Unit 6: Political and Economic Changes and Development

Globalization

the increased interconnectedness of people, states, and economies

• includes the flow of economic activity, technology, and communications around the world

• most have moved towards a capitalist trading country 

• economies are interconnected

• results in the sharing of cultural symbols, political ideas, and social movements across countries

• TECHNOLOGY (driving force)

Containerization

a system of intermodal freight transport using intermodal containers (also called shipping containers) A shipping system that uses large, standardized containers to easily move goods between ships, trucks, and trains.

• allowed more rapid efficient shipment of goods

Just-in-time Manufacturing (JIT)

a production model in which items are created to meet demand, not created in surplus or in advance of need. Producing goods only when needed to reduce storage costs and waste

• allowed more rapid efficient shipment of goods

Foreign Direct Investment (key feature of globalization)

investment from abroad in economic activity in another country (building a factory is an ex). When a company or individual from one country invests in a business in another country.

• inflow: the value of an inward direct investment made by non-resident investors in the reporting economy

• outflow: are the value of outward direct investment made by the residents of the reporting economy to external economies

Trade (key feature of globalization)

the import and export of goods and services

International Capital Flow (key feature of globalization)

the movement of money across national borders

• see the transfer of financial assets, cash, stocks, or bonds, across international borders

• Capital=money

Multinational Corporations (MNCs)

companies that have facilities or assets in more than one country. Companies that operate in multiple countries (like Apple or Toyota)

• can be headquartered in one country but operate production facilities in another country due to lower labor costs and less government regulation

• have multiple offices throughout the world to take advantage of a large pool of talented people with specialized knowledge

• food brands such as McDonalds, Starbucks and KFC are examples

• can increase capital growth and provide jobs

• spend money on infrastructure such as roads, bridges, and canals benefitting local communities

• most profits made goes abroad (back to the home country)

• working conditions suck (sweatshops)

Rentier States

states that rely on the export of oil or from the leasing of resources to foreign entities as a significant sources of government revenue. Countries that get most of their income from selling natural resources to other nations.

Resource Curse

governments are tempted to over-rely on this singular resource for revenue and fail to diversify their economy. When countries with lots of natural resources still struggle economically or politically due to corruption or poor management.

• abundances of a valuable resource can be this

International Organizations

a body established by a treaty or other agreement among countries. Groups made up of multiple countries that work together on shared goals (like the UN or IMF).

ex:

• World Bank (supports economic-liberalization policies)

• International Monetary Fund (IMF) (supports economic-liberalization policies)

• membership idea (give up some of their sovereignty in exchange for the benefits of membership)

Economic Liberalization

supports the free market and reduces trade barriers. Reducing government control over the economy to encourage free markets and competition.

• lessens the role that government plays in the economy

Import Substitution Industrialization (ISI)

usage of high tariffs and providing incentives to encourage the growth of domestic manufacturing. An economic strategy that encourages producing goods domestically instead of importing them.

• Mexico (once upon a time)

• is a protectionist economic policy

• sometimes used before economic liberalization

Protectionist Economic Policy

designed to shelter domestic industry from competition and reduce foreign influence on sectors in the economy. Policies (like tariffs or quotas) that protect domestic industries from foreign competition.

• ISI is an example

• key industries in energy and steel are nationalized by the government 

Structural Adjustment Programs

the privatization of state-owned companies, a reduction of tariffs and reducing subsidies for domestic industries. Economic reforms required by the IMF or World Bank in exchange for loans, usually involving cuts to government spending.

Austerity Measures

a way to secure debt relief from the IMF and World Bank (usually for the poorer countries)

• can result in cuts to programs aimed at “leveling the economic playing field” for disadvantages citizens and tend to negatively and disproportionately impact the poor

• trying to raise economic equality

Supranational Organizations

representatives of members countries have some say in governing of the institution and give up sovereignty over issues that affect the organization as a whole

• agree to abide by the rules of the organization, even when doing so means changing domestic policies

• raise fundamental questions about state sovereignty over globalization and economic policy

• EX: ECOWAS, World Trade Organization, EU

Economic Community of West Africa (ECOWAS)

This is an example of a supranational organizations found in West Africa where Nigeria is a member. A regional group that promotes trade and cooperation among West African countries.

European Union (EU)

This is an example of a supranational organization holding 27 European countries that agreed to share sovereignty in specific areas creating a common market for free movement of goods, services, capital, and people, and developing common policies for economic, social, and security matters

• A political and economic union of European countries that cooperate on trade, laws, and policies.

Treaty of Rome

created the Economic Community (EC) for more economic integration in the original “inner 6”

• this is the foundation of the EU

Maastricht Treaty

created the Euro, a common currency controlled by a new European Central Bank (ECB) located in Frankfurt, Germany

Schengen Agreement

provides that EU citizens can freely travel between member states

Transnational Activism

a collective of groups that work across national borders to promote or resist change. Cooperation among activists across countries to promote global causes (like climate change or human rights).

• can include social movements, advocacy, networks, and non-governmental organizations

• work to challenge the sovereignty of the nation-state system and may target national governments, international institution, or private firms/corporations

Nongovernmental Organizations (NGOs)

not-for-profit organizations outside of government that usually focuses on social or political issues. Private, nonprofit groups that work on social or political issues (like Amnesty International)

Inflation

a general increase in the prices of goods and services in an economy

Privatization

the transfer of government-owned assets or services to the private sector

National Healthcare System

a type of healthcare system that is government financed and managed system

National Healthcare Insurance

the government requires citizens to purchase health insurance

Market-based Private Insurance

citizens gain insurances through their employment and medical care is provided by private clinics and hospitals