Exam questions
Name and briefly explain two of the resolutions resolving the upheavals in response to industrialisation.
2 out of the following: - allied forces defeating fascism at the end of WWII. - communism collapsing with the end of the USSR, apart from some minor cases, like North Korea - New Deal Capitalism facilitating social redistribution and investing in public Infrastructure
With the clear rise of digitech and "globots", in the long run, what jobs are safe from being replaced by machines and why?
"Globots" and other forms of digitech have already started, and will continue, to replace or augment workers. However, with this particular form of revolution/disruption, it will be white collar workers who are replaced. Thus, it can be speculated that new jobs will appear (as it has in the past), and humans will work the jobs that globots cannot. This involves the more human aspects of creativity and logical reasoning, skills that cannot be aggregated into a big data set for globots to use. While machine learning can certainly replace jobs such as looking over papers and computing, it can only do so with a large enough data set to learn from. Human emotions and creativity cannot be placed in such a data set, meaning that jobs that require these human cognitive abilities will be safe from being replaced.
What are the three main mechanism through which trade liberalization in the political economy takes place?
1. Multilateral Talks, such as the Doha Round 2. Regional trade agreements, like the Trans-Pacific Partnership (TPP). 3. Unilateral tariff setter
Why was 1986 the big year for F TAs?
1986: Single European Act (EU Treaty) establish plan to form Single Market by 1992. 1986: Spain and Portugal join EU. 1986: Canada and US launch FTA talks to deepen and widen the 1965 Auto Pact (CUSFTA signed in 1988). 11986: Uruguay Round (MTN) launch.
What were the main drivers of lower trade costs in the 18th and 19th century?
A significant drop in transport costs is one of the primary reasons for lower trade costs. Steam engines which steadily improved in its design made it economical for industrial use. With the rise in industrialization and more demand for transportation, innovations in transportation continued. Overtime, railroads, and steamships revolutionized land transportation and ocean travel.
What is a tariff and in which ways do they 'slow down' globalisation? Provide a fictional example and explain some impacts on domestic consumers and on exporters.
A tariff is essentially a tax on imported goods. An example would be a twenty per cent tax on bananas entering the Brazilian market. In this case, if a banana would (without tariffs) cost 1 dollar for Brazilian consumers, an applied tariff of 20% would increase the cost from 1 dollar to 1.20 dollars for Brazilian consumers. For consumers, this would increase prices of imported bananas by 20 cents. Additionally, for international producers of bananas seeking to export bananas to the Brazilian market, it would hurt their ability to sell bananas in Brazil, both because prices would go up which may reduce demand for bananas and because they will have a harder time competing with Brazilian banana producers, which are not subject to a twenty percent import tariff.
When did economic globalization actually start?
A trivial answer would be in generic terms "globalization" has always existed, as some forms of exchanges between different people, states and cultures are indeed as old as mankind itself. Sapiens crossed Alaska millennials ago to reach the American continent, the Prophet Muhammad, coming from the Arabic peninsula, travelled to places as diverse as Spain, North Africa and India to spread his ideas, in the end of the thirteenth century a young Venetian called Marco Polo went all the way to China to meet the great Kublai Khan. A more profound and accurate answer will try to answer the question by actually measuring economic exchanges and its effects on national political and economic units. It is exactly what Oxford and Harvard scholars O'Rourke and Williamson have done in their article When did Globalization begin? (2002). In their article, they define convincingly economic globalization as the integration of markets across space, specifically measured by international price convergence. To do so, they take the example of one good exchanged across the globe: wheat. Their findings show that around 1815, because of arbitrage, geopolitical stability allowed by Pax Britannica ensuring free and fair trade across the oceans and new means of transportations driven by steam power, the price of wheat can more or less be indexed homogeneously worldwide. In other words, O'Rourke and Williamson argue that around 1815, the influence of national authorities on the price of a good (law, tax or prohibition) influenced less this price than the overall compilation of global economic activity that tends to define the price of wheat. Put differently, production and consumption became so unbundled in 1815 that economic globalization actually became a primary driving force.
Choose one of the following socio-economic transformations unleashed by the Industrial Revolution in the UK and develop it over a few sentences: shift in political power, rural exodus, influence of labour, drop in inequalities
A. Shift in political power - the Industrial Revolution entailed a shift in the process of value creation from land to capital, while labour's contribution stayed stable. This sparked a decline in the political influence of the traditional landed aristocracy that had dominated Parliament during most of British history. Conversely, a rising capitalist class saw its influence and power expand. B. Rural exodus - the shift from farm to factory generated a significant rural exodus, as workers concentrated around factories and in cities and left the countryside. This undermined traditional social structures that were still prevalent in rural villages and reconfigured social relations and social roles. C. Influence of labour - with the advent of universal male suffrage after World War I in the UK, labour's influence and bargaining power shot up. Workers organized and formed unions that had the power to bargain for higher wages and to block factories if needed. D. Drop in inequalities - Conversely to the New Globalisation's division of spoils, the Old Globalisation smoothed inequalities. This is mostly because, in that case, technological progress (steam) increased the productivity of manual workers (blue collars) but not the productivity of "mental" workers (white collars). Therefore, the share in national income of the top 5% significantly fell during that period and into the first half of the 20th century.
When did economic globalization actually start?
According to O'Rourke and Williamson, economic globalization defined as the integration of markets across space, specifically measured by international price convergence, started about 1815. Because of arbitrage, geopolitical stability allowed by Pax Britannica ensuring free trade across the oceans and new means of transportations driven by steam power, the price of wheat could more or less be indexed homogeneously worldwide.
When did globalisation start as a worldwide phenomenon, according to O'Rourke and Williamson? Why that date and not earlier/later?
