Global Issues MTU final
What other economic intergovernmental organizations exist and how is their purpose different than the Bretton Woods organizations (WTO, IMF, and World Bank)?
(OECD, This is a broad group of, at the moment, 30 developed nations. The OECD is "the most encompassing 'club' of the world's rich countries" (Ougaard 2007: 914-17). 1. Gathers statistics on economic globalization. 2. Watches over the economic performance of nations. 3. Promotes the liberalization of flows of capital and the globalization of finance, and banking, as well as FDI and transnational organizations. 4. Seeks to deal with the difficult issue of taxation, and the problems of double taxation and tax evasion, in a global economy. 5. Is involved in regulations dealing with global environmental issues. EU, The European Union was a product of the post-WW II era, as well as the Bretton Woods era. A key figure in its development was Jean Monnet who believed that the fragmentation of Europe put it at a disadvantage vis-a-vis the US in the era of industrial capitalism, mass production, and mass consumption. To compete, Europe had to become more unified in order to create a large and integrated market and large corporations and financial institutions, like those in the United States. NAFTA, (north america free trade agreement wages declined rather than increasing in Mexico; the initial gain in Mexican jobs has given way to a loss of jobs, especially to China; Mexican farmers have been disadvantaged in comparison to American farmers who receive substantial subsidies from the government; US workers have also lost jobs (Kletzer 2007: 6) because their firms have moved to Mexico (or Canada) and the ability of those firms to fight for jobs and better working conditions has been weakened; wages have declined in the US; Canada has cut social programs in order to compete better within NAFTA; environmental protection has declined with a corresponding increase in environ- mental problems. MERCOSUR, MERCOSUR (Roett 1999) is sometimes called the Southern Common Market. It was created by the Treaty of Asuncion in 1991 with the goal of a common market in South America by 1995. and OPEC) Organization of Petroleum Exporting Countries
How is globalization impacting consumption?
2 credit card brands in america, hyper consumption, hyper debt, everywhere, not just america
What is the Bretton Woods system and why was it formed?
A key factor in the Depression was thought to be a lack of cooperation among nation-states. That lack of cooperation was associated with high tariffs and other import restrictions and protectionist practices, as well as the propensity of govern- ments to devalue their currencies in order to gain an edge in global trade over other countries. The latter also made exchange rate wars among the nations involved more likely. Those concerns were the backdrop for the creation of the Bretton Woods system and its five key elements (Bordo and Eichengreen 1993; Boughton 2007: 106-7). First, each participating state would establish a " 'par value' for its currency expressed in terms of gold or (equivalently) in terms of the gold value of the US dollar as of July 1944" (Boughton 2007: 106). For example, the US pegged its currency at $35 per ounce of gold, while, to take one example, Nicaragua was 175 cordobas per ounce. This meant that the exchange rate between the two currencies was five cordobas for one dollar. "Second, the official monetary authority in each country (a central bank or its equivalent) would agree to exchange its own currency for those of other countries at the established exchange rates, plus or minus a one-percent margin" (Boughton 2007: 106-7). This made international trade possible at or near the exchange rate for the currencies of the countries involved without the need for any outside intervention. Third, the International Monetary Fund (IMF) was created (Babb 2007: 128-64) (as was the forerunner of the World Bank - see below) to establish, stabilize, and oversee exchange rates. Forty states became IMF members in 1946 and were required to deposit some of their gold reserves with it. The IMF was empowered to approve the par values of currencies and member states could not change that value by more than 10 percent. If a currency was destabilized, the IMF was prepared to lend member states the money needed to stabilize their currency. Fourth, the member states agreed to eliminate, at least eventually, "all restrictions on the use of its currency for international trade" (Boughton 2007: 107). Finally, the entire system was based on the US dollar (at the end of WW II the US had about three-fourths of the world's gold supply and accounted for over one-fifth of world exports). The US agreed to make the dollar convertible into other currencies or gold at the fixed par value. The dollar became, in effect, a global currency. Of course, as the Bretton Woods system came into existence and had a chance to develop, it changed dramatically over time.
What is autarky and why did states pursue it after World War I?
Autarky: Turn inward of a nation-state in order to become as economically self-sufficient as possible. because of the economic turmoil caused by ww1, states became afraid of depending on other states
What is a multinational corporation (MNC) and how have they changed global economic relations?
Corporation that operates in more than two countries. However they are created, MNCs lead to the development of far more complex networks. For starters, the firm's internal network now needs to be tied into net- works in other countries. These larger, more complex networks are inherently more difficult to control. There are difficulties involved in finding a balance between centralized control and local sensitivity; economies of scale in production and responsiveness to local market conditions; core and peripheral knowledge; and global integration and local responsiveness. Then there are more specific issues such as the location of corporate headquarters (usually the home country); core research and development centers (also usually the home country); sales and marketing (usually dispersed globally); and production activities (also usually dispersed).
