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Global Liberal Order

System of international institutions, alliances, and trade agreements created after 1945 to promote global cooperation and economic integration

Chronology of Globalization

1945-1989 liberal era (moderate globalization); 1990-2008 neoliberal era (rapid globalization); 2008-present post-liberal era (challenges to globalization)

Kenworthy (US vs other rich countries)

The US has higher inequality, lower taxes, and less government spending compared to other wealthy countries

State (Government)

The central authority that regulates the economy and provides public goods

Market

A decentralized system where buyers and sellers exchange goods and services

Market Benefits

Markets efficiently allocate resources using prices and incentives to guide production and consumption

Market Failure

When markets fail to produce efficient or fair outcomes (e.g., pollution, monopolies)

State Fixing Market Failure

Governments can regulate, tax, or provide goods to correct market failures

Supercapitalism

Extreme free-market capitalism with high competition and less regulation (Reich)

Democratic Capitalism

A more regulated form of capitalism (1950s-1970s) with stronger government role

Causes of Supercapitalism

New technology, global supply chains, deregulation, increased competition

Winners of Supercapitalism

Consumers (cheap goods) and investors (higher profits)

Losers of Supercapitalism

Workers (lower wages, job insecurity) and citizens (weaker government protections)

Amartya Sen Globalization Argument

Globalization should be judged by fairness, especially its impact on the poor

John Meynard Keynes and Keynesian Economics

Government should regulate the economy to prevent crises and maintain stability

argued that governments should actively manage the economy using spending and regulation to prevent crises like the Great Depression. His ideas influenced post-WWII policies, including the creation of global institutions (IMF, World Bank) and the adoption of a mixed economy with strong government involvement, leading to stable growth and moderate globalization.

Friedrich Hayek Free Market Theory

Markets should operate with minimal government intervention

Gross Domestic Product (GDP)

Total value of goods and services produced in a country

GDP per Capita

GDP divided by population; measures average wealth

Economic Growth

Increase in GDP over time

Recession

Short-term economic decline

Depression

Long-term severe economic decline

Sources of Growth

Technology (innovation), education (skills), and investment (capital)

Shift to Free Market Capitalism

Since the 1980s, countries have moved toward deregulation and free markets

Silk Road

Early trade network connecting Asia, Europe, and the Middle East

Colonialism

European expansion and exploitation of resources; early form of globalization

Globalization Definition

Economic activity organized across countries rather than within one nation

Neoliberalism

Free-market ideology emphasizing deregulation, privatization, and global trade

Washington Consensus

Set of neoliberal policies promoting globalization and reduced government control

Trade Liberalization

Reduction of tariffs and barriers to trade

Financial Liberalization

Free movement of money across borders

Foreign Direct Investment (FDI)

Investment in physical assets like factories in another country

Asian Miracle

Rapid economic growth in Asian countries using mixed policies (not pure neoliberalism)

Structural Adjustment

IMF/World Bank policies forcing poor countries to adopt neoliberal reforms

Trade

Exchange of goods and services across countries

Production

Process of making goods and services

Global Supply Chain

Production process spread across multiple countries

Capital Flows

Movement of money between countries for investment

Multinational Corporations (MNCs)

Firms operating in multiple countries

Labor Globalization

Movement of workers across borders (limited compared to capital)

Outsourcing

Hiring another company to perform tasks

Offshoring

Moving jobs or production to another country

Limits of Globalization

Economic, social, and political barriers prevent full globalization

Difficult-to-Outsource Jobs

Jobs requiring physical presence (skilled trades like HVAC + plumbing), local knowledge (attorneys, senior management, public policy work) or face-to-face interaction (surgeons, therapists, early childhood educators)

Economies of Agglomeration

Benefits firms gain by clustering together geographically

Apple Production in China

Driven by skilled labor, supply chains, not just low wages

Global Economy Requirements

Cheap transport/communication, financial system for currency exchange, and countries willing to enable trade

David Harvey Neoliberalism

View that neoliberalism expands markets and reduces state power; critical perspective

Tariff

Tax on imports

Quota

Limit on quantity of imports

Non-Tariff Barriers

Regulations that indirectly restrict trade

Agricultural Subsidies

Government support for farmers that can hurt poorer countries

Free Trade Agreement

Agreement between countries to reduce trade barriers

WTO (World Trade Organization)

