont with a powerful naval presence and lots of colonies
• during 1930s Great Depression, Britain had dropped the ball on being the world hegemony , and the US had not yet picked it up
• post WWII Europe and Asia were devastated, US had a monopoly over the world and could make money at the expense of others
• oil is the most vulnerable industry; US oil interests are in Middle East/Afghanistan

Question 5

Hedgemont

Answer 5

a country who can, because of their economic power, enforce the laws and order of the world

Question 6

Global Markets

Answer 6

• who is the Washington DC of today?
• national power is going down because of globalization (similar to big businesses taking power from the states to national government in the early US –> now international businesses)
• nations now have to subsidize big corporations to get them to enter –> reduces government power
• currently Europe is taking power from countries: EEC – abolishing all tariffs among 6 countries

Question 7

What is competitiveness for a country?

Answer 7

• rankings based on economics, government, business efficiency, infrastructure, etc.
• Switzerland #1: stay out of others way; don’t get involved; remain neutral
• Singapore #2: not going to go through the usual growth path; straight from blue collar to white collar by educating their people
• Finland #3, Germany #4, US #5, Sweden #6
• United Arab Emirates and Saudi Arabia are in top 20

Question 8

If weak currency is good, why don’t we just print a lot of money?

Answer 8

EX: Argentina

• bad in the long run because there is an optimum amount of everything
• don’t want to have hyperinflation but don’t want to print nothing

Question 9

What is a double competitive squeeze?

Answer 9

U.S. (better at high tech stuff) –> Europe Sears <— Walmart

• not necessarily bad to be in the middle; EX: GM middle strategy & Chevrolet
• either avoid the middle or go to it

Question 10

Has the US lost its competitiveness, given the rise of China and Asia in world trade?

Answer 10

• competitiveness = the ability of a country to generate more wealth for itself than by its competitors in world markets
• important variable driving competitiveness is the relative valuation of a currency
• strong dollar in 1985 period made it harder for the US to export and easier for the US to import from foreign countries and this lowers a country’s rank on the competitiveness scale

Question 11

Is Europe passing the US politically?

Answer 11

Maybe…

• spreading peace across Eurasia serves US interests and
• European popularity in the world is rising because Europe is the world’s largest bilateral aid donor
• provides more than twice as much aid to poor countries as the US
• largest importer of agricultural goods from developing world, thereby enhancing its economic influence in key regions of instability
• when it expanded to 25 countries, the European union counted for nearly half of the world’s outward foreign direct investment and exerts greater leverage than the US over pivotal countries such as Brazil and Russia
• Brand Europe is taking over
• European views are more congenial to international taste and are more easily exported than their US counterparts

Question 12

Does Europe have an advantage over the US in dealing with terrorism?

Answer 12

• Europe excels at military intelligence, which requires expert linguists and cultural awareness particularly by the French and the Spanish