According to the authors , g lobalisation is defined as world market integration. Su ch level of integration is assessed by measuring global price convergence of selected commodities (e.g. wheat). By resorting to economic historical data, it is only possible to identify remarkable price convergence as of the early 1800s, so that this is the most appropriate choice when talking about the start of globalisation.
What is the 3-Act Structure composed of?
Act 1 is considered the Set up from 1815 - 1914, Act 2 is the confrontation from 1914 - 1949, and Act 3 is the resolution from 1950 to 1990
Why did protectionism and regionalism get a bad name during Act II of Phase 3?
Act II marked the period of the great depression and the two world wars. The former caused the United States to erect protectionist barriers to trade in a misguided effort to promote domestic demand for domestic production. However this backfired and ended up exacerbating the depression. This caused a shift away from protectionist measures. In addition, the two world wars were fought between military blocs which mirrored trade blocs. After the wars, there was a general perception that regionalism would likely lead to further wars, and so global economic integration governed by the Bretton Woods institutions was encouraged.
Why was the "Pax Britannica" so instrumental in promoting international trade during the 19th century ?
After the Napoleonic Wars, Britain progressively started to move ahead of other European and North Atlantic powers, partly thanks to having started to industrialize earlier and to a demographic boom. As its empire began to spread across the seas, it needed a strong navy to protect it and ensure that trade routes between the metropolis and the colonies were not disrupted. Control of the seas and a booming economy made Britain an unrivalled power at that time and, after the repeal of the Corn Laws in 1846, it used its clout to promote and spread free trade across the globe. This is why many historians argue that the Old Globalisation was partly made possible by Britain's hegemony.
Describe key events in the 19th century which accelerated globalisation.
An international price convergence particularly in agricultural goods began taking place from 1820 which coincided with the Pax Britannica - where "Britain ruled the seas". Alongside technological advances in transport, this peace allowed for reductions in trade costs, which engendered a large portion of globalisation.
What was the 'Commodities Super Cycle' in the last 3 decades (second unbundling)?
As industrialization leads to rapid income growths, it leads to an increase in commodity demand and leading to a long term sustained demand for commodities creating a commodity super cycle. Commodity super cycles are decade-long periods in which commodities trade above their longterm price trend. In the second unbundling, some countries have seen strong industrialization which led to increased incomes and created commodity super cycles.
What is the "Commodity Super Cycle" and how did it work?
As industrialization leads to rapid income growths, it leads to an increase in commodity demand and leading to a long term sustained demand for commodities creating a commodity super cycle. Commodity super cycles are decadelong periods in which commo dities trade above their long term price trend. In the second unbundling, some countries have seen strong industrialization which led to increased incomes and created commodity super cycles.
Why is Albert Bridge in Adelaide a good example of the virtuous cycle for the North?
Because production of iron goods was much more sophisticated in England (Manchester) than it was in any other place around Adelaide, such as in Asia. Therefore, it made sense to produce and then ship it for such a long distance.
Briefly explain why the 2UB has made industrialization less "lumpy".
Before the 2UB, industrialization was conceptualized as a gradual process, with "stages" of development. In practice, this meant that, to industrialize, a country had to start "from the bottom" by kickstarting sectors that required mostly low-skill labor and low technology (like textiles) through "big-push" state-led support policies. The country would then "move up" the ladder of development and tackle the next sector, till it would end up having a full domestic supply chain. The 2UB has turned this "sector-by-sector" logic on its head. By joining GVCs, countries can now leapfrog some sectors at the bottom of the ladder and become competitive in specific stages of the production process (auto wires for Vietnam, for instance). This means that a country doesn't need to have a proper domestic industrial base to join GVCs - it can basically free ride on others' industrial capacities.
What are the bilateral investment agreements (BIT) and how do they affect developing nations within their border?
Bilateral investment agreements (BIT) are concessions made by developing countries to rich nation firms seeking to invest in the country. They encompass the disciplines between private foreign investors and hosting countries. Provisions in BITs constrain developing nation's sovereignty by limiting their ability to impose control on capital flows (allowing firms to take money in and out freely) and by imposing the right to submit disputes to international arbitration rather than local courts (so called Investor State Dispute Settlements). Nations subscribing to BITs increased rapidly after 1985 allowing participation in international production networks and global value chains. BITs have shifted from being "shallow", focusing on tariff cuts, to "deep", impacting national laws and practices where provisions affect free movement of capital, services and intellectual property.
How did the UK jobs patterns shift from the mid-19th century onwards?
Both tables, UK employment and UK job shares, clearly illustrate how the population was increasingly involved in the Service and Manufacturing industry whereas the agriculture sector experienced a drastic decline.
Labour became a political force able to gather and bargain for better conditions and living standards. From 1874 to 1914, Continental Europe instated strong protectionist policies. What was the motive behind these policies? Is the dependency theory partly motivated by this protectionist policies of the Continental Europe?
Continental Europe placed protectionist policies to help in nation building and with a motive of infant industry development. It can be argued that the dependency theory which garnered strong interest in the 1970s by newly independent countries had the same argument of placing protectionism to increase nation building.
What is the main narrative for act II?
Due to the world wars, the great depression and totalitarianisms, protectionism and regionalism received a poor reputation throughout this time. This biased subsequent governments to see open trade as a good thing and closing trade as a bad thing. This also contributed to the subsequent development of international multilateral institutions (GATT, WTO) in act III.
Name a few key aspects of Act I that were influenced by Great Britain.
