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This lecture is going to provide the reader with a brief history of global capitalism. What is meant by global capitalism or international political economy is the structure and dynamics of the international economic relations. | This lecture is going to provide the reader with a brief history of global capitalism. What is meant by global capitalism or international political economy is the structure and dynamics of the international economic relations. | ||
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The first one is called the First Globalization what some others call the ''years of classical liberalism'', the ''golden era'' which is the period from the mid-19th century to the First World war. Then we will look at the inter-war integration of global capitalism. The third period is called embedded liberalism and refers to the first post-war stage in the late 1940s to some time in the mid-1970s and then the last stage that is the current stage of the Second Globalization which begins in the mid-1970s and it is still going up. | The first one is called the First Globalization what some others call the ''years of classical liberalism'', the ''golden era'' which is the period from the mid-19th century to the First World war. Then we will look at the inter-war integration of global capitalism. The third period is called embedded liberalism and refers to the first post-war stage in the late 1940s to some time in the mid-1970s and then the last stage that is the current stage of the Second Globalization which begins in the mid-1970s and it is still going up. | ||
=The First Globalization= | =The First Globalization= | ||
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In ideological terms, the "Transport Revolution" and "Market integration" in the 18th century come along with the decline of Mercantilism and the rise of liberalism which is the rise of free trade ideology.<ref>Semmel, Bernard. [https://books.google.fr/books?id=WVT8J1YFRqgC&lpg=PP1&dq=The%20Rise%20of%20Free%20Trade%20Imperialism%3A%20Classical%20Political%20Economy%20the%20Empire&pg=PP1#v=onepage&q=The%20Rise%20of%20Free%20Trade%20Imperialism:%20Classical%20Political%20Economy%20the%20Empire&f=false The rise of free trade imperialism: Classical political economy the empire of free trade and imperialism 1750-1850]. Cambridge University Press, 2004.</ref><ref>Kindleberger, C. P. (1975). The Rise of Free Trade in Western Europe, 1820–1875. The Journal of Economic History, 35(1), 20–55. https://doi.org/10.1017/s0022050700094298</ref> | In ideological terms, the "Transport Revolution" and "Market integration" in the 18th century come along with the decline of Mercantilism and the rise of liberalism which is the rise of free trade ideology.<ref>Semmel, Bernard. [https://books.google.fr/books?id=WVT8J1YFRqgC&lpg=PP1&dq=The%20Rise%20of%20Free%20Trade%20Imperialism%3A%20Classical%20Political%20Economy%20the%20Empire&pg=PP1#v=onepage&q=The%20Rise%20of%20Free%20Trade%20Imperialism:%20Classical%20Political%20Economy%20the%20Empire&f=false The rise of free trade imperialism: Classical political economy the empire of free trade and imperialism 1750-1850]. Cambridge University Press, 2004.</ref><ref>Kindleberger, C. P. (1975). The Rise of Free Trade in Western Europe, 1820–1875. The Journal of Economic History, 35(1), 20–55. https://doi.org/10.1017/s0022050700094298</ref> | ||
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Fichier:Adam Smith The Muir portrait.jpg|A sketch of Adam Smith facing to the right. | Fichier:Adam Smith The Muir portrait.jpg|A sketch of Adam Smith facing to the right. | ||
Fichier:Portrait of David Ricardo by Thomas Phillips.jpg|Portrait of David Ricardo by [https://en.wikipedia.org/wiki/Thomas_Phillips Thomas Phillips], circa 1821. This painting shows Ricardo, aged 49, two years before his death. | Fichier:Portrait of David Ricardo by Thomas Phillips.jpg|Portrait of David Ricardo by [https://en.wikipedia.org/wiki/Thomas_Phillips Thomas Phillips], circa 1821. This painting shows Ricardo, aged 49, two years before his death. | ||
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What follows is the [https://en.wikipedia.org/wiki/Manchester_Liberalism Manchester School of Liberalism] that developed around Manchester, which is the site of the first industrial revolution, and notably the hub of the world's textile manufacturing industry, in the late 18th century and early 19th century.<ref>Bresiger, Gregory. "[https://cdn.mises.org/13_1_3_0.pdf Laissez Faire and Little Englanderism: The Rise, Fall, Rise, and Fall of the Manchester School]." Journal of Libertarian Studies 13 (1997): 45-80.</ref><ref>William Dyer Grampp, The Manchester School of Economics (Stanford: Stanford University Press, 1960). 3/16/2020. <https://oll.libertyfund.org/titles/2128></ref><ref>Wallace, E. (1960). The Political Ideas of the Manchester School. University of Toronto Quarterly, 29(2), 122–138. https://doi.org/10.3138/utq.29.2.122</ref> That school of thought came to dominate ideologically in England first, and then it diffused through different channels, first in France and then to the rest of Europe with some exceptions. The Manchester School also refers to a group of men who were responsible for the abolition of [[Between Free Trade and Protectionism: 1846 - 1914|Corn Laws]] and the adoption of free trade by Great Britain after 1846, such as [https://en.wikipedia.org/wiki/Richard_Cobden Richard Cobden] and [https://en.wikipedia.org/wiki/Herbert_Spencer Herbert Spencer]. The [https://en.wikipedia.org/wiki/Corn_Laws Corn Laws] blocked the import of cheap grain, initially by simply forbidding importation below a set price, and later by imposing steep import duties, making it too expensive to import grain from abroad, even when food supplies were short. The aboltion of the Corn Laws the United Kingdom's workers to consume cheaper foodstuffs and ensuring more regular employment initiating symbolically the great era of free trade that lasts until the First World War. | What follows is the [https://en.wikipedia.org/wiki/Manchester_Liberalism Manchester School of Liberalism] that developed around Manchester, which is the site of the first industrial revolution, and notably the hub of the world's textile manufacturing industry, in the late 18th century and early 19th century.<ref>Bresiger, Gregory. "[https://cdn.mises.org/13_1_3_0.pdf Laissez Faire and Little Englanderism: The Rise, Fall, Rise, and Fall of the Manchester School]." Journal of Libertarian Studies 13 (1997): 45-80.</ref><ref>William Dyer Grampp, The Manchester School of Economics (Stanford: Stanford University Press, 1960). 3/16/2020. <https://oll.libertyfund.org/titles/2128></ref><ref>Wallace, E. (1960). The Political Ideas of the Manchester School. University of Toronto Quarterly, 29(2), 122–138. https://doi.org/10.3138/utq.29.2.122</ref> That school of thought came to dominate ideologically in England first, and then it diffused through different channels, first in France and then to the rest of Europe with some exceptions. The Manchester School also refers to a group of men who were responsible for the abolition of [[Between Free Trade and Protectionism: 1846 - 1914|Corn Laws]] and the adoption of free trade by Great Britain after 1846, such as [https://en.wikipedia.org/wiki/Richard_Cobden Richard Cobden] and [https://en.wikipedia.org/wiki/Herbert_Spencer Herbert Spencer]. The [https://en.wikipedia.org/wiki/Corn_Laws Corn Laws] blocked the import of cheap grain, initially by simply forbidding importation below a set price, and later by imposing steep import duties, making it too expensive to import grain from abroad, even when food supplies were short. The aboltion of the Corn Laws the United Kingdom's workers to consume cheaper foodstuffs and ensuring more regular employment initiating symbolically the great era of free trade that lasts until the First World War. | ||
[[File:Imperial Federation, Map of the World Showing the Extent of the British Empire in 1886 (levelled).jpg|thumb|250px|An elaborate map of the [https://en.wikipedia.org/wiki/British_Empire British Empire] in 1886, marked in pink, the traditional colour for imperial British dominions on maps | [[File:Imperial Federation, Map of the World Showing the Extent of the British Empire in 1886 (levelled).jpg|thumb|250px|An elaborate map of the [https://en.wikipedia.org/wiki/British_Empire British Empire] in 1886, marked in pink, the traditional colour for imperial British dominions on maps]] | ||
