Chapter 9 - Foundations of Economic Globalization PDF
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This document is chapter 9 of a larger work, focusing on economic globalization in the context of the 20th century. It explores factors that shaped its development, the concept of prosperity, its measurement, factors that prevent prosperity, and key terms related to the topic.
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Foundations of Economic Globalization Chapter 9 To what extent did world events shape contemporary economic globalization? Key Questions in this Unit To what extent did world events shape contemporary economic globalization? To what extent do contemporary factors contribute to expa...
Foundations of Economic Globalization Chapter 9 To what extent did world events shape contemporary economic globalization? Key Questions in this Unit To what extent did world events shape contemporary economic globalization? To what extent do contemporary factors contribute to expanding globalization? To what extent does globalization affect sustainability? To what extent can globalization bring sustainable prosperity to all people? What does prosperity mean to you? - Having a life full of things - Completing personal life- that make it comfortable goals - Having resources to spare - To have purpose - To be wealthy in any aspect - To flourish - The feeling that you are not - Good life on a “downward slope” and - Success are in a steady good position - Money - To do your best, and to feel - Love happy and accomplished - Friendship - Happiness - GDP What does prosperity mean to you? - Being successful in the - To not have financial worries things you do - Good relationship with God - When you have justified all - Healthy (mentally and the hard work you put in… physically) by achieving your goals What does prosperity mean to you? - Making money - Being recognized for success - That you have a strong, $ steady foundation for the future - How can prosperity be measured? - Happiness - Your achievements - Long-term economic - Wealth sustainability - Mental health test - GDP in nations - The amount of life goals - Average life span completed - live birth rates - How full your “bucket” is - # of physicians / 1000 - Do you see the glass as half people v empty or half full (the saying) - % of people above the poverty line What can stop prosperity? - Mental health issues - Economic status - Not doing your best (even if - Societal discrimination you fail, at least you tried - Other people, groups, your best) nation, etc. attempting to - No motivation/loss of interest take that prosperity for - Comparing your life to others themselves - Not enjoying what you have - Haters accomplished in life and put - Tough times economically, yourself down not having the right - resources - Poverty or having fewer resources by virtue of your position What can stop prosperity? - Fear and lack of self - An event in your life that confidence shifts your worldview drastically, leading to a -Fear of being judged by others change in priorities and lack of confidence. -lack of opportunity - Economic recession Prosperity: “Prosperity” is defined differently by different people. a measure of overall well-being a combination of health, happiness and security of identity financial security definition is unique to all of us Sustainability: "the ability to be maintained at a certain rate or level" How does maintaining your lifestyle fall into line with the sustainability of life on Earth Should the earth's resources be shared equally? Are we obliged to be "stewards" of the resources for the next generations (7th Generation) Indigenous Perspective - decisions are made today thinking of the impact 7 generations forwards What comes to mind when you see this image? How about this image? Key Terms economic globalization reparations communism economic depression market economy What does Economic Globalization mean? Economic Globalization - the widespread international movement of goods, capital, services, technology, and information Economic Globalization in Canada Oil and gas pipelines and oil tankers bring Canadian oil and gas products to the world markets Aspects of Economic Globalization As with most topics in Social Studies, Economic Globalization is a heavily debated topic Some view economic globalization as a force that creates healthy interdependence that will lead to economic prosperity for all Others recognize the global economic interdependence and say it can be healthy ○ However, they also recognize that it doesn’t yet benefit all people Economic Globalization: Supporters - Joseph Stiglitz (2022) - Trustworthy due to his Nobel Prize - Economically more integrated due to the reduced barriers in communication and transportation costs - Due to economies of scale, new ships, internet, and cheaper labour - Times changed since 2001 = More integrated due to technology (cell phones) - Positive view Economic Globalization - Sceptics - William Tabb (2022) Challenges economic globalization ○ Doesn’t benefit everyone (Examples: People with an already high standard