History of Globalization
History of Globalization INTB 3351
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Globalization and Oil Part 2 39oini39 m39 39 Pmuull mums m hHHnnan harm s women Luna 7 1785 us 53 I 551 4 quotan s 325 1 1930s 1935 1937 1937 Mexico s Oil Great Depression hurt Mexican economy especially workers in oil and agriculture in northern region 90 of oil reserves and 75 of mining operations are foreign owned mostly American in 1930s New President Cardenas inaugurated Oil workers union strike Demanded 40 hour work week 6 weeks vacation pensions at 85 of wages at 50 yea rs of age replace foreign workers with trained Mexicans within 2 years Presidential commission investigates worker grievances Mexico Commission and Cardenas sided with workers against foreign oil companies Cardenas used threat of nationalization to force oil business to compromise enshrined in Constitution of 1917 March to June 1938 Mexico nationalized oil industry and foreign owned property foreign management abandoned Mexican oil industry Envoy nu Al e Imun Ann me n In 39 w w339 1 mm mm LynIr svnux quot 11 IIInan squot mluomm 39R E pmesn v WE quot39v r usmnmu amp 7 Kuwgr Tr39 Mexico and Venezuela US and AngloDutch led boycotts of Mexican oil pushed Mexico into trade alliance with European fascist nations US led a boycott of Mexican silver and manufactured goods to punish Mexico In 1973 Mexico recovered to 19205 production levels and in 1977 to 1981 the US eased boycott restrictions Venezuela became the major source of Latin American oil for Allies in 1940s during WW2 largely replacing Mexican oil 1943 Venezuela negotiates with oil companies for larger share of profits Fearing another quotMexican Nationalizationquot a 5050 accord is devised so that the private companies and Venezuelan state will evenly divide profits Saudi Arabia Aware that Venezuela has now gotten a much greater deal Arabia reassessed contracts with oil companies ARAMCO ArabianAmerican Oil Company founded in 19205 and expanded in 19405 by American and British oil companies as parties to Red Line agreement Shared oil production and profits within the quotred line zone opened during and after WW2 After 1943 Venezuelan trade delegates circulated in the Middle East Egypt Iraq Arabia and promoted the 5050 deal Saudi Arabia 1949 1950 Foreign Companies Profit 3 Times Saudi Arabia s earnings Saudi Arabia demanded increase in share following Venezuela s 1943 deal Companies resisted Lost in Mexico conceded in Venezuela attempted to make a stand in Middle East Pressure too intense from supplier nations but US government extended open support for Seven Sisters Aramco etc Saudi Arabia quotGolden Gimmick US firms allowed to deduct from US taxes any foreign taxes paid during the conduct of business 1949 US firms pay 43 million in taxes and 39 million in profit sharing with Saudis Under quotGolden Gimmick break in 1950 the US firms paid 4 million in taxes and 78 million in profit sharing with Saudis Oil companies Saudi Arabia triumph Who loses Iran Anglo Iranian Oil BP in Iran 1945 1950 BP earns 250 million in profit pays 90 in concession to Iran and more than 90 million in taxes in Britain WW2 Shah Reza Pahlavi a military dictator with prewar ties to fascism in Europe joined Allies and after WW2 was the hope of the US and Britain to keep the Soviets out of the oil rich Middle East Turned over power to son in 1941 Iran 1950 Iran s Parliament under democratic pressure to renegotiate oil concessions and seek 5050 deal like Venezuela and Arabia Shah and PM Razmara opposed nationalization or renegotiation a deeply unpopular position with Iranians March 1951 Razmara assassinated by gunman who supported nationalization of oil and ejection of foreign influence April 1951 Iranian Parliament chose Mohammad Mosaddegh of the National Front to be new PM Iran Mosaddegh and Parliament opposed Shah ordered nationalization British Secret Service MI6 US Central Intelligence and Shah s military stage a joint coup Mosaddegh out of power under house arrest Shah in exile during the popular uprising returns to power in 1953 Shah and Iran will not nationalize oil but instead are subsidized by the US government and oil companies until revolution in 1979 AngloIranian BP also abdicated monopoly of Iranian oil and opened it to American companies OPEC 1959 BP cuts price it will pay for oil 10 Arab Oil Congress held in Cairo Egypt Proposed cartelizing to drive up price 1960 Standard Oil of NJ cuts price 7 1960 Venezuela Arab nations and Iran join together to form OPEC Modeled after Texas Railroad Commission which regulated production in 19205 and 19305 Texan oil fields and the quotAsIsRed Line international cartel Goal Restrict production and supply to drive price up OPEC 19605 to 1970s Global oil consumption skyrockets No longer an oil glut supply now below demand prices escalating OPEC nations becoming increasingly wealthy oil consuming nations like USA see standard of living costs increase Direct economic conflict between USA and oil exporting nations UN Purlnlnn plnn znun Palestinian loss of land 1946 to 2000 Palemman andJewisnlanuwd 1947 1942471957 I L 39 hnzli ma Plnnniln um ISRAEL The Oil Weapon US support of Israel always irritating to Arab nations and Iran Israel founded in 1948 by UN from lands formerly under British control following the defeat of the OttomanTurkish empire in 1918 Arabs refer to the land as Palestine Jews in Europe and America refer to land as Israel Britain and UN favor facilitating the relocation of European Jews to this