During Act I (1815-1914) world trade grew approximately 80 times. This mostly happened because of the reduction in transport costs, brought about by the steam revolution, which started in Great Britain. Trade policy and tariffs were another trade barrier that Britain was instrumental in removing; from 1815 onwards they made consistent efforts toward lower tariffs, before finally embracing free trade in 1846 with the passing of the Repeal of the Corn Act. This spurred other European nations to adopt a similar policy in order to achieve the same industrial success. Finally, the global peace environment guaranteed by the Pax Britannica enhanced trade among nations.
During the New Globalization, what characterized trade patterns among North-South nations?
During the New Globalization and due to the transference of manufacturing process and technology to the South, in the late 1980s and early 1990s North to South trade started to resemble the trade among rich nations. This two-way trade, or back-and-forth trade, is when two nations import and export the same kind of goods. It is mostly associated with intermediate goods and mainly within relatively few manufacturing sectors, technically known as intra-industry trade
What led to the development of anti-globalisation sentiments among nations?
During the period of events such as World Wars and Great Depression, nations began to observe lack in trust which led to the emergence of policies that target protectionism and regionalism at national level. These actions predominantly hindered the global economy from recovering and reduced the window of international trade opportunity.
What main changes characterized globalization before WWI?
During the preWWI wave of Globalization, lasting from 1820 to 1914, trade volumes increased drastically, as consumption and production were unbundled. The north (G7) industrialized, while the deindustrialized (A7). Industrialization in the north also led to urbanization since economic activity clustered locally as trade expanded globally. In sum, the 19th century growth take the north led to the Great Divergence
Explain the mechanisms behind Northern industrialization and Southern de-industrialization during Phase III.
Falling trade costs and industrial concentration in the North Atlantic economy fuelled each other. The North, which already started out with a slight comparative advantage in manufacturing, and thus a head start through the industrial revolution, increased its industrial exports as trade costs started to decrease. These exports lead to the clustering of production and innovation in the exporting countries, which resulted in greater industrial competency (quantity and quality wise) and this learning shifts comparative advantage in the direction of G7 'the North' and away from the Ancient 7 'the South'. As this cycle- virtuous for the North and vicious for the South-perpetuates itself, the North accumulates comparative advantages and sustains its industrialization process, whereas the South experiences de-industrialization.
What really changed between the first unbundling and the second unbundling and how?
Globalization changed from being about transfer of goods, whereas the second unbundling became about know-how crossing borders (instead of just goods crossing borders). How? Because global value chains opened up a pipeline for the movement of information as high-tech states transferred knowhow to low-wage manufacturing states. This resulted in the globalization of information arbitrage, and the flow of know-how to diverse states.
What was the most striking aspect of Phase Three with regard to the global North and South?
Great Britain was the first to industrialise, followed by the rest of Europe and North America after the end of the Napoleonic Wars. The concentration of factories and falling trade costs made it possible to achieve scale economies on the supply side without sacrificing access to market on the demand side, undermining competition from elsewhere and further expanding North Atlantic industries. On the other hand, the ancient civilizations, particularly those of India and China, which until the nineteenth century were seen as more highly developed than Europe, began to now experience a decline. In 1750, they accounted for 73% of global manufacturing but by 1830, this had already decreased to 50%. However, it was after this that the rapid industrialization of the North truly occurred and by 1913, the ancient civilisations saw their share drop to a mere 7.5%. This industrialisation of the North and concurrent de-industrialisation of the South is one the most interesting features of Phase Three of globalisation.
Based on the currently available information, what does the future of work look like?
If the transition is well-managed, AI can be helpful in shaping a more humane, rich and generous society, as the technological advances can yield benefits to the society as a whole, since robots produce but don't consume like humans.
How does telemigration change globalisation and the nature of GVC compared to Phase IV?
In Phase IV GVC acted as pipelines channeling G7 knowhow to low-wage developing countries. With telemigration, GVC become a pipeline to supply labour from low wage countries to G7 economies. In either case, this arbitrage process causes a tendency towards global wage equalization
.Explain how the "Juggernaut effect" works in multilateral trade liberalization.
In multilateral trade negotiations, exporters in the Home country become a new political-economic force, acting as anti-protectionists, advocating for trade liberalization and thus changing the domestic balance of political interests (previously, in isolation, domestic producers had more leverage to advocate for tariff protection). Multilateral trade negotiations then make tariff cuts a politically optimal choice. Reciprocal tariff cuts, in turn, change the political power of domestic groups, strengthening pro-liberalization forces (e.g. exporters that benefitted from the opening of new markets) and weakening anti-liberalization forces (e.g. domestic producers that faced increased import competition). Such change in the domestic political economy resulting from reciprocal tariff cuts of all nations participating in the multilateral trade negotiation creates conditions for further tariff cuts in future multilateral negotiations.
Briefly explain the juggernaut effect in trade liberalization
In multilateral trade negotiations, exporters in the Home country become a new political-economic force, acting as anti-protectionists, advocating for trade liberalization and thus changing the domestic balance of political interests (previously, in isolation, domestic producers had more leverage to advocate for tariff protection). Multilateral trade negotiations then make tariff cuts a politically optimal choice. Reciprocal tariff cuts, in turn, change the political power of domestic groups, strengthening pro-liberalization forces (e.g. exporters that benefitted from the opening of new markets) and weakening anti-liberalization forces (e.g. domestic producers that faced increased import competition). Such change in the domestic political economy resulting from reciprocal tariff cuts of all nations participating in the multilateral trade negotiation creates conditions for further tariff cuts in future multilateral negotiations.
What caused international trade to diminish from 1914 to 1949?
In times of war international trade always reduces. This was also the case during WWI. In the interwar period protectionism and the Great Depression prevented trade from bouncing back. Only after WWII international trade picked up again
What is the problem with "human" tasks that makes them hard for AI?
It is hard to gather structured data and information on these tasks, and to discern patterns amongst them, which is basically how AI works. Also more complex human interactions are subjective and lack definitive clear outcomes, which AI needs to predict and perform.