of living might worsen, child labour, pop culture) Big “But” in a statement Economist - can speak towards this topic Lists the positives of globalization = doesn’t happen Critics globalization Economic Globalization - Sceptics - Naomi Klein (2022) Rejecting economic globalization Believes it builds a barrier between people Trends of globalization = impacts people Shuts out less fortunate people ○ Unemployment and basic needs are not being met Connects to the digital divide because of these fences of social exclusion Economic Globalization: Supporters - Joseph Stiglitz Won Nobel Prize for Economics in 2001 Believes the world economies and peoples are more integrated than ever before Interdependence has happened due to: ○ Communication/Transportation costs being reduced greatly ○ Barriers to the flow of goods, services, capital, and knowledge has been torn down Economic Globalization - Sceptics - William Tabb (2022) William K. Tabb is Professor Emeritus of Economics Queens College and of Economics, Political Science and Sociology at the Graduate Center of the City University of New York Interdependence is a fact, but it's not equal. Not yet Globalization has the potential to increase living conditions to people over the globe, but this potential is not met. Economic Globalization - Sceptics - Naomi Klein Canadian author and journalist *Economic globalization reaches every aspect of life* Economic globalization builds fences between people Globalization shuts people out of schools, hospitals, workplaces, and even their own farms, homes, and communities ○ People are unemployed and their basic needs are not being met Continued Debate Around Economic Globalization Some argue that economic interdependence creates instability ○ If one country goes on strike/has a crisis, it can dramatically impact the economy of another country Others argue that economic interdependence actually enhances stability ○ Countries that rely on one another are less likely to go to war/have serious conflict What do you think? Can you connect how each of these factors impact the global economy? Do you have examples? Briela, Josiah, Nico, Jubitha - War: World war II + Cold war, lead to economic - 2018, US China trade war, tariffs from china, global instability, Europe and Japan could not produce supply chains were damaged enough goods for the people, depopulation - 2008 - financial crisis Changes in investors confidence : 2008 global financial - Price changes - inflation for non-renewable energy, crisis declined stock market values, lack of confidence make 1973 OPEC oil embargo, oil prices went up due to the markets lose trillions of dollars in value. conflict in the middle east - Brexit - 2015, lead to the currency value decreasing, trade dynamic between UK and european union changed - Natural Disaster: 2004, indian ocean tsunami, hit Thailand. loss of tourism which affected the economy because it was one of the country’s biggest sources of revnue Zedric, Khilen, Sergei Government economic policies War within or among countries: America's civil war took - The united states wants to put a tariff on Canada and lots of resources and government spending to supply Mexico, because the united states wants to keep soldiers, food, and materials. This alone impacted the AMERICAN, the importing and exporting countries’ economy in United States as focus was almost solely on the economies both, less buyers = low economy, and stuff civil war, but also the outcome of the the war, which was the produced globally is going to be more expensive to defeat of the South and abolishment of slavery which import impacted half of America's economy greatly. Economic Uncertainty: The Collapse of the Tobacco Famine: In Africa, conflict has left a significant impact on the Manufacturing Industry from 2022-2023 displacement of millions of vulnerable people Countries that are victims of displacement are Ethiopia, Yemen, and South Sudan A specific impact of these conflicts are food shortages, which can be extremely detrimental to separated Natural resources families who have been displaced - Oil and gas industry is subject to price fluctuations Natural Disasters: natural disasters destroy infrastructure, because of its low supply and those fluctuations are and valuable resources. (Haiti Earthquake 2010 destroyed present and constant, which can change the global valuable infrastructure in a fragile economy) lead to surge of economy because of reliance on fossil fuels economic inflation, and rely on the globe. Sam, Tyler, Jaxson Natural Disasters: Affects the natural resources and structures nature, War: Causes countries at war to produce less products, impacting how much that country is able to export. - Typhoon Hagibi impacting the industries they are producers in. ie; Russia provides less oil to Europe now, as they are at war with Famine: Less people are able to do work, and if they’re working it’s not as efficient as compared to them being full. An example would be the forced Ukraine. starvation of the Ukrainian people, which subsequently limited wheat export. Changes in Investors’ confidence: