Unit 3: Economic Globalization

Question 1

Define Prosperity.

Answer 1

The condition of being successful or thriving especially in economic well-being.

Question 2

Define sustainability.

Answer 2

Avoiding the depletion of natural resources to ensure that they are always at a certain level.

Question 3

Define sustainable prosperity.

Answer 3

Being prosperous while ensuring that natural resources are not depleted past a certain point.

Question 4

What are the foundations of economic globalization?

Answer 4

The spread of trade, transportation, and communication systems around the world in the interest of promoting worldwide commerce.
An example of economic globalization that we can relate to as Albertan’s is the oil and gas industry: Canadian oil is mined by Canadian workers then shipped to the rest of the world for millions of consumers to use.

Question 5

What are the factors that affect the global economy?

Answer 5

• War: within a country or among other countries.
• Natural disasters: such as earthquakes, droughts and floods.
• Famine: Which affects people directly and also affects the international market.
• Economic uncertainty: caused by factors such as the collapse of a major industry, depletion of natural resources or political change.
• Changes in investor’s confidence: which can affect share prices on local and global stock exchanges.
• Price changes for non-renewable energy: such as oil and natural gas.
• Government economic policies, such as tariffs and other trade regulations, foreign aid and interest rates.

Question 6

What Key events occurred in the late 20th century?

Answer 6

• World War 1
• Treaty of Versailles
• Rise of Communism
• Creation of the League of Nations
• The Great Depression
• World War 2
• Creation of the United Nations.

Question 7

World War 1

Answer 7

• Began after the assassination of Archduke Ferdinand in Austria and lasted from 1914-to 1918.
• Known as the Great War because it was the longest and hardest hit war in history.
• Machine guns, poison gas and airships were used as weapons; causing about 16 million casualties.
• The Central Powers (Germany, Austria-Hungary, Bulgaria, Ottoman Empire) V.S. The Allied Powers (Russia, France, Great Britain, Italy, Romania, Japan and eventually the U.S.A.).
• Germany and the rest of the Central Powers surrendered to the Allied powers in November 1918.
• European governments and cities were destroyed.
• Billions of dollars worth in dept.
• World wide production of manufactured goods dropped by 25%.

Question 8

The Treaty of Versailles.

Answer 8

• Signed in 1919, it ended WW1 and aimed to ensure peace and prevent another global war.
• France, Britain, U.S.A. and Italy were the countries in control of creating and upholding the document.
• Germany was held responsible for causing the war and was punished financially through reparation payments.
• Compensation for abuse or injury during the war.
• The league of Nations was also created in 1919 with the following goals:
• resolve conflict peacefully.
• uphold humanitarian and military files and regulations.

Question 9

Russian Revolution.

Answer 9

• In 1914, The Russian Empire was ruled by Czar Nicholas ll.
• Absolute monarchy, lagging industrialization, lack of preparedness during WW1, low wages.
• Vladimir Lenin and the Bolshevik party overthrew the monarch in 1917, Czar and his family were killed in 1918.
• This pulled Russia out of WW1 and into their own civil war until 1921.
• The Bolsheviks won the civil war and Russia became the Soviet Union (USSR) under Vladimir Lenin.
• Russia emerged as the USSR: The world’s first communist state.
• Government controls politics and the economy to bring about equality.
• Getting rid of capitalism and capitalist states(USA).
• In 1924 Lenin died and was replaced by Joseph Stalin.
• Stalin would become known as one of the most brutal dictators in history leading with fear and oppression with over tens of millions dying under his control.
• Stalin ruled over Russia during the Great Depression, Second World War and Cold War until his death in 1953.

Question 10

The Great Depression.

Answer 10

• Following the end of WW1 in the 1920s, most developed countries experienced an economic boom.
• The roaring 20’s.
• On the New York Stock Exchange, however, share prices were decreasing and panic caused people to sell their shares in haste(Black Tuesday)
• In 1929, the New York Stock market crashed and economies across the world, collapsed.
• $40 billion and 30 million jobs were lost in the U.S.A. alone.
• Challenged ideas of a completely free and capitalist market that was controlled by the consumers.
• People no longer had money to spend on goods.
• Decrease in demand, decrease in jobs
• The entire world went into an economic depression
• A period of low economic activity and high unemployment
• Many governments began to invest in their nation’s economy in order to stimulate growth(FRD)
• The economic troubles would not end until the start of WW2
• The need for weapons and equipment to be built led to increased employment and money.

Question 11

Define Fascism.

Answer 11

A political ideology that’s usually characterized by ultranationalism, authoritarian rule and contempt for democracy in a country being controlled by a dictator.
Became present in Italy, Japan and Germany.

Question 12

World War ll.

Answer 12

• Germany’s economic and social struggles(reparations) followning WW1 aided in the election of the Nazi party under Hitler in 1933 and the rise of Fascism.
• In 1939, Hitler invaded Poland which went against the treaty of Versailles–this led to Britain and France declaring war on Germany.
• Allied powers(UK, USSR, US) V.S. Germany, Italy and Japan.
• 1939 to 1945, resulted in 80 million deaths worldwide
• The war ended when the U.S.A. dropped nuclear bombs on Japan and forced a surrender.

Question 13

Post-WWll

Answer 13

• The two World Wars, the Great Depression and the rise of Communism had destroyed the economy and left millions poor, starving and dead.
• Allied powers once again tried to come together in hope of cooperation over conflict.
• A mix of social, political and economic relationships formed between many of the allied powers(Canada, U.S.A., Britain, France, Etc.)
• The United Nations was formed to facilitate more cooperation between Nations.