Define briefly globalization Phase III as it unfolded as a "3-act play".
It is hard to pinpoint the start of the first unbundling of production/consumption, but a good way to look at it was Kevin O'Rourke and Jeff Williamson's work that showed that starting 1820, local prices were no longer only set by local supply and demand forces, but by international supply and demand. Thus it is said that 1820 was the start of the first out of three acts of Phase III. Lasting until WWI, Act I was characterized by rising trade volumes, mainly due to lower trade costs after steam engines (First Industrial Revolution) could be put on ships and later on during the Second Industrial Revolution after the development of the electricity sectors and internal combustion engines. Additionally, trade soared after the lowered import tariffs championed by the UK and which encouraged other European nations (but not the US) to follow such reduction in trade barriers. Increased trade led to increased industrialization and urbanization of the North and deindustrialization of the South, and the gap between the two worlds widened into was called "Divergence Big Time". Act II starting in 1914 until end of WWII, witnessed the re-bundling of production and consumption. High tariffs were put in place in a backlash against the last century globalization. One major factor was the protectionist US Smoot- Hawley Tariff Act and the strong European retaliation to it, and the fact that the UK was no longer the hegemonic worldwide power it was in order to be able to keep the world trade system running. Act III starting post-WWII witnesses the resurrection of the trading system after the US and other European countries abandon their protectionist policies and instead become reciprocal tariff reducers. The General Agreement on Tariffs and Trade of 1947 metamorphosed into the 1995 WTO in 1994, which set a universal trade system that was rules-based instead of results-based. The MFN, NT, transparency, consensus decision making and other pillar principles led to increased reciprocal lowering of trade tariffs (except for some developing countries who were allowed to "free-ride"), but also to increased liberalization in trade in services and IP. As a result, the so-called "juggernaut effect" led to increase lobbying power of the export-industries (pro-liberalization) at the expense of the import-competing lobbies (pro-tariffs) which then fosters further and stronger liberalization.
What enabled trade to flourish in the beginning of the 19th century?
Lower trade costs brought about the steam revolution, global reduction in tariffs in the Norther economies and the Pax Britannica, a century of relative peace guaranteed by the British Empire.
What have been the main effects of Steam revolution?
On a sociological side the advent of Steam revolution radically changed the relationship among individuals, as it "reduced" the distance between agglomerates. In terms of trade instead, Steam technology led to a gradual decrease of trade costs.
Explain the Domino effect in regional liberalisation in a few words.
Once regional trade agreements are signed, third nations have a direct incentive in joining as their exporters would profit from the larger market. This creates a self-sustaining liberalization cycle that is hinged on the reciprocity principle.
What are the three phases of trade liberalization distinguished by Paul Bairoch from 1815 to WWI?
Paul Bairoch defines three periods of trade liberalization during the 19th century up to WWI. The first period is characterized by the United Kingdom's gradual move to free trade, leading up to the reappeal of the Corn Laws in 1846. In a second period, from 1846 to 1879, the European continent progressively adopts free trade as well and lowers tariffs, in an effort to copy the British industrialization. The last period, from 1879 to WWI, the continent falls back into protectionism. Indeed, following the national unifications of Italy and Germany, protectionism was linked to nationalism and nation-building through import substitution industrialization.
What is the so-called Phase 5 of globalization that has appeared recently which will likely be the centrepoint of the hypothesized future of globalization? What are its 2 central tenants?
Phase 5 of globalization refers to the radical changing of the nature of globalization once again. It has been brought about especially after 2016 when machine learning became more advanced and useful. Its two central tenants are automation and globalization. Both automation and globalization are furthered by Phase 5, resulting in increased telemigration (affecting globalization), and robotics acting as white collar robots, doing high-end work automatically, which presents a massive switch in automation.
What is the future of trade: goods or services? Why?
Since 2008 the percentage share of trade in goods has continued to decline, while the trade in services continues to grow: trade in services is growing 60% faster than the trade in goods. This growth is likely to continue as digitalisation brings down face to face costs, and tele migration enables service provision from anywhere in the world to anywhere in the world. Moreover, when one includes services which are embedded in the trade in goods (such as design, programming) and the trade value of 'free' services (such as social media), one finds that services already constitute a larger share of global trade and goods.
.What's the direct impact of Telemigrants and White Collar Robots on local communities' authority and income?
Since Telemigrants and White Collar Robots won't pay taxes there, and will not be under the jurisdiction of the local laws and regulations, this will lead to a decrease in revenues and authority.
How did events like World Wars and Great Depression influence the global market and international trade?
Since the offset of World War 1, nations enacted higher tariffs and the further occurrences in international trade during the 1920s raged around the world that hindered economic growth, resulting in a contraction in international trade.
What are the jobs most likely to be replaced and what the least likely?
While there is no obvious answer to this question, we may make some guesses based on what AI can and can't do, i.e. in what tasks is still below human skills. This implies that the easiest jobs to be automated in the next few years regard predictable physical activities, processing and collecting data. On the other hand, education and management are among the least automable services.
What is the danger of using employment protection legislation against RI & AI?
Such measures are extreme reactions to change, which are designed to assuage the consequences of harsh market and economic shifts by slowing the process; they should therefore only be used in extreme circumstances. Growth always requires change on some level, and putting legal barriers to this process is generally unwise, and should be considered as a last and temporary resort.
In second globalization, Containerization (the act of putting trade goods in containers) was more important than all the trade agreements after WWII? True or false? Explain your answer with a few sentences.