Less money is spent on existing industries when investors lose confidence. This loss Economic uncertainty: Example: during the 2008 global financial crisis, of confidence can also make new industries never taking off, the collapse of major banks and declining consumer confidence caused a slowing world economic growth. However, when investors global recession. Money would be more concentrated to remain within the country to boost gain confidence in the market, enormous profits can be the economy. made. Ie; the rise of ai since 2022, making every major company have some sort of ai division Government economic policies: policies like tariffs and interest rate changes heavily influence inflation, trade relationships and more. Price changes on non-renewable resources: The price for Example: The us china trade war from 2018 to 2019 led to tariffs on the resourced would skyrocket in order to balance out the hundreds of goods, reducing trade between the two countries and causing price hikes globally supply and demand. Jaiden, Dan, Jeril Kalyna WAR - Russian-Ukraine war, increased the price for oil due to boycotting of russian oil producers. Government economic policies- great depression, crashed the economies stock values dropped by 90%, 25% Famine - Holodomor, the Soviet Union needed the food to of the people in US where unemployed. fuel the war effort, new superpower enters WW2, War ends in Axis loss. Changes In Investors Confidence - Natural Disaster - Hurricane katrina 2005, destroyed the Price Changes in Non-Renewable Energy - the upcoming gulf of the USA damaging 125 billions worth of assets. winter is predicted to be very cold, meaning that increased Spiked oil prices due to the damage of the oil rich gulf amounts of natural gas will be used, leading to the systems. Disturbed the shipping of materials due to the skyrocketing of prices of natural gas. damaged shipping ports. Economic Uncertainty - the COVID-19 pandemic made prices of some items drop (oil and gas), while others skyrocketed (essentials) Ranielle, Tiffany, Jazlene, Victoria - War: Russia and Ukraine, Israel and Palestine - Unemployment rates increasing in Palestine, which resulted in 500,000 job losses - Natural disasters: Japan (Great Kanto Earthquake) 70% of the structures were destroyed, in which the costs to rebuild had severely impacted Japan’s economy and lost 10% of its property assets. - Philippines (Pinatubo eruption), Florida (Hurricane Idalia) - Price changes for non renewable energy: Costco gas prices - Government economic policies: Trump’s tariff on Mexico and Canada, deporting illegal immigrants - Famine: North Korea Famine (withdrawal of USSR and Chinese food supply in the 1990, flooding and drought), the Great Chinese Famine (agriculture policies, economic mismanagement, natural disasters such as droughts and floods) - Economic uncertainties: Inflation, housing prices ( - Investors confidence: Online investments, fraud in younger investors, supply chain issue arise, underperforming apple product Rysha, Sophie, Zoie, Keriya War - economic assets destroyed (such as machines and buildings) that could affect the economy due to the vast amount of money going towards replacing those buildings. Conflict between nations can affect trade Government economic policies - shapes the global economy because it weakens economy of other countries and ruins economic by influencing trade, investments, and financial stability. relationships/trade partners.. → THE AMERICAN CIVIL WAR: War was Reduces consumption due to heavy taxation and tariffs on expensive for both sides, with an estimate total cost of $3.3 billion. The confederate dollar became worthless by 1865 goods. → Trump threatening 25% tariff on Canadian and Mexican goods which would significantly impact the economy Famine, the scarcity of food, can bring people to harm as well as reduce of Canada. (Increased Costs for U.S. Manufacturers and food exports. Lowers productivity and increases sickness, meaning less Consumers but disrupts trade relationships) workers. Causes inflation and price increase of food prices. → 2011 famine in Somalia: caused severe drought and a devastating famine, killing about 250,000 people, half of whom were children. This famine Economic Uncertainty - slows growth, disrupts jobs, and was fueled by drought and rapidly increasing food prices. reduces investment as people and businesses and lose confidence → Delayed decision making - uncertainty can Natural Disasters - Natural disasters, such as earthquakes, can destroy the environment which can lead to shortage of raw materials as it disrupts delay consumption and investment decisions by people and trade. Leads to economic costs of recovery (businesses and hospitals businesses need to be fixed) → HURRICANE KATRINA, US (2005): Hurricane caused $125 billion in economic loss Change in investors confidence - slows economic growth Energy Price Changes - The rise of oil and gas prices increase costs for because they are afraid to expand their business and invest businesses and families. Increases operating costs of businesses (people