Along with that comes a geopolitical context in which England is the dominant power, coined by some authors as [https://en.wikipedia.org/wiki/Pax_Britannica Pax Britannica] with a global economy that is centred and structured around London.<ref>Schedvin, C. B. “Staples and Regions of Pax Britannica.” The Economic History Review, vol. 43, no. 4, 1990, pp. 533–559. JSTOR, https://www.jstor.org/stable/2596734.</ref><ref>Morris, Jan. [https://books.google.fr/books?id=pgftEXaDykkC&printsec=frontcover&dq=Pax+Britannica+By+Jan+Morris&hl=en&sa=X&ved=0ahUKEwiexaDRqp_oAhXODmMBHZUPB3cQ6AEIKTAA#v=onepage&q=Pax%20Britannica%20By%20Jan%20Morris&f=false Pax Britannica : the climax of an Empire]. London: Faber, 1968. Print.</ref> Today, New York is the capital of global capitalism; in the 19th century, London was the capital of capitalism.<ref>MARCHILDON, G. P. (1995). From Pax Britannica to Pax Americana and Beyond. The ANNALS of the American Academy of Political and Social Science, 538(1), 151–168. https://doi.org/10.1177/0002716295538000013</ref><ref> Parchami, Ali. [https://books.google.fr/books?id=Pwt6AgAAQBAJ&printsec=frontcover&dq=Hegemonic+Peace+and+Empire:+The+Pax+Romana,+Britannica+and+Americana&hl=en&sa=X&ved=0ahUKEwjMyNGIq5_oAhUAAGMBHYk0AHYQ6AEIKTAA#v=onepage&q=Hegemonic%20Peace%20and%20Empire%3A%20The%20Pax%20Romana%2C%20Britannica%20and%20Americana&f=false Hegemonic peace and empire : the Pax Romana, Britannica and Americana]. London New York: Routledge, 2009. Print.</ref> | Along with that comes a geopolitical context in which England is the dominant power, coined by some authors as [https://en.wikipedia.org/wiki/Pax_Britannica Pax Britannica] with a global economy that is centred and structured around London.<ref>Schedvin, C. B. “Staples and Regions of Pax Britannica.” The Economic History Review, vol. 43, no. 4, 1990, pp. 533–559. JSTOR, https://www.jstor.org/stable/2596734.</ref><ref>Morris, Jan. [https://books.google.fr/books?id=pgftEXaDykkC&printsec=frontcover&dq=Pax+Britannica+By+Jan+Morris&hl=en&sa=X&ved=0ahUKEwiexaDRqp_oAhXODmMBHZUPB3cQ6AEIKTAA#v=onepage&q=Pax%20Britannica%20By%20Jan%20Morris&f=false Pax Britannica : the climax of an Empire]. London: Faber, 1968. Print.</ref> Today, New York is the capital of global capitalism; in the 19th century, London was the capital of capitalism.<ref>MARCHILDON, G. P. (1995). From Pax Britannica to Pax Americana and Beyond. The ANNALS of the American Academy of Political and Social Science, 538(1), 151–168. https://doi.org/10.1177/0002716295538000013</ref><ref> Parchami, Ali. [https://books.google.fr/books?id=Pwt6AgAAQBAJ&printsec=frontcover&dq=Hegemonic+Peace+and+Empire:+The+Pax+Romana,+Britannica+and+Americana&hl=en&sa=X&ved=0ahUKEwjMyNGIq5_oAhUAAGMBHYk0AHYQ6AEIKTAA#v=onepage&q=Hegemonic%20Peace%20and%20Empire%3A%20The%20Pax%20Romana%2C%20Britannica%20and%20Americana&f=false Hegemonic peace and empire : the Pax Romana, Britannica and Americana]. London New York: Routledge, 2009. Print.</ref> | ||
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In terms of the overall dynamic of the system exports as a share of the world, output picked just before the First World War in 1913. Although there is a slump in the ratio of exports to the world output in the 1900s, then the share goes up in 1913, the moment when the global economy is the most open during the classic era.<ref>Estevadeordal, Antoni, et al. “The Rise and Fall of World Trade, 1870-1939.” The Quarterly Journal of Economics, vol. 118, no. 2, 2003, pp. 359–407. JSTOR, www.jstor.org/stable/25053910.</ref> | In terms of the overall dynamic of the system exports as a share of the world, output picked just before the First World War in 1913. Although there is a slump in the ratio of exports to the world output in the 1900s, then the share goes up in 1913, the moment when the global economy is the most open during the classic era.<ref>Estevadeordal, Antoni, et al. “The Rise and Fall of World Trade, 1870-1939.” The Quarterly Journal of Economics, vol. 118, no. 2, 2003, pp. 359–407. JSTOR, www.jstor.org/stable/25053910.</ref> | ||
Despite the fact that the 19th century ended with a strong protectionism, the trade between the countries of the whole world knows a historical growth. The annual growth is 3.5% during the 19th century against 1% from 1500 to 1800. As a result, the importance of countries' foreign trade in relation to their economies is clearly increasing, and these economies are becoming increasingly open. | Despite the fact that the 19th century ended with a strong protectionism, the trade between the countries of the whole world knows a historical growth. The annual growth is 3.5% during the 19th century against 1% from 1500 to 1800. As a result, the importance of countries' foreign trade in relation to their economies is clearly increasing, and these economies are becoming increasingly open.[[Image:Exportations de marchandises pour quelques pays développés en 1910.png|thumb|300px|Exports of goods for some developed countries in 1910.]] | ||
[[Image:Exportations de marchandises pour quelques pays développés en 1910.png|thumb|300px|Exports of goods for some developed countries in 1910.]] | |||
Exports represented 2% of GNP in 1830, in 1860 it was 9% and in 1913 it was 14%. There is an increase in the openness of the European economy. The expansion of trade affects different countries unevenly. These differences reflect several factors, but especially the different size of economies. We see this clearly with the United States, because if we look at the level of exports, they arrive at almost the same level in absolute value as those of Great Britain, but account for only 6% of GDP whereas in the United Kingdom we speak of 18%. | Exports represented 2% of GNP in 1830, in 1860 it was 9% and in 1913 it was 14%. There is an increase in the openness of the European economy. The expansion of trade affects different countries unevenly. These differences reflect several factors, but especially the different size of economies. We see this clearly with the United States, because if we look at the level of exports, they arrive at almost the same level in absolute value as those of Great Britain, but account for only 6% of GDP whereas in the United Kingdom we speak of 18%. | ||
The importance of third world trade is also increasing. If we look at the estimates, the share of exports between 1830 and 1913 increases from about 2% to 19%. | The importance of third world trade is also increasing. If we look at the estimates, the share of exports between 1830 and 1913 increases from about 2% to 19%.[[Image:Commerce international en produits manufacturés.png|thumb|center|400px|International trade in manufactured goods.]] | ||
[[Image:Commerce international en produits manufacturés.png|thumb|center|400px|International trade in manufactured goods.]] | |||
European countries dominate international trade in manufactured goods. More generally, the country's participation in international trade is closely linked to the structure of its economy. At the end of the period, the surplus of exports is impressive for Great Britain while for Latin America it is the opposite. This is typical because it is a region that has difficulty industrializing. | European countries dominate international trade in manufactured goods. More generally, the country's participation in international trade is closely linked to the structure of its economy. At the end of the period, the surplus of exports is impressive for Great Britain while for Latin America it is the opposite. This is typical because it is a region that has difficulty industrializing. | ||
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From that spot in the North Atlantic, a big chunk of the global economy was organized. By repercussion, the rest of the global economy was organized around the British Empire. And of course, China was under the influence of foreign powers and to a large extent of the United Kingdom. | From that spot in the North Atlantic, a big chunk of the global economy was organized. By repercussion, the rest of the global economy was organized around the British Empire. And of course, China was under the influence of foreign powers and to a large extent of the United Kingdom. | ||
== | ==Money== | ||
[[File:Bank act 1844.jpg|thumb|upright|Bank Act of 1844.]] | [[File:Bank act 1844.jpg|thumb|upright|Bank Act of 1844.]] | ||
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<youtube>g9eOLbNgODE</youtube> | <youtube>g9eOLbNgODE</youtube> | ||