land after the holocaust Arabs see this as dispossession loss of sovereignty European imperialism 1948 War erupts immediately Israel triumphs US USSR and other NATO allies on Israel s side but this all predated much of the oil relationships of the USA and the Middle East Arab Israeli Wars 1956 Egypt nationalized Suez canal antagonized British and French Britain France and Israel attacked Egypt but USA and USSR together pressured the allies to end attack on Egypt 1967 Six Day War Egyptled second Arab attack on Israel US supported Israel in 1967 Saudi Arabia threatened US with oil embargo war was very brief no significant consequences for US and oil but first time oil used by Arabia to leverage US policy regarding Israel First Oil Shock Yom Kippur War 1973 Saudi Arabia threatened USA with embargo Angered over US support of Israel sought more funds for war demand 100 increase in oil prices US negotiators agree to 15 Arab nations angered and confused over relationship with USA Embargo October 1973 5 reduction every month in production until price goes up 100 embargo to the USA President Nixon authorized 22 billion in aid to Israel Oil jumps from 5 to 17 a barrel US entered enormous slump of recession and quotstagflationquot mun Patna s 5 57 m My 2mg hock Heading l Another 0 The rms 039 ml amu ed Fm rm I m m ahon pew bane a 107 A quot 5 mgquot FEE onscrmhcn In 7 mgsu mnamu ms N n r gt u mu was 3 w hullch mmmnrao mmquot L19 m I mm 2003 nm K150an V quotK mummy un L973 Korean We waneme Lgsursa mamms Srvcu wgmmc Wm Mm n M Mwwmxum Second Oil Shock 1970s US aid to Israel and Iran to cultivate alternative allies in region Arab led resentment fuels anti American feeling in region 1974 Saudi Arabia uses wealth and power to acquire 60 control of ARAMCO No longer in the control of American or European companies over the next 20 years Arabia will wholly purchase ARAMCO 1979 Iranian Revolution Iranian people overthrow the USbacked Shah dictatorship Iranian Revolution 4 5 of world oil reserves off the market due to instability of Revolution 150 price increase results from panic about another embargo or further loss of access Jimmy Carter s covert military operations to rescue American hostages failed 52 Americans held hostage for 444 days Economy nosedives in 1979 1981 1970s to Present American and British companies prospect for oil outside of OPEC control Alaska Gulf Coast and North Sea developed and begin to deliver but Saudi Arabia and Iraq continue to hold largest known reserves Saudi Arabia now in control of oil diplomatically allied with US consumer interests Egypt and Arabia make peace with Israel Tremendous division between Arabian governments and Arabian people however PEE Share at Wurld Gru e il Reserves mm artam Tam wand 1133 313 31 inn 33111313 s f Px39ydus uu m Luau r alas I 3 1 a SHUDI 333343 313 33 IRFIQ 1133 34 UHE 33 i 34 HUUJFIIT 333 31 IRFIN 33 3 UENEZUELH 34 Hussm 433 31 U3 304 3 LIBYFI 333 14 MEXICO 333 i 33 0 SD 109 ISD 200 250 BC III E d 6 8 10 mam 244 us average 5 1006 v9lt54 m Amman mm mm a 9 an 5 mm M the may medians amudma NC Oil and Gas wwwngoilgascom OilhnponstotheUS u n V 7 w HHL39 um oo o o o 0 OO o I 305 thousand million barrels Knewquot U5 10H 0 rlC n ungth Us a Escwcx mu m at am Cuuem w lam US Consumption and Imports mrhomv dlmvdsw my wvw 225 of total oil produced in 2008 39 aSlt0n3umC l Dv Hm U5 i ah 118 A of total oil produced in 2008 39 mi by 1 mi J Millions tonnes of oil 5 o o o o o 000 L uomnpmd uondumsuoa x on o o o o Figure 5 Oil producing countries past peak Mb Per day 35 an 1 23921 1 15 Hi 192104 liuim 2m um sum x Forecast Dulanlia 1 399 mm madam quot iLmn in USA 1511 Tunis USA1971 humw 19 lush u 1955 19m 1940 1950 1966 MMcw ysl r m GarbH 21307 Source HS 2006 PEMEX perm NPD DTI E145ka HEB HRS U39SEIA JWMT Fmecasi LEST Ema ZSJammy 2M 1996 20m 39 2010 19m 19m USChina Oil Cunsump on 19802008 I China I U S 2mm 35M l 14M 12mm 494 v 44 10pm EM 6900 Thousands Of BarelsFer Day 40m gt y 21mm 19813 1953 199 Km Eula 5 EnergyInlanmalimAdmhislrn mmhal ustusrci nalnymm China39s Sources at 0i lnthousands ofbb perdav Angola 151 Saudi Arabia MIC Others 358 Venezuela A150 11 Russia 299 Source TIME Facts Global Energy China and Africa Now The Race for Raw Materials mm m wm um um zxilm lscmmmr 00mm m m u 5i 21263 Globalization Phase One 18405 to 1914 River Valleys 3000 to 500 BCE The Four OldWorld River Valley Cultures Slnng Chm YellawR v V Mesupmamm f Trgnis g Euphales W m 0 gt 39a I Yangzu mm Gange i rl 39 I H 0 1 Rome to China The Silk Road f l i H L 597 1 RUSSIA Balkh 1 V n AFGANISTAN cHINA KErman gt Medina PAKISTAN Lhaza Mecca SAUDI 7 ARABIA 39 39 39Aden Medieval Trade Leagues Voyages of Zheng He 1405 to 1433 i 777 7 7 h 1 5 a39wtgu Zhengqu NUS1433 39 DCEAH Voyages of Columbus 1492 to 1503 min A NORTH AMI lCA x wl ulmnIJEm 39 but HGT 1 mm L v 3 H r n Nx k 3 I lquot39 I f 1 7 5M 4 H F m Lag31m 39 J nrunmr 553 V Fund1 Len VJ xII t rzuxxhu NV 41N39I39RAI AMERJCA wuun ONII h nlhxu HutJIM hum r HULI FIH SOUTH AMERICA Mercantilism Mercantilism 15001800 in theory involved the economy s subservience to the needs of the state Mercantilist nations strove for protectionism a positive balance of trade the accumulation of gold and a global system in which colonies primary job was to supply natural resources to the factories of the home country Assumption that trade is a zerosum game One nation s gain is another nation s loss Prominent trading companies owed their success to statechartered monopolies to exclusive rights to territories Trade mainly involved high