which gives fewer job opportunities. Less investments in the laid off due to budget cuts) → Cost of living: high energy prices have put stock market, decreasing income for investors. cost of living pressures on households around the world Jacob, Tristan, Alisia, Faye - Lack of grain coming from Ukraine due to the Russian invasion - Flooding in brazil causing orange juice prices to increase - In Japan, common floods, typhoons, and similar disasters would destroy their crop production and ruin their city’s economy (it would destroy most buildings and resources) - Germany decided to get rid of nuclear power (seriously why?) causing it to be reliant on expensive Russian gas and oil - Famine during the holodomor causing many people to die and not be able to participate in the economy - American tariffs on Canadian goods (illegal by the way) would cause major problems since America is Canada's #1 trading partner - WIth the advancement of fusion energy and potentially new nuclear power plants (hopefully), along with electric cars can make alberta oil and coal industry irrelevant. - Increasing or decreasing oil and gas prices will heavily affect Alberta’s and Canada’s economy as it is a huge part of its profit - Investments in Alberta's oil industry fell from 76 billion in 2014 to 35 billion in 2023 (but has been climbing since 2020) Crizbel, Annika, Edom, Raisa Natural disasters - When natural disasters occur buildings are destroyed which results in the government putting money into rebuilding and recovering land War - Russia and Ukraine, war can disrupt trade because destroyed. Haiti earthquake in 2010 that killed over 300 factories, buildings and shipping might be slowed due to the war. 000 people, climate change causing hurricanes in Inflation can occur. Florida. Famine - increased food prices which are likely increased from Price changes for non-renewable energy - High prices of war. The government aids. oil and natural gas might slow down the economy and low prices may affect the oil prices oil producing prices. Economic uncertainty - higher borrowing costs, higher than For example the war in Ukraine and the tensions in the expected inflation. For example Japan’s currency yen. middle east creates uncertainty in oil markets Government Economic policies - Tariffs increase money for the Changes in investors confidence - Low confidence can government, for example Canada puts a 25% tariff on certain result in a slower economy because there are less steal items from Mexico investments and stock market decline. High confidence results in economic growth Renelle Rediet Alisa Danbale - War: Russia and Ukraine - expenses spent on war and economic damage as land and resources are damaged during the process - Natural Disasters: (Severe Floods) Vietnam - Famine:A total of 1.9 million people are in the grips of catastrophic hunger – primarily in Gaza and Sudan but also in pockets of South Sudan, Haiti and Mali. They are teetering on the brink of famine. In Zamzam camp in northern Sudan, famine has been confirmed. Many food crises involve multiple overlapping issues that are building year on year. - Government economic policies: Donald Trump tariffs on Mexico and Canada, increases prices and shipping. - Price changes gas prices- Ex: Vancouver, the gas prices continue to increase. - Earthquakes: China. China is in a very highly seismic area which leads the countries to have highly catastrophic earthquakes Impacts of Economic Globalization on the World The relatively free movement of money/trade has drastically increased the power/influence of transnational corporations ○ Some companies are wealthier than some countries Companies Vs. Countries Annual Revenue/GDP Companies: Countries: Netflix: $11.693 billion Malta: $11.278 billion Visa: $18.378 billion Bosnia and Amazon: $117.900 billion Herzegovina: $16.917 billion Kuwait: $110.873 billion https://www.businessinsider.com/25-giant-companies-that-earn-more-than-entire-co untries-2018-7#walmarts-revenues-exceed-belgiums-gdp-25 “We are living through a transformation that will rearrange the politics and economics of the [21st century]. There will be no national products or technologies, no national corporations, no national industries. There will no longer be national economies, at least in the way we have come to understand that concept.” - Robert Reich, former Secretary of Labour of the United States (1993-1997) How did 20th century world events shape contemporary Spanish Flu economic globalization? Early 20th Century 1914, European empires controlled the vast majority of the world’s territory, resources, and population ○ This made the empires extremely wealthy ○ Britain had roughly ¼ of the population under its rule Trade between the imperialists was complex, interdependent, and led to massive amounts of production of goods (Mercantilism) Countries’ insatiable desire to expand/protect their empires/influence led to one of the greatest conflicts in human history... World War I Many expected the war to end quickly, however that was not the case ○ Soldiers exposed to: Physical/psychological trauma