Global Interdependence Notes

Managing Economies

Monetary authorities control a country's money supply.
Monetary policy uses interest rates to manage the economy, addressing recessions and inflation.
Poor monetary policies in developing countries can result from prioritizing government financial interests over economic health.
Governments regulate the economy using price ceilings and floors which can cause market distortions.
Minimum wage is a price floor that can lead to job losses or increased consumer spending.

Traditional politics, based on patronage and personality, contribute to social and economic inequities.
True reforms require a shift to party programs, platforms, and dialogue with citizens.

Global economy involves economic interactions crossing international borders on a global scale.
Factors hastening globalization: cargo ships, technology, multinational corporations (MNCs).
The International Monetary Fund (IMF) fosters global monetary cooperation, facilitates trade, promotes employment, and reduces poverty.

Multinational corporations (MNCs) operate in multiple countries, establishing plants/offices where resources/labor are cheapest.
MNCs integrate the world as a single market, distributing goods/services across borders.
MNCs create jobs, increase productivity, and bring technology, but face management challenges and criticisms regarding economic exploitation and human rights.

Globalization promotes free trade, eliminating trade barriers like tariffs.
General Agreement on Tariffs and Trade (GATT) lowered tariffs and expanded free trade.
The World Trade Organization (WTO) oversees GATT, ensuring smooth and free trade among nations.
Global flows of goods, services, finances, and people drive economic growth.
Regional trade blocs: EU (tariff-free trade, common currency), NAFTA (eliminated tariffs between Canada, US, Mexico).
Nations are economically interdependent, relying on each other for goods/services.
Comparative advantage: nations produce goods/services at a lower cost and trade with others.

The 2007 "Great Recession" was caused by rising housing prices, lax lending, and risky mortgage-backed securities (MBS).
Government responses included Keynesian fiscal stimulus (spending, tax cuts).
The global economy stabilized by 2010, but remained weak, especially in some European countries.
The IMF, European Commission, and European Central Bank provided financial assistance to countries like Greece.

Global economic development impacts energy and resource use, causing political and environmental problems.
Reliance on oil creates political vulnerabilities for nations lacking domestic reserves.
OPEC's oil embargo in the 1970s caused economic decline and shifts in international relations.
The Persian Gulf War demonstrated global economic interdependence.

Burning fossil fuels causes pollution, acid rain, and global warming.
Chlorofluorocarbons (CFCs) deplete the ozone layer, increasing UV radiation and skin cancer rates.
Soil erosion and habitat destruction threaten wildlife populations and ecosystems.

Sustainable development (green growth) aims to balance economic growth with environmental preservation.
Achieving sustainable development requires efforts in both economic and political areas.

World Trade Organization (WTO): facilitate smooth and fair international trade
International Monetary Fund (IMF): Promote monetary cooperation and economic growth
World Bank Group: reduce poverty

For: promotes peace through trade, raises the standard of living, creates jobs in emerging countries, promotes investment in less developed countries, creates a sense of world community.
Against: creates conflict because of an inherently unfair system, benefits developed nations disproportionately, takes jobs from high-paid laborers in developed countries, benefits those who already have money, erodes local cultures.