valuetovolume products Trade was not free competitive capitalistic or marketbased British Hegemony 1588 Defeat Spanish Armada 1607 and 1620 Establish permanent British colonies in North America at Jamestown and Plymouth Bay 1688 British Glorious Revolution unites Britain and Protestant European nations like Holland into dynastic alliance 17005 Series of political and religious conflicts between Britain and France and their allies British Hegemony 1789 to 1815 French Revolution challenges monarchy in Europe British unite with other Continental monarchies to defeat RevolutionaryNapoleonic France 1815 to 1846 British naval supremacy and the end to French rivalry leave Britain economically dominant 18205 to 1846 Push for quotFree Trade No longer desires protectionism and dislikes closed colonial trade networks Corn Laws Repealed 1846 End of Protection End of Mercantilism British Grain Tariff Repeal of Corn Laws 18205 73 Theory of Comparative 18305 59 Advantage 18405 24 Principle of quotMost Favoured Nation Status Role of Colonies 1846 Full repeal Why Britain Market Revolution Thesis International trade led to European cities dominated by merchants which led to Urbanbased commerce replacing landbased agriculture which allowed Logic of market to undermine the foundations of feudalism which gave Individuals the freedom to pursue trade and selfinterest which created Marketbased capitalism which expanded into Globalization Britain s Market Revolution 0 Enclosure movement 0 Market in rents and labor 0 Agricultural workers driven off the land into small workshopsfactories or to North America Mechanized commercial agriculture able to sustain quotsurplusquot population outside of agriculture 0 English banking developed to facilitate trade between London and British agriculture Why Britain Industrial Revolution Thesis International trade led to Urban based merchantsfree markets which combined with scientific discoveries and Protestant Christian quotwork ethic encouraged Controlled fertility and political freedoms which gave rise to Entrepreneurial innovations and laborsaving technology which produced The Industrial Revolution quotEurocentricquot Story 0 Industrial revolution emerged after the creation of a successful capitalist system in England and spread to other parts of Europe and the United States 0 But did it emerge necessarily because ofthis developing capitalist system 0 Was the quotRise of the West a quotmiraclequot wherein certain cultural and economic conditions produced an industrial society superior to other parts of the world Why not China 0 As late as 1800 China had achieved a level of per capita growth and development equivalent to England 0 China had efficient functioning markets but did not industrialize 0 Serious ecological obstacles to further growth in England and China as well limits of quotold biological regime Divergence between England and China due mainly to quotcoal and colonies Great Divergence 0 Industrial revolution took the form of capitalism as it had developed in England but was not necessarily the result of that particular kind of capitalism 0 Coal and colonies were necessary for helping Britain escape the limits imposed by the biological old regime while China and Asia remained bound by it 0 These quotlandsaving developments were as important as quotlaborsaving developments in producing the industrial revolution 0 Growth of cotton textile industry and spread of steam power technology to other manufacturing and transportation ie railways steamships industries led to a broader industrial revolution and set in motion globalizing forces Newcomb Steam Engine 1712 18th Century railroad Slave plantations Cotton Gin 17905 Imam of cm Gin Eli WW5 Britain beats India at Cotton Productivity Increase in Cotton Spinning Indian handspun textiles in 18th century 50000 hours per 100 lbs cotton 0 English mechanized steampowered spinning in 1825 135 hours per 100 lbs cotton Cotton Imports to Britain 0 1780s 25 million lbs 0 18405 600 million lbs British Hegemony Transportation revolution initially benefitted Britain over other nations British had the best coal and controlled most key sources of steamer coal British shipping lines took the lead in establishing regular cargo service to world ports created exclusive shipping cartels British Royal Navy protected shipping lanes and provided quotcostfree insurance British established control over the Suez Canal region by occupying Egypt in 1882 British Steamship 1859 Suez Canal 1869 P agile 39IL 3 ELLITE IMAGE OF THE SUEZ CANAL TAKEN FROM THE SOUTH N FISM Part One 18505to 19405 The Global History of OH a i 4311 1 7 1 44 J gi39A l F 39 I M Vita pry The Early Days 18505 to 1870s Oil collected from skimming seepages in bodies of water Kerosene oil used for heating lighting and lubricating competing with other oils from animal fat Smoky smelly expensive 18505 Pennsylvania Rock Oil Company prospects for cleaner oil Drake s Well erupts in 1859 First year 75 wells Within two years virtually exhausted Coal mining regions prospect for oil Western Pennsylvania Ohio Kentucky West Virginia Busts follow Booms tremendous social unrest pollution financial ups and downs Rockefeller 1859 JD Rockefeller formed partnership 1865 bought out partner in Ohio refinery business Standard Oil incorporated 1870 Cleveland Ohio dominated mid western refining Rockefeller dominated Cleveland Partnered with Henry Flagler whiskey railroads Florida real estate Established preferable financial arrangement with railroads through rebates and drawbacks Out