Economic Globalization and Key Theorists
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Questions and Answers

What primarily contributed to the Third World countries being unable to repay their debts?

  • A decrease in the import of manufactured goods.
  • The sudden increase in population.
  • The establishment of a stable government.
  • The increased value of the U.S. dollar along with rising oil prices. (correct)

Which of the following is a consequence of the Third World countries focusing on cash crops?

  • A decrease in agricultural land use.
  • An increase in food self-sufficiency.
  • Exporting food while experiencing local food shortages. (correct)
  • A diversion of funds to military projects.

How does the International Monetary Fund (IMF) assist countries dealing with debt?

  • Only by supplying food aid.
  • By eliminating all debts without repayment.
  • Through the implementation of strict adherence to specific programs. (correct)
  • By providing unconditional financial support.

What primarily backed the Third World countries’ need to borrow money post-World War II?

<p>Increasing manufactured goods prices without a corresponding rise in raw material prices. (C)</p> Signup and view all the answers

What are the International Monetary Fund (IMF) and World Bank primarily structured to do?

<p>Support struggling Third World countries financially. (A)</p> Signup and view all the answers

Which of the following is an effect of the agricultural focus shift in Third World countries?

<p>Dependence on foreign companies for profits from cash crops. (B)</p> Signup and view all the answers

How long do countries need to abide by IMF programs to receive debt relief?

<p>Six years. (B)</p> Signup and view all the answers

What has led to malnutrition and famine in some Third World countries?

<p>Export of food to First World countries while lacking local resources. (A)</p> Signup and view all the answers

What factor contributed to the outbreak of World War I?

<p>Desire of imperial powers to protect or expand colonies and trade (A)</p> Signup and view all the answers

What was one economic consequence of World War I for Europe?

<p>Destruction of European cities, towns, and farms (C)</p> Signup and view all the answers

How did Joseph Stalin's methods contrast with capitalist beliefs?

<p>Stalin exerted complete control over the economy. (C)</p> Signup and view all the answers

What economic philosophy did Milton Friedman advocate?

<p>Maximum freedom for individuals in economic choices. (D)</p> Signup and view all the answers

Which leaders were influenced by Milton Friedman’s economic ideas?

<p>Ronald Reagan and Margaret Thatcher (D)</p> Signup and view all the answers

What major economic trend has occurred since the end of World War II?

<p>Advancement of trade liberalization and lower tariffs (C)</p> Signup and view all the answers

What is a major benefit associated with trade liberalization for developing countries?

<p>Development of a comparative advantage in specific products (D)</p> Signup and view all the answers

Which economist is credited with the theory of comparative advantage?

<p>David Ricardo (D)</p> Signup and view all the answers

What assertion does comparative advantage make regarding international trade?

<p>Countries should specialize in products they can produce more efficiently. (A)</p> Signup and view all the answers

Despite trade liberalization, why do many countries still remain poor?

<p>Lack of resources and industrial capacity (C)</p> Signup and view all the answers

What distinguishes cash crops from subsistence crops?

<p>Cash crops have export value and attract demand. (D)</p> Signup and view all the answers

What does 'debt servicing' refer to?

<p>The repayment of interest and principal to external creditors. (A)</p> Signup and view all the answers

Which of the following best defines globalization?

<p>The process of economic interdependence among countries. (D)</p> Signup and view all the answers

What is a key characteristic of infrastructure in a community?

<p>It encompasses basic services needed for societal functioning. (C)</p> Signup and view all the answers

What does liberalization in economic policy typically entail?

<p>Relaxation of government restrictions. (B)</p> Signup and view all the answers

Which statement accurately describes the North in economic terms?

<p>Comprising wealthy, industrialized, first-world countries. (B)</p> Signup and view all the answers

What does privatization mean in an economic context?

<p>The sale of government-owned enterprises to private entities. (A)</p> Signup and view all the answers

What is the primary purpose of Structural Adjustment Programs (SAPs)?

<p>To implement policy changes required to receive loans. (B)</p> Signup and view all the answers

What is the primary aim of protectionism?

<p>To protect domestic industries from foreign competition. (C)</p> Signup and view all the answers

Which policy is an example of protectionism?

<p>Tariffs on imported goods. (C)</p> Signup and view all the answers

What is a criticism of protectionism?

<p>It allows higher prices for locally produced goods. (B)</p> Signup and view all the answers

Which idea supports the belief that globalization is beneficial?

