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Unformatted text preview: Lecture 11: International and finance and currencies Definition Todays lecture and next Wednesdays are about international finance , the passing of money internationally. The topic for today will be international investments and loans, and next week well discuss different national currencies and what happens when the values of the different currencies change in relation to each other. Need for economic development I want to begin by putting international finance in the context of economic development generally. This has come up before but the point is so essential that it bears repeating. Ive discussed the need for economic development in terms of Engels Law, of avoiding impoverishment by switching from an all-primary products economic to a primary-secondary mix. This is all true enough but something even more fundamental is involved. Economic development is absolutely essential because the coming of the modern world creates demographic pressures that inevitably break down the traditional ways of life. Specifically, the knowledge of how to cut the death rate leads to a large gap between falling death rates and the still-high birth rates characteristic of traditional society. As this gap opens, the population grows at hitherto-unprecedented rates, a growth which creates a short-term need to rapidly increase food production, and an even more fundamental long-term need to bring the birth rate down too, thus closing the gap between birth and death, and so slowing down and eventually stopping population growth. If this is been done, the fears of forty years ago about out-of-control population growth leading to massive starvation would come true. How is this avoided? Largely by economic development, by transitioning from an all-rural economy to a mixed urban-rural economy. In the traditional countryside, a womans economic role is largely restricted to producing child laborers; in the city, while children are an economic burden, the woman can be a wage-earner. Thus, the coming of the modern era, which occurred in most of the developing world in the years after 1950, creates a demographic problem, very rapid population growth, that only completing the transition to modernity can solve. This is done in part by changing attitudes about proper or permissible gender roles, specifically about the desirability of women performing other roles besides child-bearing, and also by creating opportunities for women that did not formerly exist. Opportunity cost refers to the opportunities foregone by making a certain choice: if I buy house A, I can no longer buy house B. If I major in microbiology, I cant major in geography. Now, in an economy where no cash jobs for women exist, the opportunity cost of a woman staying home and having children is zero; conversely, as the sphere of economic opportunities expands, the opportunity cost of the at-home lifestyle increases too; or, to put it the other way round, economic incentives to limit family size increase.round, economic incentives to limit family size increase....
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This note was uploaded on 07/08/2008 for the course GEOG 20 taught by Professor Acker during the Spring '08 term at University of California, Berkeley.
- Spring '08