Economic Globalization Overview
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Questions and Answers

What is a characteristic of economic globalization?

  • Isolation of national economies
  • Reduction in international trade
  • Increased integration of economies (correct)
  • Decreased use of technology

    • Which mode of transportation is associated with the current global economic system?

  • Railroads
  • Cargo ships and airplanes (correct)
  • Steam ships
  • Horse-drawn carts

    • What does the 'law' of comparative advantage suggest?

  • Nations should focus on industries they do not excel in
  • Nations should diversify as much as possible
  • Nations should produce goods they can make most efficiently (correct)
  • Nations should rely solely on agricultural products

    • What negative impact can result from the global economy on poor nations?

    <p>They may suffer due to debt repayments</p> Signup and view all the answers

    How did economic events before World War II affect major economies?

    <p>They caused significant economic collapse</p> Signup and view all the answers

    Which factor significantly contributed to the acceleration of economic globalization?

    <p>Advancements in transportation and communication</p> Signup and view all the answers

    Which of the following is a potential disadvantage of globalization?

    <p>Widening inequality among nations</p> Signup and view all the answers

    What is often cited as a competitive advantage for countries in the global economy?

    <p>Access to a large, skilled labor force</p> Signup and view all the answers

    What was a key limitation imposed on member states regarding currency values under the Bretton Woods Agreement?

    <p>Member states could not change their currency values by more than 10 percent.</p> Signup and view all the answers

    Which of the following statements accurately reflects the role of the US dollar in the Bretton Woods System?

    <p>The US dollar was convertible into other currencies or gold at a fixed par value.</p> Signup and view all the answers

    What was one of the significant outcomes of the Bretton Woods Agreement on global trade?

    <p>International trade was encouraged through reduced restrictions.</p> Signup and view all the answers

    What led to the collapse of the Bretton Woods System in the early 1970s?

    <p>The US decision to stop exchanging gold for currency.</p> Signup and view all the answers

    What was a primary goal of the IMF within the Bretton Woods framework?

    <p>To provide stability and security to the global monetary order.</p> Signup and view all the answers

    Which organization emerged from the Bretton Woods Agreements to oversee global investments?

    <p>The World Bank.</p> Signup and view all the answers

    What impact did the Bretton Woods System have on exchange rates?

    <p>It stabilized exchange rates enough to promote international trade.</p> Signup and view all the answers

    What was a key feature of the Bretton Woods Agreement regarding currency use?

    <p>Countries agreed to eliminate all restrictions on using their currency for international trade.</p> Signup and view all the answers

    What does 'Industrial Upgrading' refer to in the context of global trade?

    <p>The shift from low-value to high-value production</p> Signup and view all the answers

    What is 'Offshore Outsourcing'?

    <p>Moving business operations to other countries for cost efficiency</p> Signup and view all the answers

    What is a potential consequence of increased global consumption patterns?

    <p>Hyper-consumption and hyper-debt among consumers</p> Signup and view all the answers

    How does globalization primarily manifest through economic changes?

    <p>Via international economic integration and cultural exchange</p> Signup and view all the answers

    What challenge does global trade raise regarding its system?

    <p>How to make the system more just and equitable</p> Signup and view all the answers

    What was one of the primary fears that led to the plan for a more open international economy after World War II?

    <p>Recurrence of the Great Depression</p> Signup and view all the answers

    Which event led to the establishment of the Bretton Woods system in 1944?

    <p>The end of World War II</p> Signup and view all the answers

    What was a key goal of the Bretton Woods Agreements?

    <p>Preventing competitive devaluations of currencies</p> Signup and view all the answers

    Which organization was created to stabilize and oversee exchange rates as part of the Bretton Woods Agreements?

    <p>International Monetary Fund</p> Signup and view all the answers

    How was the value of currencies determined under the Bretton Woods system?

    <p>Based on a fixed exchange rate with gold as the standard</p> Signup and view all the answers

    What requirement was placed on the 40 states that became IMF members in 1946?