<p>Enhancing global trade literacy. (C)</p> Signup and view all the answers

What role did the Bretton Woods Conference play in global economics?

<p>It mapped out the creation of the IMF and World Bank. (D)</p> Signup and view all the answers

What did John Maynard Keynes argue regarding government involvement in the economy?

<p>Government intervention is necessary during economic distress. (C)</p> Signup and view all the answers

What is the main purpose of the General Agreement on Tariffs and Trade (GATT)?

<p>To reduce tariffs and trade barriers among member countries. (D)</p> Signup and view all the answers

What is a cash crop?

<p>A crop cultivated for income through export. (D)</p> Signup and view all the answers

How does the World Bank aim to help developing countries?

<p>By funding infrastructure projects and reducing poverty. (D)</p> Signup and view all the answers

Which characteristic is shared by both the IMF and the World Bank?

<p>They aim to stabilize international economic affairs post-WWII. (D)</p> Signup and view all the answers

What are the implications of imposing import substitution policies?

<p>They can lead to reduced choices for consumers. (B)</p> Signup and view all the answers

What was Friedrich Hayek's stance on government control of markets?

<p>He believed in minimal government involvement to protect competition. (D)</p> Signup and view all the answers

What is the primary goal of corporate diplomacy as described in the content?

<p>To localize businesses and integrate them into communities. (A)</p> Signup and view all the answers

What is a primary consequence of Structural Adjustment Programs (SAPs) on social services?

<p>Cutbacks in all forms of social spending (C)</p> Signup and view all the answers

What do SAPs typically promote regarding government presence in the economy?

<p>Less government intervention in the economy (D)</p> Signup and view all the answers

How do Structural Adjustment Programs impact local currencies?

<p>They mandate devaluation of local currencies (A)</p> Signup and view all the answers

What is a potential negative outcome of prioritizing export production over food crops?

<p>Higher malnutrition rates (B)</p> Signup and view all the answers

What does the term 'Institute of Misery and Famine' refer to?

<p>The IMF in the context of 3rd world countries (D)</p> Signup and view all the answers

Which of the following is NOT a type of SAP?

<p>Promotion of local product subsidies (C)</p> Signup and view all the answers

How can SAPs affect the agricultural sector in 3rd World countries?

<p>Promoting cash crops for export (B)</p> Signup and view all the answers

What is a likely effect of eliminating price controls on basic foodstuffs?

<p>Higher prices making food unavailable to the poor (B)</p> Signup and view all the answers

What challenge do farmers in the 3rd World face when competing with those in the North?

<p>Government subsidies protecting Northern farmers (C)</p> Signup and view all the answers

What is one criticism of the global trading system mentioned in the content?

<p>It benefits industrialized nations at the expense of the South (B)</p> Signup and view all the answers

What is one of the intentions behind the wage freezes enforced by SAPs?

<p>To attract foreign investment by lowering labor costs (B)</p> Signup and view all the answers

What is the implication of the phrase 'spend less, export more' in the context of SAPs?

<p>Countries should minimize spending to balance budgets while boosting exports (B)</p> Signup and view all the answers

What effect do commodity price settings by Northern countries have on Southern economies?

<p>They lead to lower profits for Southern exporters (A)</p> Signup and view all the answers

What is a direct impact of privatizing government-owned enterprises due to SAPs?

<p>Layoffs and wage cuts for workers (B)</p> Signup and view all the answers

Flashcards

Globalization

A process that connects people globally through economics, society, environment, technology, and politics.

Tariff/Duty

A tax imposed on goods and services imported into a country.

Commodity

An article of trade or commerce, especially agricultural or mining products that can be processed and resold.

Liberalization

A relaxation of government restrictions, typically in areas of social or economic policy.

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Subsidy

Financial assistance provided by a government to support an enterprise considered beneficial for the public.

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Debt Servicing

The repayment of interest and principal to external creditors.

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Infrastructure

The basic facilities and services essential for a community or society's functioning, including transportation, communication, water, power, and public institutions.

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Sweat Shop

A shop or factory where employees work long hours at low wages in poor conditions.

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Comparative Advantage

The idea that countries should focus on producing goods they can make most efficiently, even if they can produce other goods, and trade for the rest.

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Trade Liberalization

The process of reducing trade barriers like tariffs, aiming to increase international trade.

