global economy in historical context early patterns of global finance and trade, largely supported...

Global Economy in Historical Context

• Early Patterns of Global Finance and Trade, largely supported state building, war making, and colonization.– 14th C.-Florentine Merchant Banks (Peruzzi Company)

• Financed Trade with Asia• “Super company”: also produced cloth transnationally

– 16th -18th C.-• Antwerp, Belgium financial center• Bank of England financed Britain's war with France• British and Dutch East India Companies• Hudson Bay Company

– 18th C.-Amsterdam and London are global cities

Global Economy in Historical Context: 1850-WWII

• MNCs establish colonial operations– Extractive and Primary Industries;

• Mining, Logging• Agriculture: Plantations and Ranches; Fruit and Tea • Oil companies emerge

– MNCs export textiles and decimate indigenous industries

• Industrial Age: 1870-1914– Classical Gold Standard Period: Skeptics argue that this

was the only truly globalized era.– Telegraph drastically improves communication

Global Economy in Historical Context: Interwar Years

• Interwar (WWI and WWII) years: Global Monetary Disorder– Collapse of the Gold Standard– German Hyperinflation– Domestic investments predominate

• Trade protectionism and cartels dominate remaining international business

• Soviet Union withdraws from int’l market

Global Economy: Bretton Woods

• 1944 Meeting in Bretton Woods, New Hampshire• Marshall Plan• IMF: short term loans, also administered global

financial order– Compromise between free trade and social democrats

– Discrepancies between European and developing world

• World Bank: Infrastructural Development• GATT: General Agreement on Tariffs and Trade

Global Economy: Development 1950’s-1960’s

• Decolonization: finished by early 1960’s: however global capital is afraid of conflict and turmoil

• Marshall plan is completed, IMF and World Bank turn to new independent states.

• Development = “Progress, modernization, infrastructure”– embedded in Cold War conflicts; used as geopolitical

strategy

Global Economy: Big Changes in the 1970’s

• 1971: Nixon delinks dollar from gold standard floating exchange rates

• OPEC cartel quadruples oil prices”petrodollars”

• US/Euro Banks have $50 billion to loan• Developing countries receive this boon

in the forms of government and private loans

Global Economy: Neoliberal 1980’s

• Early 1980’s-Debt crisis begins: world wide interest rates soar/ global recession/fall in commodity prices

• IMF imposes Structural Adjustment Policies (SAPs) to justify additional loans.

• “Green Revolution,” Industrial Agriculture and commodity “dumping” drive small farmers out of business

• Rural-Urban Migration in Developing World• IMF riots• 1989-Fall of USSR and end of Cold WarMarket

economy is the only game in town

Global Economy in the 1990’s

• Structural Adjustment continues and critique intensifies

• GATTWTO (1995): “Free” Trade and Financial Flows)

• Global Assembly Line-– MNC’s– Export Processing Zones

• Industrial/Export Agriculture• Internal and External Migration continues• Rise of the Mega city and the Informal Economy• Rise of Transnational Communities

The Global Assembly Line

VW’s Global Assembly Line

1. U.S. 2. Japan 3. Germany

23. Turkey 24. General

Motors 28. Ford Motors 29. Norway 30. Mitsui & Co. 33. Mitsubishi 34. Royal Dutch

Shell

35. Itochu 36. Saudi Arabia 37. Exxon 38. Wal-mart 39. Greece 47. Israel 48. General

Electric 57. Ireland

Country v. Corporate Economic Size: World Ranks-GDP and Sales

The Rise of Multinationals

• Overheads

Differences in Wage Rates

Average wages of workers who make Suburbans

U.S. $18.96/hr. Mexico $1.54/hr.

# of Suburbans producedMexico 80,400U.S. 83,000

Comparative Wage Rates: US/Mexico

The Cost of a Shoe

• Early 1960s - Oregon• 1967 – Japan• 1972 - S. Korea and Taiwan• 1986 – Indonesia, China and

Thailand• 1994 - Vietnam

Globe-trotting Nike

Industrial relocation: non-labor factors

• Government incentives and regulations– Provision of infrastructure (Export Processing

Zones)– Reduced cost of land, water, electricity– Tax breaks and tariff reductions– Lower environmental pollution standards– Lower health and safety standards

Global Growth in EPZs

Region(No. of EPZs)

Key Countries (No. of EPZs)

Latin America and the Caribbean (240)         Central America and Mexico (148)         Caribbean (51)         South America (41)

Mexico (107) Honduras (15)Costa Rica (9) Dominican Republic (35)Colombia (11) Brazil (8)

Europe and NIS (81) Slovenia (8) Bulgaria (8)

Asia and Near East (264) Turkey (11) Philippines (35) Indonesia (26) Jordan (7) China (124)

Africa (47) Kenya (14) Egypt (6)

Oceania (2) Fiji (1)

Total (633)

61% MFG - 77% EXPORTS

Map of world trade interconnectedness

Exports -1982 36 %1994 50 %

Imports –1982 31 %

1994 42 %

Intra-Firm Transfers -U.S. Corporations Data

Global Production: Social Issues

Health and Safety of Workers

• Coercive Working Conditions• Anti Union Environment• Government Involvement in Coercion and

Lack of Participation/Democracy in Decisionmaking

• Child Labor http://www.ilo.org/public/english/standards/decl/intro/ilo_movie/index.htm