TRUE. It lowered trade costs by the order of tens of times. In 1965 it was possible to load 1.7 tons per hour, in 1970 30 tons per hour. This, coupled with their flexibility for different ways of transport (train, air freight, ship) and the possibility of refrigeration for food trade, facilitated international and intercontinental trade more than any other tariff reduction or non-tariff agreement.
What are two ways in which the WTO differed from the GATT regime?
The WTO improved on the GATT in two radical ways. The first was the coverage expanding to include services, agriculture, textiles and clothing, also ushering in deregulations of some investment restrictions. Secondly, the nature of the WTO itself was more institutionalized than the GATT, allowing for better dispute settlement. Decisions now became binding, and were unable to be blocked. This was mostly done through the establishment of the Appellate Body.
Why did technological advances such as the steam engine in the 18th and 19th century lead to upheavals in the UK and Europe more generally?
Technological advances such as the steam engine and later on internal combustion engines and electricity led to a transformation of the economy and of the British society. Automation allowed an increase in agricultural productivity; consequently, between 1700 and 1880, the British population quadrupled which led to a concentration of demand and specialization of cities. British families left their villages for the cities to work in manufacturing and services, which changed the nature of the British society. Technological advances also caused an important political shift; for decades, landowners (the nobility) decided on the rules, laws, and detained the wealth of the nation. With the rise of technological advances, the share of land in value creation declined while the share of value creation from capital increased, which led to the rise of the capitalist class. While those shifts first happened in the UK, they quickly spread to other European nations. This rapid social and economic dislocation was such that societies had difficulty to adjust smoothly, creating disturbances and upheavals. On the brighter side, technological advances had a drastic impact on inequality, which fell substantially.
What were some upheavals caused by technological progress and the subsequent backlashes?
Technological transformation drove economic transformations that produced social upheaval. Technology allowed for cities and countries to start specialising in industries, and there was a rapid social and economic dislocation which overwhelmed societies' ability to adjust smoothly. Among the main transformations includes population shifting from rural to urban, political power shifting from nobility to capitalists, and governments shifting from autocracies to democracies. These social and economic changes caused backlashes in form of fascism and communism, with countries trying to stabilize their societies and stop further changes from happening.
What is the four-step progression of the Great Transformation?
Technology produces an economic transformation, the economic transformation produces an economic and social upheaval, the upheaval produces a backlash, and the backlash produces a resolution.
Describe the key epochs of the Great Divergence
The Great Divergence took place between 1710 and 1973 and encompassed two industrial revolutions which related to mechanisation/automation and rapid globalisation linked to falling transport costs. The 1st industrial revolution took place from 1712 to 1870 with advances in coalpowered steam technology which e.g. mechanised textile production. The second industrial revolution took place from 1870 to 1970 powered by electricity and internal combustion.
In what ways was the impact of the ICT Revolution different from Old Globalisation?
The ICT Revolution drastically reduced both the time and cost involved in moving ideas and knowhow across borders, thus shifting the centre of value creation from capital (which had driven much of Old Globalisation following the reduction in transport costs) to knowledge. Advances in ITC allowed for the organisation of complex activities across long distances, which triggered the offshoring of manufacturing to low-wage nations. At the same time, rapidly evolving technology resulted in the automation of manufacturing, thus steadily pushing workers out of factories. The ICT Revolution has immensely benefited the service sector, not just by boosting productivity but also by creating new types of services. Contrary to Old Globalisation which was marked by a shift from farms to factories, the ICT Revolution has sparked a shift from factories to offices.
Explain why in 1990s the ICT revolution, associated with the decrease of digital costs, eventually resulted in a global increase of commodity prices.
The ITC Revolution resulted in the decrease of costs in computing, data storage and transmission costs. This consequently gave firms the capacity to organize business operations from enormous distances; manufacturing was offshored to nations where wages were much lower than in the industrialized countries. Industrialisation in developing economies brought about an increasing demand for commodities that was not matched by sufficient supply, thus driving the prices up.
Briefly summarize the Juggernaut effect.
The Juggernaut effect refers to the virtuous cycle of multilateral trade agreement negotiations. As governments change their position on tariffs to the advantage of pro-export groups, the domestic political economy forces adapt. In consequence, the pro-export groups benefit, resulting in a further amplification of their influence. Therefore, the government is inclined to further lower trade barriers in the next negotiation round.
What backlashes emerged because of the upheavals caused by the Great Transformation?
The Upheavals driven by the Great Transformation produced two great backlashes. The first was communism, which emerged already as an ideology in the second part of the 19th century. Communism called for the abolition of the market economy. Societal choices were to be made in the interest of the working class and guided by the Communist Party, through planning of the economy. The second backlash was fascism, whose Manifesto was published in 1919. At the time, fascism was seen as a balanced way to smooth laissez-faire capitalism while being an alternative to communism. Fascism supported a market economy but proposed a "corporatist" model, where all classes (workers, capitalists, government) would cooperate to minimize the roughest consequences of capitalism.
What are the main differences between GATT and WTO ?
The World Trade Organization (WTO) was more institutionalized than GATT (General Agreement on Tariffs and Trade). As an organizational institution, WTO (which is in some ways a successor to GATT) has stronger dispute settlement procedures that are legally binding, whereas the GATT was a set of rules agreed upon by nations without a trade dispute capacity, and whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. Therefore, the scope of GATT was limited to the trade of goods whereas WTO expanded its scope to include trade in the service sector and intellectual property rights.
What were the main changes in the period between 1820-1914?
The beginning of phase III brought around the boom of trade with global tariff reductions in the north, Northern Industrialization along with de-industrialisation of the south, urbanisation heavily biased towards the Atlantic economies and divergence 'Big Time'.
What was the first country to industrialise? Which three countries were next and what advantages did industrialising early bring?
