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HISTORY OF THE WORLD ECONOMY AND MIGRATION - Coggle Diagram
HISTORY OF THE WORLD
ECONOMY AND MIGRATION
THE FIRST GLOBALIZATION WAVE
rebellion against the tyranny of distance;
the empires invested in the new areas of conquer;
first industrial revolution;
exporting high-value goods such as manufactured goods, spices, metals and precious materials.
It was already a globalized world, even in modern times. Despite this, before the 19th century, imports plus exports as a share of the value of output were very small.
Europe raised within this phase. Europe started gaining ground over other countries, and by 1500 came to possess economic potential and technologies enormously superior to anyone.
Factors that allowed development:
climate
geographical determinism
resources
cultural and institutional accumulation
politics
social structure
religion
educated human capital
SECOND GLOBALIZATION WAVE
1850 - 1919
A turning point was the invention of
steam
: distance started becoming less important and this paved the way to the developing of international trade. Steam transport and improved communication networks allowed the integration of commodities from the most distant regions.
Breakthrough in transportation technology that allows to buy goods and commodities from far away.
Britain was the engine of global trade and was the main actor in the finacial system as known as the gold standard.
Great Divergence
in income levels between (and within) regions, as the new technologies diffused only gradually across the globe. Not everywhere the march of growth was the same. Some countries grew faster than others.
The great escape
Globalization Backlash
This golden age of globalization was brought to a tragic and abrupt end by the outbreak of World War 1. International disgregation. End of liberal economic trade. With the outbreak of the 1stWW, international trade stopped due to several reasons:
tariffs
isolationism
protecionism
autarky
international geopolitical tension
consequences of the war:
Treaty of Versailles
art 231: Germany was forced to recognize full responsibility for all the loss and damage resulting from the war.
But Germany was a loosing country and already experienced territorial, human and raw material losses.
Keynes was against this treatment and wrote
The economic consequences of the peace
.
He understood that France and UK's aim was to push down Germany and to avoid its recover, in order to make it a borrower and a poor country. Weaken Germany's possibility to compete.
Keynes suggested to cancel both the US debt and the reparations (that were merely vindictive).
A weak Germany would have led to an inefficient, disorganized Europe.
The US decided to act like an international power:
Dawes Plan
reparations had to be calculated according to the german ability to pay;
fixed exchange--> let the money circulate and invest in Germany.
Wall Street Crisis in 1929
1928 in Europe (US started withdrawing its capital in Germany)
1929 broke out in the US
President Hoover was not able to cope with the crisis. The measures adopted were inept. Why did the crisis occur?
less flexible production and work;
deflation
gold standard
international monetary system was not working properly
monetary policy mistakes: restrictive--> prices fell
passive and hesitant behaviour of the autorities
no liquidity
speculation
The new Deal 1933-1939
Natinal Industrial Recovery act 1933: regulate industry for fair wages and prices that would stimulate economic recovery;
Civilian Conservation Corps 1933 (for youth--> provide work)
Acgricultural Adjustment act
Tennessee Valley Authority (electricity)
Acts relatetd to the protection od the baniking system: securitirs acts; Glass-Steagall act
WPA: public works administration 1935
Wagner act: trade unions and bargain contracts collectively
A fruit of Globalization: the birth of the US
Importance of imgration form Europe and free movement of people and labour.
1773 Boston Tea Party
1776 Declaration of Independence by Thomas Jefferson
1789 Proclamation of the federal State
1823 Monroe Doctrine
1860 election of Abraham Lincoln
1862 Homestead Act to assist the West expansion
1861-65 Civil War
Technology in the US
factor accumulation and technical progress
The US
transport revolution
led to the great convergence in grain prices. Water and steeam transport.
railways funded by privates: the railways became the first enterprises to be funded by modern financial institutions;
highways recived public investments from the federal government.
Among the greatest technological improvements of the period was the application of steam to land and sea transport.
Telegraph
Instantaneous communication between distant points
Railways
Move and unprecedented volume fo goods at unpredected speed. Schedule in hours.
Distribution
Transportation and communication networks. Organizational and technological innovations.
Production
lowered costs and increased productivity. Mass production and advertising.
