Emerging Markets and Global Finance Overview

Big Emerging-Market Economies

• Borrowing in local currency is better in times of crisis for big emerging-market economies
• This reduces currency devaluation risk, as the lender bears some of the risk

Financial Support for South Africa

• The US, UK, and EU agreed to financially support South Africa's ailing power utility, Eskom
• This is both an energy transition strategy and a way to alleviate the pressure on South Africa's government account from Eskom's debts

Wall Street Consensus

• Investment bankers, fund managers, and borrowers maintain the dollar-based global financial network
• In major crises, this system becomes an overt public-private partnership secured by liquidity swap lines from the Fed

Strong US Economy

• A strong US economy supports global capital accumulation and the prosperity of American capital
• It requires a tighter stance from US monetary policy to control inflation

Textile Industry

• The cotton industry prioritizes low costs.
• T-shirts are a common example of cotton's history and are inexpensive; ethics associated with their production are often discussed.
• Cotton has been used in South and Central America since 5000 B.C.E.
• Cotton was widely used beginning in the Indus River valley by 3000 B.C.E.

Cotton Spread to Europe

• Herodotus described cotton as a wool superior in quality and beauty.
• Alexander the Great introduced cotton to Europe.
• Muslim traders and later conquerors spread cotton spinning and fabric-making techniques. Columbus encountered cotton in the Bahamas.

Cotton in America

• Cotton was cultivated in Virginia beginning in the 1610s, with the Spanish earlier in Florida.
• The slave trade and demand for a large, cheap workforce were key to cotton production's expansion.

Colonialism and Indian Textiles

• The British restricted Indian textiles to ensure a stable supply of raw cotton
• This was done to strengthen Britain's dominance in the global textile trade.

Fast Fashion

• Fast fashion brands like Zara emerged in the 1800s
• Mass production and new textile equipment led to lower costs, increased speed of production, and a wider range of options

Industrial Revolution & Textile Production

• The invention of the Spinning Jenny by James Hargreaves enabled automated spinning of thread in 1764. The thread was still weak
• Richard Arkwright created the water frame in 1769. This improved the strength of the thread and introduced water-powered systems (which enabled 1 person to do the work of many)
• The invention of the power loom in 1785 by Edmund Cartwright facilitated the automated manufacturing of cloth.
• Improvements in technology and machinery drastically changed the levels of textile production

First Industrial Revolution

• Increased textile output in England from 21 million to 347 million yards, 1796 to 1830
• Led to Britain's dominance in the global cotton industry for decades

Lowell's Mills

• Lowell, Massachusetts was established as a planned textile manufacturing town in the early 1820s
• The mills employed thousands of textile workers who were predominantly women and children.
• The Lowell girls went on strike over reduced wages in the 1830s and 1840s with some legislative support to remedy the situation in Massachusetts.

U.S. Civil War and Cotton

• The Civil War restricted cotton exports from the South to other parts of the world
• This had major repercussions on global economies (such as famine), resulting in global turmoil.
• Sharecropping became a widespread practice replacing previous practices like slavery.

Slavery and Cotton

• Slavery was a central component of the most dynamic and far-reaching production complex in human history.
• It was deeply entrenched in the South and troubled many in the North and other regions.

The Textile Industry - Evolution

• Estimates show humans started wearing clothes 500,000-100,000 years ago
• The Textile industry has been evolving for thousands of years
• The industry spread across the region of China, Turkey, India and became heavily linked to the Silk Road

Oil and Gas Industry

• Gasoline was initially a byproduct of oil refining.
• In the 1800s, gasoline was often disposed of in rivers, and not commonly used until the internal combustion engine was developed.

Gasoline's Impact

• Gasoline's political and economic influence are substantial.
• William Knox Darcy exploited resources in Persia, now Iran, and founded British Petroleum.
• John D. Rockefeller's Standard Oil controlled much of the world's refining capacity in the late 1800s.
• Henry Ford democratized auto manufacturing.

Service Industry

• The service industry is a large part of all employment (over 50%) and a major part of global GDP. In Canada and in the U.S., it is estimated to be around 67%.
• The service sector was a small part of economies that focused on agriculture.
• The service sector grew as urban populations grew.
• Detroit experienced de-industrialization in the late 20th century, with manufacturing jobs declining

Global Cities in the 1980s

• Global cities, such as New York, London, and Tokyo, emerged in the 1980s as centers of finance, law, and global production.
• Global financial centers are major beneficiaries of outsourcing and offshoring

Offshoring

• The process of moving production or manufacturing to a different country for a lower cost.
• Offshoring and outsourcing often overlap in practice
• Some companies move jobs offshore to escape regulations, minimize taxes, or enhance production methods.
• Critics suggest that offshoring can lead to lower wages, exploitation of workers, and reduced benefits.

OPEC

• OPEC was formed in 1960 to coordinate petroleum policies among its member countries
• The formation of OPEC resulted from an attempt from members (like Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela) to coordinate and unify the petroleum policies, prices, and supply to ensure fair and stable prices.
• OPEC became increasingly global in the 1970s controlling approximately 56% of the global market
• Geopolitical events had a destabilizing effect on oil markets.

Supply Chain Disruptions

• The COVID-19 pandemic exposed vulnerabilities in global supply chains
• Organizations need to establish specific protocols to anticipate, diagnose, detect, activate resources, protect against, and track threats to avoid supply chain disruption.
• The ADDAPT framework can help companies establish these capabilities.