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 Trade builds Globalization  The EIC existed because of the demand of things like tea.

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Presentation on theme: " Trade builds Globalization  The EIC existed because of the demand of things like tea."— Presentation transcript:

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2  Trade builds Globalization  The EIC existed because of the demand of things like tea

3  The goal of all this was a favorable balance of trade..  …exporting more than was imported

4  However, as countries try to do this they risk a worldwide reduction in trade volume.  This equals depression and a loss of productivity

5  Before 1945 much trade was done in regional or exclusive blocs

6  The British had the Imperial Preference system  Commonwealth Countries were given better deals

7  Japan did this with East Asia  (Their WWII Empire was called the “The Greater East Asia Co-Prosperity Sphere”)

8  The US used the Monroe Doctrine to obtain favorable trade with Latin and South America

9  After 1945 a major goal of the US, and FDR, was a de-construction of this and a return to truly free trade

10  The beginning of a fully negotiated monetary and trading regime.  Designed to prevent a repeat of post WWI collapse of the international economy

11  Two key words:  Regulated market  Currency control

12  The US and the UK studied the problems that had led to the Great Depression  Wild fluctuations in exchange rates  Sudden currency devaluation

13  The US worried that there would be no strong market for US goods and services after the war  Enter the Marshall Plan

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15  The Marshall Plan was designed to pump recovery monies into Europe.  In 2008 terms, almost 300 billion was given in both loans and gifts to Europe.

16  It became a cornerstone of Cold War policy as well.  Money was offered to Eastern Europe and the USSR  It was declined, of course.

17  The Soviets tried a similar program but it failed to stimulate as much as the massive US influx of cash did.

18  The Marshall plan was a cornerstone of Military strategy as well.  A revitalized Germany was an integral part of the Marshall Plan  And a major fear of the Soviets

19  In the next two decades, Europe surpassed pre-war agricultural production and industrial capacity increased by almost 35 percent.

20  Noam Chomsky  The amount of American dollars given to France and the Netherlands equaled the funds these countries used to finance their military forces in southeast Asia

21  The Marshall plan played a large role in setting the stage for global economic management on a scale unprecedented.  Bretton Woods built a regime that included…

22  To manage world trade, several organizations were set up.  GATT  IMF  WTO

23  Major tasks:  Reduction of trade and tariff barriers  Was superseded in 1995 by…

24  Further liberalization of trading regimes  Poor states possess a veto  Economists believe that big states may reform blocs to control their trade better

25  The IMF was designed to regulate a monetary regime  Competitive devaluations were forbidden  (This is where a state makes itself more attractive for international markets)

26  Designed to maintain international liquidity  Provides cash inflow to states with insufficient cash flows.  Do this by making short term loans

27  If you take a loan, the IMF will impose “pre conditionality”  These are essentially economic performance targets that need to be in place for an IMF loan

28  Structural Adjustment Program  Basically, the IMF wants a troubled government to sell off anything it can to help balance books.  In the past these sales were at highly discounted prices to Western States.

29  These are implemented by the IMF and do things like.. ..raise taxes ..lower corporate taxes  Budget restrictions

30  Argentina- Budget restrictions helped to implode the ability to finance any public good.  Kenya-Opened up the Central bank to corruption by easing currency restrictions.

31  Designed as a multi-lateral capital investment corporation after 1945.  The purpose was to re-build war torn economies

32  Later it switched from lending money to 3 rd world countries to…  …integrating them more effectively in an open and global political enviroment.

33  Throughout the 70s and 80s, many 3 rd world states borrowed heavily and were, consequently, left in debt.  The capital gains expected never materialized; the interest payments took too much on already stretched economies.


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