The first country to industrialise was the United Kingdom, followed by France, the United States and Germany. Early industrialisation allowed for more optimised production methods domestically, which in turn 'diverged' the economic development of these four countries as opposed to nonindustrialized countries which did not enjoy the same increase in production.
What are the two main differences between phase 4 and future phase 5 of globalisation?
The first difference is that automation and globalisation are now taking place simultaneously, known as globotics. In phase 4, automation replaced workers in one country, while globalisation outsourced work to workers in another country. However, in phase 5, the rise of tele migration has meant that automation has actually fuelled the outsourcing of work to other workers. The second difference is that automation is now replacing jobs in the service sector. Previously, in phase 4 automation replaced workers in the manufacturing sector through the adoption of more sophisticated machines and robotics. However, the rise of digitalization and AI in the fifth phase has meant that services are capable of being automated.
When was the first wave of liberalisation, and what was it characterised by?
The first wave lasted from 1945 up to 1985, and is characterised by the rise of GATT, European integration and growth of regionalism and multilateralis m across the world. EEC and EFTA kicked off, however, non tariff barriers continued to rise, partly offsetting liberalisation
When was the first wave of liberalisation, and what was it characterised by?
The first wave lasted from 1945 up to 1985, and is characterised by the rise of GATT, European integration and growth of regionalism and multilateralism across the world. EEC and EFTA kicked off, however, non-tariff barriers continued to rise, partly offsetting liberalisation.
What does the "great stagnation" refer to?
The great stagnation refers to the period of time from 1000 to around 1820 where per capita GDP growth stagnated due to isolated and bundled production and consumption, which made innovation and growth difficult.
What was the fundamental trigger for the convergence?
The main trigger was the rapid decline in the cost of moving ideas from very expensive to nearly costless. This trend began around 1990 and lasted for approx. two decades. The main inventions were the scale up of air cargo and digital communication technology such as SMS and Email. Importantly, they enabled the coordination of complex tasks and processes from far away through file sharing and web-based cooperation platforms.
Explain one of the reasons why knowledge is considered to be an important component of new globalisation.
The new globalisation from the beginning of the 1990s was characterised by the ICT revolution, which was accompanied by offshoring of production and manufacturing processes, and the rapid diffusion of knowledge and ideas. The thing that put the "new" in new globalisation was the tremendous, one-way direction of technology and know-how that flowed from the mature, industrialised to the emerging economies, completely transforming the world. While it took a century for the advanced economies to industrialise, the speed and unprecedented nature of this form of globalisation developed and accelerated a completely new version of industrialisation in the countries of the Industrializing 6 (China, India, Indonesia, Korea, Poland, Thailand and Turkey). In the G7 nations, this phenomenon produced a very different reaction with the dispersion of manufacturing processes, displacement of jobs, and slower economic growth, leading to deindustrialisation. Thus, knowledge was a defining characteristic of this new globalisation and ICT that facilitated this.
What was the impact of the Covid-19 pandemic on Phase V of globalisation?
The pandemic caused the adoption of phase V to be significantly speeded up, as 1. C19 forced an 'emergency' digital transformation - lasting & massive. 2. Domestic remote teams opens doors to service offshoring. 3. Social spacing raises value of adopting White Collar Robots & telemigrants
Explain briefly why containerisation is considered to be a breakthrough in international trade
The practice of transporting goods in containers of uniform size and shape has revolutionized international trade. By lowering export times and costs, and improving the preservation of certain goods (i.e. food), containers played a bigger role in increasing trade than all the trade agreements signed after World War II. For instance, before containerisation, loading 30 tonnes onto a ship used to take 17 hours, after 1970, this same process took one hour.
What marked the beginning of phase III of Globalisation?
The precise beginning of phase 3 is hard to define, however it has been estimated to be around 1815. This was when domestic market prices became responsive to international prices, which demonstrated that markets had begun to integrate to a degree. This integration could only occur once trade costs had been lowered sufficiently, which represents the first unbundling: the use of steam power in transporting goods. In terms of historical events, this was around the time of the Congress of Vienna and the beginning of the British empire, which both contributed to creating the conditions for economic integration.
Why has the "Great Convergence" taken place during the 4th phase of Globalization?
The revolution of information and communication technology paved the way for the "Great Convergence" in the fourth phase. The gap in the distribution of knowledge could gradually be bridged. This led to a partial deindustrialization of the North and an industrialization of the South. The key element of this "Phase" is the combination of G7 know-how with developing low-wage labour. The increase industrializaiton of the "south" resulted in a rapidly industrializing economy, a key developement generating a wide variety of spill-over effects (increase of middle-class for example)
Briefly describe the evolution of income inequality (consider the share of income of top 5% earners in UK) in the past two centuries, and give some explanations on how the second industrial revolution reversed the trend in early 1900s
The share of income of the top 5% earners in the UK remained quite high (around 40% of GDP) until the late 1800s. From there on, it fell continuously to almost 15%, until 1978, when wage inequalities started to grow again. The reasons behind the evolution of income inequality is subject to a complex debate involving numerous aspects of economic systems. Yet, some relevant explanations have been advanced to explain why inequalities decreased by the early 1900s, to name a few: - a sudden increase in the scarcity of labour at this period led to an increase of people's wages, - the political emancipation of woman and lower social classes in 1920s Britain enabled them to better protect their interests, - lastly, following WWI, workers' union and voting power expanded across British industries, leading to further wage increases
What was the impact of the steam revolution on the first unbundling?
The steam revolution set off a century-long chain of events that transformed the world. Steampowered and then diesel-powered ships had an evolutionary impact on the cost of sea travel. Along with the lower cost of shipping goods, faster and safer transportation meant lower costs of moving people and ideas. The lower cost of moving goods relaxed the key constraint that held production and consumption closely bundled. Once this separation was feasible, the global economic differences made trade profitable. As people started to buy goods made far away, nations increasingly specialized in their most competitive sectors and long-distance trade took off. This was globalization's first unbundling, the physical separation of production and consumption.