The american market was very huge but it did not grow thanks to the internaional trade. On the contrary, there was a huge internal market that could develop thanks to its internal increasing demand. For this reason, high tariffs did not affect the US growth: they did not have to import products and their growth did not depend on trade.
US growth resulted from the mobilization of internal resources.
The grain invasion
: impact of cheap grain from the US on the European Economy.
This could happen thanks to falling transport costs. Cheaper grain meant lower rents throughout Europe and protection boosted rents (lower rents). Increase in land endowment.
Cheap New World's cereals flood in Europe.
Transatlantic grain price convergence during that period: in the free-trading UK, rents collapsed.
Denmark: free trade
The article further details the integration of international grain markets, showing significant price convergence between Britain and the U.S., while highlighting the limited integration within Continental Europe due to protectionist policies. The analysis of grain prices reveals that while British prices fell significantly, other countries experienced more modest declines, indicating that tariffs muted the effects of global market integration.
In continental Europe, tariffs were imposed on imports to mute the impact of the grain invasion on agricultural incomes. Protection cut the declines in rent associated with cheap grain.
Why the US grew so fast?
From the 1890s on, the US was the world's leading industrial nation.
european immigration;
system of manufacturing: ability to produce faster and cheaper. Taylorism, the supply chain,unskilled labour-force, mechanization, assembly-line, mass production, assemblng interchangeable parts, standardization;
no laws, no bureaucratic impediments
resources;
geographical size;
growth of both population and pre-capita income: this led to the growth of a consumer demand;
capital abundant, labour scarcity;
the State had a fundamental role in stimulating the western colonization and in setting up the anti-trust legislation;
diversification.
inputs:
land, people, knowledge, education,
capital, technology, State.
1860 Treaty of Chevalier
free trade between UK and France
most favoured nation clause
What is Globalization?
It is a phenomenon characterized by the integration of international markets in which raw materials, labor, goods, services and capital can move. Interaction through migration, trade, politics, cultures.
reduction of costs
people and labour can move freely.
Globalization has not a linear path. Every wave of it, ends up with a backlash that provokes a stop or a fall of international trade. Contemporary globalization arised from a worldwide process of uneven economic development that has been centuries in the making.
Globalization and inequality
A country can grow through the accumulation of usable knowledge and wheter international capital flows are free
growth depends on a wide range of variables other than exposure to trade: investment in human and physical capital, educational system, savings, employment, technological progress, institutional enviroment.
Baldwin's unbundling
1) transport and industrial revolutions: cost of shipping declined;
2) fragmentation of the production. InformationCommunicationTechnology revolution: it helped reducing the cost of managing complex activities internationally. Both goods and tasks are traded. The ICT revolution lowered the cost of coordinating complex processes across great distances;
3) this phase will be dominated by the declining of face-to-face interaction costs.
In the 1970's the firts unbundling ended. Separation of production and consumption. Decreasing in prices. Goods are traded
THIRD GLOBALIZATION WAVE
Started after the 2ndWW. International capital flows greatly expanded. We witness a golden age of economic growth.
International organizations to protect peace and free trade were born: both the Americans and the Europeans cocluded that economic integration and political cooperation were necessary in order to preserve peace. Cooperation and gold exchange standard led by the US.
The third globalization wave was brought about a paceful global system of trade and monetary governance thanks to setting up of new and innovative interantional organizations.
Stikker, Pella, Petsche
Lessons learnt from the past:
no autarky, no US isolationism, no war debts, help both winners and losers
land lease act 1939
AIDS
UNRRA (1943)
First aid package for countries devasted by the conflict. Provided european countries with goods that had to be used in relief and rehabilitation. Mostly food and money for civilians. This program was not enough: some regions were heavily bombed, there were no money for public goods and they were taking so long to recover.
Marshall Plan
Innovative plan
Provided social stability against the spread of communism. Loans and grants to renew the production and to recover. Economic reconstruction, economic integration, international cooperation.
The
OEEC
was set up in 1948 in Paris to prepare end estimate the reconstruction of europe: the goal was to develop national production and coal and electricity industry.
