AEM_230_lecture_6sep07_deGorter

AEM_230_lecture_6sep07_deGorter - Trade and Globalization...

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1 Trade and Globalization First age of globalization in the decades before WWI (similar to now) Because it was: under the aegis of the United Kingdom stimulated by technological advances The world enjoyed an era of: liberal trade free movement of people free movement of capital Real GDP per head rose 1.3 % per year from 1870 to1913 (unprecedented) Asia and Africa lagged (victims of colonialism)
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2 Globalization defined “the integration of economies through markets across frontiers” Trade a key part (goods, services, labor,….) Globalization is fragile depends on the support of states that provide security of property and person but states necessarily territorial (create loyalties steeped in humanity’s psyche) WWI began the ruin of the first globalization Now, a better liberal international order that extends opportunities to whole world
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4 Why was there a retreat? Combination of powerful forces reversed the tide: geopolitical insecurity—the rivalry among the great powers that culminated in two world wars; macroeconomic instability—above all the Great Depression; protectionist interests—particularly Smoot- Hawley tariff in the United States in 1930 collectivist ideas—nationalism, imperialism, socialism, and communism
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5 Globalization today driven by three forces… reduced costs of transportation and communications (creates trade and vice-versa) economic liberalization (the move to the market) incorporation of billions of people in world economy Asia’s rise
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6 Recent developments Late 1960s, success of a small # of outward- looking East Asian economies By the late 1970s, the failures of state planning and nationalization were also becoming evident This set the stage for the most dramatic period of economic liberalization ever: 4 billion additional people within the purview of the global market transformation of Mao’s China into the most internationally open large country in history the collapse of the Soviet empire (and reunification of Europe) the end of India’s “license raj”
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7 Recent developments (cont’d) These events alone transformed the economic lives of about 2.8 billion people But economic liberalization also swept across much of Latin America In all these cases, liberalization not just at the border (move to market internal and external) U.S an exception in the 19th century, when it combined high protection against imports with laissez-faire at home
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8 China: An Example of Liberalization Between 1992 and 2002, average tariff on Chinese imports fell from 40.6% to 6.4% A drop in import barriers comparable to rich countries from 1950s to now Since a tax on imports is also a tax on exports, China’s exports exploded Between 1999 and 2004, exports rose from $200 billion to almost $600 billion
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9 Globalization has brought: large economic gains to many parts of the world, above all to Asia (exploited labor-intensive manufactures)
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This note was uploaded on 03/04/2008 for the course ECON 2300 taught by Professor Lee during the Fall '07 term at Cornell.

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AEM_230_lecture_6sep07_deGorter - Trade and Globalization...

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