Superpowers - EQ2 - 7.4 Flashcards
Define Capitalism
- An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state
Define WEF
- A Swiss non-profit organisation that promotes globalisation and free trade via its annual meeting at Davos which brings together the global business and political elite
Define IGO
- These organisations now dominate international decision-making
- The members of these global organisations are nation states that uphold treaties and international law
Define World Bank
- It provides financial and technical assistance to developing countries.
- It makes development loans to developing countries but within a ‘free-market’ model that promotes exports, trade, industrialisation and private businesses which benefits large, developed-world TNCs.
Define OCED
- This organisation is the predecessor to the World Bank and the World Trade Organisation
- Their mission is to improve the economic and social well-being of people world-wide through the promotion of improvement policies
Define WTO
IGO established in 1995 that regulates global trade. It has brokered many agreements aimed at promoting open trade and reducing protectionism
Define Free Trade
The exchange of goods and services free of import/export taxes and tariffs and quotas on trade volume
Define IMF
- Promotes global economic security and stability and assists countries to reform their economies
- Economic reforms often mean more access to developing economies for TNCs
What do IGOs promote
- Free trade
- Capitalism
Superpowers have a ………………………. influence on the global economy
The USA, EU and Japan - in 2016 accounted for ….% of GDP
Superpowers have a disproportionate influence on the global economy.
The USA, EU and Japan - in 2016 accounted for 60% of GDP
Who are the biggest contributors to IGOs
- USA, UK, Germany, France, Japan and Canada
What do USA, UK, Germany, France, Japan and Canada all have in common which factors into their influence over IGOs
- capitalist economies
- promote free trade in goods and services across borders.
- are dominated by private enterprise, rather than government-owned companies
- promote wealth creation and accumulation by companies and individuals
When were the first range of IGOs created
- Just after the end of the Second World War in 1945, Europe and the USA created a range of global Inter-Governmental Organisations (IGOs)
what are IGOs dominated by
- Western capitalist countries and their views
Although …………………….. was an early precursor of globalised freed trade the ………………………… led to unprecedented levels of international trade.
Although colonialism was an early precursor of globalised freed trade the opening up of markets after 1945 led to unprecedented levels of international trade.
What was Comecon
- Comecon formed by Russia was an IGO to facilitate cooperation
between socialist and communist
Since……………………. the world has been dominated by the…………………….. economic system
Since the end of the Cold War in 1990 the world has been dominated by the free-market capitalist economic system.
For much of the 20th Century, capitalism operated ………………………., however as free-market capitalism has become increasingly dominant, …………………………
For much of the 20th Century, capitalism operated alongside socialist planned economies, however free-market capitalism has become increasingly dominant, other systems have weakened
Give examples of how as free-market capitalism has become increasingly dominant other systems have weakened
- The collapse of socialist economies in the USSR and Eastern Europe.
- China’s movement away from a socialist economy towards what has been called state capitalism.
- Reform in communist Cuba, allowing limited private ownership of business
When was the world bank set up and how
TheWorld Bankis the sister to the IMF and both were set up during theBretton Woods Conferencein 1944
What is the purpose of the world bank
- provides finance, advice, and research to developing nations to aid their economic advancement which reduces poverty
What does the world bank focus on
- It deals mostly with internal investment (development assistance) projects
- such as building dams, and infrastructure and promoting health and education in developing and emerging countries
Who sponsor projects in the world bank
- Usually works with wealthier nations, organisations and institutions as a sponsor of the project
Describe the loans the world bank provides
The World Bank issues low-interest loans, grants and/or zero interest credits to qualifying countries to support the development of their economies
The World Bankfunds projectsthat otherwise….
- wouldn’t happen because the cost is too high for developing countries
- or they cannot raise sufficient funds elsewhere because it is for social and not economic purposes
Explain the principle of comparitive advantage
- countries prosper first by taking advantage of their assets in order to concentrate on what they can produce best,
- and then by trading these products for products that other countries produce best.
- this means that liberal trade policies sharpen competition, motivate innovation and breed success
- multiplying the rewards that result from producing the best products, with the best design, at the best price
What are liberal trade policies
- policies that allow the unrestricted flow of goods and services
Describe how protectionsism can block free trade in wealthy nations
- the temptation to ward off the challenge of competitive imports is always present
- richer governments are more likely to yield to protectionism, for short term political gain — through subsidies, complicated red tape, and hiding behind legitimate policy objectives such as environmental preservation or consumer protection as an excuse to protect producers
What are the consequences of drifting into protectionism
- Protection ultimately leads to bloated, inefficient producers supplying consumers with outdated, unattractive products
- In the end, factories close and jobs are lost despite the protection and subsidies
- If other governments around the world pursue the same policies, markets contract and world economic activity is reduced
One of the objectives that governments bring to WTO negotiations is to prevent…
- a self-defeating and destructive drift into protectionism
What are the misconceptions about comparitive advantage
- A country does not have to be best at anything to gain from trade.
- That is comparative advantage
- I can be confused with absolute advantage
- It is often claimed, for example, that some countries have no comparative advantage in anything
- That is virtually impossible
Why is trade important
- to keep the global economy working effectively, as any barriers to trade will limit growth
Describe how the WTO was set up orginally
- In 1947 theGeneral Agreement on Tariffs and Trade(GATT) was set up to aid economic recovery after World War II by reconstructing and liberalising global trade
- Initially it was amultilateraltreaty between 23 countries to remove cross-country trade barriers
Describe how the WTO developed in the 90s
- GATT was superseded by theWTOin 1995 as an international global trading organisation with the power tomediateand settle trade disputes
How many people have signed GATT and what does that ensure
- 164 countries, at present, have signed the agreement
- to ensure that producers of goods and services, along with exporters and importers, are protected and help manage their businesses
What is the purpose of the WTO
It aims to reduce barriers and promotefree tradebetween countries whilst ensuring that trading nations keep to the agreedinternational trade rulesthrough sanctions hoping to create a more even ‘playing field’
The WTO has been a force for ……………….., with ….. & ……. ………..
globalisation, with both positive and negative effects
What are the positives of the WTO
- Powerful TNCs support the WTO for its positive impact on international economic growth
- the WTO has lowered trade barriers
- increased trade among the member countries with average tariffs being 1/10 of what they were in 1947 when GATT was founded
Limitations of the WTO
Local communities?
