Poli 260 - Week 12 (Lecture)

Poli 260 - Week 12 (Lecture) - Poli 260 Week 12: Return to...

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Poli 260 Week 12: Return to Globalization What is the ‘return to globalization’? Why did this happen? (Structural adjustment) Explore implications (onion – i.e. war/IO’s etc, for state power) What is the ‘return to globalization’? - What is globalization? o Interaction : e.g. trade/travel o Interconnection : e.g. food products contain ingredients from different places Level of interconnection, even in ordinary (consumer) goods, has increased a lot Goods may be sources from many states, and not necessarily neighboring nations o Interdependence : e.g. Chinese economy grows because of US consumption Some countries do a lot of exporting, and that’s how they grow their domestic economy When did the return start? Two things, different dates - End of Cold War (for Soviet Bloc): o Date: after 1989/1991 o Soviet satellites were forced back into the global economy as the Soviet Union could no longer support them o Fall of USSR meant socialist model was unviable – didn’t produce goods of a quality good enough for export o USSR could no longer help DC’s, who had to reform Before, were subsidized by Soviet Union and could rely on getting cheap goods for the Soviet Union - End of ISI (for developing countries): o Date: after 1986 o State is the problem in the development agenda – need an opening of markets (not state-led development) need more privatization within the state and open economy to competition from the outside o Focused on opening up financial markets and these economies o Why did these countries accept IMF programs? Debt problems/lack of growth meant that DC’s moved away form ISI and towards trade o ISI had a lot of inefficiencies – rates of growth weren’t good enough for these DC’s; because the goods produced by these economies were not up with the standards of other countries, their exports suffered Because they didn’t export much, they were constantly importing more than exporting (negative net exports) – paid for this with debt How IMF debt restructuring works (Jamaica) - Jamaica is in debt and goes to IMF for ‘bridge loan’ o When people have a shortfall of money, they have a liquidity problem and a solvency problem Liquidity: a problem of cash flow in the short term , but over time you’ll be able to pay debt off Solvency: lose your job and no one will employ you; will never be able to pay off debt (long term ) o Bridge loan: money to solve your liquidity problem - IMF says OK, if following conditions are met: o Cut government spending Rationale: reduce size of deficit (bring down interest rate in the future)/control inflation o Privatize government services Raise money to pay for debts Rationale: raise money for government coffers o Open markets Financial markets Rationale: attract foreign investment – your economy is having problems, you have a general shortfall of investments, your people are broke, so you must attract money from outside; only way is to reduce trade barriers you have on investment
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Poli 260 - Week 12 (Lecture) - Poli 260 Week 12: Return to...

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