ISS 315 Lecture 7 Notes
ISS 315 Lecture 7 Notes ISS 315
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This 3 page Class Notes was uploaded by Samantha Shea on Thursday October 6, 2016. The Class Notes belongs to ISS 315 at Michigan State University taught by Y. Sinha in Fall 2016. Since its upload, it has received 6 views. For similar materials see Global Diversity/Interdepend in Integrative Studies Social Sci at Michigan State University.
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Date Created: 10/06/16
Lecture 7 Thursday, October 6, 201612:42 PM • After WWII, world dominated by 2 superpowers ○ Both had own zones of influence • America does not have a real free market • After WWII, constant threat of military engagement • As technology of war got more advanced, many more sectors of economy were pulled into military complex ○ More things started to be controlled by the government • Everything revolves around oil • Economies were influenced by colonialism • Massive famines throughout developing world ○ Economic matter because they did not have the money to feed themselves • America was willing to side with dictators • The majority of the land, example Guatemala, was owned by one American company ○ Called the United Fruit Company ○ Government of Guatemala were labeled as communist so we orchestrated a cue that put a right wing dictatorship in power § Led to civil war there that lasted decades ○ Americans sold a ton of military equipment to government of Guatemala • Iran's oil fields were controlled by American and British companies • Iran hates us because we intervene in their country • America actively supported dependent economies • We made a distinction between authoritarian and totalitarian governments ○ Totalitarian-‐ left leaning dictatorships were not good • "Communist block" ○ Middle of WWI (1917), Russia had a communist revolution, got rid of their king (czar) ○ Derives from theories of Karl Marx § Saw free market capitalism as one of the great evils of the world § Marx felt capitalism was unequal He said it promotes inequality § § He said capitalism promotes alienation □ Gets rid of any institutions that interfere with free market exchanges § Capitalism is all about rational economic exchanges § Marx felt capitalism was unequal § He said it promotes inequality § He said capitalism promotes alienation □ Gets rid of any institutions that interfere with free market exchanges § Capitalism is all about rational economic exchanges • Russia, a communist country, tried to set up and alternate model to capitalism ○ Centralize directed economic control ○ Regulated by centralized director of some sort (in other words, government) ○ Instead of market forces determining economic factors, now it was being directed by the central government • Costs and profits determined by the government, not supply and demand ○ Invisible hand gone • Every aspect of the economy was all under the control of a government ○ No market correction for things ○ "centralized planning" • USSR backed governments around the world Some were just as repressive as right wing dictatorships that America ○ backed § Most of them tended to have centrally controlled economies § Any kind of decent tended to be brutally put down • America backed capitalism, Russia backed government controlled economy, most nations fell somewhere in between ○ Neither one or the other for most § Kind of free markets with a lot government regulation § Ex. India: transportation/food production: under government control, must major sectors of economy were not • 1989: collapse of Soviet Union ○ Part of problem was economy § Couldn’t keep up with their needs § All of Russia's client states equally abandoned economic model □ All of Eastern Europe (Poland, Hungary) abandoned centralized control model of economics □ Large chunk of population was entering a new global economy □ China: centrally controlled economy and began to open up economy to free market forces ® New institutions like WTO were set up • Agriculture was exempt from free market openness • When global economy opened up, developing countries were flooded with Western goods • Some companies have been exceedingly successful ○ Ex. Apple ® New institutions like WTO were set up • Agriculture was exempt from free market openness • When global economy opened up, developing countries were flooded with Western goods • Some companies have been exceedingly successful ○ Ex. Apple ○ Cannot generate jobs like other companies used to do ○ Even though they are American companies and successful did not generate middle class jobs • Everything has become global • Free trade is important because… ○ Economic theory is all about economic rationality: more rational= more efficient § Efficient means that rationality will generate more wealth □ More efficient = cheaper it is to produce a good ○ Goal of economics: maximize profit, minimize cost of production ○ Trade generates more profit § Made not be good for everybody in short run but in the long run is beneficial to everybody ○ Trade might increase overall wealth of country but it is up to each individual country to decide where extra wealth is distributed § Ideally everybody should benefit but more than likely a sector of the country could keep it al for themselves ○ Win-‐win situation for both countries • Wages are as low as they have ever been even though we are the most efficient we have ever been