Issue 3: ReviewSocial 10-1 Hilsden

To what extent does globalization contribute to sustainable prosperity for all people?

Chapter 9 – Foundations of Economic Globalization

Economic Globalization: “The spread of trade, transportation and communication systems around the world in the interests or promoting worldwide commerce.” Exploring Globalization, p. 383

Chapter 9 – The Economy Post-WWI

World War I: between the Allies (Britain, France & Russia)

and the Central Powers (Germany and Austria-Hungary)

destroys the landscape, infrastructure and economies of European nations – especially Germany.

Treaty of Versailles (1919) required Germany to pay reparation payments to cover the costs of rebuilding the nations affected by the war

JM. Keynes predicts that these harsh punishments would lead to resentment and another war. That is exactly what occurred.

Germany’s economy sours.

Chapter 9 – The Economy Post-WWI

Peace was laid out in the Treaty of Versailles in 1919.

It was supposed to ensure a lasting peace, but it instead created animosity and sowed the seeds of future conflict.

Germany was blamed for the entire war and forced to pay reparations to the victorious nations.

German colonies were divided up among the European powers.

Chapter 9 – The Economy Post-WWI

We have been discussing World War I and the ensuing social and economic upheaval of the following years.

This forced a great deal of change in many countries (Russian Revolution) and made the international system unstable.

These problems were exacerbated in 1929 by the collapse of the New York stock market and the economic recession that followed, known as the Great Depression

Chapter 9 – The Economy Post-WWI

The boom of the 1920s The years immediately following World

War I were a time of economic prosperity for countries whose industry was not decimated by war.

North America was the primary beneficiary of this.

Unemployment was very low and wages were very high.

Chapter 9 – The Economy Post-WWI

Black Tuesday On Tuesday, October 29, 1929 disaster struck. Investors at the New York Stock Exchange

began to realize that the prices of their stock were inflated (overestimated). Many began to sell their investments. As the day went on more and more people desperately tried to sell off everything at lower and lower prices, hoping to get something back before the prices hit zero.

Thousands of millionaires went completely broke in a single day.

Chapter 9 – The Economy Post-WWI

People had less money to spend; reduced demand for consumer goods; companies lay off workers; unemployment rises; demand for consumer goods falls more; production falls; more people thrown out of work.

Make sure you study The ‘Boom and Bust’ Cycle

Economic Agreements Post-WWII

World War II lingering resentment and economic

turmoil leads to the rise of Hitler and the second world war.

Following World War II, the UN is created to prevent another world war.

Leads to the Bretton Woods Conference (1944) World Bank – provides longer term loans to

boost development in impoverished nations IMF – provides emergency short term loans Later, GATT – establish trade rules

Influential Economists Post-WWII

JM. Keynes: “prime the pump”

Government intervention

Generate demand for goods/serves

Friedrich Hayek: Let the market fix itself Government “hands

off” Protect competition

Milton Friedman: Originally supported Keynes’ ideas, but later decided that

less gov’t control would lead to greater economic and social freedom. Friedman was undoubtedly influenced by the Cold War and concerns about socialism and communism which represent extreme government control.

Shift towards a market economy…

Hayek and Friedman’s ideas become popular in the 1970s. Britain and the US move towards a market economy individuals are free to make their own decisions with little intervention from the government and resources are the private property of individuals or companies.

For more info about ‘market economies’ see the note comparing the free market and mercantilism from issue two.

Shift towards a market economy…

Trade Liberalization: Removing restrictions on trade. Trade liberalization and free trade (a type of agreement between nations that liberalizes trade) is intended to benefit the businesses, workers and consumers in all nations. It creates jobs, uses (human) resources and reduces the cost of consumer goods. But does this always occur?

Trade Liberalization

WTO (World Trade Organization) NAFTA (North American Free Trade

Agreement) EU (European Union)

Each one of these agreements/organizations help to expand globalization by reducing or eliminating barriers to trade. This process is known as Trade Liberalization

Remember that after WWII it was widely believed that increased trade would lead to increased prosperity and therefore decreased conflict. The WTO, NAFTA, and the EU abide by this philosophy.

To what extent does globalization contribute to sustainable prosperity for all people?

Because of globalization, world economies are inextricably intertwined, and thus, our sustainable prosperity is affected by others.

Consider the effect of free trade on the economies of the global North and South.

Consider the effect of industrialization on the environment.

Consider how commonly used measures of prosperity (GDP, for instance) do not capture the full picture of what makes individuals prosperous.

So, what is the distinction between quality of life and standard of living?

Quality of life: the degree to which your basic needs are met (food, shelter, employment, recreation, time spent with family, spiritual freedom, human rights upheld, etc.) in order to live a life of decent quality. Personal satisfaction.

Standard of living: the quality and quantity of goods and services that are available to you and that you can afford.