How is globalization today similar to the prior epoch of globalization that occurred between 1896 and 1914?
During the earlier epoch global progress was spurred by such developments in transportation as the railroad and the steam ship, whereas in more recent years it is the airplane that played a central role in that development. The telegraph greatly enhanced global communications in the early twentieth century, while it is the Internet that plays that role nearly a century later. Global economic development, both then and now, depended on large-scale flows of capital. In addition, such development in both periods entailed large-scale immigration and even the growing importance of remittances to those who remained in the homeland (for a discussion of remittances today see Chapter 11). More generally, global economic specialization (Smith 1776/1977) among the nations of the world became the norm, then and now. Furthermore, this specialization operated on the basis of the "law" of comparative advantage (Ricardo 1817/1971); that is, that nations should concentrate on what they do best. This comparison is internal - that is, a nation should con- centrate on what it does best in comparison to the other things it does (or could do) and not in comparison to what other nations do. This is related to another similarity between today and a century ago and that is an emphasis on free trade and the elimination of trade barriers (e.g., tariffs). 4 Not only are there structural similarities between global economic development in the two periods, but the problems created in the two epochs are also similar. First, poor nations and the peoples who inhabit them were and are subjugated by the operations of the global economy. Second, not all parts of the world (e.g. traditional economies) gain(ed) (or gain[ed] equally) from the growth of the global economy. There were/are even sub-areas within those parts of the world that did advance that did/do not share equally in the gain. Third, not only were/are there losers in this economic competition among geographic areas, but also certain industries and social classes lose out, at least in comparison to the winners. Fourth, within nations the poor tend(ed) to suffer most when those nations are forced to repay their debts to other, more developed, nations. In sum, the global economy of a century ago (and much the same could be said today) "was not equally good for everyone and was bad for many" (Frieden 2006: 26).
What is the General Agreement on Tariffs and Trade (GATT) and what happened to it?
GATT was a system for the liberalization of trade that grew out of Bretton Woods and came into existence in 1947 (Hudec 1975). It operated until 1995 when it was superseded by the World Trade Organization (WTO) (see below). While GATT focused on trade in goods, the WTO also took on responsibility for the increasingly important trade in services. While GATT was simply a forum for the meeting of representatives of countries, the WTO is an independent organization.
What are the two key trade-related items now under discussion in the WTO?
Intellectual property rights (IPRs) (trips) These involve intangible ideas, knowledge, and expressions that require their use be approved by their owner. Trade-Related Investment Measures (TRIMs) - 1. Requirements for local content or sourcing. Minimum amounts of local content or local sourcing are specified for inputs into final products. 2. Export Performance Criteria. This spells out how much of a foreign producer's output must be exported. 3. Trade Balancing Requirements. Limits the value of goods imported by a foreign firm to the amount it exports. 4. Foreign Exchange Restrictions. Limits the inflow of foreign exchange to foreign firms. 5. Export Controls. Limits on the amount a foreign firm can export (Grimwade 2007: 1178-80).
What is the World Trade Organization (WTO) and why does it exist?
It was out of the Uruguay Round (1986-93) that an agreement was reached to create the WTO. While GATT has been superseded by the WTO, many of its elements were incorporated into the WTO, although they continue to change and evolve as a result of changing global economic realities. Negotiations on trade have continued under the auspices of the WTO and as of this writing the highly disputatious Doha Round has just ended in failure. Over the years, WTO negotiations have dealt with such issues as reducing tariffs on the trading of goods, dealing with non-tariff barriers
What is outsourcing and how is globalization impacting it?
Outsourcing is the transfer of activities once performed by an entity to a business (or businesses) in exchange for money. It is a complex phenomenon that is not restricted to the economy, not only a macro-level phenomenon, and not simply global in character. Dealing with the first issue, while outsourcing in the economic realm is of greatest importance and the issue of concern here, it also occurs in many other institutions such as health care and the military. In terms of the former, one example involves the fact that the work of the radiologist is increasingly being outsourced. This is made possible because the material with which radiologists deal (x-rays, results ofMRIs) is now usually digitized and therefore sent easily and quickly via the Internet to radiologists anywhere in the world. Thus, a digitized x-ray taken in London can be read quickly and easily by a lower-paid radiologist in Asia. Similarly, the military has outsourced many of its functions. For example, NA TO forces from various countries serving in Afghanistan may be flown there on leased Ukrainian airplanes or by the commercial airlines ofNATO nations rather than on planes from their own air forces. While both of the preceding examples exist outside the econ- omy, they are examples of outsourcing and are manifestations of globalization.