- The WTO is currently focused on programmes of poverty reduction, by removing farm subsidies in developing countries to stimulate efficient production
- in many developing countries, cheaper imports then undercut local farmers –> increasing the wealth gap —> hurting local communities
Limitations of the WTO
West?
- conflict of interest - most powerful countries in the WTO may be disadvantaged by limiting trade.
- (unlike IMF and World Bank) the WTO operates a system of ‘one country, which in theory is fairer to developing countries
- no votes have ever been taken at the WTO –> Decision-making is by mutual agreement —> most bargaining favours the EU and the USA
Limitations of the WTO
self-interested actions
- although ‘one country one vote’ consensus, countries will be influenced by what’s in their economic interest to vote for
When was the IMF created
- Created in 1944 at the United Nations, Bretton Woods Conference
Why was the IMF set up
- Along with the World Bank, its purpose was tobring financial stabilityto the world after World War II
- and avoid repeating the currency devaluation that contributed to the 1930s Great Depression
What is the purpose of the IMF
- promotes global economic stability by supporting countries in economic difficulty
Give 4 roles of the IMF
- Aims to create global financial stability.
- Stabilises currency to prevent global shocks in the financial system.
- Acts as a mediator to countries with disagreements over trade.
- Establishes trade agreements for countries wishing to become more integrated in global trade.
The main aim of the IMF is to allow thecurrencyto………………………….. between ….. global member countries
- beexchangedfreely and easily
- 190
Explain how the IMF is funded
- The IMF is funded by quota subscriptions
- Member states pay according to the size of their economy; with voting rights based on quotas
- These quotas ensure that member countries always have enoughforeign exchangeto continue to do business with the rest of the world
If member countries run into trouble, they can turn to the IMF for….
- advice and financial assistance
What have the IMF also set up
- Structural Attachment Programs (SAPs) which promotes capitalism through the conditions attached to loans
What sort of countries are usually under IMF programs
- developing, emerging or countries that have faced financial crises
Criticisms of the IMF
membership
- 2016 - 189 members in IMF
- its members are not all equal - their individual voting rights are proportional to the amounts that they have invested in the Fund
- Eight individual countries control 47% of the votes between them
Criticisms of the IMF
The IMF has been criticised for lending with…
- imposed conditionson how a country runs its economy along with making payback a priority on the loan;
- often forcing financial concerns ahead of any social care
Criticisms of the IMF
Westernisation
- Up to now, most of the IMF’s work has reflected US and European policies in managing issues such as international debt
- E.G 1980s & 90s - the main donor nations decided to impose conditions on many borrowing countries
- that forced developing countries, often in Africa,
- to cut spending on health and education in return for stabilising or extending their debt repayments
When was the World Economic Forum (WEF) founded
1971
What is the WEF
Swiss non-profit that acts as a forum for discussion between business, politicians and IGOs
How does the WEF operate
- Meetings of the WEF take place each year in Davos bringing together politicians, businesses, economists, religious groups, media groups and many others
- The aim is to discuss global issues such as ongoing conflicts, climate change and economic systems
- It is intended that this will promote global links and provide ambitious solutions to global issues
What are the aims of the WEF
- It aims to bring businesses and governments together, encouraging public and private co-operation
- It promotes free trade and is in favour of TNCs
In what way is the power of all IGOS compromised
All IGOS set up by ‘western’ nations promote free trade and capitalism (dependency theory)
What are the limitations of the WEF
- Political scientist Samuel P. Huntington believes the that ‘Davos Man’ (the WEF is mainly men)
- has little need for national loyalty,
- views national boundaries as obstacles
- & sees national goverments only useful function is to facilitate the elite’s global operations
- national voters’ instincts can sometimes conflict with the WEF’s globalised ideas e.g Brexit (growth in pro-natioanlist views)
In 2016, the USA controlled ……..%
16.5
Why did the world bank gain a bad rep in the 70s and 80s
- for financing projects that were either environmentally damaging (eg. rainforest clearance),
- or so costly that borrowing countries were unable to repay their loans
Ivory Coast Case Study
The IMF did not allow the Ivory Coast to receive aid until…..
2013 when its government agreed to set up commercial courts and allow free presidential elections
Ivory Coast Case Study
After economic reforms ………………
4.4 billion (US dollars) of debt relief was approved by the IMF & World Bank
Ivory Coast Case Study
Investment from the IMF & World Bank in education and training has depended on Govt creating a…
more competitive banking sector
Ivory Coast Case Study
What bans are still in place
- The UN still bans diamond exports from the Cote d’Ivoire after the country used them to finance civil war in 2005
Ivory Coast Case Study
Describe how cocoa bean exports have changed
- After minimum wages agreements and investments in road infrastructure were achieved in 2011, the country was allowed to export cocoa again
- The most recent exports are led by Cocoa Beans which represent 29.4% of total exports
Ivory Coast Case Study
Describe the change in exports
- During the last five years the exports of Cote d’Ivoire have increased at an annualized rate of 2%, from $11.6B in 2010 to $12.7B in 2015
