Economic Power, Developing World, and Trade - A Short Introduction §

(F) Day of the week: Saturday Class: IS203 Created Time: January 18, 2020 4:17 PM Database: Class Notes Database Date: January 18, 2020 4:17 PM Days Till Date: Passed Last Edited Time: June 9, 2021 10:42 AM Type: Lecture

I. Overview §

• Economic strength is both an end and a means

  Economic strength is the goal of countries, but it also helps to get power

Importance of Economic Strength lessened in the Cold War

II. Reemergance of Economics §

1990s Economics became important again

• US no longer economically dominanat in global
  • Global economy becomes more Pluralistic
• Europe and Japan and NICs expands and becomes more influential

III. Theoretical Perspective §

Perspectives of international trade

1. Internal Economic strength
   • Knowing whether international trade is good or bad for you
   • Using national strength to pursue international market
2. International Trade
   • Find benefits from “comparative advantage”
   • Mostly work for strong demestic market
3. International Monetary Policy

   • Floating Exchange Rates

     make sure that country’s balance of payments balance out

     • Inflation makes exporting profitable
     • Four Problems
       • Takes long time to happen
       • Need complete removal of trade barriers
       • Encourage currency speculation: makes people predict the fall of money values
       • Discourage investment: instability

   • Fixed Exchange Rates

4. Three Global Economic Subsystems

• among developed worlds
• among developing worlds
• between developed and developing worlds: most controversial

Three Perspectives §

• Liberal School: trade is always “win-win” for growth

• Marxist School: exploitation between rich and poor states…, cheap raw material ⇒ expensive products

  Countries tend to turn to isolationism and extreme protectionism

• Structuralist School: shares Marxism opinion. (export oriented)

  • Protect Infant Industries: export developed industries and wait for infant industries
  • Invest in new technologies: don’t wait for technology transfer
  • Invest in strategic industries: fundamental industries that is the most useful in society and to develop other industries

IV. Major international Financial and economic institution §

• The World Bank

  • Originally the International Bank for Reconstruction and development 1944:
  • to help destroyed economy in WWII to rebuild
  • Later for associated with UN

• The international monetary funds

  • Over see system of fixed exchange rate
  • Make sure exchange rate is stable
  • Provide short term loans

• The general agreement on tariffs and trade

  • Promote free trade, multilateral negotiation for remove of trade barriers
  • Succeeded by WTO 1995

• The world trade organization

V. Developing World §

Similarities of developing World

• Colonial Past

  • Exploitative colonial powers
  • Hostile to West

• Sharply divided classes

  • Large wage and influence Gap
  • Uneducated labor force

• Unfavorable for infant industry

  Hard to industrialize: stronger competitors

• Turn to single product industry

  Specialize is the only way to profit from trade

• Energy Dependant

  High price for oil

• Capital Mobility

  Unstable capital inflow

• Legitimacy of money

  Poor country needs to exchange their money to buy foreign goods

• Debt and interest acclimation

  Borrowed money makes debt that put more pressure on the finance

VI. Developing World’s View on International Economics §

a. Newly Industrialized Countries §

• Who?

  Malaysia, Thailand, Taiwan, South Korea, Singapore

Fast Economic growth initially

b. Middle Eastern Oil Producing States §

Oil, Islam, and Israel

c. Microstates §

37 countries

Do relations with bigger countries

Due to many numbers they are jnfluencial in UNGA

d. China’s Outlook §