performed competition in 1870s Rockefeller Aimed to consolidate refining into a horizontal monopoly South Improvement Company quotpaper tigers Challenged by state legislatures STA I Q 1879 Standard Oil controlled HEARD 90 of US refining h f I 1882 50 Trust formed 3rquot relocated administration of 50 to NYC 1870s80s labor discontent in all major industries Iquot N W m ah V N g h39g Challenging 50 Nobel brothers Swedish mining dynamite endowed Nobel Prizes Invested in Russian oil prospecting particularly in Baku Finances arranged by European Rothschild banking family Provided oil to European markets beginning in 1876 50 unleashed devastating price war to destroy NobelRussian oil industry in the 1890s but Nobel was the largest provider of oil to Europe until WW1 The Russian Revolution finally devastated their efforts and sold shares to 50 Wt Ia TA iterrmean 5 J BY ARABIA c o 1Tahnm Am ngaham39 1m I 9 Sl raz KIM t mg s m 39 Mama 61E Mm mm A 531 QATAR 39 g I 0 quot Challenging SO Samuel brothers AngloJewish traders inherited their father s import business Shell had transportation connections with Japan China Australia as well as a substantial fleet Imported shells feathers spices knickknacks Access through British citizenship to Suez Canal competitive edge over SO 1890s begin to develop modern tankers moving greater volume of oil than SO and serving as transportation service for other oil companies Challenging SO Royal Dutch prospecting in Sumatra Indonesia Malaysia Discovered oil conflict with pirates and regional militants 18905 50 and Shell competed to buy out RD to end competition Texas Patillo Higgins prospected near Beaumont 1901 Spindletop erupted Texas passed anti50 legislation kept Rockefeller out Texas Spindletop boom 19011905 Beaumont from 10000 to 50000 in six months 16000 living in tents Acres sold from 10 to 900000 Enormous boom town Tulsa OK enters in 1905 OK led TX until 1928 Gulf Oil Sun Oil Texaco Oi outside SO control Trust Busting 1902 Ida Tarbell s History of Standard Oil published a muckra king antimonopoly tract 1904 Teddy Roosevelt elected president campaigned as quottrust buster 19051909 US government prosecuted 50 for unfair trade practices 1911 Standard Oil ordered to dissolve Breaking up the Giant Seven regional miniStandard Oils 50 of New York Mobil 50 of New Jersey Exxon later merged with Mobil 50 of Ohio Sohio later bought by BP 50 of California Chevron later merged with Texaco 50 of Indiana Amoco later bought by BP Continental OH Conoco later bought by Phillips Atlantic OH Arco later bought by BP 5X0quot MObII a 7 Era of Oil Competition Mini Standard Oils in competition with Shell Royal Dutch Texan and other western companies Royal DutchShell merge in 1907 entered California and Oklahoma to compete with embattled 50 in USA All European and American companies begin to look for more oil sources in 19105 New Oil Persian oil FIRST OIL DISCOVERIES IN THE MIDDLE EAST 205 505 one BritishRussian rivalry British asserted control 1901 Iranian Shah granted concession to British prospectors 1908 Oil discovered 1909 AngloPersian formed to refine oil 1912 allied with Royal DutchShell WWI Pressure on all British companies to defer to national military needs in return British naval conversion from coal to oil as enormous subsidy 2 100 km 1W Inllos Middle East Oil World Warl in 19105 and oil surpluses in 19205 deterred prospecting in Arabia 1925 AngloPersian BP Royal DutchShell and larger Mini505 collaborate to explore Arabian oil prospects Discoveries potentially could result in dreaded over supply price deflation and cutthroat competition Two Agreements in 1928 As Is No infringing on one another s markets Red Line Line drawn around Arabia and Turkey including modern quotmiddle east of Iraq Syria Lebanon Israel etc No prospecting without sharing labor and profits The Red Line Agreement c Amliturmnmn Sm mnluwnlnmwlamu munummm Inmemmm ummmuwmwmnmawm Mmuhmmwmw i mmmumrwAinklmmlk uwmwrmmuunmwwmmm World War Two War fought over resources in the Pacific German advances through North Africa and Russia in an effort to cut off British control of Suez Canal and ArabianPersian oil fields USA has near unlimited oil reserves defeats Germany and Japan Oil acknowledged as primary national security need Envoy nu Al e Imun Ann me n In 39 w w339 1 mm mm LynIr svnux quot 11 IIInan squot mluomm 39R E pmesn v WE quot39v r usmnmu amp 7 Kuwgr Tr39 The Seven Sisters 1950 39 310 of New Jersey 501 of New York of cali39fonnjia of pipelines 910 of progd uct ian 80 ofquot reserves of refining 636 of39t a n ker eet Gulf Texaco AngglioPtearsian B P Royall Dutci hisshelli Early Challenge to Seven Sisters International Turmoil in Great Depression Mexico Revolution 19111921 19205 US industry extracting oil and mineral wealth 19305 Depressed economy perception old oil deals made with previous gov t invalid assertions of national right to oil wealth demand US companies train Mexican workers US companies resist 1938 Mexico nationalized oil 8333 cozmu noa The Cold War 19405 to 1991 0 PostWW2 military rivalry between USA and USSR Competing expansive economic systems capitalism vs communism Competing conflicting political systems democracy vs authoritarianism Two superpowers courting allies and expanding into peripheral regions and markets The Cold War Flash Points Divisfmi of dummy 1945 N SWEDEN T nsnmm r I mem mm 5W W 3 VUGDSLAVA BULGARIA 5 The Cold War Flash Points INVASION AND COUNTER glRQKE NE 25 NOVEMBER 17 A durum ngsmm 3 w a 1 5an Ihy vm 25M um I mumI mu x59 Mn The Cold War Flash Points