Chap 3 -- Economic Dimension of Globalization Steger Chap 3 Chap 3 -- Economic Dimension of Globalization

Transformation of the late 20th century: Four major points/eras of this chapter Prologue – collapse of old Imperial Capitalist System and WWII scramble for resources Part 1: 1944 -- Pax American – Keynesian Economic Revolution bringing in Brenton Woods system including UN, IMF, World Bank, GATT, fixed exchange rates … Part 2: 1970s – end of fixed exchange rates, stagflation Part 3: 1980s --Neoliberal era, globalization and free(er) trade – WTO, NAFTA, Washington Consensus Today: Post 2008 Crisis??? And Beijing Consensus

Prologue Period of “beggaring thy neighbor” http://www.youtube.com/watch?v=iVHJ3_FJZKg (Smoot Hawley in 8 minutes) https://www.cato.org/multimedia/cato-video/smoot-hawley-tariff-act-legacy (Smoot Hawley in 3 minutes from CATO Institute – libertarian think tank founded by Charles Koch and others) Milton Friedman explains role of gold in Great Depression. http://www.youtube.com/watch?v=O7pnjzCuSv8&feature=related How the Gold Standard “Caused” the Great Depression http://www.npr.org/blogs/money/2011/02/18/133874462/the-friday-podcast-gold-standard-r-i-p

Part 1: 1944-1971 Brenton Woods as the key event 1944 Brenton Woods International Monetary Conference http://www.youtube.com/watch?v=GVytOtfPZe8 GATT/WTO http://www.youtube.com/watch?v=27J3CByXKow Trade and Smoot Hawley, and what eventually emerges 5 minutes Part 1: 1944-1971 Brenton Woods as the key event – 1 minute

Overcome the problems of the first half of the 20th century Three Goals Stable International Currencies – based on Gold – but individual American citizens can’t own gold (finally fully changes in 1975) Expand International Trade & create wealth Promote peace & stability

Under the guise of the UN three organizations established to promote goals IMF (International Monetary Fund) – create rules on currencies & guarantee its stability World Bank – provide loans for reconstruction and development – promote growth around the world WTO (initially GATT) – promote international trade by lowering tariffs and standardizing rules (in the background is Pax American)

Examples of expected results Working for a World Free of Poverty –World Bank http://www.youtube.com/watch?v=Wq4Es_yB1d4&feature=relmfu   World Development Report 2010 – World Bank http://www.youtube.com/watch?v=G67TZ83s784&feature=relmfu

Part 1 Summary Under this system currency exchange values were fixed to a modified gold standard via the US $ – agreement called “Brenton Woods System” “Golden age of controlled Capitalism” Western Europe fostered Welfare states Rich People and Corporations funded much of welfare system Trade grew

Phase 2: 1971-1980 Stagflation Era Fixed exchange rates caused a massive gold outflow from the US to other countries Slowed economy Inflation – money worth less Nixon Ends Bretton Woods International Monetary System http://www.youtube.com/watch?v=iRzr1QU6K1o&feature=relmfu

Defining Stagflation Stagflation, a portmanteau of stagnation and inflation, is a term used in economics to describe a situation where the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. http://www.youtube.com/watch?v=gkLdp5sKqZw -- simple definition http://www.youtube.com/watch?v=SoRY-pEhdq4 New Zealand Example – comparing present to 1970s stagflation

Summary Energy prices soared, growth stagnated, unemployment grew, relationship of currencies out of balance, entitlements were a drag on economies -- common person got less and less Brenton Woods System abandoned – exchange of currencies allowed to freely float Period of economic drift

Phase 3: 1980-present Neoliberal Era Neoliberalism -- Main points of theory Markets are self-regulating and efficient Supply and demand balances based on price Regulation leads to inefficiencies and eventual social stagnation, political corruption, & unresponsive state bureaucracies Markets create sort of economic Darwinism – fittest survive

Concrete example of Neo Liberals mon·e·ta·rism  (mŏn′ĭ-tə-rĭz′əm, mŭn′-)n.1. A theory holding that economic variations within a given system, such as changing rates of inflation, are most often caused by increases or decreases in the money supply. 2. A policy that seeks to regulate an economy by altering the domestic money supply, especially by increasing it in a moderate but steady manner. http://www.thefreedictionary.com/monetarist

Reagonomics followed by Clinton Deregulation DEFINITION of 'Reaganomics' A popular term used to refer to the economic policies of Ronald Reagan, the 40th U.S. President (1981–1989), which called for widespread tax cuts, decreased social spending, increased military spending, and the deregulation of domestic markets. Reaganomics Definition | Investopedia Trickle down, supply-side…

Significant developments of era Collapse of Soviet Empire gave further fuel to this movement Significant developments of era Internationalization of trade & finance (NAFTA, EU…) Increasing power of TNCs (trans national companies) Enhanced role of IMF, World Bank, WTO…

Internationalization of Trade – Free(er) Trade Proponents View More choice Greater global wealth Secure International Peace Spread of Technology

Internationalization of Trade – Free(er) Trade Opponents View Gap between rich and poor countries growing Distribution inside countries also can worsen New international financial trading not supplying capital for productive investment, gambling on future profits -- Hedge funds & “Casino Capitalism”???

2. Power of TNCs Facts 200 largest TNCs are ½ of World’s industrial output All located in N. America (1 in Mexico), Japan, Europe, & S. Korea (China may enter soon) Rival size of Nation States in Economic Might Top 100 economic units 58 are countries 42 are TNCs

3. Enhanced Role of International Economic Institutions “Washington Consensus” – is it actually good or bad for the world?

Washington Consensus What the Developing World Should DO

5. World Turned Upside Down?

5. Beyond Neoliberal Approach???

Davos: World Economic Forum 2014 Global Risk Report

Marxist Geographer David Harvey on the G20, the Financial Crisis and Neoliberalism. 4/2/09 1 of 3 https://www.youtube.com/watch?v=HkTMO93Jyp0

The End of Neoliberalism The End of Neoliberalism???James Laxer, York University, Left Leaning Political Scientist http://www.youtube.com/watch?v=Qj0pVPcDqeA

Gloating view from Russia comments by Francis Fukuyama, the Bernard L Gloating view from Russia comments by Francis Fukuyama, the Bernard L. Schwartz Professor of International Political Economy & Director of the International Development Program at the Paul H. Nitze School of Advanced International Studies, Johns Hopkins University http://www.youtube.com/watch?v=RBpd78GNvbI

View from UK There are two big reasons for neoliberal thinking still holding sway. First, things have not been bad enough for a paradigm shift. By the end of the second world war, the Keynesian revolution was sufficiently developed for the Labour party to offer a comprehensive new approach to economic policymaking. Similarly, in 1979, the Conservative party was able to present the main elements of neoliberal thinking as the solution to the economic problems that blighted the economy in the 1970s. There is nothing comparable for the opponents of neoliberalism to latch on to today. Opponents of neoliberalism need to formulate a new approach to economic policymaking, not one that tinkers at the edges of the existing model.