GLOBALIZATION

What is globalization? n A single economy n Free movement of capital. n Internationalization of non- business activities. n Awareness of “the other”.

What’s money? n A means of exchange. n A unit of account. n A store of value.

Trobriand Islanders

Economics n Oikonomia (Greek): –oikos (household) –nomos (law) –Thus it means: “Meeting the needs of the household.” –Or, “Administering the wealth of the household.”

History n Not new. –Mercantilism n Causes of World War II n Bretton Woods (1944) n End of Cold War n Trading blocks

Causes for global economic integration n Capital has more power than governments. –US dollars in the 1960s (Vietnam War) –End of gold standard –Fixed exchange to floating exchange (Demand) –OPEC dollars

n Fordism to post-Fordism –Cheap LDC labor –Cause of neo-colonialism –Core versus periphery.

n Government debt via borrowing rather than taxing –Capital flow –Control inflation with monetary policy –Decline in employment –Debt management/ austerity programs

n End of the Cold War –Multi-polar world –Uni-polar world –Trading blocs: NAFTA (FTAA) EU

Positives n Enhance development of global economy n Ends poverty. n Creates wealth. n Spreads cultural values that foster democracy and toleration.

Negatives n Furthers the concentration of wealth into the core and further from the periphery. n Undermines democracy n Creates forces for revolution and suffering the world over.

Solutions: n Localized economies (?) –LETS – n Enhance gov’t powers via cooperation: –Tobin Tax

Global Financial Institutions Topic B Cooperation

Bretton Woods Agreement n Bretton Woods, New Hampshire. n Forty-four allied nations. n Recognized that economic problems contributed to WWII. n Sought to avoid the reoccurrence. n Today, these bodies are, in no small way, responsible for GLOBALIZATION.

BRETTON WOODS BRETTON WOODS(1944) International Monetary Fund World Bank General Agreement of Trade & Tariffs (GATT)

International Monetary Fund n Purpose: currencies –provide stability of world’s currencies –exchange rates (were fixed) n How: –US $ –US $ is bases for conversion into gold. No longer the case (1971). –Allowed for easy currency exchange and helped trade. –USSR not a member.

located: n Where located: –Washington, D.C. n Problems: –Power over Third World debtor nations. –SAPs –Protects western lending institutions while punishing nations that fail to pay back loans, most of which are made up of high interest.

World Bank n Purpose: –Reconstruction and development –Reconstruction and development. –Lends money to developing projects, or –Guarantees loans to countries. n How: –Member nations provide funds or seed money.

n Problems: dominated by US –Like the IMF dominated by US. –Loans made for bad ideas, to human rights abusers, and to projects that damage the environment. –Project fails: nations still must pay back loan.

General Agreement on Trade and Tariffs (GATT) n Purpose: –Regulate trade –Regulate trade. –Encourage free trade towards development.

n How: lowering of tariffsincrease access to markets –Encouraging the lowering of tariffs to increase access to markets. –Monitors trading practices and disciplines violators,i.e. dumping.

n Problems: –Forces access –Forces access to markets; therefore, the already powerful will dominate the new global order. –Encourages specialization –Encourages specialization: global monopolies. –WTO –World Trade Organization (replaced it) is the enforcer. –Anti-environmental regulations, anti-union, anti-social programs. –Loss of jobs associated with policies.