Economic Globalization
The Impact of New Technology and Comminocation
Brenton Woods Agreement
Creation of GATT/World Trade Orginization and expansion of Free Trade
The Expansion of the Free Market System (Capitalism) After the Cold War.
For a long time, many countries like Russia, Poland had very communist like views and economic systems. This meant that government control was heavy and took on a major role in their society. On the other hand, places like Canada and the USA had capitalistic views and systems, which was essensially the opposite with little to no government involvement. After the Cold War from 1947-1991 against the USA and the Soviet Union, man people under communist control joined that more western economic system (capitalism) because they saw it as solid and stable. This economy grew even more when China's leader, Deng Xiaoping, said "to get rich is glorious" and opened up the borders to international trade and capitalistic economic ideals. India soon followed suit and the economy only grew from there.
Currently, this brough a lot of companies like Amazon and Etsy to rise up and thrive. Without the expansion of a free market, these place would have likely not gone off as much as it did. Not to mention if China stuck to their original beliefs and refused to open borders, cheap manufacturing companies wouldn't be as prominent in society.
The Influence of Theorists like Keyes and Hayek.
Keyes Theory
Hayek (and Friedman) Theory
Keyes's theory was based on the idea of government involvment and the fluxiation of the economy. It is refered to the boom bust, which reffers to the economy fluxiating up and down, which creates highs (booms) and lows (busts). Keyes belived that when the economy was in a recovery (going up), taxation should rise and govermen spending should lower, while in a recession (lowering), the government should lower taxation and be more involved.
This concept is still looked at today, but in places like the USA it is lesser so due to the much harsher market economy being wanted more than government involvement.
Hayek on the otherhand belived that they should let supply and demand run the economy and fix itself as it goes along. Supply and demand is similar to the boom bust system, in the sense that it fluctuates and has it's highs and lows. When supply was up, the demand for product was down. However when it was down, the demand was higher. When the economy was booming, the supply and demand were at similar levels or at exact meeting points (an equilibrium).
This is capitalism, the system that currently runs in a lot of major countries around the globe. It's based on profit and one's own gain, and strays away from govement involvement.
Creation of the World Bank and IMF
The Brenton Woods Confrence was a large steppingstone in world economics. It joined many countries together after WW2 and was established to create an economic system that stablized everything after the war, since many countries were struggling with trying to recouperate and pay for basic things. This agreement created the World bank, and later, IMF.
Leaching off of the Brenton Woods Agreement, the World Bank and IMF were created. The World bank was first, aiming to lend loans to countries who were in need, as long as they met certain conditions and fit the spot to need these loans. Soon came IMF, which essensially had the same intent, only to help the World Bank and help expand trade. The World Bank worked with long term loans and trades, while the IMF worked mainly with short term spendings and the exchange rates. The 184 countries that all came together made this large company to help, but the vote was very out numbered with however many votes each contrie had. The richer countries that were more involved, like the USA and Japan had a large portion of the votes. This does however, mean that they have to pay more into quotas, which they then use to loan out to other countries when they're in need.
After WW2, many nations came together to create and try to stablize the crumbling economy after the shakening war that had just taken place. They were looking for ways to expand trade, and the way they did this was setting up GATT (General Agreements on Tarrifs and Trade) in 1947. It included 27 countries and established these principals:
(1/2)
This has effected a lot of people today in more ways than one. For example, many countries are forced to take out loans, which leaves them in crippling debt. Take Jamaica for example, they are constantly being forced to take out new loans due to their crippling economy in an attempt to compete with other places like the Americas, China, UK and Japan.
(2/2)
On the other hand, it has helped many countries out during times of crisies. Europe was left crippled from the wars back when the bank was founded, which very clearly helped them back to their feet. Currently, the European countries are doing a lot better than back then, and are much more stable than other countries like Congo, Jamaica, etc.
The impact of technology is very prevelent in the progression of economic globalization. A large and perhaps the most important creation due to growing technology is the stock market and how easy it is to access. With a simple touch of your phone, computer or even smart watch, people globally have the resources to invest and trade stock. In the 1990s, this was refered to as the electric herd. This was because, like a herd of cattle, the economy could be spooked by a single thing and suddenly money was being trasfered elsewhere. This term was established by an economist named Thomas Friedman in his book The Lexus and The Olive Tree.
- Trading without discrimination (so no one would get unfair or bias treatment)
- Treating imported and domestic goods as the same (not adding or excluding tax from either or)
- Protecting the rights and freedoms of domestic production (Through Tarrifs, not quotas or fees)
- Apply for a membership to the GATT (Could only renegotiate the terms once in)
There was renegotiation from 1947 - 1995, back and forth and back again between the growing community. By the end of 1995, they officially had 131 countries and controlled almost all of the global trade (90%).