It is important to note that in the history of American foreign policy, you have two major stages: the 19th century and until the interwar period, you have protectionism and isolationism. The United States protects systemic markets and keeps out of the affairs of the political affairs of the world. And then from the interval period onwards, America became globalist power. On 24 September 2019, [https:// | It is important to note that in the history of American foreign policy, you have two major stages: the 19th century and until the interwar period, you have protectionism and isolationism. The United States protects systemic markets and keeps out of the affairs of the political affairs of the world. And then from the interval period onwards, America became globalist power. On 24 September 2019, [https://www.google.com/search?client=firefox-b-d&q=trump Donald Trump] gave a speech at the United Nations, and he said that the globalists are not going to fashion the 21st century, but patriots will.<ref>The White House. “[https://www.whitehouse.gov/briefings-statements/remarks-president-trump-74th-session-united-nations-general-assembly/ Remarks by President Trump to the 74th Session of the United Nations General Assembly].” The United States Government.</ref><ref>Crowley, Michael, and David E. Sanger. “[https://www.nytimes.com/2019/09/24/us/politics/trump-nationalism-united-nations.html Trump Celebrates Nationalism in U.N. Speech and Plays Down Iran Crisis].” The New York Times, The New York Times, 24 Sept. 2019.</ref> He is trying to reverse the secular course of American policy. From the interwar period, America became a globalist power, a liberal internationalist power that promoted free trade in open global capitalism and at the same time, both became interventionists abroad. | ||
The issue that crystallized this geopolitical dynamic was the ratification of the [[The Peace of Paris and the League of Nations|League of Nations treaty]]. The League of Nations was the project first and foremost of President Wilson, it was an American project. However, the treaty was negotiated, but the United States Senate refused to ratify the treaty. Therefore, the United States never took part in the look off.<ref>Wright, Q. (1933). Book Review:The United States and the League of Nations: 1918-1920. Denna Frank Fleming. Ethics, 43(3), 350. https://doi.org/10.1086/208092</ref> | The issue that crystallized this geopolitical dynamic was the ratification of the [[The Peace of Paris and the League of Nations|League of Nations treaty]]. The League of Nations was the project first and foremost of President Wilson, it was an American project. However, the treaty was negotiated, but the United States Senate refused to ratify the treaty. Therefore, the United States never took part in the look off.<ref>Wright, Q. (1933). Book Review:The United States and the League of Nations: 1918-1920. Denna Frank Fleming. Ethics, 43(3), 350. https://doi.org/10.1086/208092</ref> | ||
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In terms of foreign economic policy, there is the rise of economic nationalism that in some cases assumes the form of economic autarky in particular in Nazi Germany, but also in the Soviet Union. In other cases, such as in the case of the United Kingdom, it assumes the form of imperial trade preferences and imperial protectionism within the [[Great Britain: The Largest of Empires at the Service of a Dominant Economy|British Empire]]. In contrast, before, the British Empire was opened to the trade of the world. From 1932, it ceases to be so. | In terms of foreign economic policy, there is the rise of economic nationalism that in some cases assumes the form of economic autarky in particular in Nazi Germany, but also in the Soviet Union. In other cases, such as in the case of the United Kingdom, it assumes the form of imperial trade preferences and imperial protectionism within the [[Great Britain: The Largest of Empires at the Service of a Dominant Economy|British Empire]]. In contrast, before, the British Empire was opened to the trade of the world. From 1932, it ceases to be so. | ||
Keynes wrote two pamphlets that marked the period namely ''A Revision of the Treaty'' in 1922 to advocate a reduction of German reparations and in ''A Tract on Monetary Reform'' published in 1823 he denounces the post-World War I deflation policies.<ref>Skidelsky, Robert Jacob Alexander. "John Maynard Keynes, 1883-1946: economist, philosopher, statesman." (2003).</ref> One was a critique of the Versailles Treaty and the way that the Allies tried to settle the issue and the other one is | Keynes wrote two pamphlets that marked the period namely ''A Revision of the Treaty'' in 1922 to advocate a reduction of German reparations and in ''A Tract on Monetary Reform'' published in 1823 he denounces the post-World War I deflation policies.<ref>Skidelsky, Robert Jacob Alexander. "John Maynard Keynes, 1883-1946: economist, philosopher, statesman." (2003).</ref> One was a critique of the Versailles Treaty and the way that the Allies tried to settle the issue and the other one is this critique of the attempt by the United Kingdom government to go back onto gold in 1925 by applying a deflationary policy. | ||
==Trend in protectionism in the 1920s and 1930s== | ==Trend in protectionism in the 1920s and 1930s== | ||
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There are German and Japanese attempts to form close regional trade blocks in the 1930s. That begins before Hitler takes power in 1933 with an attempt in 1931 to form a customs union between Germany and Austria.<ref>Orde, A. (1980). The Origins of the German-Austrian Customs Union Affair of 1931. Central European History, 13(1), 34–59. https://doi.org/10.1017/s0008938900008992</ref> It took also other forms, such as attempting to form preferential trade agreements with states in Eastern Europe as with the Schacht Agreements.<ref>Eichengreen, B., & Irwin, D. A. (1995). [https://www.dartmouth.edu/~dirwin/docs/Blocs.pdf Trade blocs, currency blocs and the reorientation of world trade in the 1930s]. Journal of International Economics, 38(1–2), 1–24. https://doi.org/10.1016/0022-1996(95)92754-p</ref><ref>Spaulding, Robert Mark. “German Trade Policy in Eastern Europe, 1890-1990: Preconditions for Applying International Trade Leverage.” International Organization, vol. 45, no. 3, 1991, pp. 343–368. JSTOR, https://www.jstor.org/stable/2706735.</ref><ref>Batou, Jean, and Thomas David. Uneven development in Europe : the obstructed growth of the agricultural countries, 1918-1939. Genève: Droz, 1998. Print.</ref><ref> Melo, Jaime, and Arvind Panagariya. New dimensions in regional integration. Cambridge New York, NY, USA: Cambridge University Press, 1995. Print.</ref><ref> Forbes, Neil. Doing business with the Nazis : Britain's economic and financial relations with Germany, 1931-1939. London Portland, OR: Frank Cass, 2000. Print</ref> Japan tries to set up the [https://en.wikipedia.org/wiki/Greater_East_Asia_Co-Prosperity_Sphere Greater East Asia Co-Prosperity Sphere]. It was an attempt initiated during the Shōwa era to create, for the benefit of the Empire of Japan, a self-sufficient bloc of Asian countries led by Japan and not dependent on Western countries. Japan invaded China in 1937, takes over the Philippines, and attempts to proceed in the same way as Nazi Germany, but in the East Asian economy.<ref>Kerry A. Chase. [https://www.press.umich.edu/pdf/047209906X-ch3.pdf CHAPTER 3: Interwar Trading Blocs - Japan, Britain, and Germany, 1919–39]. In ''Trading Blocs: States, Firms, and Regions in the World Economy''. The University of Michigan Press</ref> | There are German and Japanese attempts to form close regional trade blocks in the 1930s. That begins before Hitler takes power in 1933 with an attempt in 1931 to form a customs union between Germany and Austria.<ref>Orde, A. (1980). The Origins of the German-Austrian Customs Union Affair of 1931. Central European History, 13(1), 34–59. https://doi.org/10.1017/s0008938900008992</ref> It took also other forms, such as attempting to form preferential trade agreements with states in Eastern Europe as with the Schacht Agreements.<ref>Eichengreen, B., & Irwin, D. A. (1995). [https://www.dartmouth.edu/~dirwin/docs/Blocs.pdf Trade blocs, currency blocs and the reorientation of world trade in the 1930s]. Journal of International Economics, 38(1–2), 1–24. https://doi.org/10.1016/0022-1996(95)92754-p</ref><ref>Spaulding, Robert Mark. “German Trade Policy in Eastern Europe, 1890-1990: Preconditions for Applying International Trade Leverage.” International Organization, vol. 45, no. 3, 1991, pp. 343–368. JSTOR, https://www.jstor.org/stable/2706735.</ref><ref>Batou, Jean, and Thomas David. Uneven development in Europe : the obstructed growth of the agricultural countries, 1918-1939. Genève: Droz, 1998. Print.</ref><ref> Melo, Jaime, and Arvind Panagariya. New dimensions in regional integration. Cambridge New York, NY, USA: Cambridge University Press, 1995. Print.</ref><ref> Forbes, Neil. Doing business with the Nazis : Britain's economic and financial relations with Germany, 1931-1939. London Portland, OR: Frank Cass, 2000. Print</ref> Japan tries to set up the [https://en.wikipedia.org/wiki/Greater_East_Asia_Co-Prosperity_Sphere Greater East Asia Co-Prosperity Sphere]. It was an attempt initiated during the Shōwa era to create, for the benefit of the Empire of Japan, a self-sufficient bloc of Asian countries led by Japan and not dependent on Western countries. Japan invaded China in 1937, takes over the Philippines, and attempts to proceed in the same way as Nazi Germany, but in the East Asian economy.<ref>Kerry A. Chase. [https://www.press.umich.edu/pdf/047209906X-ch3.pdf CHAPTER 3: Interwar Trading Blocs - Japan, Britain, and Germany, 1919–39]. In ''Trading Blocs: States, Firms, and Regions in the World Economy''. The University of Michigan Press</ref> | ||