Global organization that regulates trade agreements

NAFTA

Trade agreement between US, Canada, and Mexico reducing trade barriers

Brexit

UK leaving the European Union; example of limiting globalization

Trump Tariffs

Increased tariffs to protect US industries; challenge to globalization

Comparative Advantage

Countries specialize in producing goods they are most efficient at

Rodrik Trade Argument

Trade has benefits but causes disruption and inequality

China Shock

Rapid increase in Chinese imports after joining WTO, harming US manufacturing

China Shock Effects

China gains growth and poverty reduction; US loses manufacturing jobs

Autor's Advice

Government should support workers through training and social programs

Multinational Corporation Benefits

Economic growth, jobs, and global production efficiency

Multinational Corporation Problems

Lack of accountability, environmental harm, large economic power

Commodity Trap

Countries stuck producing low-value goods

Industrial Policy

Government support for developing industries

Hyperglobalization

Extreme globalization limiting national control

Sovereignty

A country's ability to govern itself independently

Global Governance

International cooperation to regulate global issues

European Union (EU)

Group of countries coordinating economic policy

Rodrik's Recommendation

Moderate globalization is better than extreme free markets

Inequality Differences in income/wealth between individuals or groups

Gini Coefficient

Measure of inequality (0 = equal, 1 = unequal)

Causes of Inequality

Education differences, globalization, technology, policy

Benefits of Inequality

Incentives for innovation and productivity

Problems of Inequality

Social instability, unfairness, reduced opportunity

US Inequality Trend

Increasing since the 1980s due to policy and economic changes

Prices as Signals

Prices communicate information about supply and demand, helping markets coordinate decisions

Incentives

Rewards or penalties that influence economic behavior and decision-making

Containerized Shipping

Standardized shipping containers that reduced transport costs and enabled global trade

Limited Liability

Legal protection that limits owners' financial responsibility for a company's debts

Smith/Ricardo Free Trade Argument

Trade benefits all countries when each specializes based on comparative advantage

Rodrik's Trilemma

Countries cannot simultaneously achieve hyperglobalization, democracy, and national sovereignty

Democratic National Governance

Rodrik's idea that governments should regulate markets rather than rely on global governance

Poor US vs Rich Poor Country Comparison

Used to compare inequality within countries versus between countries globally

Cammack Inequality Argument

Inequality is shaped by policy, labor markets, education, globalization, and political decisions

Post-Liberal Era

The period after 2008 where globalization faces backlash from nationalism, tariffs, and political shifts

Sen reading: Is globalization Westernization?

No; globalization is not purely Western and has historically involved contributions from many regions such as China, India, and the Middle East.

Sen reading: Main argument

Globalization itself is not the problem; the issue is the unequal distribution of its benefits.

Sen reading: How to judge globalization

Globalization should be evaluated based on fairness, specifically whether its benefits are shared equitably.

Sen reading: Why "poor are better off" is insufficient

Even if the poor gain something, it does not mean the distribution of benefits is fair.

Sen reading: Conclusion

Globalization should be maintained but reformed through institutions to ensure fair distribution of benefits.

Commanding Heights: Main theme

The battle between government control and free markets over who should run the economy ("commanding heights")

Commanding Heights: Keynes vs Hayek

Keynes supported government intervention; Hayek supported free markets with minimal government

Commanding Heights: Keynesian era

Keynesian policies dominated from the 1930s-1970s with strong government regulation and spending

Commanding Heights: Reason for Keynesian dominance

Government intervention helped end the Great Depression and stabilize economies after WWII

Commanding Heights: Problem in 1970s

Stagflation (high inflation + unemployment) showed limits of Keynesian policies

Commanding Heights: Shift to free markets

In the 1970s-1980s, countries moved toward deregulation, privatization, and free markets

Commanding Heights: Role of Thatcher

Margaret Thatcher reduced government control, privatized industries, and promoted free markets

Commanding Heights: Role of Reagan

Ronald Reagan promoted tax cuts, deregulation, and limited government intervention

Commanding Heights: Neoliberalism

Rise of free-market capitalism emphasizing deregulation, competition, and limited government