The Cold War Flash Points 39 NATO DIIIer allies nhhe Uniled Slales Wmsaw Pan Other nnies nllhe Suviel Llniml Noll o A 70 nu luzrillzs DeColonization European Colonial Systems collapse European Allies Britain and France bankrupted European Axis powers Italy and Germany defeated Japanese quotEmpirequot occupied by USA Support for racial hierarchies and white supremacy eroded in wake of Holocaust and Nazi policy DeColonization India 1947 Decades of independence movements in India Gandhijust one of many leaders demanding an end to the injustice of British rule ISRAEL mu m Vk DeColonization Israel 1948 0 British occupation since WW1 Place ofJewish refugees in anti Semitic 1920s and 1930s 0 Site of intense conflict between Arab inhabitants British administrators Jewish settlers European community s mixed motives for establishing a Jewish nation DeColonization Indochina 1954 0 French occupied since mid19th century Japanese occupied during WW2 NATO assisted French re occupation from 1945 to 1954 resisted by Vietnamese and others French face military defeat US steps in to preserve Vietnam as a western ay AntiKeynesianism Austrian School Friedrich Hayek Ludwig von Mises Peter Drucker Joseph Schumpeter Respond to 1920s inflationary crisis in Germany and Austria Reject Keynesian stimulus notions Reject empowering national governments Seek to reassert classical economic theories apply to modern post war realities E The Road to Serfdom YE mum um av MILTON FRIEDMAN Anti Keynesianism Chicago School Milton Friedman Richard Posner Robert Fogel Friedrich Hayek and others Monetarism Friedman s notion that inflation is a consequence of the expansion of the money supply and that restraining inflation requires strict controls of the monetary supply AntiKeynesianism 1950519805 Antimilitary Keynesianism Concerns over Communism and state socialism appealing to recently decolonized nations Keynesianism popular in boom period 19505 and 19605 in doubt in economic distress periods such as 19705 AntiKeynesianism Thatcher Revolution 1979 1990 Reagan Revolution 1981 1993 Great Britain and USA respond to late 1970s economic distress Margaret Thatcher and Ronald Reagan embrace AntiKeynesian philosophy Question of implementation Rhetorical or real AntiKeynesianism quotReaganomicsquot Top tax rate cut from 70 to 50 1981 Top tax rate cut from 50 to 28 bottom raised from 11 to 15 1986 quotVolcker shock restrains inflation Medicaid food stamps the EPA and election monitoring all faced cuts Grants to states for education hospitals worker training also faced deep cuts Deregulation of finance led directly to the Savings amp Loan SampL crash of 1987 Increased military funding Average of 200 Billion annual deficits triples national debt AntiKeynesianism IHmamI IJIb39t 1331 tnrnugu was REAEAM mans macaw 1tmnu mommy HE A u x 1 Immune3w E E1 ILL33302 mt134 I0 39I 139 Ms S 91mg F r m Pammm in irm nmL 11911 WJI B LLE7Z 15 I 371 I Lfiv39l 5amp5 1151742 211135131 i 23415611 i lliJ ri mannar3 3912quot mk F39 The Soviet Collapse in the 1980s 1 Economicinefficiency 2 Political repression resisted in Eastern Europe 3 Invasion of Afghanistan 19791988 exhausted treasury and military 4 Oil exports collapse 5 1989 Fall of Berlin Wall 1991 Dissolution of USSR Jr him Regional Economic Integrations 1957 Treaty of Rome European Common Market 1993 Treaty of Maastricht European Community 19959902 Euro Currency 2009 Treaty of Lisbon European Union Regional Economic Integrations NAFTA 1993 Resistance and Discontent quotWashington Consensus IMF WB and WTO compete with USSR as patrons of quotdeveloping world quotThird World or NonAligned movement emerges Latin American and South Asian economies embrace S and mixed forms of export socialism Resistance and Discontent Labor Environment Trade Equality Cultural Exports Sovereignty Globalization Today Economics Is it a better world now that most of the globe shares an economic consensus Social Realities Have Americanled marketdriven economic systems made the lives of individuals better Terms Mercantilism was from the 1500s to the 1800s which involved the economy s subservience to the needs of the state These nations strove for protectionism a positive balance of trade the accumulation of gold and a global system in which colonies primary job was to supply natural resources to the factories of the home country On nations gain is another nation s loss Corn Laws were repealed in 1846 which ended protectionism and mercantilism Corn Laws protected farmers with very high tariffs on imported grain and farmers argued that repeal of the laws would doom British farming Supporters of the laws invoked the desirability of selfsufficiency in food the importance of farming to the British way of life Protectionism in the 1800s was based on how the nation created high tariffs and strict regulations on imports whereas local prices could be kept high Though most believe protectionism is harmful creating more negatives than positives and impeding countries to grow economically Adam Smith was a strong antiprotectionism supporter William Jennings Bryan was a Nebraska congressman and in the early 1900s was against the gold standard and promoted the silverite movement in the 1890s He ran for the democratic presidency three times from the 1890s to 1910 He was a strong supporter of the SpanishAmerican War PriceSpecie Flow termed by Scottish philosopher David Hume and was during the 1700s to the 1900s Nations that imported too much must restrain domestic spending to compensate for the gold loss The consequence