Poisonous Gas Rat-infested trenches Machine gun fire Constant bombardment World War I - 1914 - 1918 Combatants: ○ Britain, France, Russia VS. Austria-Hungary and Germany 15 million soldiers and civilians were killed during this conflict ○ 66 000 Canadian soldiers were killed, many of whom were in their late teens/early 20s ○ What long term legacies could losing a young population have on a country economically? What long term legacies could losing a young population have on a country economically? - reduction in the number of young workers - women are entering the work force - Total War - changes in societal structure - the right to vote for women - less children being born or did they come back and celebrate - 1920s - lose a lot of the young population and lose the worldview of those who might be more progressive “The Lost Generation” - older people, children - family farm Economic Cost of WWI Due to the war, many towns, homes, businesses, factories, farm, ports, and ships were destroyed To pay for the war, many European powers borrowed money from the United States ○ By 1918, Europe owed more than $8 billion By 1919, production of goods around the world dropped by 25% compared to 1913 ○ In Russia, production dropped by 80% Protectionism - After the war, many countries restricted trade in order to try to rebuild their own economies The Cost of Peace After WWI, the Treaty of Versailles was signed in an effort to prevent another global conflict One of the failures of this treaty was inflicting too harsh of a punishment on Germany Germany was forced to pay reparations to the victors of the war ○ Reparations - Payment for war damages The Cost of Peace Critics argued that these punishments were too harsh ○ American and Canadian delegate warned how severe these reparations were Economist John Maynard Keynes argued that it would starve/cripple Germany ○ He argued it would almost guarantee another global conflict Germany was forced to give up its colonies ○ These colonies were divided amongst European powers and Japan WWI and the Canadian Economy By 1918, the war was costing Canada $2.5 million per day ($47 mln/day) ○ To temporarily combat this, Canada introduced personal income taxes After the war, interest payments on Canada’s debt totaled $164 million a year ○ This made income taxes permanent The war required soldiers, nurses, farm/factory workers ○ Created a temporary worker shortage When soldiers returned home and weapon manufacturing stopped, unemployment rates rose Extra Viewing! Russia - Early 20th Century Ruled by Czar Nicholas II ○ Absolute Monarch Had complete control of the entire empire Russian Empire covered roughly ⅙ of the world’s surface Ruled over 150 million people ○ Over 100 different nationalities Russia - Early 20th Century Peasants lived difficult lives under ancient economic systems ○ They had little control over labour and property Industrialization in Russia was lagging behind the rest of the world When WWI began, Russian were ill equipped with poor quality weapons and leadership ○ 4 million dead after the first year The Russian Revolution - 1917 - 1922 Mid WWI, workers started revolting against the monarchy ○ Soldiers abandoned their posts to join the revolution ○ This forced Russia to pull out of WWI ○ Russian economy came to a halt Czar Nicholas was forced to relinquish power in 1917 ○ He and his family were killed in 1918 Russia was riddled with civil war until 1922 ○ Between 1920 and 1922, 5 million were killed due to famine/drought The Russian Revolution The formation of the USSR In 1922, the Union Soviet Socialist Republic, U.S.S.R., emerged out of the former Russian state The Soviet Union is widely regarded as the first communist state ○ Political theory advocating for class equality leading to a society where all property is publicly owned and each person is paid according to their abilities and need Rejected capitalism and capitalist countries The Soviet Union U.S.S.R. became a one party state controlled by the Communist Party ○ Controlled the economy and government By 1929, the soviets were governed by an absolute ruler... Joseph Stalin Became the absolute ruler of the Soviet Union Transformed the U.S.S.R. into an industrial and military giant 5 Year Plans - Command Economy ○ Set production schedules for farms and industry ○ Hundreds of thousands were forced to work in mines and factories/construction sites ○ Farmers were forced to grow grain on collective farms Farms that were operated by workers as a group Farmers were forced to hand in their grain over to a centralized government ○ By 1939, 90% of the farms in the USSR were collective farms The Soviet Union 100% Government Control of the economy The government exported farm products to fund military spending and industrialization During 1932, an estimated 5 million people died of starvation in the Soviet Union ○ Still, more than 2 million tonnes of grain was exported out of the Soviet Union Holodomor - The Terror Famine Name given to the famine in Soviet Ukraine from 1932-1933 Killed millions of Ukrainians - estimates from 3.5 - 7 million Man-made