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Economic Globalization


Economic Globalization One of the most obvious signs of globalization in our lives is the vast array of products that are available to us from all over the world. – PowerPoint PPT presentation

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Title: Economic Globalization

Economic Globalization
  • One of the most obvious signs of globalization in
    our lives is the vast array of products that are
    available to us from all over the world. Vast
    trade networks provide access to goods and
    services from all corners of the globe. We look
    at the foundational ideas and individuals behind
    economic globalization to examine how these vast
    networks developed and how they operate in
    contemporary society.

Japan The Ukita family of Kodaira CityFood
expenditure for one week 37,699 Yen or 317.25
Italy The Manzo family of SicilyFood
expenditure for one week 214.36 Euros or 260.1
Germany The Melander family of BargteheideFood
expenditure for one week 375.39 Euros or 500.07
United States The Revis family of North Carolina
Food expenditure for one week 341.98
Mexico The Casales family of CuernavacaFood
expenditure for one week 1,862.78 Mexican Pesos
or 189.09
Poland The Sobczynscy family of
Konstancin-JeziornaFood expenditure for one
week 582.48 Zlotys or 151.27
Egypt The Ahmed family of CairoFood expenditure
for one week 387.85 Egyptian Pounds or 68.53
Ecuador The Ayme family of TingoFood
expenditure for one week 31.55
Bhutan The Namgay family of Shingkhey
VillageFood expenditure for one week 224.93
ngultrum or 5.03
Chad The Aboubakar family of Breidjing Camp
Food expenditure for one week 685 CFA Francs or
Guiding Questions
  • How did economic globalization develop?
  • Which economic ideas have most influenced the
    development of contemporary economic
  • How did free trade emerge as the dominant
    economic policy of most governments?

What is Economic Globalization?
  • Integration of the worlds economies and the
    freer flow of goods.

Is economic globalization a new phenomenon?
  • Some world historians attach globalization big
    bang significance to 1492 and 1498 (exploration
    of the New World). Such scholars are on the
    side of Adam Smith who believed that these were
    the two most important events in recorded
  • Other world historians insist that economic
    globalization stretches back even earlier.
  • There is a third view which argues that the world
    economy was fragmented and completely
    de-globalized before the early nineteenth

Modern Economic Globalization
  • Historical and economic
  • globalization are not new phenomenon's. How?
    Remember the Silk Road, mercantilism, capitalism,
    and the Industrial Revolution? This is the
    evolution of both historical and economic
  • In this unit, we will examine modern economic

John Maynard Keynes Friedrich Hayek
Governments should play a significant role in managing economy Government intervention in economy is needed to increase spending and prevent or end recession. decadent capitalism is not intelligent, is not just and does not work. Less government involvement in economy means greater economic freedom and prosperity Controlling the economy controlling every sector of human life.
  • How might government intervention limit economic
  • end

Foundations of Economic Globalization
  • During the 1930s, many of the worlds major
    economies had unstable currency exchange rates.
  • As well, many nations used restrictive trade
  • In the early 1940s, the United States and Great
    Britain developed proposals for the creation of
    new international financial institutions that
    would stabilize exchange rates and boost
    international trade.
  • There was also a recognized need to organize a
    recovery of Europe in the hopes of avoiding the
    problems that arose after the First World War.

During World War II
  • Democratic allied countries, led by the US became
    concerned about what the global economy after the
    war would look like.
  • 1944, 44 allied countries met in New Hampshire,
    US at Bretton Woods to discuss post war-economic

UN Monetary and Financial Conference. Bretton
Woods, New Hampshire, U.S. 1 July 1944.

Bretton Woods Agreement
  • The delegates at Bretton Woods reached an
    agreement known as the Bretton Woods Agreement to
    establish a postwar international monetary system
    of convertible currencies, fixed exchange rates
    and free trade. This international monetary
    system was to be a global network of institutions
    to promote international trade and the regulation
    of currency () among Western countries.
  • To facilitate these objectives, the agreement
    created two international institutions the
    International Monetary Fund (IMF) and the
    International Bank for Reconstruction and
    Development (the World Bank). The intention was
    to provide economic aid for reconstruction of
    postwar Europe. An initial loan of 250 million
    to France in 1947 was the World Banks first act.

Bretton Woods continued
  • Common monetary system each country would
    maintain a fixed exchange rate for its currency.
    A fixed exchange rate, the value of a countrys
    currency is set by the government.
  • Each of the countries agreed that the fixed
    exchange rate for its currency would be based on
    the gold standard. This means that all printed
    money, such as paper money, would be convertible
    to gold and could be cashed in at any time for
    that gold.
  • What is the problem with this? Countries are
    limited to printing money up to the value of
    their gold reserves? Billion dollars worth of
    gold billion dollars worth of currency.