What are three waves of Liberalization?
The three waves are as follows, the GATT "glory days" from 1945 to 1985. Then it was fo llowed by wave 2 from 1986 to 2000, where trade liberalization deepens and spreads throughout the global south. The third wave is from 2001 to the present day, where Asian regionalism significantly increased, and the emergence of trump and the Covid pandemic.
What are three waves of Liberalization?
The three waves are as follows, the GATT "glory days" from 1945 to 1985. Then it was followed by wave 2 from 1986 to 2000, where trade liberalization deepens and spreads throughout the global south. The third wave is from 2001 to the present day, where Asian regionalism significantly increased, and the emergence of trump and the Covid pandemic.
What are the four key events that occurred in 1986?
There are four events that marked 1986 as an important progress year for the global economy. First, in 1986, the Single European Act was signed, which established a plan to create the Single Market by 1992. Spain and Portugal also joined the European Union, reinforcing the bloc. Secondly, Canada and the United states launched talks in anticipation of a Free Trade Agreement, widening the 1965 Auto Pact. Thirdly, the Uruguay Round of tariff liberalization commenced. Finally, East Asia advanced its project of unilateralism, with Most Favoured Nation Tariffs starting to fall on some aspects of their trade.
What can governments do to avoid the upheaval with globotics?
There are mainly three ways for governments to smooth out the problems associated with globotics. According to Baldwin, one plan could be to assist the workers to adjust to the trend in the form of active labour market policies - such as income support, training, job searches, unemployment insurance, etc. A second plan is shelterism, in which governments could provide workers with some protection against globotics. This does not need to be anti-tech, but could instead be a "shelter from the storm". If plan A and B do not work, a third plan could be the "nuclear option". When globotics upheaval gets out of hand, the government could implement employment protection legislation policies to slow down the process of globitics. This would have severe unintended negative consequences.
Why telemigrants and White Collar Robots would possibly lead to upheavals?
There are many ways to apprehend this question, but in general Telemigrants and White collar robots will be seen as unfair competition by local workers for basically the same reasons. First Telemigrants and White Collar robots will probably not pay taxes in local communities, and could possibly live in fiscal paradises where there is very little or absolutely no tax. They are unlikely to ask for benefits, hence taking the place of local workers. Obviously, they will not face the same cost of living as local workers: for example, they could work for a firm located in a very high-wage country such as Switzerland while living in low-cost country like the Philippines. Additionally, Telemigrants and Whit Collar robots will not follow local labour laws, henceforth creating a situation of unfair competition. White Collar robots, furthermore have not human needs, and their activities can be instantly, costlessly, and perfectly reproducible which is another source of inequality. All these phenomena will be all the more painful that they will take place in an already fragile and fragmented society and job-market. Indeed, in certain countries such as the United States or France, important fringes of the population are currently coping with some of the effects and backlashes of previous phases of globalisation. To this extent, the effects of the shifts of the fifth phase of globalisation will certainly create of Powder keg situation, that could endanger democracy and liberal societies worldwide.
What are the 3 factors of arbitrage and their associated forms of constraint?
There is arbitrage in goods that is constrained by trade costs. There is arbitrage in know-how that is constrained by communication costs. There is arbitrage in labour services that is constrained by face-to-face costs.
Explain the interrelation between Automation and Globalisation.
They are: -Driven by the same digitech, -Coming at the same time & at the same pace, -Affecting the same types of jobs.
Will the globotics revolution have the same kind of impact that the shut-down of the auto factory had in Janesville?
This does not seem likely. The auto factory in Janesville shut-down entirely, leading to spirals of poverty and deaths of despair in the town. However, the globotics revolution will likely not be a sharp shock where one day something is open and the next it is closed. Rather, it will be a series of smaller decisions and changes that will add up to completely change the way we work, similar to iPhones gradually changed and began to occupy a more central role in our day to day lives.
Explain in simple words the "Juggernaut effect"?
This effect can be referred as the rearrangement of policy by reducing each nation tariffs initiating a self-sustaining cycle. This effect is substantiated by the counterbalancing of protectionists lobbies against the pro-liberalization ones. As governments change their position on tariffs to the advantage of pro-export groups, the domestic political economy forces adapt. In consequence, the pro-export groups benefit, resulting in a further amplification of their influence. Therefore, the government is inclined to further lower trade barriers in the next negotiation round.
How did the political economy of trade deals change?
Trade deals became an exchange of northern factories for southern reform. As a Southern country, for example Colombia, you agree to liberalize your economy and reform your economy to protect the property of the G7 firms and in exchange you hope to get the factories into your country in order to trigger industrialization. The trade deals became radically asymmetric from the first unbundling point of view.
After WWII, what caused trade costs to fall massively?
Trade was institutionalized and liberalized (GATT) and tariffs were lowered in successive negotiations rounds. Regional integration (starting with European integration) also reduced tariffs and reduced th e cost of trade. However, the main driver in the surge of the volume of trade were advances in transport, namely containers and air cargo. Containers actually reduced trade costs more than tariff reductions or suppressions.
.Briefly describe White collar Robots.
WCR's are automated machines powered by AI that are able to perform many human tasks in the services sector, from most basic ones (e.g. virtual chatbox assistant) to more advanced (e.g. legal work)
What are the four stages of the trade liberalisation Wave 1 (1945-1985) in Phase III?