Question 14

The United Nations

Answer 14

• Following the League of Nations which was disbanded in 1946, the United Nations was founded with some of the following mandates.
• Support people who want to choose their own government
• Help countries co-operate on trade issues.
• Protect smaller countries against invasions by larger countries.
• Ensure that no single country controls the world’s oceans.

Question 15

Government involvement in the economy.

Answer 15

• The Great Depression made people wonder if unrestricted capitalism was the best thing.
• British economist, John Maynard Keynes believed that governments should play a larger role in a country’s economy.
• Governments should have programs to help the poor and hire the unemployed.
• Friedrich Hayek disagreed with Keynes
• Governments should not control the economy; at most, they can protect the market and ensure that competition is taking place between businesses.

Question 16

Bretton Woods Conference.

Answer 16

• The gathering of 44 allied nations in Bretton Woods, New Hampshire, U.S.A.
• Countries came together to talk about the ways in which they could avoid further warfare.
• out of the Bretton Woods Conference came talks of the UN, as well as the creation of 2 financial institutions: The World Bank and the International Monetary Fund.

Question 17

World Bank.

Answer 17

-Head of the bank is appointed by the U.S. government.
-Owned by the government of its members, which provide its funds.
Original goals
-To lend money to help war-torn countries rebuild
-Speed up Economic progress and industrialization in these countries
-To help countries develop their natural resources
-To negotiate long-term loans to increase productivity in countries.
Current Goals
-To increase growth and reduce poverty in developing countries.
-To fund specific infrastructure projects.

Question 18

International Monetary Fund

Answer 18

-Head of the IMF is nominated by the European Union: it has a board of 24 executive directors.
-Funded by member countries, which pay a quota based on their wealth-countries that contribute more money have more votes.
Original Goals
-To set dependable international exchange rates for the world’s currencies.
-To establish international economic stability and promote foreign trade
Current Goals
-To provide emergency short-term loans to countries
-To demand reforms in a country to promote good governance and get rid of corruption.

Question 19

Both World Bank and The International Monetary Fund

Answer 19

-Headquartered in Washington, D.C.
-29 member countries in 1945 and 185 members in 2006
-Established by an international treaty to help countries in economic trouble.
-Under the control of the UN.
Purpose
-To help countries get back on a stable financial footing after World War 2
-To agree on rules about how countries deal with monetary affairs
-to govern international trade and finance.

Question 20

Pros of the Internation Monetary Fund and the World Bank

Answer 20

• An organization that can help create rules for international trade to make the process fairer.
• IMF provides loans that countries could not get anywhere else
• IMF can advise countries that are exploring a new economic policy.
• Belonging to a prestigious economic organization that gives you access to trading with other countries.
• World Bank works toward poverty reduction, education and social development programs.
• The World Bank stands for gender equality.

Question 21

Cons of International Monetary Fund and the World Bank.

Answer 21

• Too much or too little intervention(IMF was criticized for intervening too much but also not doing enough in a timely manner).
• Countries may be financially irresponsible because they know they can depend on the IMF’s emergency short-term loans.
• Generic structural adjustment policies(SAPs) don’t work for every country(privatization, foreign investments, getting rid of social programs to save money).
• Richer countries with more shares in the IMF and World bank have more power when making decisions.
• The World Bank has been criticized for undermining countries with its western economic and political policies.
• No concrete evidence that the World Bank has reduced poverty.

Question 22

Define Tariff

Answer 22

• A tax or duty that is paid on a specific class of imports and exports.
• Since this is a tax, governments collect the money.
• Tariffs also help protect certain industries from going under due to the cheaper price of internationally produced goods.

Question 23

General Agreement on Tariffs and Trade(GATT)

Answer 23

• Another agreement was created during the Bretton Woods Conference: The GATT, which was officially signed in 1947.
• Countries that signed the GATT agreed to eliminate tariffs and other barriers to trade that existed between them.
• By 1995, the GATT had led to the development of the world trade Organization(WTO)
• WTO deals with international trade, making sure everything is going fairly and smoothly, mediates trade disputes and conducts trade negotiations to reduce barriers to trade.

Question 24

Sanctions

Answer 24

• The WTO has the power to institute sanctions which are an economic penalty such as a trade boycott, taken to pressure a government to agree to carry out certain actions or follow certain rules.
• Sanctions are essentially a punishment if a country or organization feels that you are misbehaving, they can boycott accepting your goods which then harms your economy enough to force you to change your actions or to follow certain rules that you were not previously following.

Question 25

Trade Liberation

Answer 25

A process that involves countries in reducing or removing trade barriers such as tariffs and quotas, so goods and services can move around the world more freely.

Question 26

Free Trade

Answer 26

The trade that occurs when two or more countries eliminate tariffs and taxes on the goods and services they trade with one another. This should create a reciprocal process where both countries benefit.

Question 27

The Effects of Trade Liberalization on the Canada Clothing Industry.

Answer 27

• From 1989 to 1995, Canada-U.S.A. free trade agreement eliminated tariffs on clothing imports and exports between two countries. Effect: Candaina clothing exports to the U.S.A. grew, as did the imports from the U.S.A. to Canada.
• From 1995 to 2002, Canada eliminated quotas on some clothing products from developing countries. Effect: Clothing imports from developing countries grew; imports from the U.S. dropped.
• From 2002 to 2005, All trade restrictions, were removed from clothing imported to Canada from developing countries. Effect: Imports from China and Bangladesh more than tripled while imports from other developing countries and U.S. dropped. Domestic production fell. Clothing prices in Canada declined by 5.8%.