Week 8 Global Economy Flashcards
1945 4 competing sets of ideas
- socialist command eco (URSS)
- liberal market systems (USA) interdep
- Imperial preference systems, privileged relationships w colonies (W Europe)
- Mercantilist, statist eco, eco nationalism (Japan, Asian tigers) National Self-sufficiency = major challenge to eco lib
today global eco
-globalized prod
-globalized financial markets
-global trade
= single global eco
new actors : Mncs , IGOs, bond-rating agencies
Bretton Woods system
Core of lib eco order : 1944
- syst of rules, institut and procedures to regulate the internat. monetary syst
- US $ - reserve currency linked to prices of gold
- other currencies «pegged» value established in relation to the US $
«Dollar-gold» standard consolidates the role of the US as the world’s manager of the financial system
BW institutions
IMF : provide its member countries w short term loans if they xp fin crisis or shortage of liquidity for internat. trading
World Bank : provide dev. k+ to war damaged countries
(proposed) International Trade Organisation
- regulate internat. trade by reducing and eliminating trade barriers (tariffs and quotas)
- complement the IMF and WB
GATT 1947 settlement body for trade grievances (complaints)
WTO = successor of GATT 1994
BW institutions’ approach
Keynesian Approach :
- government promoting liberal trade and investments
- government stimulating growth during eco recessions
Result = «embedded liberalism» market forced «embedded» into a framework of nat. regulations (full employment, equalisation of incomes, social safety net) until 1970s
washington consensus
new version of lib eco ideology late 80s :
10 «standards» (neo)liberal eco policy prescriptions for developing countries promoted by IMF, WB, US treasury dept :
- fiscal discipline
- privatisation of industry
- liberalisation of trade and FDI
- deregulation in favor of open competition
- tax reform
- reduction of social spending
-> expansion of market forces domestically
associated w «conditionality» funds from global instituons available to those countries who commit to the above policy measures
SHIFT TOWARD FREER MARKET POLICIES (1980s 1990s 2008)
MNCS for liberals
- embodiment of the liberal ideal of an interdependent world eco
- most efficient mechanism for eco debt and improved well being
- transmission belt for k+, ideas and eco growth
- intrinsic (belongs naturally) part of global gov
critics of MNCS
- create monopolies (high prices and low wages)
- evade taxes (most of tax rev)
- neg. impact on envt
- cultural homogénéisation
- interfere in domestic pol
- radicals : exploitation and modern slavery
how much $ crosses international borders per day?
$ 4.5 trillion
BW until when
1971 «Nixon shock»
free market to establish the exchange rate for $
free floating exchange rate between national currencies
fiat money : currency without intrinsic value established as money, backed by the government that issued it
IMF originally
To provide its member countries w short term loans if they xp a financial crisis or a shortage of liquidity for international trading
IMF from 1982
involved in negotiations between creditor and debtor countries, bailouts and structural adjustment lending
criticism of IMF
- moral hazard : encourage states to engage in reckless behaviour because they can count on the fund’s safety net
- too interventionist in eco
- no transparency in decision making
- should limit itself to crisis management and balance of payments issues (not devt)
- lends money to dictators and corrupt governments (without making them pay back)
- men-dominated
crédit rating agencies
operate by selling their expertise at assessing the creditworthiness of large-scale borrowers (companies and govts) -> indication to buyers of this debt how likely they are to be paid back
Governance of trade
WTO replaced GATT 1995
- one state one vote but decision making by consensus
- ministerial council meets at least every two years
- each member can make a motion, introduce/ withdraw a proposal or block consensus
- in practice relative market size is the primary source of bargaining pw so WEAKER STATES COERCED TO A CONSENSUS BY THE MORE POWERFUL ONES
