Global Economy Mechanisms - Lecture 4

Global Economy Mechanisms - Lecture 4

• The lecture covers components like the economic role of the national state, the impact of globalization on the national state, the role of the state in multi-layered governance, the national state's role in promoting economic growth, and triggering factors of economic growth.

Structure of the Lecture

• Economic role of the national state in the global context
• Impact of globalization on the national state
• Role of the state in multi-layered governance
• Role of the national state in promoting economic growth
• Triggering factors of economic growth

The Economic Role of the National State in the Global Context - Conceptual Framework

• A state is a territorial political community with an independent government.
• A nation-state is a state primarily loyal to a cultural identity (nation or nationality).
• Nation-states possess sovereignty and legitimacy.
• Nation-states are not voluntary organizations, but are concerned with public policy.
• They have a monopoly on legitimate force, sometimes limited by democratic traditions, constitutions, or bills of rights.

The Economic Role of the National State in the Global Context - Conceptual Framework (continued)

• Imposing regulations and collecting taxes from other economic sectors.
• Producing goods and services, often selling them in the market or providing them freely to the community.
• Distributing funds through transfers.

The Impact of Globalization on the National State

• Globalization may or may not weaken the role of the state.
• Globalization may or may not lead to the end of state sovereignty.
• The state remains a key actor in both domestic and international arenas.
• Globalization does not reduce the role of the national state; rather it redefines it.
• Globalization modifies sovereignty without undermining it.
• Globalization leads to the transfer of decisions to international and local levels of government.
• Globalization contributes to economic and social interdependence.

The Impact of Globalization on the National State (continued)

• Globalization introduces global threats and factors like global financial flows, multinational companies, internet, and global media corporations.
• The state faces challenges regarding state sovereignty transformation factors.
• There is a voluntary reduction in sovereign power through supranational alliances and participation in international organizations.

The Role of the State in Multi-Layered Governance

• Globalization pressures including economic integration, fiscal discipline, and democratic governance force governance institutions to reassess their roles.
• These roles encompass catalyst, enabler, gatekeeper, mediator, and negotiator.
• These changes have led to new roles, relationships, and partnerships among governments, citizens, and businesses, increasing the public's influence on governance policies and institutions.

The Economic Role of the National State in the Global Context (continued)

• Governments improve efficiency through competition and minimizing externalities like pollution, while providing essential public goods.
• Governments promote equity by using tax and expenditure programs to redistribute income.
• Governments maintain macroeconomic stability, promoting growth while reducing unemployment and inflation using fiscal and monetary regulations.

The Economic Role of the National State in the Global Context (continued): Examples of Government Policies

• Antitrust laws, deregulation, and anti-pollution/smoking ordinances are examples.
• Building public infrastructure like lighthouses and schools.
• Progressive taxation, transfer programs, and income support. Monetary policies like adjusting interest rates and controlling money supply.
• Fiscal policies like adjusting tax rates and government spending. Investing in education, lowering budget deficits and boosting national savings rates.

The Importance of Economic Growth

• The level of economic growth is important, historical examples illustrated that.
• Economic growth is crucial to increasing living standards, public health, essential for reducing poverty, and essential for supporting human needs.
• 1929-1933 global economic downturn showed the devastating effects of economic decline.

The Importance of Economic Growth (continued)

• The vicious cycle of economic downturns includes low average incomes, low saving and investment rates, low productivity, and low rates of capital accumulation.

Triggering Factors of Economic Growth

• Human resources (labor supply, education, skills, discipline, motivation)
• Natural resources (land, minerals, fuels, environmental quality)
• Capital (factories, machinery, roads, intellectual property)
• Technological change and innovation (science, engineering, management, entrepreneurship)

Triggering Factors of Economic Growth (continued): Data Analysis

• India, China, Nigeria, USA, and Indonesia projected population figures for 2050 provided for analysis.
• Question about the consequences and implications of this data for concern countries and other countries.

Triggering Factors of Economic Growth (continued): Basic Economic Questions

• What to produce?
• How to produce?
• For whom to produce?

Opportunity Cost

• Opportunity cost measures the sacrifice of the next best alternative.
• Example: costs of pursuing a master's degree.

Solving the Problems in Economics: Free Market vs. Planned Economy

• Free market: resources allocated by market forces, firms maximize profits, individuals maximize their own welfare.
• Planned economy: resources allocated by government directives, social objectives determine production.

Mixed Economies

• To what extent should the government intervene?
• In what areas should the government intervene? (e.g., transportation, energy, postal services).
• How should the government intervene in providing goods and services? (e.g., should they produce them or regulate some private providers?).
• Mixed economies are a combination of free market and planned economies.

The Growth Accounting Approach

• Economists use aggregate production functions to link national output to inputs and technology.
• The APF is a mathematical relationship (Q = AF (K, L, R)).
• Q is output, K is capital, L is labor, R is natural resources, A represents technology, and F is the production function.
• Input increases usually lead to increased output, but diminishing returns are possible.
• Technology augments input productivity (output-to-weighted-average-input ratio).

The Growth Accounting Approach (continued)

• Growth in output is decomposed into growth of capital, labor, and technological innovation.
• Example: if labor grows at 1% and capital at 5%, the output's projected growth can be estimated.

Explore the intricate dynamics of the national state's economic role within the global context in this lecture. Understand how globalization shapes national governance and the factors that promote economic growth. Delve into the conceptual framework of nation-states and their significance in the global economy.