1. Economic Globalization
Which economic ideas have most influenced the development of contemporary economic globalization?

3. Foundations of Economic Globalization
A number of events led to the development of economic globalization as we know it today.
The establishment of a new monetary system
Creation of the World Bank and the International Monetary Fund
The expansion of the free market economy into the former-bloc countries
The Impact of new technologies on the movement of money around the world

4. New Monetary System Bretton Woods Agreement
1944, 44 Allied countries met to discuss rebuilding the global economy after the war
The Agreement established a system of rules, institutions, and procedures for the postwar economy.
It effectively established a new International Monetary System
A global network of institutions to promote international trade and the regulation of currency (money) among Western countries

5. The Gold Standard
The 44 countries at the Bretton Woods conference agreed that each country would maintain a fixed exchange rate for its currency.
Fixed Exchange Rate
The value of a country’s currency is set by the government.
It would be based on the Gold Standard.
All printed money could be convertible to gold and could be cashed in for gold at anytime.
Money printed by the government must be backed up by a gold reserve.

6. Problems with the Gold Standard
A country can only print as much money as it has in gold. 1 billion in gold = 1 billion in currency.
In times of crisis the government needs money. It simply can print more.
This can cause the government to go into debt.
Too much debt the value of the currency drops the result is inflation
Inflation – Country ends up with more currency but each unit of currency buys less

7. Floating Exchange Rate
Due to high inflation in the United States, their government closed the gold window.
1976 – All the world’s major currencies had Floating Exchange Rates.
Value was no longer fixed by the government, but found its value on the world market.
Supply and Demand

8. Canadian $ Value
The Canadian dollar isn’t determined by the amount of gold we have.
Instead it lies in the wealth of the country and in what the dollar can buy here and in other parts of the world. (perception by the World Market!)
The value on the international market will always change.
The US $ has been the standard for all currencies since the end of the Second World War
Japan, European Union and the United States have the strongest economies and currencies.

9. World Bank The Bretton Woods Agreement created the World Bank
Agency of the United Nations
In practice it is independent and controlled by its 184 member countries
Provides loans to less developed countries
PLUS Developed Nations in potential CRISIS … ie: NEW ZEALAND in the 1980s-1990s)

10. Expansion of the Free Market Economy
Cold War was “fought” between 1946 and 1989.
between the communist and Western Powers
With communism’s collapse many of the former communist countries turned to the United States and embraced a Free Market Economy
Emphasis on Competition and “Freer” Trade.
Other countries followed suit, China, India.
China is the world’s foremost country for manufacturing
India offered cheap and efficient outsourcing through technology

11. Technology and Communication
Technology decentralized international money markets (Markets in which funds are loaned for a short period of time to businesses or governments)
The Electronic Herd
Through technology anyone can access world money markets
Through a personal computer people from home can access a Mutual Fund manager

13. International Monetary Fund (IMF)
Also came out of the Bretton Woods Agreement
Works with the World Bank
Tries to bring stability to international monetary affairs and to help expand trade
It monitors exchange rates and provides short-term financial assistance.
Agency of the UN
Funded through quotas by its member countries.

14. 14

16. People of Influence British economist
John Maynard Keynes
British economist
Developed theories that called for a large role for government in the economy
Direct gov’t would increase total spending and prevent or lift the economy out of a recession

17. People of Influence Opposite view of Keynes
Friedrich Hayek
Opposite view of Keynes
When governments try to plan or control societies, those societies are doomed to failure.
Based his theories on Totalitarian regimes, ex, Soviet Union and Nazi Germany

18. Free Trade and Economic Globalization
What is Free Trade?
As countries become more interdependent they need to rely on free trade agreements
How has Canada been involved in free trade?

19. General Agreement on Tariffs and Trade
GATT was established in 1947 as an agency of the UN. It had 4 main principles
Conduct trade in a non-discriminatory manner
Treating imported goods like domestic ones
Protecting domestic industries through Tariffs
A membership requires the country to list all tariffs and trade restrictions with other countries

20. Softwood Lumber

21. Free Trade with the US 1989 – The Free Trade Agreement (FTA)
Took the majority of the tariffs off
Reasons for Canada
Wanted access to a large market
Reasons for the US
Wanted access to our resources
The agreement excluded water

22. North American Free Trade Agreement
1994 – FTA extended to Mexico
NAFTA created the largest free trade area in the world
Before NAFTA there wasn’t a lot of trade between Mexico and Canada, after NAFTA Mexico increased its trade to Canada by 200% and Canada’s trade increase by 25%

23. View points on free trade
Why would some people favour free trade and some oppose it?
Page 219 in your text book. Read the voices section.