The Soviet Union turned toward self-sufficiency after Stalin decided to abandon the New Economic Policy in 1928. The USSR was rushing toward a degree of economic isolation unparalleled by any industrial | The Soviet Union turned toward self-sufficiency after Stalin decided to abandon the New Economic Policy in 1928. The USSR was rushing toward a degree of economic isolation unparalleled by any industrial ecnocy at peace.<ref>Dohan, Michael R. “[https://www.cambridge.org/core/services/aop-cambridge-core/content/view/127F025AAD6EF0BC74AA0F009B24ECC7/S0037677900087787a.pdf/economic_origins_of_soviet_autarky_1927281934.pdf The Economic Origins of Soviet Autarky 1927/28-1934].” Slavic Review, vol. 35, no. 4, 1976, pp. 603–635. JSTOR, https://www.jstor.org/stable/2495654.</ref> According to Dohan, the motive for autarky most frequently cited by Western observers is Soviet fear of capitalist aggression, both military and economic.<ref>Alexander Gerschenkron, Economic Relations with the USSR (New York, 1945), p. 140</ref> But it can also be cited the other causes for the decline in Soviet trade such as Stalin's xenophobia and distaste for the uncontrollability of the foreign sector, effects of the world depression, and systemic characteristics of a Soviet-type economy which hinder the coordination of a highly variable foreign trade sector with a central plan. However, for Dohan, these explanations although insightful are not sufficient. The collapse of Soviet foreign trade in the 1930s had its roots in the pre-World War I structure of the Russian economy and foreign trade sector.<ref>Dohan (1969), pp.118-48; and Holzman (1963), pp.29S-98.</ref> The USSR was probably the most closed of these national economies in the 1930s and the 1940s.<ref>Armstrong, Willis C. “The Soviet Approach to International Trade.” Political Science Quarterly, vol. 63, no. 3, 1948, pp. 368–382. JSTOR, https://www.jstor.org/stable/2144779.</ref><ref>Hough, J. F. (1986). Attack on protectionism in the Soviet Union? A comment. International Organization, 40(2), 489–503. https://doi.org/10.1017/s0020818300027211</ref> | ||
Then Latin America, in particular, Argentina abandoned free trade in the 1930s. trade openness significantly declined during the 1930s while Argentina showed high openness ratios ranging from 30 to 40 per cent during the first globalization era.<ref>Brambilla, I., Galiani, S., & Porto, G. (2018). [https://latinaer.springeropen.com/articles/10.1007/s40503-017-0050-9 Argentine trade policies in the XX century: 60 years of solitude]. Latin American Economic Review, 27(1). https://doi.org/10.1007/s40503-017-0050-9</ref> Until the 1930s, the economy of Argentina and other Latin american countries were centred on the export of raw materials and the dominance of landowners over capital and the working class. This can be explained as following the 1929 crisis, raw materials prices collapsed while the prices of manufactured imports do not falling.<ref>Iriye, A, Akira Iriye, and Saunier. The Palgrave dictionary of transnational history. New York: Palgrave Macmillan, 2009. Print.</ref> | Then Latin America, in particular, Argentina abandoned free trade in the 1930s. trade openness significantly declined during the 1930s while Argentina showed high openness ratios ranging from 30 to 40 per cent during the first globalization era.<ref>Brambilla, I., Galiani, S., & Porto, G. (2018). [https://latinaer.springeropen.com/articles/10.1007/s40503-017-0050-9 Argentine trade policies in the XX century: 60 years of solitude]. Latin American Economic Review, 27(1). https://doi.org/10.1007/s40503-017-0050-9</ref> Until the 1930s, the economy of Argentina and other Latin american countries were centred on the export of raw materials and the dominance of landowners over capital and the working class. This can be explained as following the 1929 crisis, raw materials prices collapsed while the prices of manufactured imports do not falling.<ref>Iriye, A, Akira Iriye, and Saunier. The Palgrave dictionary of transnational history. New York: Palgrave Macmillan, 2009. Print.</ref> | ||
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That corresponds to the collapse of the international trading system in the early 1930s. There is one date that marks the reversal of that trend. It is 1936 and the [https://en.wikipedia.org/wiki/Tripartite_Agreement_of_1936 Tripartite Agreement of 1936] between the United States, the United Kingdom and France. Subscribing nations agreed to refrain from competitive depreciation to maintain currency values at existing levels, as long as that attempt did not interfere seriously with internal prosperity.<ref>Wikipedia contributors, 'Tripartite Agreement of 1936', Wikipedia, The Free Encyclopedia, 18 December 2019, 07:56 UTC, <https://en.wikipedia.org/w/index.php?title=Tripartite_Agreement_of_1936</ref> That is the first attempt to restore some kind of international monetary system based on active cooperation between central banks. Central banks from now pledge to help each other, counteract outflows of gold and money in order to stabilize exchange rates between the major currencies that make up the world economy. The agreement stabilized exchange rates, ending the [https://en.wikipedia.org/wiki/Currency_war currency war] of 1931 - 1936, but failed to help the recovery of world trade.<ref>Robert A. Mundell and Armand Clesse (2000). The Euro as a stabilizer in the international economic. Springer. p. 284. ISBN 978-0-7923-7755-9.</ref> | That corresponds to the collapse of the international trading system in the early 1930s. There is one date that marks the reversal of that trend. It is 1936 and the [https://en.wikipedia.org/wiki/Tripartite_Agreement_of_1936 Tripartite Agreement of 1936] between the United States, the United Kingdom and France. Subscribing nations agreed to refrain from competitive depreciation to maintain currency values at existing levels, as long as that attempt did not interfere seriously with internal prosperity.<ref>Wikipedia contributors, 'Tripartite Agreement of 1936', Wikipedia, The Free Encyclopedia, 18 December 2019, 07:56 UTC, <https://en.wikipedia.org/w/index.php?title=Tripartite_Agreement_of_1936</ref> That is the first attempt to restore some kind of international monetary system based on active cooperation between central banks. Central banks from now pledge to help each other, counteract outflows of gold and money in order to stabilize exchange rates between the major currencies that make up the world economy. The agreement stabilized exchange rates, ending the [https://en.wikipedia.org/wiki/Currency_war currency war] of 1931 - 1936, but failed to help the recovery of world trade.<ref>Robert A. Mundell and Armand Clesse (2000). The Euro as a stabilizer in the international economic. Springer. p. 284. ISBN 978-0-7923-7755-9.</ref> | ||
=The postwar economic order: Embedded Liberalism= | = The postwar economic order: Embedded Liberalism= | ||