factors contributed to this famine ○ Not allowed to leave or seek aid ○ Forceful removal of food and supplies from households Many people were forced to resort to extremes in order to survive ○ Murder, cannibalism, etc. Genocide The Great Depression Post WWI During the 1920’s, many countries had an economic boom ○ Investors were confident that stock prices would stay increasing ○ Unemployment was low ○ Spirit of optimism after surviving the war ○ Minimal government regulations over the economic system The roaring 20s were in full effect Black Tuesday October 29, 1929, stock prices started to drop in the New York Stock Exchange This drop worried some investors and prompted them to sell ○ After seeing investors sell, it created a domino effect of people selling stocks out of panic ○ This panic caused share prices to plummet, causing the slide to turn into a crash The Great Depression The crash started a chain reaction Many of those who invested lost money ○ People could not pay their bills ○ Those who borrowed money could not pay it back ○ Those who loaned money could not collect Not having money to spend caused product demand to decline This caused companies to decrease production, laying off workers or shutting down completely ○ This led to an increase in unemployment, and more people being laid off The Great Depression These events moved the world into an economic depression known as The Great Depression ○ Economic Depression - Severe and prolonged downturn of economic activity In an effort to protect their own economies, many countries restricted trade ○ Countries increased tariffs on imported goods ○ This led to more jobs lost The Great Depression and Canada Between 1929 and 1933, exports from Canada fell by 50% By 1933, unemployment in Canada was at 26.6% ○ Salaries of those still employed were often cut substantially To make matters worse, Canada experienced a drought ○ It started in 1928 and continued off and on until 1937 ○ Top soil blew away in some regions, causing farming to become extremely difficult Grasshoppers flourished, eating the little grain that could actually grow Analyze World War II Build up to World War II Impact of the Treaty of Versailles ○ Economic Prosperity reparations, loss of colonies, loss of industrial land ○ Safety & Security burning of the Reichstag, job instability ○ Values & Belief War Guilt Cause - all Germany’s fault Germany was desperate for a leader to solve these problems... The Rise of Adolf Hitler and the Nazi Party Adolf Hitler and his Nazi Party pledged to fix Germany’s economic problems ○ The Nazis promised to restore Germany to its former glory In 1933, the Nazi Party was elected into power Hitler quickly dissolved parliament in Germany and established himself as the Fuhrer, or absolute ruler Adolf Hitler was extremely popular in Germany at this time ○ He appeared to restore Germany to its former glory ○ Convinced a large portion of the population that they were part of a superior race that deserved to rule over others The Aryan Race Under Hitler’s command, Germany invaded and took over the Rhineland, Austria, and Czechoslovakia World War II Begins On September 1, 1939, Germany invade Poland ○ In response, Britain, France, Australia, New Zealand and Canada declared war on Germany ○ The U.S. stayed out until 1941 when Japan bombed Pearl Harbour More than 50 countries joined the war all over the world World War II More than 60 million soldiers and civilians died in this conflict The countries that suffered the most casualties were those that had direct combat within their borders ○ Russia: 7-9 million ○ China: 1.3-10 million ○ Germany: 3.5 million Nazi Death Camps One of the most infamous events in WWII were the German death camps Jews, Poles, Czechs, Greeks, Roma, Serbs, Ukranians, Russians, Homosexuals, people with physical disabilities, trade unionists, and prisoners of war ○ All victims Estimated 10-26 million people were killed as a result of these death camps Canada and World War II Over the course of the year, 42 000 Canadians died ○ 52 000 were wounded physically and psychologically ○ “Shell Shock” now we would diagnose as PTSD The war had both short and long term effects on the Canadian economy During the war, production of weaponry, ships, and war goods increased ○ This is the idea of a total war Farming became more mechanized Unemployment fell to an all time low, at less than 1% Over 1 million women joined the workforce What factors laid the foundations of contemporary globalization? 