What does Economic Globalization Mean



Foundations of Economic Globalization

Chapter 9

Chapter Issue: To what extent did the world events shape contemporary economic globalization?

What does Economic Globalization Mean?

p. 216-218

• Some people believe that globalization is all about economics.

• Those who hold this view believe that global trade, the global transportation system and global communication systems that increase prosperity for some people, the unequal distribution of wealth, and the conflicts between peoples and countries over natural resources are all rooted in economics.

• Economic globalization includes, for example, the oil and gas pipelines and large tankers that carry oil products; brought employment and prosperity, but also affected climate change

Aspects of Economic Globalization

• Some see it as a force that creates healthy interdependence that will lead to prosperity for everyone.

• Others say it could be healthy, but doesn’t yet benefit all (William Tabb)

• Two views: Joseph Stiglitz, Nobel Prize winner for Economics in 2001- interdependence has happened because communication and transportation costs have been reduced and barriers to the flow of goods, services, capital, and knowledge have been taken down

• Naomi Klein, Canadian author and journalist- globalization shuts some people out of schools, hospital, workplaces, and even their own farms, homes, and communities- “fences of social exclusion”

• Relatively free movement of money, people, information, and goods across borders has helped increase the size and economic power of transnational corporations- some are so big that they are wealthier than the governments of some countries

• Robert Reich-The Work of Nations- transformation will rearrange the politics and economics of the 21st century- no national products or technologies, no national corporations or industries, no national economies

• Some people argue that this interdependence creates instability because a crisis in one country- whether it is caused by a civil strife, an outbreak of disease, or a strike- can become a serious global economic problem that can lead to job losses, factory closures, and unemployment in many other countries

• Many people argue that, at the same time, stability is increased because countries that trade with one another are unlikely to go to war

• See Figure 9-5 Factors that Affect the Global Economy p.218:

-war, famine, economic uncertainty, government economic policies, price changes for non-renewable energy, changes in investor’s confidence, natural disasters

• See reflect and respond- John Ralston Saul’s opinion

How did 20th Century World Events Shape Contemporary Economic Globalization?

p. 219-225

• In 1914, European empires controlled great wealth, vast territories, and the lives of millions of people around the world

• The imperial powers wanted to protect or expand their colonies and trade; needed colonies as source of raw materials and market for manufactured goods

• Along with other factors, competition led to WW I – Germany, Austria-Hungary, Italy versus Britain, France and Russia’ involved the colonies and other countries

The Costs of World War I

• 15 million soldiers and civilians killed

• Soldiers spent years in France living in muddy, rat-infested trenches under the constant threat of bombardment, machine-gun fire, and poison gas

• Huge economic costs- cities, towns, farms, roads, factories, ports, ships, and railways destroyed; economies devastated

• By 1919, world production of manufactured goods was more than 25% lower than it had been in 1913

The Costs of Peace

• Treaty of Versailles signed after WW I- supposed to ensure peace and prevent another global war

• Imposed harsh conditions on Germany –reparations- payments for war damages in Britain, France, Russia and other countries

• John Maynard Keynes, a member of the British delegation, warned that crippling Germany and Austria with war debts would starve the people and guarantee another world war

• Germany also had to give up colonies which were divided among European governments and Japan w/o consulting the Indigenous people who lived there

The Effects of World War I on the Canadian Economy

• By 1918, cost more than $2.5 million a day

• Income tax introduced to help pay – supposed to be temporary

• After war, interest payments -$164 million a year; soldier’s pensions- $76 million a year

• Unemployment rose

The Russian Revolution

• In 1914, Russia ruled by Czar Nicholas II

• Russian empire covered 1/6 of the earth’s surface- nearly 150 million people with more than 100 different nationalities

• Food and fuel shortages; Russia torn apart by civil war until 1922; between 1920-1922, 5 million killed by drought and famine

Communist Russia

• In 1922, the first communist state- Union of Soviet Socialist Republics emerged

• Communism- a new economic and political model- supposed to get rid of class distinctions; opposed capitalism and capitalist countries such as the U.S.

