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Chapter 3 GS101

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Global Studies
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Ali Zaidi

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GS101 Chapter 3-The Economic Dimension of Globalization Week 3 -Technological progress of the magnitude seen in the last three decades is a good indicator for the occurrence of profound social transformations centred on the market -Changes in the way in which people undertake economic production and organize the exchange of commodities represent one obvious aspect of the great transformation of this age -Economic globalization refers to the intensification and stretching of economic interrelations across the globe -Markets have extended their reach around the world, in the process creating new linkages among national economies The Emergence of the Global Economic Order -Contemporary economic globalization can be traced back to the gradual emergence of a new international economic order assembled at an economic conference towards the end of WWII -U.S.A. and Great Britain reversed their economic policies of the interwar period, which introduced high tariffs on imported goods to protect the national economy. -They created a more stable money exchange system in which each country’s currency was pegged to the U.S. -States were allowed to set their own political and economic agendas -The economic conference led to the establishment of ‘The International Monetary Fund’ to administer the international monetary system, ‘The International Bank for Reconstruction and Development’ now known as the ‘World Bank’ designed to provide loans for Europe’s post-war reconstruction, and ‘The Global Agreement on Tariffs and Trade’ as a global trade organization charged with fashioning and enforcing multilateral trade agreements -The conference also established what is called the ‘golden age of controlled capitalism’ Governments controlled money flows into and out of their countries and high taxation on wealthy individuals and profitable corporations led to the expansion of the welfare state -Rising wages and increased social services in the wealthy countries offered workers entry into the ‘middle class’ -President Richard Nixon abandoned the gold-based fixed rate system in 1971 and following that decision was high inflation, low economic growth, high unemployment, energy crises and deficits. -In 1980 Ronald Reagan led the neoliberal revolution against Keynesianism, which linked the notion of globalization to the ‘liberation’ of economies around the world -The neoliberal economic order led to the collapse of communism in Russia and Europe in 1989 -Since then, the 3 most significant developments related to economic globalization have been the internationalization of trade and finance, the increasing power of transnational corporations, and the enhanced role of international economic institutions like the IMF, the World Bank, and the WTO The Internationalization of Trade and Finance -In the last few years, the public debate over the alleged benefits and drawbacks of free trade reached a feverish pitch as wealthy Northern countries have increased their efforts to establish a single global market through regional and international trade-liberalization agreements such as NAFTA -Free trade will enhance consumer choice, increase global wealth, secure peaceful international relations, and spread new technologies around the world -It is unclear whether the profits resulting from free trade have been distributed fairly within and among countries -The gap between rich and poor countries is widening at a fast pace GS101 Chapter 3-The Economic Dimension of Globalization Week 3 -Free trade proponents have encountered severe criticism from labour unions and environmental groups who claim that the elimination of social control mechanisms has resulted in lowering of global labour standards, severe forms of ecological degradation, and the growing indebtedness of the global South to the North. -The internationalization of trade has gone hand in hand with the liberalization of financial transactions, it includes: the deregulation of interest rates, the removal of credit controls, and the privatization of government-owned banks and financial institutions -There is greater investment opportunities -During the 1990s, new satellite systems and fibre-optic cables provided the nervous system of Internet- based technologies that further acceler
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