1944 Bretton Woods International Monetary Conference July, 1944 - representatives from 44 countries met in the small town of Bretton Woods for a U.N. conference ○ World War II was not over (wouldn’t end in E.U. for 10 months, Pacific for 13) Aim of the conference - trying to figure out how to prevent economic turmoil that could lead to another global conflict Looking to the Future Even before the end of WWII, people knew they had to avoid a similar conflict in the future Many countries from around the world, including Britain, the United States, and Canada, sent representatives to aid in building an organization that would: ○ Support people who wanted to choose their own government ○ Help countries cooperate on trade issues ○ Protect smaller countries from invasion from larger countries ○ Ensure that no single country controlled the world’s oceans Formation of the United Nations Rebuilding After War People around the world were tired of the fighting, and were looking to rebuild their lives after the destruction of war ○ Many major cities were in ruins Nagasaki, Hiroshima, Warsaw, Stalingrad ○ Refugees/Survivors of German death camps looked for safe homes ○ The war cost more than $2 trillion worldwide People wanted to rebuild their lives on a secure economic basis Remember: John Maynard Keynes Government Involvement in the Economy British economist who warned that the WWI peace treaties were doomed to fail Led British delegates at Bretton Woods Believed unrestricted capitalism that exists prior to WWI/between the wars had failed ○ The government should have social programs in place for unemployed people as a way to combat layoffs due to low demand ○ Lower taxes for individuals as ensuring people had money to spend, would in turn stimulate the economy ○ As a result, businesses would have to rehire workers to keep up with the steady demand ○ https://www.thecanadianencyclopedia.ca/en/article/social-programs-in-canada ○ WELFARE STATE The World Bank and International Monetary Fund 2 organizations were mapped out at Bretton Woods under Keynes guidance, both aimed to help stabilize international trade: ○ The World Bank - International Bank for Reconstruction and Development ○ International Monetary Fund - I.M.F. Delegates hoped that persuading countries to agree on rules would help kickstart international trade again, and avoid large scale conflicts in the future Investigate their Websites - What did you find? Views on the World Bank and I.M.F. Supporters of these organizations argue that they have helped stabilize the world economy ○ Believe it has brought prosperity to many countries Critics argue that these organizations are too influential ○ Their help costs too much, especially for developing countries ○ For example, when I.M.F. lends money to a country, it can order them to make budgetary cuts to their spending Agreements on Tariffs and Trade At Bretton Woods, some countries agreed to work together to establish trade rules ○ This led to the formation of G.A.T.T. in 1947 General Agreement on Tariffs and Trade Members agreed to gradually eliminate tariffs and other trade barriers between their members ○ Trade Liberalization was the goal and the elimination of tariffs was the main method of achieving this goal ○ These countries met multiple times to discuss this over the decades following The World Trade Organization In 1995, the World Trade Organization (W.T.O.) emerged form G.A.T.T. By 2007, the W.T.O. was regulating trade in services such as telecommunications, banking, as well as other goods W.T.O. set rules regarding copyright laws and intellectual property ○ Slogans, patents on drugs, industrial design, and communications technology Changing the Foundations of Economic Globalization After WWII, the U.S.A and U.S.S.R. became economic and military superpowers ○ America had capitalism and a democratic government ○ Soviets had communism and a centralized government run by a dictatorship The differences between these two nations fundamental values divided the world on one side of the ideological spectrum or another Changing National Economics In the 1970’s, some countries had spent so much money trying to grow their economies, that they fell into massive amounts of debt ○ To add to this, inflation was rising and so was unemployment ○ According to Keynes' theory, this was not supposed to happen at the same time Remember: Friedrich Hayek Government Non-Involvement in the Economy Fundamentally disagreed with Keynes Had a mistrust of government control ○ Whether this was full control (U.S.S.R.) or partial control (Western Nations) Government should protect the market by ensuring that rules/laws do not interfere with competition or business Believed market and competition would keep the economy healthy Changing National Economies People started to embrace the ideas of a free market and reject government intervention, Support for Hayek’s theory gained support By 1974, Hayek, along with his colleague Milton Friedman, shared the Nobel Prize in economics Hayek/Friedman believed that a more free market would generate a healthy economy and prosperity Their theories started to influence world leaders ○ Margaret Thatcher - Britain ○ Ronald Reagan - The United States of America Debate Surrounding Market Economies Some argue that market economies make individuals more free to make their own decisions with little intervention from the government ○ All resources are privately owned by companies/individuals Critics argue that this can lead to economic imbalance and an increase in the wealth gap/destruction of the middle class Most countries today, including Canada, take a mixed approach to market economies ○ Some government intervention