• Land and property were to belong to everyone; everyone would work for the benefit of all and get help as needed

• U.S.S.R. became a one-party state- Communist Party controlled the government and the economy- farming, industry, and transportation

• Dictator Joseph Stalin- made Soviet Union into an industrial and military giant, Forced work, collective farms

The Great Depression

• Late 1920s- economic boom; low unemployment, price of shares rising on the stock exchange, a place where people buy and sell shares in publicly traded companies

• October 29th, 1929- Black Tuesday- stock market crash started chain reaction in which entire world moved into an economic depression,- The Great Depression

The Great Depression in Canada

• Between 1929-1933, Canadian exports fell by 50%; by 1933, 26.6% of Canadian were out of work; salaries of employed cut

World War II

• Great Depression esp. hard in Germany due to reparation payments from WWI;

• Adolf Hitler and the Nazi Party promised to fix things, elected in 1933 and dissolved the German parliament and declared himself fuhrer, or absolute ruler

• Hitler-popular; convinced many Germans that they belonged to a master race entitled to rule others

• Took over the Rhineland, Austria, Czechoslovakia

• On September 1, 1939 invaded Poland

• In response, Britain, France, Australia, New Zealand, and Canada declared war; U.S. entered on side of Allies after Japan attacked Pearl Harbor in 1941

• More than 50 countries and colonies were drawn into the war

• More than 60 million people, civilians and military, died

World War II in Canada

• About 42,000 Canadians died, another 54,000 wounded physically or psychologically

• Short- and long-term economic effects; government spending increased and manufacture of arms, airplanes, and ships rose, Farming became more mechanized

• Unemployment fell; more than a million women joined the ‘paid’ workforce; from 1939-1941, employment in Canada’s manufacturing sector rose by 50%; less than 1% if Canadians unemployed by the end of the war

What Factors Laid the Foundations of Contemporary Global Economics?

p. 226-233

• Representatives of Britain, the U.S., Canada, and other countries worked to build an organization, the United Nations, that would:

~support people who wanted to choose their own gov’t.

~help countries co-operate on trade issues

~protect smaller countries against invasion by larger ones

~ensure that no single country controlled the world’s oceans

• war had cost more than $2 trillion dollars

The United Nations Monetary and Financial Conference at Bretton Woods

• in July 1944, representatives of 44 countries met in Bretton Woods, U. S. for a conference sponsored by the U.N.

John Maynard Keynes and Government Involvement in the Economy

• Keynes led the British delegation at the conference; he believed that unrestricted capitalism had failed; gov’ts. playing a very limited role in country’s economy was wrong

Friedrich Hayek and Government Non-Involvement in the Economy

• Mistrusted gov’t control, complete or partial; thought gov’t. should protect the market by ensuring that its rules and laws do not interfere with competition between businesses; believed competition and market would keep economy healthy; gov’t stay out of the way

The World Bank and the International Monetary Fund

• The World Bank (also called the International Bank for Reconstruction and Development) and the International Monetary Fund (IMF) -mapped out at the Bretton Woods conference; were to be supported by the UN and were to help expand international trade

• Supporters say these organizations have helped stabilize the global economy and brought prosperity to many countries

• Critics say they have become too influential and that their help in developing countries has come at too high a cost

General Agreement on Tariffs and Trade

• Signed in 1947, GATT members agreed to gradually eliminate tariffs and other trade barriers among themselves

• World Trade Organization emerged from the GATT -1995

• By 2007, the WTO was regulating trade in services , such as telecommunications and banking, as well as goods

• Set rules to protect copyright and intellectual property, which refers to products of the mind or intellect, such as slogans, industrial designs, communication technologies, and patents on drugs

• See points of view on structural adjustment programs-p.229

Changing the Foundations of Economic Globalization

• After WW II the U.S. and the Soviet Union became economic and military superpowers

• U.S.- capitalist economic system and democratic government

• Soviet Union- communist economic system and central gov’t. run by a dictatorship

• Battled for global influence and power, but never open military warfare- called the Cold War

• Cold War interfered with global trade- IMF, the World Bank, and the GATT unable to resolve issues

• During 1980s, people in various communist counties struggled to overthrow Soviet control; in 1989, Soviet Union began to collapse

• Destruction of the Berlin Wall which had separated communist East Berlin from capitalist, democratic Wet Berlin became symbolic of fall of communism

Changing National Economies

• By 1970s, some gov’ts. had huge debts, inflation and unemployment rising

• Views of Hayek and Friedman began to gain support

Moving Toward a Market Economy

• Hayek and Friedman believed that less government intervention and freer markets would generate economic health and prosperity

• Friedman’s (see profile-p.231) theories began to influence Reagan in the U.S and Thatcher in Britain

• U.S. began to move toward a market economy in which individuals were freer to make their own decisions with little intervention from the government- and where resources are the private property of individuals and companies.

• Canada- mixed economy- public and private sectors play significant role

• Case study- China p. 232-233

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