  • However, in times of crisis such as war, famine
    or the need to build infrastructure such as
    highways and dams, a country may need to borrow
    . How do they borrow money? As individuals, we
    rely on our credit cards like VISA or MASTERCARD.
    However, for governments and people, a debt is a
    debt and it needs to be paid. Well, often
    governments will print more money in order to pay
    for the things they need. What happens when
    governments print more money?
  • debt and when it has too much debt, the value
    of the countrys currency drops inflation.

Floating Exchange Rates
  • 1960s USA - high inflation as a result of the
    Vietnam War and massive new social programs.
  • Prez Nixon closed the gold window. This meant
    that the US dollar was no longer redeemable for
    gold by the US govt. A lot of countries followed
  • 1976, most world currencies had floating exchange
    rates countrys currency was no longer fixed
    by the government. Found its own value on the
    foreign exchange market. Currencys value was
    decided by supply and demand. the number of
    people looking to buy and sell it in the foreign
    exchange market.

The Value of Money
  • What is the value of our Canadian dollar? How is
    it determined? Why is it sitting at over one
    dollar in the US the last number of weeks ? Why
    are people buying cars and shopping to the South?
  • The answer the real value of the dollar lies in
    the wealth of the country and in what the dollar
    can buy here and in other parts of the world.
    Canada has a strong economy presently and so our
    dollar is valued more here and in other parts of
    the world, like the US.

Bretton Woods creates the World Bank and the IMF
  • World Bank
  • theoretically, is an agent for the United
    Nations, but in practice, is independent and
    controlled by its 184 countries.
  • provides loans to less developed countries that
    are in financial difficulty. To get loans,
    countries are usually required to meet certain
    political and economic conditions. (ex. Reducing
    corruption, reduce spending on social programs
    like health care)

International Monetary Fund
  • Work together with the World Bank to bring
    stability to international monetary affairs and
    to help expand world trade.
  • IMF is in charge of monitoring exchange rates and
    providing short term financial assistance.
  • Agency of the United Nations.
  • Funded primarily through quotas that member
    countries pay. A countrys quota is based on its
    relative size. USA contributes most to the IMF
    because it is the largest economy in the world.
    See page 211 Fast Facts and Figure 10-5 on page
  • Annual expenses of running the IMF are met mainly
    by interest payments on loans and deposits.

The Expansion of the Free Market Economy
  • The Cold War 1946 1989 between the US and the
    former Soviet Union. It was a war between
    Communism/centrally planned economies vs
    capitalist free market democracies.
  • With the end of this cold war, many former
    communist countries began to embrace capitalist
    free markets. Ex. Poland, Russia, East Germany.
  • China has recently opened its doors to capitalism
    and has become trading partners with many other
    super world powers like USA and Japan. India has
    also become a world leader (outsourcing)
  • The whole world is now part of the global
    economy.You can invest anywhere in the world
    because we have access to computers where we can
    invest in companies and governments all over the
    world. You can buy stocks and bonds and make a
  • end

Contemporary Economic Globalization
  • When most people think of economic globalization,
    they think of free trade.
  • To a large extent, this is accurate. The
    economies of the world have become more
    integrated over the past 20 years.
  • How did free trade emerge as the dominant
    economic policy of most governments?

Regulation of Free Trade
  • After WWII, United Nations was created made up of
    50 countries.
  • The General Agreement of Tariffs and Trade (GATT)
    was established in 1947 as an agency of the UN.
  • It began with a membership of 23 countries
  • Operated under 4 principles

  • Conducting trade in a non-discriminatory manner.
  • Treating imported goods from a member country in
    the same manner as similar domestic goods.
  • Protecting domestic industries through tariffs (a
    tariff is a tax imposed on imports to increase
    their price and thus reduce competition with
    domestic products)
  • Requiring any country that applied for membership
    to present a list of tariffs and other trade
    restrictions imposed on member countries.

  • Between 1946 and 1995, GATT members agreed to
    substantial reductions in trade barriers.
  • 1995- membership of 131 countries, accounting
    for more than 90 of international trade.
  • GATT was transformed into the World Trade
    Organization in 1995.
  • How do the 4 principles of GATT, now WTO
    contribute to and further economic globalization?

Free Trade between Canada, USA and Mexico
  • Reasons for why each wanted to sign the
    agreement. Read page 218 and complete the
    following chart.

Canada United States Mexico

What is being implied here?
The following cartoon is from Australia but it
reflects many of the views that Canadians hold
about freer trade with the United States. What
point of view is being communicated by this
cartoon? Do you share this view? Why or why not?
Case Study Canada and the Wine Industry
  • How has freer trade affected Canadian industry?
  • Read the case study on page 221-222 and answer
    the following question in your notes
  • What did the Canadian wine industry do to adapt
    to the Free Trade Agreement? Were these measures
    successful? Why?
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