The Globalization of Economic Relations

Question 1

Globalization Overview:

Answer 1

• Term widely used in social sciences and public debates for 30 years.
  
  • Lack of consensus on its meaning, determining forces, or consequences.

Question 2

• Defined as the widening, deepening, and speeding up of worldwide interconnectedness.
  
  • Multidimensional phenomenon involving political, technical, cultural, and economic aspects.

Answer 2

Economic Globalization:

Question 3

Approaching Globalization:

Answer 3

• Mistake to approach globalization solely from an economic perspective.
  
  • Economic dimension is a major driving force and requires special attention.

Question 4

• Involves globalization of trade, finance, technology, communication, and production.

Answer 4

• Economic Globalization Dimensions:

Question 5

• Historical process resulting from innovation and technological progress.
  
  • Involves increasing integration of economies globally in goods, services, capital, labor, and technology.
  • Qualitative transformation, not just a quantitative change.

Answer 5

• Definition of Economic Globalization:

Question 6

• Debate on the relevance of nation-states in a globalized world.
  
  • Hyperglobalists argue states are obsolete, while others acknowledge a redefined role as managers of the national economy.

Answer 6

• Role of Nation State:

Question 7

• TNCs seen as major players in the global economy.
  
  • Some equate contemporary globalization with TNCs.
  • TNCs constantly evolving, with a significant role in economic globalization.

Answer 7

Globalization and Transnational Corporations (TNCs):

Question 8

• International monetary regimes and trade relations discussed to understand economic globalization.
  
  • Global commodity chains concept introduced to reflect on dispersed production and global buyers’ importance.

Answer 8

Evolution of Economic Globalization:

Question 9

• No single definition or consensus on its origin.
  
  • Some suggest ongoing since human migration; others trace back to the sixteenth century.

Answer 9

• Origin of Economic Globalization:

Question 10

• Globalization roots traced to the Silk Road and sixteenth-century long-distance trade.
  
  • Significant economic developments in the seventeenth and eighteenth centuries.
  • Nineteenth-century marked a breakthrough with the industrial revolution and increased international trade.

Answer 10

• Historical Perspective:

Question 11

• Nineteenth-century characterized as a “golden age” with relative peace, free trade, and economic stability.
  
  • Intensified economic integration linked to the division of labor and the modern world economy.

Answer 11

“Golden Age” of Globalization:

Question 12

• Current globalization challenged as a myth; concerns about its impact on income distribution.
  
  • Supporters argue it fosters universal economic growth; critics emphasize uneven distribution and marginalization.

Answer 12

• Contemporary Globalization Impact:

Question 13

• Global Income Inequality:

Answer 13

• Historical patterns show a widening gap between developed and developing regions.
  
  • Structuralists argue that capitalism under globalization reinforces unequal patterns.

Question 14

• Underdevelopment seen as a consequence of colonialism and imperialism.
  
  • Capitalist system perpetuates unequal exchange and dependence.

Answer 14

Underdevelopment and Inequality:

Question 15

International Monetary Systems:

Answer 15

• Definition: Rules, customs, instruments, and organizations for international payments.
  
  • In the liberal tradition, it facilitates cross-border transactions, reflecting economic power and interests.

Question 16

Critique of Globalization:

Answer 16

• World-system analysts view globalization as a relabeling of old ideas.
  
  • Emphasis on the political nature of money and its role in diplomacy within international monetary systems.

Question 17

• Originated in the early nineteenth century, adopted by the UK in 1821.
  
  • European nations and the U.S. shifted to gold at the International Monetary Conference in 1867.
  • By 1880, roughly 70% of nations participated.
  • Functioned as a fixed exchange rate regime with gold as the only international reserve.

Answer 17

Gold Standard:

Question 18

• Maintained trade balance equilibrium through the price-specie flow mechanism.
  
  • Automatic adjustment led to loss of autonomy in monetary policy.
  • Eichengreen’s criteria for a successful IMS: order, stability, elimination of balance-of-payments problems.

Answer 18

Strengths and Weaknesses of Gold Standard:

Question 19

End of Gold Standard and the Inter-war Period:

Answer 19

World War I led to the end of the classical gold standard.
- Competitive devaluations, capital controls, and tariffs in the 1930s resulted in a drop in international transactions.
- Shift from gold standard to floating currencies in the 1930s, influenced by structural changes.

Question 20

• Established in 1944 with an adjustable peg system, the gold-exchange standard.
  
  • U.S. dollar became the only convertible currency, linked to gold.
  • IMF and IBRD created to promote international financial cooperation and aid post-war reconstruction.
  • Exchange rates adjusted but infrequently; U.S. faced increasing deficits leading to the collapse of Bretton Woods in 1971.

Answer 20

Bretton Woods System:

Question 21

• After the collapse, industrialized countries attempted controlled exchange rates.
  
  • Managed floating introduced in 1973; Jamaica Accords in 1976 formalized the shift.
  • Coordinated actions (Plaza Agreement in 1985, Louvre Accord in 1987) aimed to stabilize currencies.

Answer 21

Transition to Floating Exchange Rates

Question 22

Neo-liberal Era and Washington Consensus:

Answer 22

• 1990s saw the triumph of the Washington Consensus, advocating free-market policies.
  
  • IMF’s conditionalities linked to free-market ideology criticized by Stiglitz and others.
  • Unregulated capital flows, current account deficits, and pegging regimes led to vulnerability and financial crises in Mexico (1994) and East Asia (1997–8).
  • Criticism of the Washington Consensus for its impact on development and globalization.