    <p>They were required to deposit gold reserves with the IMF</p> Signup and view all the answers

    What was the significance of establishing a 'par value' for currencies at the Bretton Woods conference?

    <p>It facilitated stable international trade and investment</p> Signup and view all the answers

    What was the margin allowed for fluctuations in exchange rates under the Bretton Woods system?

    <p>1 percent</p> Signup and view all the answers

    What is a trade surplus?

    <p>When a country exports more than it imports</p> Signup and view all the answers

    Which of the following is primarily benefiting from global commerce?

    <p>Transnational corporations</p> Signup and view all the answers

    What is meant by the term 'International Production Networks'?

    <p>Global networks of producers for finished products</p> Signup and view all the answers

    What is a characteristic of economic globalization?

    <p>It creates protectionist policies in first world countries</p> Signup and view all the answers

    Which of the following best describes a 'Global Value Chain'?

    <p>All individuals and activities involved in the production and distribution of a good globally</p> Signup and view all the answers

    What does the term 'Race to the Bottom' refer to in global trade?

    <p>The phenomenon of countries reducing standards and wages to remain competitive</p> Signup and view all the answers

    In the example of '9 Dragons Paper', what happens after the waste paper is collected?

    <p>It is recycled into container boxes in China</p> Signup and view all the answers

    In the global trade of T-shirts, which country is responsible for cotton growing?

    <p>US</p> Signup and view all the answers

    Study Notes

    Economic Globalization

    • Growing interdependence of world economies.
    • Increased cross-border trade of goods and services, international capital flow, and globalized technology.
    • Driven by human innovation and technological progress.
    • Marked by:
      • Increasing economic integration around the globe.
      • Faster and more frequent trading.
      • Cross-border movement of goods, services, and capital.

    Global Economic System: Then and Now

    • Global economy is characterized by unequal gains, with poor nations often experiencing negative consequences despite globalization.
    • Certain sectors and social groups suffer losses as a result of globalization.
    • Transportation:
      • Then: Steam ships and railroads.
      • Now: Cargo ships and airplanes.
    • Communication:
      • Then: Telegraphs.
      • Now: Internet.

    How Economies Interact Today

    • Global economic specialization encouraged through comparative advantage principle.
    • Nations should focus on activities where they excel compared to others.
    • Example: Philippines BPO industry.
    • Countries face competition from low labor rates in places like China.

    The Global Economy in the 20th Century

    Before World War II

    • Economic turmoil stemming from World War I, the Great Depression, and World War II.
    • Negative impact on major economies.
    • Rise of autarky: nations seeking self-sufficiency.

    After World War II

    • Desire for a more open international economy.
    • Fear of repeating the Depression era.
    • Need for societal absorption of post-war manpower.
    • Concerns about re-emergence of trade barriers and restrictions on capital flow.
    • Focus on reducing trade barriers and promoting money and investment flow.

    Bretton Woods Institutions

    • Created in 1944 at Bretton Woods, New Hampshire.
    • 730 delegates from 44 countries participated.
    • Agreement for an international monetary system.
    • Main objectives:
      • Efficient foreign exchange system.
      • Prevention of currency devaluations.
      • Promotion of international economic growth.

    Bretton Woods Agreements: 5 Key Elements

    • 1) Par Value for Currencies: Each country established a "par value" for its currency in relation to gold or the US dollar.
      • The US dollar was pegged to gold at a fixed price.
    • 2) Currency Exchange by Central Banks: Central banks agreed to exchange their currencies at established rates with a minor margin.
      • Facilitates international trade.
    • 3) International Monetary Fund (IMF) Role: Established to stabilize exchange rates and oversee the system.
      • IMF members deposited gold reserves.
      • Approved currency par values.
      • Provided loans to stabilize currencies.
    • 4) Elimination of Trade Restrictions: Member states agreed to remove restrictions on using their currency for international trade.
    • 5) US Dollar as Global Currency: The US dollar became the foundation of the system.
      • Convertibility of dollars into gold or other currencies guaranteed.