was governments were incapable of responding to financial crisis through economic stimulus John D Rockefeller in 1959 formed a partnership in 1965 he bought out his partner in the Ohio refinery business and in 1970 he incorporated Standard Oil He was dominating in Cleveland Ohio and he aimed to consolidate the refinery business into a horizontal monopoly Treaty of Versailles was signed in 1919 at the Paris Peace Conference which ended the war between Germany and the Allied Powers One of the most controversial stipulations of this treaty was that Germany had to admit fault for the war This was during Woodrow Wilson s term as President and he was concerned with the rebuilding of Europe s economy rather than harsh treatments for Germany John Maynard Keynes was a Bloomsbury intellectual and critic of the WW1 treaty and economic order from the 1910s to the 1920s He devised economic decisions for government intervention in the economy via fiscal and monetary policy He said governments should use the policies to even out the boom and busts Autarky promoted by Stalin is quality of being selfsufficient forcible separation from the rest of the world In 1808 President Jefferson declared a selfimposed embargo on international shipping bringing America close to complete Autarky Fascism is a form of radical authoritarian nationalism that becomes prominent in Europe around the 1950s This was mainly a political response to the depression and linked to the cause of WW2 with Nazi Germany and Adolf Hitler SmootHawley Act was in 1930 for US protectionism where nations sought to protect domestic industry and agriculture during the Great Depression after WW1 Passed during President Hoover s Presidency seemed to be a success but economies didn t recover and unemployment kept rising Comparative Advantage is a concept where you can produce a particular good or service at a lower marginal and opportunity cost over another Bretton Woods was in 1944 where 700 delegates of 45 nations met at Mt Washington Hotel in Bretton Woods New Hampshire They met to plan a post war world economy before the war ended The four cornerstone agreements that were made were the IMF the World Bank the GATTWTO and the gold standard Marshall Plan was in 1947 passed by congress at President Truman and secretary of state Marshall s request It was meant to lend money to allies to rebuild after the war and speci cally to rebuild European economies so they could purchase American manufactures Third World arose during the Cold War from the 1940s to 1991 to de ne countries that were not aligned with NATO and the allies or the Communist Bloc Most of these countries were extremely poor and many of them were former colonies under British Rule During the decolonization period most of Africa became their own country with nation states Standard Oil was incorporated by John D Rockefeller in 1870 and by 1879 it controlled 90 of US re ning The company was started in Cleveland OH but the administration was relocated to NYC in 1882 Standard Oil aimed to consolidate oil re ning into a horizontal monopoly The As Is Agreement consisted of 7 principles to limit excessive competition within the oil industry This was sparked by price wars among major oil companies in the 1920s and most signi cantly between SO of NY and India When it was adopted in 1928 more than a third of worldwide production capacity was shut down due to v upply This 39 39J J with the Red Line Agreement The Red Line Agreement was signed by partners in the Turkish Petroleum Company TPC in 1928 aimed to monopolize the oil into a cartel like order The Red Line Agreement slowed the development of Middle Eastern oil reserves until after WW2 The term Seven Sisters was coined in the 1950s to describe the seven oil companies which formed the cartel that dominated the petroleum industry from the 1940s to the 1970s The group comprised AngloPersian Oil Company Gulf Oil Standard Oil of California Texaco Royal Dutch Shell Standard Oil of NJ and Standard Oil of NY Prior to 1973 the members of the Seven Sisters controlled 85 of the world s petroleum reserves Golden Gimmick was connected with Saudi Arabia in 1950 It was where US rms were allowed to deduct from US taxes any foreign taxes paid during the conduct of business In 1950 US rms paid 4 million in taxes and 78 million in pro t sharing with Saudis Notes Mercantilism from 15001800 involve the economy of the subservience to the needs of the state These nations strove for protectionism a positive balance of trade the accumulation of gold and a global system in which colonies primary job was to supply natural resources to the factories of the home country The Corn Laws were fully repealed in 1846 ending protectionism and mercantilism The Corn Laws kept prices high with high tariffs on exports and imports The Newcomb Steam Engine of 1712 Cotton Gin of 1790s by Eli Whitney British Steamships of 1859 Suez Canal of 1869 The Three Rival Powers 1860s to 1910 Germany USA Japan The gold standard operated in England and empire from 1717 to 1931 abandoned in the Great Depression Other industrial nations follow suit in the 1870s Price specie ow is a compulsive wage and price restraint is central feature of gold standard Nations that import too much must restrain domestic spending to compensate for loss of gold The consequence of this action is that government is incapable of responding to financial crisis through economic stimulus John Maynard Keynes was a Bloomsbury intellectual and critic of the WW1 Treaty and economic order of 1910s and 