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Market Economy

A type of economy where government regulation is minimal, and businesses are free to make their own decisions.

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Communism

An economic system where the government has complete control over all aspects of the economy.

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Economic Costs of WWI

The economic costs of WWI were significant, including destroyed infrastructure, heavy debt for some European governments, and disruption to global trade.

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Causes of World War I

A major factor leading to World War I was the competition between imperialist powers to expand their colonies and global trade.

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Milton Friedman's Economic Philosophy

Milton Friedman, a modern supporter of Adam Smith's ideas, argued that minimal government intervention in the economy would lead to individual prosperity and maximum freedom.

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Stalin's Methods

Joseph Stalin's methods transformed the Soviet Union into a superpower through forceful collectivization, state control, and industrialization. Capitalists would disagree with his methods due to their emphasis on individual freedom and limited government.

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Challenges of Trade Liberalization

Though trade liberalization aims to bring prosperity to all countries, many developing nations face challenges in achieving economic success despite adopting it.

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David Ricardo's Theory of Comparative Advantage

David Ricardo's theory highlights how countries can benefit by specializing in goods they produce efficiently and trading with other countries for goods they produce less efficiently.

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Terms of Trade

The price of a country's exports compared to the price of its imports, and how this ratio changes over time.

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Third World Debt Crisis

The situation where many developing countries (3rd World) are heavily in debt to wealthier nations (1st World) due to complex factors like unequal trade and borrowing.

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Food Exports in the Debt Crisis

When a country focuses on exporting agricultural products to generate revenue for debt repayment, often at the expense of producing enough food for its own people.

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IMF and World Bank

International institutions designed to aid struggling countries after World War II, but criticized for being dominated by powerful nations.

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IMF Debt Management

A practice where developing countries agree to follow strict IMF rules for six years to receive debt relief.

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Corruption in the Debt Crisis

The situation when corrupt leaders in developing countries misuse borrowed funds for personal gain or inefficient projects, worsening the debt crisis.

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Factors Worsening the Debt Crisis

The rise in oil prices, interest rates, and the value of the US dollar made it extremely difficult for developing countries to repay their debt.

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Debt Spiral

The cycle where developing countries struggle to repay their debts, leading them to borrow even more, creating a spiralling problem.

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Protectionism

A policy that aims to protect domestic industries from foreign competition.

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Economic Nationalism

Policies designed to encourage consumers to buy goods produced within their own country, often using slogans like 'Be Canadian, Buy Canadian'.

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Import Substitution

A method used in protectionist policies where imports that compete with domestic production are restricted to encourage local manufacturing.

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Limited Consumer Choice

A criticism of protectionism where consumers have fewer choices due to limited availability of foreign goods.

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Higher Domestic Prices

A criticism of protectionism where domestic producers can raise prices due to less foreign competition, potentially hurting consumers.

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Definition of Domestically Produced

A criticism of protectionism where foreign-made components are used in domestically assembled products, raising questions about the definition of 'domestically produced'.

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Misrepresenting Foreign Goods

A criticism of protectionism where imported goods with cheaper production costs are sold at higher prices, claiming to be locally made.

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Globalization: Education for Competitiveness

The belief that globalization is overwhelmingly positive, emphasizing the need for education aligned with global markets to ensure competitiveness.

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Globalization: Global Trade Literacy

The belief that globalization is overwhelmingly positive, emphasizing the importance of training teachers to educate students about global trade.

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Globalization: Support for Displaced Workers

The belief that globalization is overwhelmingly positive, emphasizing the need for programs to support and retrain displaced workers due to international trade.

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Globalization: Innovation and Adaptation

The belief that globalization is overwhelmingly positive, emphasizing the opportunity for innovation and adaptation to create new jobs and raise wages, similar to the impact of technology.

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Corporate Diplomacy

The belief that globalization is overwhelmingly positive, emphasizing the importance of businesses engaging in international diplomacy to develop local operations.

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Bretton Woods Conference

A conference held in 1944 to address economic turmoil after World War II and establish a global trading system.

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John Maynard Keynes

An economist who advocated for government intervention in the economy to address economic downturns and stimulate growth.

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Cash Crop

A crop grown primarily for export, often to generate revenue for a country.

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Structural Adjustment Programs (SAPs)

A set of economic policies imposed by the IMF and World Bank on developing countries as a condition for receiving loans.

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Public Sector

The part of the economy that deals with the delivery of goods and services by the government.