• Why do Ritzer and Dean say that Bretton Woods died on August 15, 1971 and what caused this event?
President Richard Nixon took the US off the gold standard resulting in a devaluation of the dollar and the end of the standard by which the currencies of other nations operated. For one thing, it had been based on the preeminence of the US and the dollar. However, as many of the economies of the world recovered from WW II - in part because of Bretton Woods - other nations and currencies grew in import- ance (e.g. Japan and the yen, the European Union's euro, and more recently China and the yuan). Second, international finance was restored to major importance after years of being subordinated to a focus within national economies. This led to the growth in speculation in international currencies. For example, as indications arose that the interest rates in a given country were likely to rise, speculators would buy up that currency and in the process sell off currencies that were likely to decline because of lower interest rates. With the declining importance of the US, and increasing doubt that it could sustain the exchange rate set by Bretton Woods, speculators turned their attention to the US dollar. To defend the dollar, the Federal Reserve had to raise interest rates and this led to a recession in the US because it raised the price of American products and made it more difficult for American firms to compete in the global marketplace. Eventually the Nixon administration was unwilling to accept this because of the adverse political consequences resulting from a recession caused by rising interest rates.
What are the major criticisms of the Bretton Woods organizations and how have they changed in response to these criticisms over the years?
Recent changes in the organizations are traceable to several major forces includ- ing globalization (a concept and a process not even dreamt of in 1944), major trade disputes, and the increasing power and ambition of growing economic powers, especially in Asia. In terms of the latter, the World Bank has been loaning large sums of money to countries (e.g. China; including $710 million in early 2009 to help rebuild areas hit by a 2008 earthquake) whose economies did not need such loans. In fact, of the bank's $23 billion in loans in 2006, $13 billion went to "middle-income" countries rather than to poor countries. Even in terms of the funds that do go to poor countries, the World Bank is an increasingly small player in comparison to various international and private aid organizations. As a result, one professor said: "... it's hard to see what good it [the World Bank] has done anywhere" (quoted in Weisman 2007a: C8). The Bank argues it is helping large numbers of the poverty- stricken in less developed countries, while its critics say it is the opening of markets there, and not bank loans, that have helped in poverty reduction. The IMF is saddled with such problems as relentless criticism of past austerity programs imposed on poor countries in exchange for bailouts, the bailouts them- selves for legitimating and supporting bad policies by countries receiving them, by a shift in global power away from the US and Europe and toward countries like China, and the fact that the IMF has been rendered increasingly less relevant by a growing global economy. Thus, former US Secretary of State George Schulz says, "If it [IMF] disappeared tomorrow, I don't think people would miss it very much" (quoted in Weisman 2007a: C8). On the other hand, there are those who argue that while things are relatively calm for the moment, the IMF will be needed during the next global financial crisis. The biggest problem facing the WTO is the possibility that the failure ofthe Doha Round could lead to a reversal of the long trend toward more open trading systems. The fear is a new era of protectionism which, in turn, would lead to a slowdown in the global economy. This fear was exacerbated in the Great Recession as one began to hear outcries in the US to "buy American." Similar calls were being heard elsewhere in the world. IMF The privatization of state-run systems (e.g. steel mills) was often done too quickly and the new privatized businesses were often ineffective, in part because they weren't ready to operate on their own. As a result, consumers suffered, as did workers as privatization brought with it job loss. Privatization often also went hand-in-hand with corruption (see below). The push to liberalize financial and capital markets, and to reduce barriers to trade, often hurt small emerging countries (e.g. through higher unemployment) and contributed to the financial crises of the 1990s. Furthermore, resentment was generated in those countries because the pressure to liberalize them came with restrictions on finance, capital, and trade. The emphasis on foreign investment often adversely affected indigenous busi- nesses in less developed countries. The IMF failed in the sequencing and pacing of the changes: "forcing liberaliza- tion before safety nets were put in place, before there was adequate regulatory framework, before the countries could withstand the adverse consequences of the sudden changes in market sentiment that are part and parcel of modern capitalism; forcing policies that led to job destruction before the essentials of job creation were in place; forcing privatization before there were adequate competition and regulatory frameworks." (Stiglitz 2002: 73). The IMF failed to deal with a variety of issues such as job creation, land reform, improved education and health services, and helping workers adversely affected by its policies.
What is the difference between a supply chain, an international production network, a global commodity chain, and a global value chain?
Supply chains: Value-adding activities in the production process beginning with raw materials and ending with a finished product. International production networks: Networks of producers involved in producing a finished product. Global commodity chains: Value-adding chains, global industries, and the sellers of global products. Global value chains: Various phases of production, delivery to final consumers, final disposal.