The third stage in the history of global capitalism is the stage called Embedded liberalism. The concept of embedded liberalism was introduced by John Ruggie in | The third stage in the history of global capitalism is the stage called Embedded liberalism. The concept of embedded liberalism was introduced by John Ruggie in this article ''International regimes, transactions, and change: embedded liberalism in the postwar economic order'' published in 1982.<ref>Ruggie, J. G. (1982). [https://bbs.pku.edu.cn/attach/20/c5/20c50510067906d7/io82ruggie.pdf International regimes, transactions, and change: embedded liberalism in the postwar economic order]. International Organization, 36(2), 379–415. https://doi.org/10.1017/s0020818300018993</ref> According to Ruggie, embedded liberalism is a commitment to a new kind of liberal multilateralism compatible with 'domestic interventionism' aiming at supporting domestic social security and economic stability within Western industrialized countries.<ref>Helleiner, E. (2019). The life and times of embedded liberalism: legacies and innovations since Bretton Woods. Review of International Political Economy, 26(6), 1112–1135. https://doi.org/10.1080/09692290.2019.1607767</ref> Embedded liberalism is a term designed to convey the fact that the operating principle of this stage of global capitalism was a way to accommodate the imperative of external stability and the imperative of domestic policy autonomy.<ref>Abdelal, Rawi, and John G. Ruggie. "[https://tobinproject.org/sites/tobinproject.org/files/assets/New_Perspectives_Ch7_Abdelal_Ruggie.pdf The principles of embedded liberalism: Social legitimacy and global capitalism]." New perspectives on regulation (2009): 151-162.</ref> | ||
==The advent of Pax Americana== | ==The advent of Pax Americana== | ||
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The United States promotes multilateral liberalization in trade and financial flows. It keeps its domestic market open for its allies, and that is a significant feature of the few decades following the end of the Second World War. The United States notably becomes a source of international investment for construction in particular in the late 1940s and the early 1950s operating also in Europe, Japan and Korea. It stabilizes the international economic system by providing finance and creates space by doing so to reconcile external imperatives and domestic policy autonomy across the world. | The United States promotes multilateral liberalization in trade and financial flows. It keeps its domestic market open for its allies, and that is a significant feature of the few decades following the end of the Second World War. The United States notably becomes a source of international investment for construction in particular in the late 1940s and the early 1950s operating also in Europe, Japan and Korea. It stabilizes the international economic system by providing finance and creates space by doing so to reconcile external imperatives and domestic policy autonomy across the world. | ||
==The Second and Third Worlds== | == The Second and Third Worlds == | ||
But just as the United States is doing, there are vast chunks of the world that stand aside. Those are the so-called second and third worlds. The second world is the world under the domination of the USSR and China after 1949. The Third World is the former colonial world that will, later on, give rise to the non-aligned movement and the [https://en.wikipedia.org/wiki/Group_of_77 Group of 77] (G77) in the United Nations. | But just as the United States is doing, there are vast chunks of the world that stand aside. Those are the so-called second and third worlds. The second world is the world under the domination of the USSR and China after 1949. The Third World is the former colonial world that will, later on, give rise to the non-aligned movement and the [https://en.wikipedia.org/wiki/Group_of_77 Group of 77] (G77) in the United Nations. | ||
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Those states pursue inward-oriented industrialization and development. In the case of Latin America and Asia and particular India that takes the name of [https://en.wikipedia.org/wiki/Import_substitution_industrialization Import substitution industrialization] (ISI).<ref>Silva, E. (2007). The Import-Substitution Model. Latin American Perspectives, 34(3), 67–90. https://doi.org/10.1177/0094582x07300589</ref><ref>Baer, Werner. “Import Substitution and Industrialization in Latin America: Experiences and Interpretations.” Latin American Research Review, vol. 7, no. 1, 1972, pp. 95–122. JSTOR, https://www.jstor.org/stable/2502457.</ref><ref>Sapelli Claudio. 2003. [https://repositorio.uc.cl/bitstream/handle/11534/4837/000352269.pdf?sequence=1 The Political Economics of Import Substitution Industrialization] - [https://www.uc.cl/ Pontificia Universidad Católica de Chile] - [https://economia.uc.cl/ Instituto de Economia]</ref> | Those states pursue inward-oriented industrialization and development. In the case of Latin America and Asia and particular India that takes the name of [https://en.wikipedia.org/wiki/Import_substitution_industrialization Import substitution industrialization] (ISI).<ref>Silva, E. (2007). The Import-Substitution Model. Latin American Perspectives, 34(3), 67–90. https://doi.org/10.1177/0094582x07300589</ref><ref>Baer, Werner. “Import Substitution and Industrialization in Latin America: Experiences and Interpretations.” Latin American Research Review, vol. 7, no. 1, 1972, pp. 95–122. JSTOR, https://www.jstor.org/stable/2502457.</ref><ref>Sapelli Claudio. 2003. [https://repositorio.uc.cl/bitstream/handle/11534/4837/000352269.pdf?sequence=1 The Political Economics of Import Substitution Industrialization] - [https://www.uc.cl/ Pontificia Universidad Católica de Chile] - [https://economia.uc.cl/ Instituto de Economia]</ref> | ||
To a large extent, ideologically, this is a return to prescriptions that derived from mercantilist thought, in particular from the thinking of economic nationalists like [https://en.wikipedia.org/wiki/Alexander_Hamilton Alexander Hamilton] and [https://en.wikipedia.org/wiki/Friedrich_List | To a large extent, ideologically, this is a return to prescriptions that derived from mercantilist thought, in particular from the thinking of economic nationalists like [https://en.wikipedia.org/wiki/Alexander_Hamilton Alexander Hamilton] and [https://en.wikipedia.org/wiki/Friedrich_List Frederick List].<ref>Mehmet, Ozay (1999). Westernizing the Third World: The Eurocentricity of Economic Development. London: Routledge.</ref><ref>Chang, Ha-Joon (2002). Kicking Away the Ladder: Development Strategy in Historical Perspective. London: Anthem Press.</ref> | ||
The idea is that to develop industrial capacities and technological capacities, a country has to see a lot of itself from the world economy. In order to keep out the imports of more advanced countries that prevent its own industry from acquiring those capacities and developing its own economies of scale, the country has to reserve the domestic market to its own industrial firms. It is, therefore, necessary for them to replace these imports with domestic production to gaining their independence. They do so notably by placing high tariffs on imports and by implementing protectionist and inward-looking trade policies. For those countries, it is an attempt to reduce foreign dependency through local production of industrialized products, whether through national or foreign investment, for domestic or foreign consumption. | The idea is that to develop industrial capacities and technological capacities, a country has to see a lot of itself from the world economy. In order to keep out the imports of more advanced countries that prevent its own industry from acquiring those capacities and developing its own economies of scale, the country has to reserve the domestic market to its own industrial firms. It is, therefore, necessary for them to replace these imports with domestic production to gaining their independence. They do so notably by placing high tariffs on imports and by implementing protectionist and inward-looking trade policies. For those countries, it is an attempt to reduce foreign dependency through local production of industrialized products, whether through national or foreign investment, for domestic or foreign consumption. | ||
