GLBL ST 1 Lecture Notes - Lecture 11: Containerization, Core Countries, General Agreement On Tariffs And Trade
Week 6 Lecture 1: The Crisis of Fordism (organized capitalism) and the Role of
Multinationals in the Globalization of Production
A: Crisis of Organized Capitalism/Fordism
● Causes (1960-1970s)
1. Rising costs in production/declining relative productiviity in core countries (particularly rising
wage bills)
a. High rates of inflation and unemployment; wages going up much faster than efficiency
(productivity) returns; (costs rising faster than profit?)
b. Graph: shows profit rates and how they went down in the 1960s, and began to recover..
c. This factor feeds into #2
2. Declining rates of profits for major firms/industries (exhaustion of existing technologies, wage
costs/productivities, labor unrest/strikes, saturation of home markets)
a. Relates back to Schumpeter’s cycle; decline before the boost of new technology--at this
time locked into internal combustion engine, etc. → motor vehicles had leading edge of
1960s;
b. Delays in POV of businesses, not labor force
c. Increasingly faced with having to come up with new ways to sold old products--markets
that are no longer growing (saturation of home markets)
d. The CRUX, the profit squeeze
3. Removal of barriers of trade (Kennedy and Tokyo Rounds at GATT)--political decisions
(particularly US favoring free trade within its sphere of influence during Cold War)
a. Graph: huge decrease in tariffs on manufactured goods (blue); overall decrease in
tariff rates (esp. after WWI) from other countries→ more open economies
i. Cyclical element but over time (and recently in the context of cold war) there
have been dramatic reductions in tariff
b. Other (purple) graph: relative level of tariffs/barriers across countries--higher rate=more
relatively open economy; dip during organized capital and great increase in relative
openness
i. → globalization!
c. GATT (General Agreement on Tariffs and Trades) rounds: rounds of discussion
involving opening up the world economy involving multiple nations (now known as the
World Trade Organization WTO)
i. Urguay Round (Average Tariff Reduction)
d. Important as an enabling factor, allowing us to find markets abroad by allowing us to
expand our subsiduaries abroad!
4. New transportation technologies (e.g. containerization) and telecommunications (satellite
transmission, fax, etc.) reduce transport costs as share of total costs of production
a. E.g. invention of shipping containers has ENABLED trade, not CAUSED it!
i. Shipping containers do not INCREASE the market of world trade but has allowed
for it to happen as efficiently as it has
ii. Containers and the explosion of trade graph: greater number of
containers=greater level of trade
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Week 6 lecture 1: the crisis of fordism (organized capitalism) and the role of. 1960s: delays in pov of businesses, not labor force. Faxes to allow bills to be sent, etc. transport costs today are miniscule compared to ir! Industrial triange: transport costs don"t have as much relavance anymore: also important as an enabling factor, allowing us to find markets abroad. 1971: us government abrogation of the 1944 bretton woods agreement--shift from fixed to floating exchange rate for usd ($). Nixon administration wanted to make us exports more compeittive before 1972 presidential election. (balance of payments problem--importing more than exporting) Beginning of financialization of the world economy: forex , money markets, worldwide derivatives markets, securization of loans, etc. Removal of capital controls and floating exchange rates needed for all of these. Prices of basic resources (particularly oil) figure as major factor in the world economy second spike in 1979 ( shocks )