Wave 1 can be divided into 4 stages as listed below. Wave 1.1 (1945-1956): This period witnessed the beginning of European economic integration in response to the Marshall Plan and the initial form of multilateralism. The European Economic Cooperation (CEEC) was established, and the General Agreement on Tariffs (GATT) and Trade was signed during the period.
What is the first needed addition to the basic Ricardian logic that would enable us to explain the great divergence (1820 1990), and how does that work?
We need to think of national competencies as both the outcome of and the cause of trade. It starts with a two-way link between industrial competencies and industrial agglomeration, and works through the cycle shown below (lec7, slide 27), The virtuous/vicious cycle.
How can we see the domino effect in place in the context of multilateralism in Europe?
When the European Economic Community came into force as a customs union, creating a bloc between Germany, France and Italy (as well as the Netherlands, Belgium, and Luxembourg), the European Free Trade Association (EFTA) was set up in reaction by the UK, which included the UK , Sweden, Finland, Switzerland, Austria, Ireland, Norway, Iceland. Subsequently in 1958, the UK applied to join the EEC, which triggered Ireland, Norway and Denmark to also apply in 1961, and were included in 1973, paving the way for the European Union.
What does it mean when competitive advantage is denationalized?
When the relative efficiency across nations is based on a mix of high-tech and low-wages, not national technology and wages that are then compensated. The boundaries of competitiveness are within firms, but also across borders (in other words within global value chains and not within nations).
Briefly explain why the first and second tech impulses are different in terms of impact on workers.
With the first tech impulse - driven by mechanisation - mechanical power was able to directly help people who worked with their hands, as it provided them with machines that could help them. However, it only indirectly helped people who worked with their heads, such as doctors or lawyers, since it did not provide them with such helpful machinery. On the other hand, the second tech impulse was driven by computerisation and ICT and had a great impact on all the workers. In fact, not only did it create better substitutes for manual workers, such as robot-arms for factories, but it also created better tools for mental workers. Notably, the latter were provided with several new tools which were directly able to help them in their work, such as new and better forms of communication, spreadsheets, the internet, and databases.
What are two technological revolutions that affected trade from North to South in the New Globalization?
With the second unbundling (or New Globalization) the two technological revolutions were air cargo and information and communication technology (ICT). Air cargo and its surplus after WWII stimulated and was stimulated by international production networks. Manufacturers could flow intermediate goods among distant factories as easily as within a nation; the critical attraction is not cost but speed and certainty of the transportation. On the other hand, ICT allowed industrialized countries to offshore part of their manufacturing process to developing countries due to the lost costs associated with managing complex activities internationally. The North to South transmission began first by moving technologically unsophisticated labour-intensive work, but later increasingly sophisticated phases impacting manufacturing.
What are the key impacts of the first unbundling?
a. Atlantic economies and Japan (the "North") industrialized while the ancient civilizations in Asia and the Middle East (the "South") deindustrialized (especially India and China). b. Growth take-offs occurred everywhere but sooner and faster in the North than in the South. c. The Great Divergence appeared. d. International trade boomed. e. Urbanization accelerated, especially in the North.
Which of the following is NOT a characteristic of the second unbundling? a. Knowledge is now stuck in G7 economies. b. Low wages are part of the explanation for know-how transfers from rich to emerging countries. c. It has allowed the so-called "Great Convergence". d. Know-how has become firm-specific rather than country-specific. e. The four statements are correct.
a. Knowledge is now stuck in G7 economies.
What are the four steps of the Great Transformation?
a. Tech produces economic transformation b. Economic transformation produces economic and social upheaval c. Social upheaval creates backlash d. Backlash leads to a resolution
.Analyse the following statements on the recent changes in international trade: I - Within-factory trade flows represent an increasing share of total trade. II - With the so-called "Great Convergence", knowledge flows have become exclusively one-way, which was not the case before the 2nd unbundling. III - The rise of regionalism in the 1990s has not weakened the WTO regime, as the most important blocs keep applying the most-favoured-nation principle towards third countries. Which of them are correct? a. I, only. b. II, only. c. I and II, only. d. II and III, only e. I, II and III.
c. I and II, only.
Analyse the following statements on the adequacy of Ricardo's comparative advantage theory in today's world: I - The diffusion of knowledge and know-how has obliged China to rely even more on wage differences in order to be competitive. II- The globalization of value chains has denationalized comparative advantages. III - Comparative advantages are increasingly determined by combinations of hi-tech and low Which of them are correct? a. I, only. b. II, only. c. II and III, only. d. I and III, only. e. I, II and III.
c. II and III, only.
Which is not correct about the steam revolution? a. Steam power transformed human's relationship with the physical world b. Steam revolution lowers the trade costs slowly c. Steam revolution lowers the trade costs rapidly d. Telegraph also radically transformed communication
c. Steam revolution lowers the trade costs rapidly
Which is not correct about the impact of globalization's first unbundling? a. International trade boomed. b. The Great Divergence appeared. c. Urbanization accelerated, especially in the South. d. Growth take-offs occurred everywhere but sooner and faster in the North than in the South.
c. Urbanization accelerated, especially in the South.
Which is not correct about the impact of the tech spark in Phase Three? a. Better tools for manual workers b. Better uses of financial capital c. No direct impact on mental workers d. Direct impact on mental workers
d. Direct impact on mental workers
H ow can you explain the microclustering that happened during the First Unbundling? a. Companies could now export to world markets because of low costs of trade, thus they needed to expand their factories sizes and complexity of their production stages in order to meet large scales of production b. Because trade costs were lower but communication costs were still high, factories micro clustered in order to better coordinate their complex production stages c. Micro clustering led to innovation because many people were thinking about the same problems, and innovation was profitable to invest in because factories were selling to a global market d. Innovation led to higher income and growth, which fulled even more innovation e. All the above
e. All the above