    Key Takeaways of the Bretton Woods Agreement

    • Established a collective international currency exchange system (mid 1940s to early 1970s).
    • Required currencies to be pegged to the US dollar, which was pegged to gold.
    • Influenced international currency exchange and trade through the creation of the IMF and the World Bank.
    • Ended in the 1970s when the US abandoned the gold standard.

    Effects of the Bretton Woods Agreements

    • Major impact on:
      • Global trade.
      • Global monetary order.
      • Global investment.

    Effects of Bretton Woods Agreements: Global Trade

    • Reduction in international trade restrictions through GATT and later WTO rounds of meetings.

    Effects of Bretton Woods Agreements: The Global Monetary Order (IMF)

    • IMF aimed to provide monetary stability and flexibility.
    • US dollar value remained fixed, while other countries could adjust their currencies.
    • Stable exchange rates encouraged international trade and investment by limiting significant rate fluctuations.

    Effects of Bretton Woods Agreements: Global Investments (World Bank)

    • The rise of multinational corporations (MNCs), particularly American-based firms.
    • Large-scale organizations became essential for the efficient operation of global industries.

    Economic Globalization Today

    • Global per capita GDP increased significantly in the latter half of the 20th century.
    • Emergence of major Asian economies like Japan, China, Korea, Hong Kong, and Singapore.
    • Economic globalization remains uneven.
      • First world countries often practice protectionist policies.
      • Transnational corporations, rather than governments, are primary beneficiaries.

    Global Trade

    • Trade Surplus: Exports exceed imports.
    • Trade Deficits: Imports exceed exports.
    • Supply Chain: Sequence of processes involved in production and distribution of a commodity.
      • Represents value-adding activities.
      • Example: Cotton to thread to T-shirt to market.

    Global Trade

    • International Production Networks: Networks of producers involved in creating a finished product.
      • Example: Jeans production chain involving various countries for different stages.
    • Global Commodity Chains: Network of labor and production processes resulting in a finished commodity.
      • Example: Nike production chain.
    • Global Value Chains (GVC): Includes all participants and activities in a good or service's production, global supply, distribution, and post-sale activities.
      • Example 1: 9 Dragons Paper (waste paper collection in the US, recycling in China, distribution globally).
      • Example 2: T-shirts (cotton grown in the US, manufacturing in China, distribution in the US, resale in Africa).

    Impact of Global Trade: “Race to the Bottom”

    • Downward spiral of competitiveness among countries.
    • Countries compete by offering low wages, poor working conditions, etc.

    Impact of Global Trade: “Industrial Upgrading”

    • Shifting from low-value to high-value production by nation-states, firms, and workers.
    • Example: China's transition towards higher-value product manufacturing.

    Impact of Global Trade: “Outsourcing”

    • Contracting activities previously performed internally to external businesses for a fee.
    • Example: Marketing company outsourcing social media support to an external agency.

    Impact of Global Trade: “Offshore Outsourcing”

    • Contracting activities to businesses in other countries.
    • Example: Call center industry.

    Impact of Global Trade: Consumption

    • Accelerated global flow of consumer goods, services, financial processes, and instruments.
    • Example: Widespread acceptance and use of Visa and Mastercard globally.
    • Negative consequences:
      • Hyper-consumption (excessive buying).
      • Hyper-debt (high levels of debt).
      • American consumption trends influencing the world.

    Conclusion

    • International economic integration as a core aspect of globalization.
    • Economic changes underpin many aspects of globalization.
    • Need to address the equitability and fairness of the global economic system.

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    Description

    Explore the intricacies of economic globalization, focusing on the growing interdependence of world economies and the impact of technological advancements. This quiz highlights the transformations in trade, communication, and the effects on different nations and groups, emphasizing both benefits and drawbacks. Test your understanding of how economies interact in today's global landscape.

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