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International Political Economy

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Political Science
John Haines

POL208: Globalization and Economics January 18, 2011 2008 financial crisis after housing bubble burst roughly $3 trillion exchanges on world market. The financial meltdown started in Minnesota housing market demonstrates how interconnected global financial flows are. -System of cheap mortgages so value of house didnt actually matter, borrowing and the only hope of reimbursement was in the housing market, where it was thought to be steadily rising. When US housing market plummetedso did US. -Banks are no longer able to borrow money, small businesses cannot borrow money from banks. Bad times. -South lacked equity; entire banking sector burst in Iceland. World trade flows decreased. OECD definition: globalization is a process where markets and production in different countries are becoming increasingly interdependent due to the dynamics of trade in goods and services, flows of capital and technology. On top of this, the increased international specialization and increased transnational production of companies is another crucial element to globalization. American cars, 85% production is allocated to other parts of world. Local production of food no longer meaningful -Poverty more so a result of the lack of financial institutions (not due to financial system) -The financial system magnifies what human beings are i.e. humans are social animals with bounded rationality -State economic policies may be dwarfed by the size of global international flows of capital -Emphasis on the need for international corporations; key consequence of 2008 financial crisis has demonstrated the obsolescence of the G7 group and need for a G20 institution Financial Institutions: Netherlands 1602 first modern corporation; United East India Company its significance, for the first time they offered stocks of limited liability, a crucial development. Government sponsored enterprise with a monopoly of all Dutch trade. This system of shares (limited liability stocks) allowed the company to raise an enormous amount of revenue, developing the first stock
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