Download ECONOMIC GLOBALIZATION

ECONOMIC
GLOBALIZATION
The Birth of the International
Monetary System
World Bank and IMF
Keynes and Hayek
From GATT to NAFTA
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THE BIRTH OF THE INTERNATIONAL
MONETARY SYSTEM
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In 1944, 44 allied nations met at Breton
Woods, New Hampshire to discuss post war
economic order
The Breton Woods agreement, established a
new international monetary system, and a
global network of institutions to promote
international trade and the regulation of
currency (money) among western nations
One of the most far reaching agreements
was the fixed rate of currency exchange
The value of this is established by the
government, and based on the gold standard
All printed money had to be backed by
reserves of gold
https://www.youtube.com/watch?v=BHw4
NStQsT8
THE BIRTH OF THE INTERNATIONAL
MONETARY SYSTEM
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By the 1960s the USA faced huge
inflation as a result of the Vietnam
War, and new social programs
President Nixon in 1971, closed the
gold window so by 1976 all the
world’s major currencies had
floating exchange rates
This means that the exchange rate of
a country’s currency found it’s own
value on the world market, based on
supply and demand
Since World War II, the US dollar
has been the world standard
currency
http://www.youtube.com/watch?v=iRzr1QU6K1
o&safe=active
The World Bank and the IMF
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Two of the agencies that were developed
out of the Breton Woods agreements are the
World Bank and the International Monetary
Fund (IMF)
The World Bank provides loans to less
developed countries, and is an agency of the
Untied Nations and controlled by its 184
members
Countries applying for loans are usually
required to meet certain economic and
political conditions
• Reducing corruption
• Increasing democracy
• Adopting a Western-style free market
• Reducing spending on social programs
• https://www.youtube.com/watch?v=Mhr
C2_Hak08
FOREIGN AID: WHY SOME
DON’T BELIEVE
• Foreign aid like
that supplied by
the World Bank is
often criticized, in
a small group
come up with
three criticisms of
foreign aid
https://www.youtube.com/watch?v=tAvA_cOeeOI&ind
ex=34&list=PL8dPuuaLjXtPNZwz5_o_5uirJ8gQXnhEO
•
http://www.youtube.com/
watch?v=hFbOzEI6IYk&saf
e=active
•
http://www.youtube.com/
watch?v=VvSrJ9BorSo&saf
e=active
THE INTERNATIONAL
MONETARY FUND
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The IMF is in charge of monitoring
exchange rates and providing short
term financial assistance
The IMF is funded primarily
through quotas that member
countries pay
The USA contributes the most to
the IMF 17% of the total quotas
$61 billion
Palau the world’s smallest
economy contributes 0.01% $5
million
The annual operating expenses are
met by the interest payments on
loans and deposits
https://www.yo
utube.com/watc
h?v=MhrC2_Hak
08
THE INTERNATIONAL
MONETARY FUND
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Facts about the IMF
• Current membership: 185 countries
• Staff: approximately 2,635 from 143
countries
• Total Quotas: $338 billion (as of 9/30/07)
• Loans outstanding: $17 billion to 68
countries, of which $6 billion to 57 on
concessional terms (as of 9/30/07)
• Technical Assistance provided: 438.4
person years during FY2007
• Surveillance consultations concluded: 134
countries during FY2007, of which 125
voluntarily published information on their
consultation.
EXPANSION OF FREE MARKET
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The end of the Cold War, started the
decline of the centrally planned
economic systems
Countries like Russia, Poland and East
Germany were the first to move to free
market systems
China was another area that began to
change it’s economic operations, Deng
Xiaoping declared “to get rich is to get
glorious”
When China joined the World Trade
Organization in 2001, added 1 billion to
world markets
India also began entering the world
markets in a dramatic way, particularly
in outsourcing, telemarketing and call
center support were tremendous growth
areas
TECHNOLOGY AND
COMMUNICATIONS
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By the 1990s new technologies
had changed international
investments and money markets
On-line trading grew
exponentially, unfortunately the
growth of the electronic herd
phenomena was an unintended
consequence
This is were investors base their
decisions of easily available but
difficult to substantiate
information causing dramatic
shifts in the marketplace
JOHN MAYNARD KEYNES
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Keynesian economics calls for a
large role for government in the
economy
He believed in direct government
intervention in the economy
through spending, to prevent or
reduce recession
Today governments who follow
these beliefs increase spending
and decrease taxes when
consumer spending is too low
They reduce spending and increase
taxes when consumer spending is
too great leading to inflation
https://www.youtube.com/watch?
v=RqihKq7F_xI
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FRIEDRICH
HAYEK
Argued the human societies are too complex
to be planned, and can never match the
natural evolutionary wisdom from a free
society
He based his theories on analysis of
totalitarian regimes like the Soviets and the
Nazis
Key beliefs
• Free market
• Dynamic competition
• Human action but not human design
• Many planners
• Importance of prices
• https://www.youtube.com/watch?v=eGb
AXSV9E-k
GENERAL AGREEMENT OF
TARIFFS AND TRADE
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Established 1947, 23 countries four
principles
• Conducting trade in a non-discriminatory manner,
no member given special privileges
• Treating imported goods of a member country in
the same manner as similar domestic goods
• Protecting domestic industries by tariffs not
quotas of fees
• Requiring new members to provide a list of tariffs
and other trade restrictions imposed on member
countries
• From 1946-1995 there have been eight
rounds of GATT meetings, by 1995 GATT
include 131 countries and more than 90% of
international trade
• https://www.youtube.com/watch?v=cijnV8
P5UHE
FREER TRADE WITH OUR
BIGGEST PARTNERs
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In 1989 the Free Trade Agreement (FTA) was
signed between Canada and the United States
It removed most trade barriers between the
two countries
It was a controversial agreement
in 1994, the North American Free Trade
Agreement (NAFTA) was signed
It created the largest free trade bloc on the
planet with 360 million people
Mexican imports to Canada have increased
200% between 1993 and 2003 while Canadian
imports to Mexico have increased 25%
Mexico trails only Canada and Japan in terms of
trade with the USA
https://www.youtube.com/watch?v=LaMCKSec7Y
INVESTMENTS HAVE CHANGED
WHAT DOES THIS CARTOONIST
THINK
OR THIS CARTOONIST
OR THIS ORGANIZATION
https://www.youtube.com/watch?v=k70qUtcaPUI
NAFTA AT 20
http://trade.gov/fta/nafta-at-20.pdf
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NAFTA Is 20 Years Old – Here Are 20 Facts That Show How It Is
Destroying The Economy
http://www.globalresearch.ca/nafta-is-20-years-old-here-are-20-facts-that-show-how-itis-destroying-the-economy/5396316
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Advantages of NAFTA
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https://www.thebalance.com/advantages-of-nafta-3306271
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Canada's Perspective on NAFTA
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https://www.youtube.com/watch?v=dW25Dt91Nc0