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There are two aspects to this. One is the way infrastructural investment in the developing world is going to be financed from now. It is no longer done through private funds and bank lending done from London and New York. It is to be done by public credits extended by international organizations or the United States Treasury. That is the origins of [https://en.wikipedia.org/wiki/World_Bank_Group the World Bank Group] (WBG) composed by five members institutions which are the [https://en.wikipedia.org/wiki/International_Bank_for_Reconstruction_and_Development International Bank for Reconstruction and Development] (IBRD), the [https://en.wikipedia.org/wiki/International_Development_Association International Development Association] (IDA), the [https://en.wikipedia.org/wiki/International_Finance_Corporation International Finance Corporation] (IFC), the [https://en.wikipedia.org/wiki/Multilateral_Investment_Guarantee_Agency Multilateral Investment Guarantee Agency] (MIGA) and the [https://en.wikipedia.org/wiki/International_Centre_for_Settlement_of_Investment_Disputes International Centre for Settlement of Investment Disputes] (ICSID). The first two are sometimes collectively referred to as the World Bank.<ref>Wikipedia contributors. (2020, March 29). World Bank Group. In Wikipedia, The Free Encyclopedia. Retrieved 09:01, April 4, 2020, from https://en.wikipedia.org/w/index.php?title=World_Bank_Group&oldid=948011839</ref> | There are two aspects to this. One is the way infrastructural investment in the developing world is going to be financed from now. It is no longer done through private funds and bank lending done from London and New York. It is to be done by public credits extended by international organizations or the United States Treasury. That is the origins of [https://en.wikipedia.org/wiki/World_Bank_Group the World Bank Group] (WBG) composed by five members institutions which are the [https://en.wikipedia.org/wiki/International_Bank_for_Reconstruction_and_Development International Bank for Reconstruction and Development] (IBRD), the [https://en.wikipedia.org/wiki/International_Development_Association International Development Association] (IDA), the [https://en.wikipedia.org/wiki/International_Finance_Corporation International Finance Corporation] (IFC), the [https://en.wikipedia.org/wiki/Multilateral_Investment_Guarantee_Agency Multilateral Investment Guarantee Agency] (MIGA) and the [https://en.wikipedia.org/wiki/International_Centre_for_Settlement_of_Investment_Disputes International Centre for Settlement of Investment Disputes] (ICSID). The first two are sometimes collectively referred to as the World Bank.<ref>Wikipedia contributors. (2020, March 29). World Bank Group. In Wikipedia, The Free Encyclopedia. Retrieved 09:01, April 4, 2020, from https://en.wikipedia.org/w/index.php?title=World_Bank_Group&oldid=948011839</ref> | ||
[[Fichier:GDP history Since 1950 ~ 2016.png|vignette|Gross national income per capita history 1950~2016 | [[Fichier:GDP history Since 1950 ~ 2016.png|vignette|Gross national income per capita history 1950~2016]] | ||
The International Bank for Reconstruction and Development (IBRD) was precisely established in 1944 to offers loans and finance infrastructure projects in middle-income developing countries such as Africa, Latin America and Asia. Along with that, there are American initiatives for reconstruction in Western Europe and Japan. That is the [https://en.wikipedia.org/wiki/Marshall_Plan Marshall Plan] and its Japanese equivalent introduced in 1947. A functional equivalent to those plans is the boost to the Korean economy that comes out of wars spending during the Korean War in the Korean Peninsula in the 1950s. | The International Bank for Reconstruction and Development (IBRD) was precisely established in 1944 to offers loans and finance infrastructure projects in middle-income developing countries such as Africa, Latin America and Asia. Along with that, there are American initiatives for reconstruction in Western Europe and Japan. That is the [https://en.wikipedia.org/wiki/Marshall_Plan Marshall Plan] and its Japanese equivalent introduced in 1947. A functional equivalent to those plans is the boost to the Korean economy that comes out of wars spending during the Korean War in the Korean Peninsula in the 1950s. | ||
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To a large extent, the origins of what later on was to be called the Western European economic miracle, the [https://en.wikipedia.org/wiki/Japanese_economic_miracle Japanese Economic Miracle], and the [https://en.wikipedia.org/wiki/Miracle_on_the_Han_River Korean Economic Miracle] have to do with the fact that early on the American government decided to fund major investments in infrastructure in those countries to provide them with a platform on the basis of which economic development was going to take place in its allies.<ref>Crawford, Robert J. "Reinterpreting the Japanese economic miracle." Harvard Business Review 76.1 (1998): 178-183.</ref><ref>Hassink, R. (1999). South Korea’s economic miracle and crisis: Explanations and regional consequences. European Planning Studies, 7(2), 127–143. https://doi.org/10.1080/09654319908720508</ref><ref>Foreman-Peck, J. (2014). European Industrial Policies in the Post-War Boom: “Planning the Economic Miracle.” In Industrial Policy in Europe after 1945 (pp. 13–47). Palgrave Macmillan UK. https://doi.org/10.1057/9781137329905_2</ref> | To a large extent, the origins of what later on was to be called the Western European economic miracle, the [https://en.wikipedia.org/wiki/Japanese_economic_miracle Japanese Economic Miracle], and the [https://en.wikipedia.org/wiki/Miracle_on_the_Han_River Korean Economic Miracle] have to do with the fact that early on the American government decided to fund major investments in infrastructure in those countries to provide them with a platform on the basis of which economic development was going to take place in its allies.<ref>Crawford, Robert J. "Reinterpreting the Japanese economic miracle." Harvard Business Review 76.1 (1998): 178-183.</ref><ref>Hassink, R. (1999). South Korea’s economic miracle and crisis: Explanations and regional consequences. European Planning Studies, 7(2), 127–143. https://doi.org/10.1080/09654319908720508</ref><ref>Foreman-Peck, J. (2014). European Industrial Policies in the Post-War Boom: “Planning the Economic Miracle.” In Industrial Policy in Europe after 1945 (pp. 13–47). Palgrave Macmillan UK. https://doi.org/10.1057/9781137329905_2</ref> | ||
===Multinational enterprises=== | === Multinational enterprises === | ||
The other important trend is the culmination of the shift away from the [https://en.wikipedia.org/wiki/Spoke%E2%80%93hub_distribution_paradigm hub and spoke structure] of the Classical Era towards the years of multinational enterprises. That is a trend that began in the 1920s with American corporations investing in Europe and to a much lesser extent in Japan, but mostly Europe. | The other important trend is the culmination of the shift away from the [https://en.wikipedia.org/wiki/Spoke%E2%80%93hub_distribution_paradigm hub and spoke structure] of the Classical Era towards the years of multinational enterprises. That is a trend that began in the 1920s with American corporations investing in Europe and to a much lesser extent in Japan, but mostly Europe. | ||
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In the 1990s, after the second and third worlds stopped pretending to pose a challenge to the American economy, reintegrated fully the global economy dominated by the United States. There was a lot of talks about the American unipolar moment, a moment of unprecedented dominance by one single grade power of the global system.<ref>Sheetz, M., & Mastanduno, M. (1998). Debating the Unipolar Moment. International Security, 22(3), 168–174. https://doi.org/10.1162/isec.22.3.168</ref> | In the 1990s, after the second and third worlds stopped pretending to pose a challenge to the American economy, reintegrated fully the global economy dominated by the United States. There was a lot of talks about the American unipolar moment, a moment of unprecedented dominance by one single grade power of the global system.<ref>Sheetz, M., & Mastanduno, M. (1998). Debating the Unipolar Moment. International Security, 22(3), 168–174. https://doi.org/10.1162/isec.22.3.168</ref> | ||
Another feature of the geopolitical picture that is important is the rise of China. And again, the rise of China begins with a realignment of China away from the Communist world and towards the United States with the famous visit of Nixon to Beijing in 1972 and the opening up of the Chinese economy to inward investments under [https://en.wikipedia.org/wiki/Deng_Xiaoping Deng Xiaoping] in 1979.<ref>Ash, Robert F., and Y. Y. Kueh, eds. The Chinese Economy Under Deng Xiaoping. Clarendon Press, 1996.</ref> That initial stage of the rise of China is synonymous with alignment with the United States.<ref>Bramall, Chris. "[https://ideas.repec.org/b/oxp/obooks/9780198296973.html Sources of Chinese economic growth, 1978-1996]." OUP Catalogue (2000).</ref> | |||
Another feature of the geopolitical picture that is important is the rise of China. And again, the rise of China begins with a realignment of China away from the Communist world and towards the United States with the famous | |||