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Privatization

Transfer of ownership from government to private companies.

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Subsidies

Financial assistance given by a government to a person or a group to support a business.

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Devaluation

The process of reducing the value of a currency.

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Import Quota

A trade barrier that limits the quantity of a good that can be imported.

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Tariffs

Taxes on imports or exports.

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Processed Goods

Raw materials that have undergone processing to become a finished product.

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Agricultural Subsidies in Developed Countries

The practice of governments in developed countries providing financial assistance to their farmers, making it difficult for developing country farmers to compete.

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Neoliberalism

The idea that globalization and free trade can lead to economic growth and prosperity for all.

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Global Economic System

The interconnected web of economic policies, institutions, and actors that shape the global economy.

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Global Inequality

The unequal distribution of wealth and power between developed and developing countries.

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Commodity Dependence

The process by which developing countries become increasingly reliant on the export of a few raw materials.

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Study Notes

Economic Globalization

  • 20th century world events shaped contemporary economic globalization
  • One factor leading to World War I was imperial powers wanting to protect or expand their colonies and trade
  • Economic costs of World War I included destruction of European cities, towns, and farms; many European governments borrowed from the U.S. and were in debt
  • Communism is complete government control
  • Joseph Stalin transformed the Soviet Union into a superpower by controlling the government
  • Capitalists oppose Stalin's methods because they support limited government

Karl Marx

  • Born May 5, 1818, in the Kingdom of Prussia

Milton Friedman

  • Modern-day supporter of Adam Smith's idea of government non-involvement in the economy
  • Believes less government regulation leads to greater individual prosperity
  • Advocates for maximum freedom in personal economic choices, leading to maximum economic, political, and social freedom
  • Believes government's role is to not support people through tough economic times, emphasizing self-reliance

Trade Liberalization and Comparative Advantage

  • Economic trend since World War II
  • Lower tariffs encourage trade
  • No country has achieved economic success without being open to trade
  • Lower tariffs reduced poverty by 14% between 1993 and 1998
  • Countries like India, Vietnam, and Uganda have experienced growth and poverty reduction due to trade liberalization
  • Developed a comparative advantage in producing certain products, attributed to British economist David Ricardo in 1817

Protectionism

  • Also known as economic nationalism and economic patriotism
  • Generally opposes globalization
  • Supports domestic industries and limits competition
  • Implements policies like import substitution (restrictions on imports to support domestic production)

Education and Innovation

  • Education needs to align with the global marketplace, prioritizing training for in-demand skills
  • Make global trade literacy a priority
  • Innovation should be embraced by adapting and accepting globalization.
  • This is crucial in creating new jobs

Globalization of Global Economics and Development

  • Bretton Woods conference in 1944 aimed to prevent future economic crises
  • Led to creation of the IMF and World Bank to expand international trade
  • Supporters advocate for free trade and minimal government involvement
  • Opponents highlight detrimental effects of globalization for developing nations

Trade Liberalization

  • Developed countries benefit from exporting manufactured goods to 3rd world countries
  • Some developed countries protect their agriculture sectors through tariffs and subsidies.
  • World Trade Organization (WTO) emerged as a successor to GATT
  • It regulates trade in services, goods, and intellectual property.
  • Established to help countries in economic trouble.
  • Aims to establish stable financial footing after World War II.

Services

  • Structural Adjustment Programs (SAPs) - loans to countries for economic reforms
  • Public services, like healthcare, become a direct function of the government.
  • Subsidies - financial assistance to support businesses in the public interest.

Cash Crops

  • Crops grown to be exported, not consumed locally
  • Often controlled by foreign companies
  • Resulting profits often leave the host country

Debt Servicing

  • Repayment of loans, interest, and principle to external creditors
  • Frequently leads to economic hardship in developing countries

Devaluation

  • Reduces the value of a country's currency
  • Makes exports cheaper and imports more expensive

Third World Debt Crisis

  • IMF and World Bank assist struggling nations
  • World trade was directed by economic policy of 1st world nations, often at the expense of 3rd world nations
  • Countries may have to export natural resources to fund debt servicing.

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Description

This quiz explores the influence of 20th century events on economic globalization and evaluates the thoughts of prominent theorists like Karl Marx and Milton Friedman. Understand how World War I affected European economies and delve into the contrasting views on government involvement in the economy. Test your knowledge on these foundational concepts shaping modern economics.

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