Newly born functional institutions created by the US:
OEEC: attended the distribution of aid, boosted trade liberalization, removed quotas, founded the first experiment of an european banking system (EPU)
Economic Cooperation Administration (role of supervision)
European Productivity Agency (fill the productivity gap)
ITALY
lack of energy
coal
food
industries
ships
loans to industry to import modern american technology. Diffusion of mass production in europe
IMF, GATT, EPU, Bretton Woods. Pursue liberalization and eliminate trade barriers
factors that triggered economic miracle:
stability and functionality of the international moneraty system (IMF and EPU)
trade liberalization (GATT, OEEC)
humanitarian aid
FOURTH GLOBALIZATION WAVE
Started in 1985 and is related to the ICT revolution. It reduced the cost of coordinating complex processes over large distances.
This wave corresponds to the second Balwin's unbundling.
Rise of inequality since 1980.
This wave was driven by the ICT revolution which lowered the cost of coordinating complex processes across countries.
The losers of this wave were the workers with medium skills. Polarization of the labour force. There were no measures to help the middle class.
Globalization and Brexit: negative effects of globalization:
foreign competition
factory closures
unemployment
stagnating purchasing power
deteriorating infrastructures and public services
social exclusion
brain drain
dwindling local traditions and identity
uncertainty about the future
effects of globalization
offshoring: manufacturing and GDP shares shifted from G7 countries to a few developing countries. Unite the world. Convergence
Locally, the economic geography of G7 countries became more polarised. Differences within countries.
The free circulation of goods
the free movement of goods helped and boosted the development of globalization. Declining price gaps: convergence in prices and wages thanks to free trade and free migration.
International trade
: production improvements allowed the falling of the price of goods. Steam and freight: faster and cheaper. Railways challenged the State's capacity to receptivity and its stage of development.
Transport revolution
made possible by the steam engine, led to international trade and to the falling of transport costs. More and more cheap and efficent.
Does trade cause growth?
It depends on how the international market is linked to the domestic economy, on the degree of integration and on the country's size.
Economic policies related
to the (not) free-market
mercantilism (XVII century). Hamilton, List. Preindustrial europe. International trade is a zero-sum game. A state needs to stimulate exports and reduce imports by applying tariffs.
French mercantilism: Colbertism
A country's wealth os measured by the amount of money in its coffers.
Manifactures Royales: consisted of a pervasive intervention by the state in the economy in order to increase the wealth and prestige of the nation.
British mercantilist policy (XVII century)
Preindustrial europe. Impose tariffs to protect States form globalization (1850).
Navigation Act
Calico Acts
help national production
Economic policies of free trade
David Ricardo
Comparative advantage:
a State has to specialise in the field with the
best and most efficient production. Specialise in the production of goods and services that coulde be made relatively more efficiently. The gains from trade derives from the specialisation of each country in the production of the goods in which it has a comparative advantage.
Hecksher-Ohlin theory
labour and capital scarce on intensive products. Abundant factor of production.
J.S. Mill
Adam Smith
Let the market move and reach its equilibrium freely.
Absolute advantage
The birth of a new global actor: the EU
ESCS in 1952 with its six founding members.
EEC and Euratom in 1957 with the Treaty of Rome: by 1968 tariffs were abolished.
As Balassa said, without federalism and political integration, there will be limited improvements: it is necessary at least a common and a bigger budget.
TFEU competences: exclusive, shared, supportive
BUDGET
: it is small but at least increasing. 7 year program.
The budget's goals include social and economic cohesion and agriculture.
Other goals are single market, cohesion, resilience, digital innovation, enviroment, security, migration..
Regional policy
to finance development in poor countries or regions.
new financial instruments:
EU social fund
EU investment bank
Common Agricultural Policy
Support farmers, prices of agricultural producs, support production.
Monetary system: consequences of the oil crisis in 1973
1972 Snake: failed due to monetary instability and economic divergence between states
ESM in 1979: ensure stable exchanges rates. Paved the way to Maastricht.
ECU in 1979
1987 free movement of capital
1998 European Central Bank
2002 euro
Concluding remarks:
customs union and a single market in which people, goods, capital and services can circulate freely
monetary union: price stability, economic growth, job creation
cohesive community thanks to the common budget
shared political values