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Chapter 12

PSCI 2602 Chapter Notes - Chapter 12: Portmanteau, Washington Consensus, Financial Transaction

Political Science
Course Code
PSCI 2602
Supanai Sookmark

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Week 8 Chapter 12 Global Growth, Inequality, and Poverty: The Globalization Argument and
the Politial Siee of Eoois
Globalization a portmanteau word embracing high integration of national economies
in terms of trade, investment, and finance, and an ideology, favoring privatization and
market liberalization. (321)
Neo-liberalism is an economic philosophy about the best way for an economy to create
wealth and widely distributed material well-being. (321)
o The state should maintain social order, enforce property rights and free entry to
sectors, and ensure market competition and a stable financial system.
o It must not try to stimulate growth and diversification of production, attempt to
redistribute income and wealth more than marginally.
o It should suppot apitalists i thei elatios ith lao, fo apitalists ae the
creators of wealth and employment. (321)
Global policy means policy developed by actors who claim to think for the world and
who play an advocacy role in multiple states and transnational forums. (322)
Economic growth in long-term perspective
One indicator of improving performance is the rate of growth of global production.
Another indicator is world average life expectancy at birth. (325)
The larger part of global income inequality (inequality in the distribution between all the
people of the world shoulder to shoulder, irrespective of country) has been, since the
industrial revolution, horizontal, meaning inequality of average incomes in different
places, rather than vertical. (325)
The argument implies that the world economy is an open system, with no hierarchical
structure of core, and periphery, in which the prosperity of some classes and regions
depends on the poverty of others. (326)
A hierarchically structured world economy, with some countries and regions having
more activity in dynamic, high profit and high wage activities, and able to set the rules
for others.
o The structure as a core-periphery model
o Developed countries at the core and developing countries at the periphery
o Bound together by the tendency for supply to exceed demand in the core
making the core dependent on the periphery as a source of demand for its
o Seod  the oes depedee o ipots of atual esoues fo the
periphery. (327)
Second wave
o Floating currencies transferred currency risk to the private sector and stimulated
the development of currency and derivative markets.
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o The oil price hike by OPEC, resulted in large trade deficits in oil-importing
countries, including the US, which gave another boost to the international
market for US dollars and for cross-border lending. (327)
Third wave
o Eaed the os of aiu ta aoidae ad ie-take all
o Podutio gloalizatio ad deep itegatio, pooted  the este-
dominated international development organizations, including the World Bank
and the IMF, under the banner of the Washington Consensus policy agenda for
developing countries. (328)
The fourth wave
o An intensification of the third: China-centric production globalization
o Financial globalization
Shows itself in both surging volume of cross-border financial transaction
and institutional and legal liberalization of national financial systems and
cross-border capital movements. (328)
o Tasitioig fo taatio states to det states
o Competed to cut taxes and privatize public assets so as to attract foreign capital.
o The International balance of power shifted in favor of international finance and
creditor states
o National distribution of power in developed and many developing countries
shifted towards representatives of groups whose interests and ideology aligned
with international finance. (328)
Growth and geographical distribution
The world growth trend hides large variations between regions and classes.
Example: Sub-Saharan Africa, with almost 1 billion people, had an average income in the
mid 2000s barely above the level of 1980, despite most states having implemented
Washington-Brussels Consensus structural adjustment programmes for many years.
After decades of self-conscious development and market liberalization, the average
income for the South is still only 15 per cent of that of the North. (336)
Few developing countries have sustained growth at 6 per cent a year or more for more
than 15 years. (336)
China holds the world record for number of years of continuous growth at 6 per cent or
more. (336)
The ratio of the average income of the richest 10 countries over that of the poorest 10
increased from around 33 in 1960 to almost 120 in 2010.
Income inequality between countries
Concept I inequality: distribution between unweighted countries
Concept 1 gives China the same weight as Uganda.
Advantage that it requires little information about each country: just per capita GDP or
Treat each country as a laboratory test observation.
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