Lecture 3
Economic globalization - Interdependence (KC1)
We went from largely national economies after WW2…
● Significant state ownership and production
● Government directed investments and use of resources
● High barriers to trade
● Restricted movement of capital
● Every country had its own currency
→ Economic policies based on Keynesian ideas of how to organize the economy
To highly independent economies today
● More private ownership and production
● Resources allocated through the market
● Extensive international trade
● Global production chains
● Free movement of capital and global financial markets
● Common currencies and currency convertibility
→ Economic policies based on (neo)liberal ideas about how to organize the economy
Challenges of international economic governance
1. Generate economic growth and development
- Raise living standards and reduce poverty
2. Ensure a stable world economy
- Prevent economic crises and shocks
3. Facilitate cross-border trade and economic activity
- Stimulate economic exchange with mutual benefits
4. Loss of state sovereignty and democratic control
- Rise of illiberal movements and autocratic regimes
Economic promises of globalization
● Division of labour maximizes productivity
● Specialization maximizes gains from trade
● Global competition lowers prices and/or increases quality, and increase variety
● Goods, services, capital, and people can move more freely across borders
Political promises of globalization
● Nation-states that trade with each other are less likely to go to war?
- Interdependence rather than self-sufficiency
, Economic challenges of globalization
● Increased economic interdependence can also lead to increased economic fragility
● Greater likelihood of international crisis
- Spill-over effects and financial instability
● Race to the bottom in terms of prices and quality
- Companies exploiting people or prices
Political challenges of globalization
● Exploitation and human rights abuses along supply chains
● Global markets require global rules
- Difficult to achieve and sustain
● Increased openness may lead to an increased backlash
International actors in economic governance (KC2)
● World bank → Economic assistance & development
● International Monetary Fund → Financial assistance & market stability
- Last resort, you do not loan from them unless there is no other way.
● World Trade Organization → Trade
● Organization for Economic Co-operation and Development → Economic policy
● G7/G20 → Pressing and novel economic issues
● Global expert professions → Networks and norms
- Becoming more important, helps organizations work together through their network
IMF and World Bank: Ideas and policies
● From Keynesian ideas to the Washington Consensus
● Seen as key actors in spreading neoliberal economic policies since the 1980s
- Deregulation, privatization, and liberalization
● Conditionality: I’ll give you a loan, but …
- Loans given to states in exchange for specific economic reforms
Economic globalization - Interdependence (KC1)
We went from largely national economies after WW2…
● Significant state ownership and production
● Government directed investments and use of resources
● High barriers to trade
● Restricted movement of capital
● Every country had its own currency
→ Economic policies based on Keynesian ideas of how to organize the economy
To highly independent economies today
● More private ownership and production
● Resources allocated through the market
● Extensive international trade
● Global production chains
● Free movement of capital and global financial markets
● Common currencies and currency convertibility
→ Economic policies based on (neo)liberal ideas about how to organize the economy
Challenges of international economic governance
1. Generate economic growth and development
- Raise living standards and reduce poverty
2. Ensure a stable world economy
- Prevent economic crises and shocks
3. Facilitate cross-border trade and economic activity
- Stimulate economic exchange with mutual benefits
4. Loss of state sovereignty and democratic control
- Rise of illiberal movements and autocratic regimes
Economic promises of globalization
● Division of labour maximizes productivity
● Specialization maximizes gains from trade
● Global competition lowers prices and/or increases quality, and increase variety
● Goods, services, capital, and people can move more freely across borders
Political promises of globalization
● Nation-states that trade with each other are less likely to go to war?
- Interdependence rather than self-sufficiency
, Economic challenges of globalization
● Increased economic interdependence can also lead to increased economic fragility
● Greater likelihood of international crisis
- Spill-over effects and financial instability
● Race to the bottom in terms of prices and quality
- Companies exploiting people or prices
Political challenges of globalization
● Exploitation and human rights abuses along supply chains
● Global markets require global rules
- Difficult to achieve and sustain
● Increased openness may lead to an increased backlash
International actors in economic governance (KC2)
● World bank → Economic assistance & development
● International Monetary Fund → Financial assistance & market stability
- Last resort, you do not loan from them unless there is no other way.
● World Trade Organization → Trade
● Organization for Economic Co-operation and Development → Economic policy
● G7/G20 → Pressing and novel economic issues
● Global expert professions → Networks and norms
- Becoming more important, helps organizations work together through their network
IMF and World Bank: Ideas and policies
● From Keynesian ideas to the Washington Consensus
● Seen as key actors in spreading neoliberal economic policies since the 1980s
- Deregulation, privatization, and liberalization
● Conditionality: I’ll give you a loan, but …
- Loans given to states in exchange for specific economic reforms