That lasts more or less until the early 2000s. From the early 2000s, there are growing discussions about how China poses a challenge to the United States, and there is debate within the US about revising its China policy from the quality of cooperation promotion shifting towards the quality of containment. To a large engine that geopolitically the main debate about the future of global capitalism today. | |||
Ideologically, Keynesianism can easily go on the decline from the 1970s onwards because it is accused of fostering inflation and because a greater proportion of domestic electorates become inflation of adverse. So before under the gold standard, it was mostly investors and wealth-holders that were averse to inflation and were also the first sections of the electorate to be in franchise in the 19th century before universal suffrage became the norm in the first half of the 20th century. But the vast majority of people before the Second World War had a lower stake in the fight against inflation or state because they did not have financial assets. | |||
That changes to a large extent after the 1950s because a good share of the working class develops savings of its own and so the share of the total population that has a stake in low inflation goes up. So the importance of fighting inflation becomes more important. | |||
Along with the relative decline of Keynesianism | Along with the relative decline of Keynesianism, ideologically, there is the rise of what many people call neoliberalism or the Washington consensus as it was captured by John Williams, an economist in 1990. The dominant view of that theory is that the economy has to be privatized, has to be deregulated and has to be opened up to international. | ||
==Markets== | |||
== | |||
How does that play out in terms of the international trade system? | How does that play out in terms of the international trade system? | ||
Initially, there is a wave of protectionism called the new protectionism in the late 1970s. At the time, again, one of the major debates in IP is the world global capitalism fracturing again, just like it did in the interval period. | |||
But obviously this time it does not. That is the article by Helen Milner. And why doesn't that happen? It does not happen because of the rise of multinational production, The rise of multinational enterprises. | |||
Justice and | Justice and Cooperations have begun to spread across state borders and they have begun to have to earn a major share of the profits abroad either through export or production abroad itself. Therefore they have begun to conduct what economists called intra-firm trade. Because companies do that and they do that because it is more efficient to produce things now that way, they do not want protectionist barriers to go up because that obviously will interfere with their intra-firm trade and will raise costs and to manage profitability. | ||
The 1970s see a lot of trade liberalization. There is a new GATT round | The 1970s see a lot of trade liberalization. There is a new GATT round that is of multilateral trade liberalization that is carried through. If you look at the share of exports in international trade grows more quickly than the international economy does, so the share of international trade in international economic activity goes up. So the new protectionism is a dog that does not bark. That provides the proof in the early 1980s for international political economy theorists, but something different is going on in global capitalism and that this is a different period to the interiors. | ||
Liberalization is also spurred by the fact that less developed countries abandoned input substitution industrialization. | Liberalization is also spurred by the fact that less developed countries abandoned input substitution industrialization. That happens first in Eastern Europe that opens up gradually most important in Poland and Hungary but then also Latin America who start importing capital from abroad to fund the growing share of inputs in its economy and gradually abundance IESI and turns towards the global market. | ||
Before the way trade liberalization is going to deepen during the stage of the second globalization is not through multilateral trade liberalisation. It's not mostly through multilateral trade liberalization, but through the new regionalism through the spread of preferential trade agreements, just as the customs union was set up in Western Europe in 1957. | |||
And importantly the United States itself turns towards preferential trade agreement in the early 1980s. Until the late 1970s the United States itself refused to enter into preferential trade agreements without a countries because it did not want to undermine the norms and rules of the international trading system that he had promoted. | |||
From the 1980s onwards as the international position of American industry comes under threat from the Japanese and the Western European challenge, the Americans shift gear and adopted regionalism themselves. There is a series of agreements that lead up to the NAFTA most importantly the first one is the Canad-United States free trade agreement in the 1980s that is later joined by Mexico after Mexico opens up during the 1980s. In 1994 you have NAFTA that comes into being. It's the opposite of the Spirit of multinational trade liberalization promoted by America in the 1940s and the 1950s. | |||
There is Mercosur so the fact that Latin American countries bind together in a preferential trading block. The deepening of the European Union and a debate in the late 1980s and in the early 1990s about the rise of fortress Europe which is the fact that as Europe is gradually coming closer together that is going to be detrimental to American export to the European market. | |||
Japan pursues its own network of preferential trade agreements that mostly are done by laterally instead of bringing its trade partners into a block. Japan signs a series of treaties with individual countries in the East Asian basin. | |||
There is Asean which is the bloc of developing countries in the Southeast Asian region: Thailand, Malaysia, Korea, Indonesia, and the Philippines that are high growing economies at the time, Taiwan and Hong Kong. | |||
The global system training system is characterized by competitive liberalisation. That is a term coin by an economist called Fred Buxton that was very influential in Washington in the international trading policy. The difference here is that there is competition just as there was competition in the interval period. However, this time competition does not spur economic nationalism and an inward trend but competitive liberalization. The major powers the EU Japan the US and as time goes by China compete with each other for preferential access to third markets so that their own multinationals can better position themselves in the global competitive struggle that takes place. | |||
Another feature of the trading regime is that it takes the shape of deep liberalization. That often comes along with bilateral investment treaties. It is no longer just about tariffs. It is also about so-called non-tariff barriers. Why? Because trade is coupled as it wasn't before with production. so it's important for multinationals to know that not simply will they be able to import and export out of given market commodities but also that they can organize production within those markets without fear of interference from the local government with their property rights. | |||
Chart 1 :33 :29 | |||
This chart shows the evolution of trade agreement in the world. We see the spike the tremendous spike in the number of such agreements from 1991 onwards. | |||
This is the kind of thing that the GATT and later on the WTO were sets up to prevent. That's the key thing. | |||
==Investment== | |||
Let start with competition to attract capital. The abandonment of input substitution industrialisation meant that the source of industrial investment for developing countries now become the world market and no longer the domestic economy. The developing countries have to compete now to attract capital just as they used to compete in the gold standard era, in the classical era to attract capital. | |||
Let start with competition to attract capital. The abandonment of input substitution industrialisation meant that the source of industrial investment for developing countries now become the world market and no longer the domestic economy. The developing countries have to compete now to attract capital just as they used to compete in the gold standard era, | |||
But this time it is different because now they are competing to attract industrial investments they are competing to attract multinational enterprises in the manufacturing sector, in the high technologies sectors, so that those companies produce their goods in developing markets and no longer in the advanced markets. | |||