What is the World Bank and why does it exist?
The World Bank (officially The International Bank for Reconstruction and Develop- ment [IBRD]), a specialized agency of the UN, is the most important element of the World Bank Group (WBG) (Bradlow 2007: 1262-7; Gilbert and Vines 2000). IBRD (or the Bank) was established in 1944 at Bretton Woods and began operations in 1946. Membership is open to all member states of the IMF and as of this writing it includes 184 nations. It provides funds to government-sponsored or -guaranteed programs in so-called Part II countries (member states that are middle-income or creditworthy poorer nations). It also provides advice and analytical services to such states. encouraging "development of productive facilities and resources in less developed countries"; funding for "productive purposes" when private capital cannot be obtained on reasonable terms; • encouraging international investment in order to promote international trade and development and equilibrium in balance of payments; • helping member countries improve their productivity, standard of living, and labor conditions (Bradlow 2007: 1264).
What is the "race to the bottom" and why do some believe it leads to "industrial upgrading" while others believe it results in persistent poverty?
The basic argument is that for less developed countries to compete and succeed in the global economy, they must under- cut the competition in various ways such as offering lower wages, poorer working conditions, longer hours, ever-escalating pressure and demands, and so on. It is often the case that one nation is willing to go further than the others in order to attract the interest of MNCs. An ever-spiralling decline in wages, etc., occurs in the "winning" less developed nation, at least until it is undercut by other countries eager for work and willing to offer even lower pay, poorer working conditions, and so on. In other words, the countries that get the work are those that win the race to the bottom. These, of course, are almost always pyrrhic victories since the work is earned on the basis of creating poorly paid and horrid circumstances for the workers within the "victorious" nation.
What is the International Monetary Fund (IMF) and why does it exist?
The goal of the IMF is macroeconomic stability for both member nations and, more generally, the global economy (Cardim de Carvalho 2007: 658-63). More specifically, the IMF deals with exchange rates, balances of payments, international capital flows, and the monitoring of member states and their macroeconomic policies. The IMF is a lightning rod for critics who see it as supporting developed countries and their efforts to impose their policies on less developed countries. Its supporters see it as key to the emergence and further development of the global economy.
According to Ritzer and Dean, what caused the recent "Great Recession?"
This was demonstrated most recently in the sub-prime mortgage crisis (and the associated great financial crisis of late 2008) which had its roots in problems associated with a dramatic increase in the issuing of highly risky "sub-prime" mortgages by American banks. These were mortgages sold primarily to relatively low-income people (whose ability to repay those loans was not checked closely) in order to allow and induce them to buy homes. They were offered low interest rates (rates below the prime interest rate), or the possibility of paying only on the principal with no interest payments, but those highly attractive terms lasted for only a few years. After that, the interest rates were to "float" rising to the higher rate prevalent at the time. This served to raise homeowners' monthly payments, some- times substantially
What is the International Trade Organization (ITO) and what happened to it?
We can begin with the International Trade Organization (ITO) because, while it was a creation of Bretton Woods, it never really got started. It was killed largely by US opposition based most broadly on perceived threats of the ITO to its national sovereignty. Further, some (protectionists in the US) found it too oriented toward free trade, while other Americans (free traders) thought it too protectionist. Given the contradictory nature of this assault, it was clear that the ITO had little chance of winning political support in the US. In fact, opposition to the ITO was so strong that President Harry Truman never submitted it to Congress because it was sure to be killed there. The ITO was dead before it started, but the idea of free(r) trade was not. This is clear in the discussion to follow of GATT, as well as of the World Bank.
What are the two key areas that Ritzer and Dean say we must focus on to address the problems of political globalization?
accountability, transparency
How is globalization changing corporate structures, the people who work there, and their management ideas?
argued that this space is the last frontier of business. New organizational forms are being made necessary by the new realities of the global economy and of doing business globally. One way of putting this (although it is, as we have seen, highly flawed) is that business organizations are becoming increasingly "flat" rather than hierarchical (Friedman 2005). Another, is that they are growing more like networks; what is being created is the "network organization" (Castells 2000).
Vandermeer and Perfecto • What is causing rainforest deforestation in Costa Rica and what should be done to stop it?
bananas
How has oil impacted the global economy according to Ritzer and Dean?
oil producing countries have so much money they don't know what to do with it, so they are investing. the us will fall if those countries don't invest in american companies, but also if they invest too much and start owning all of america. oil rich countries soon will have to import more oil to meet their needs because when people get richer they use more oil
What global value chains between the US and China do Ritzer and Dean discuss and what do we learn about global economics from each?
scrap metal, waste paper, t shirts, iphones, "used" factories, automobiles, wine,