1920s He devised economic rationale for government intervention in the economy via fiscal and monetary policy He said governments should use these policies to even out the booms and busts The Great Depression of 19291939 stock market collapsed international trade plummeted agriculture crises in many nations monetary crisis including extreme in ation 25 unemployment led to consumption declines and consumption decline furthers production declines and unemployment continues Fiscal policy whereas governments can in uence the economy by their spending and taxing decisions Monetary policy whereas governments can in uence economy by their control of the money supply World War H promoted social welfare states fascism communism all products of the great depression USA was the clear winner while Britain and France were devastated Unlike WWI USA was willing to step into national role Bretton Woods meeting held at Mt Washington in New Hampshire where 700 delegates from 45 nations came together to create a postwar world economy before the war ends The 4 comer stone agreements created are the IMF the World Bank the GATTWTO and the Gold Stande The IMF or the International Monetary Fund s goal was to stabilize exchange rates by nations contributing to a pool from which they may borrow in times of crisis USA has 17 with Germany and Japan both with 6 It was used to ease difficulties of return to gold standard via Keynes active government spending The World Bank was originally the International Bank for Reconstruction and Development The goal was to lend to wardevastated economies After the Marshall Plan of 1947 the WB shifts lending to developing nations especially in Asia and Latin America Often targeted to promote anticommunism now primary mission is to end poverty GATT is the General Agreement on Tariffs and Trade there have been 7 rounds since WWII lasting typically 35 years The GATT dissolved in 1993 replaced by the WTO World Trade Organization in 1995 a larger organization with the same basic goals The Gold Standard after WWII capitalist nations returned to a modi ed gold standard and abandoned it in the 1930s In eXibility in domestic monetary and scal policy eased with international lending Nations used monetary and scal policy to bend gold standard In 1971 the world moved to at money The Marshall Plan of 1947 was passed by congress at President Truman and secretary of state Marshall s request It was mean to loan money to the Allies to help rebuild Speci cally to pump money into European economy so they could purchase American manufactures Successful on both Intemational Keynesianism Globalization Interim Depression War Reconstruction 191 Os to 19505 Three Rival Powers 18605 to 1910 German unification in 18705 industrialization in 18805 and 18905 War with France in 18705 Seeks African and Pacific colonies in 18705 to 18905 United States Industrialization on British model 18405 Sectional conflict resolved after Civil War and South and West integrated into Northern industrial economy Begins to seek Pacific and Caribbean colonies in 18505 to 18905 Three Rival Powers 18605 to 1910 Japan Industrializes in 18905 to 19105 Defeats Russia in RussoJapanese War of 1905 over access to Asian mineral resources Seeks colonies on Asian Pacific Rim and threatens China Korea Southeast Asia Australia etc European Continent United States and their colonial holdings become generally quotfree trade nations on the Gold Standard and actively seek to quotopenquot China WWI German militarization and colonial competition antagonize Britain and Russia Lingering French anxiety over loss of coal rich lands in 1870 leads to Alliance of British Russia and French against Germany German ally and neighbor Austria Hungary seeks to consolidate control over its southeastern imperial fringe in Slavic lands allied to Russia Anti imperial resistance leads to violence in Serbia WWI Germany backs AustriaHungary Russia backs Serbia the nations fall into war like dominoes USA remains quotisolationistquot Huge Irish American and German American populations do not support alliance with Britain Many fear the war is fought by Britain to secure colonial holdings not USA s fight Many see advantage of letting Europe knock itself out so USA can pick up pieces Mien nwmm u m ha Central minimum T5 I 33 Hussmu EI39uFBE c Q AMNTIIC DCEAN WWI USA after provocations by Germany and fearing loss oftrade with Britain entered war in 1917 War over in 1918 0 Industrialized war of machines airplanes submarines machine guns hand grenades tanks etc Disillusionment follows WWI Skepticism and cynicism over international networks of trade or diplomacy an quotinwardquot turn 19205 Business leaders attempted to revive international trade networks largely failed Multilateral and diplomatic political arrangements routinely failed and business had to be satisfied with private or bilateral agreements 19205 Culture quotLost Generation Jazz Flappers Prohibition mass consumption VACCash of 1929 w a H d The Gold Standard Operated in England and Empire from 1717 to 1931 abandoned in the Great Depression Other industrial nations follow suit in 1870s Interchangeability of currency facilitates trade international comityfriendship etc Pricespecie flow compulsive wage and price restraint is central feature of gold standard Nations that import too much must restrain domestic spending to compensate for loss of gold Consequence Governments incapable of responding to financial crises through economic stimulus John Maynard Keynes Keynes Bloomsbury intellectual