That is the policy of setting up special economic zones in China, in Mexico, the maquiladoras, in Southeast Asia and providing preferential fiscal treatment to multinational companies and so on and so forth. | That is the policy of setting up special economic zones in China, in Mexico, the maquiladoras, in Southeast Asia and providing preferential fiscal treatment to multinational companies and so on and so forth. | ||
All of this kind of thing | All of this kind of thing akes the shape of bilateral investment treaties that are mostly signed between countries that are the source of multinational investment, The US European Union Japan and growingly China, and countries that wish to import capital. Those countries sign bilateral investment treaties in the same way that in the classically are the adopted the gold standard, there is a good housekeeping silver approval as a guarantee to foreign investors. if they bring their money into the host country, their investment will be protected. | ||
A big push in that direction came in the late 1970s and the 1980s With Latin America and Eastern European countries, and then in the 90s again, there was a big push into Central and Eastern Europe after the collapse USSR. | |||
A big push in that direction came in the late 1970s and the 1980s | |||
Along with that comes to decline and the disappearance of expropriations of multinational enterprises in | Along with that comes to decline and the disappearance of expropriations of multinational enterprises in LDCs. | ||
From the late 1980s onwards the number of IIAs has soared. Mostly during the 90s because the 90s were the main time when countries were competing to attract capital. The last thing consequence of this is that there is now a web of legal arrangements Not multilateral but preferential legal arrangements that protect the rights of investors across the globe. | From the late 1980s onwards the number of IIAs has soared. Mostly during the 90s because the 90s were the main time when countries were competing to attract capital. The last thing consequence of this is that there is now a web of legal arrangements Not multilateral but preferential legal arrangements that protect the rights of investors across the globe. | ||
From the point of view of international investors | From the point of view of international investors BITs are the functional equivalent of colonialism. It is not to say that the system is neocolonial, it is just as colonialism in the past was there to safeguard the property rights of investors from the advanced world today bilateral investment treaties play the same role. | ||
== | ==Money== | ||
The | The Bretton wood system collapsed; the revised gold dollar standard collapse is 1968-71. Why 1968 1971 because in the late 60s, it becomes obvious that the stock of dollars held abroad is greater than the in value than the stock of gold held in the United States. Therefore if all of the holders of dollar assets abroad try to redeem their holdings for gold, the United States goes bust. | ||
That is what France attempted to do .it cashed in on its gold holdings, and that precipitated the delinking of the dollar from the gold in 1971. no one is talking about a gold standard except some libertarians in the fringes of the Republican party in the US are talking about a gold standard today. | |||
What happens is that the dealing of the dollar from the gold, actually reinforced the position Of the dollar in the international monetary system. The dollar was as good as gold before. But now the dollar is as good as the dollar. That means that because the dollar is so important international economic transactions, the United States enjoys an exorbitant privilege in the sense that it can print dollars and pay for whatever it needs to import and suffers no consequences. | |||
The United States is today the only country in the world for which there is no contradiction between external stability And domestic autonomy. The United States can pursue the domestic policies it wants, and that has a negligible impact on the value of the dollar. It was a way to understand the financial crisis happened in 2008. There was an inflow of capital into the US economy just as the giants of American finance world were collapsing. | |||
Just as there was a major crisis in the heart of the system investors believed that the most the safest of assets was still the US government that and so the dollar went up. Whereas in the past, any sensible person would be fleeing the dollar. In any economy in which there was a crisis of that scale would have suffered a collapse of its exchange rate. For the dollar, it was different, it was the other way around. | |||
What took the place of the Breton wood system was ad hoc cooperation between the US and its allies. The bond summit in 1978, the plazza accords in 1985 and the louvre accord 1987 were the allies of the United States agreed basically to adjust their economies in a way that would help the US stabilized the value of the dollar. Why did they agree to do that? Because they wanted the daughter to stop depreciating and they wanted the dollar the United States to stop exporting dollars because that fueled inflation in Europe and Japan. | |||
One major epiphenomenon of the breakdown of the Bretton would system was European monetary unification. Initially the European attempted to restore the Bretton wood system, That is the period between 1971 and 1973 with the Smithsonian Institute agreements. That fails because the United States does not care to restore the link between the dollar and gold. So what the Europeans do is that, to begin with, they restore a regional Breton, a European monetary system. Then, later on, to make sure that arrangement is stable, they replace fixed exchange rates with a central bank and a single currency, and that is the euro that you have today. | |||
Probably the most important feature in terms of the international global financial system is the lifting and capital controls. Universally during the 1970s and the 80s countries lift capital controls In advance countries. In the 90s the process is accomplished in most of the developing worlds with the notable exception of China. In China, there is still no free convertibility of the local currency, you have to get administrative agreement to exchange your Yuan for dollars euros or whatever still in 2019. | |||
The last feature of the global financial system is that just as the Bretton wood system breaks down and international financial flows grow exponentially at a much greater pace than the international economy or the international trading system. | |||
That comes with increased financial fragility across the globe. So you have a wave of financial crises because investors can shift money across jurisdictions. Very quickly also because of technological developments with the rise of ICT technologies and so on. | |||
So you have three waves of financial crises: the Latin American debt crisis of the 1980s, the East Asian crises of the late 1990s, And then the crises comes to the heart of the system, and that is the global financial crash after 2008 and the Eurozone crisis of the early 2010s. That's the result of the fact that global finance is no longer constrained by capital controls and so many holders can shift vast amounts of money across borders very quickly. | |||
=Annexes= | =Annexes= | ||
*Ministère de l’Économie, des Finances et de l’Industrie. [https://tresor.economie.gouv.fr/Articles/8d57c9da-3265-4cba-bbd3-38400c1216e2/files/28f8c9a8-7d26-46bc-8de6-db789430edf5 Learning from the first globalisation (1870-1914)]. TRÉSOR-ECONOMICS No. 93 – October 2011. | *Ministère de l’Économie, des Finances et de l’Industrie. [https://tresor.economie.gouv.fr/Articles/8d57c9da-3265-4cba-bbd3-38400c1216e2/files/28f8c9a8-7d26-46bc-8de6-db789430edf5 Learning from the first globalisation (1870-1914)]. TRÉSOR-ECONOMICS No. 93 – October 2011. | ||
*MOORE, Rickie. The Commonwealth as an instrument of globalization In: Le modèle économique anglo-saxon à l’épreuve de la globalisation [online]. Paris: Presses Sorbonne Nouvelle, 1996 (generated 18 mars 2020). Available on the Internet: <http://books.openedition.org/psn/5389>. ISBN: 9782878549010. | *MOORE, Rickie. The Commonwealth as an instrument of globalization In: Le modèle économique anglo-saxon à l’épreuve de la globalisation [online]. Paris: Presses Sorbonne Nouvelle, 1996 (generated 18 mars 2020). Available on the Internet: <http://books.openedition.org/psn/5389>. ISBN: 9782878549010. | ||
=References= | =References= |