Critic of WWI treaty and economic order of 19105 and 19205 Economic Consequences of the Peace 1919 Devised economic rationale for government intervention in the economy via Monetary policy Fiscal policy Governments can and SHOULD use these policies to quotevenquot out booms and busts according to Keynes Great Depression 1929 to 1939 Stock market collapsed International trade plummeted Agricultural crises in many nations Monetary crises including extreme inflation 25 Unemployment led to consumption decHnes Consumption decline furthers production declines and unemployment continues eighty years of unemployment U S unemployment rate 1929 2009 30 1929 1940 1950 1960 1970 1980 1990 2000 I h A Data from April quot3quot 39 me Ndiunm Euraau 0f 39 me lanuan L L C 39 fram quabo Stauslics quotBeggar Thy Neighbor Nations sought to protect domestic industry and agriculture 1930 USA s SmootHawley Tariff Act US protectionism 1931 Europe and Latin America retaliate with own protective ta riffs 1931 Bank Panics Eastern Europe Germany France UK Mexico USA 1931 Germany then Britain abandon Gold Off gold standard Currencies quotfloatquot international trade risk increased while economy in turmoil trade contracted and collapsed 1933 US abandoned Gold Standard quotBeggar Thy Neighbor Major US Bank Crises 4 in 1924 to 1929 33 in 1929 to 1933 1933 FDR and USA abandon Gold Standard FDR Closed banks with temporary quotholidayquot US capitalists such as JP Morgan prop up US economy briefly with lending to banks i 3 3 5 41quot 73 l 1 l Keynes Proposal Active Government Stewardship of Economy Fiscal Policy Governments can influence economy by their spending and taxing decisions Monetary Policy Governments can influence economy by their control of the money supply In times of recession the state should supply the demand to correct for downward market forces In times of boom the state should restrain and reverse itself Widely criticized as unreliable because of economists fallibility Also governments tend NOT to draw down and shrink or end programs which were intended to be temporary Critics point out this is the radical increase of government size and power World War H Social Welfare States Fascism Communism all Political Responses to Depression Economic conflicts resource competition political ideology massive warfare from 1939 to 1945 Decolonization wars from 1945 to 1980s USA clear winner other European Allies such as Britain and France devastated Unlike 1920s USA willing to step into national role Mt Washington Hotel Bretton Woods New Hampshire iii 5a 239 39 a lllllli Ill 4quot 4 u 3 I quot A 7 lt A L t1 Bretton Woods 1944 700 delegates from 45 Nations meet at Mt Washington Hotel in Bretton Woods New Hampshire in 1944 Planning postwar world economy before the war ends Four Cornerstone Agreements IMF lBRDWorld Bank GATTWTO Gold Standard International Monetary Fund Initially 45 nations now 187 Goal Stabilize exchange rates Method Nations contribute to pool and USA is largest contributor from which they may borrow in times of crisis Used to ease difficulties of return to Gold Standard via Keynes active government spending Today USA has 17 control with Germany and Japan 2nd and 3rd with 6 each Other nations represented with a mix oftheir economic size and pool contribution 180 nations share the remaining 70 USA dominance is assured in IMF decisions Past 10 IMF Presidents however have been Europeans Christine Legarde President July 2011 World Bank Originally the International Bank for Reconstruction and Development Goal To lend to wardevastated economies After Marshall Plan 1947 WB shifts lending to quotdevelopingquot nations especially in Asia and Latin America 20 Years of low level lending often targeted to promote anticommunism in nonwestern nations in 19505 and 19605 Since 1968 Primary mission End Poverty Much larger levels of lending in 1970s to 19905 Jim Yong Kim President July 2012 GATT General Agreement on Tariffs and Trade A deliberative assembly oftrade delegates sent by member nations Delegates negotiate trade treaties in bilateral and multilateral agreements during GATT and WTO quotroundsquot Rounds 7 total since WWII last typically from 3 to 5 years GATT dissolved in 1993 replaced by the World Trade Organization WTO in 1995 a larger organization with the same basic goals Parallel institutions such as the meetings ofthe G6G7GSGZO at economic forums have continued the work since the oil embargo crisis of 1973 Also the World Economic Forum in Davos Switzerland has met annually since 1971 Gold Standard After WW2 capitalist nations returned to a modified Gold Standard abandoned in 19305 Inflexibility in domestic monetary and fiscal policy eased with international lending Nations used monetary and fiscal policy to quotbendquot Gold Standard US on quotmodifiedquot Gold Standard 19451971 US went off Gold Standard again in 1971 and the world moved to fiat money Marshall Plan Passed by Congress at President Truman and Secretary of State Marshall s request 1947 13 Billion in loans to Allies from 1947 to 1952 to rebuild UK France Alliedoccupation Germany etc Soviets refuse aid Specifically to pump money into European economy so they could purchase American manufactures Indirectly intended to increase standards of living in war ravaged Europe to prevent appeal of Soviet ideology Successful on both International Keynesianism I39JNLAND 5 w a Europe 400 500 gar Q Eurnpe 000 1300 1 a e Europe1348 53 AH j 9 Europe 3 1300 i 9 Europe 3 1580 UNION Dr SOVIET Europe c1648 SDCIAIJST Eur pe 1815 9 Europe 1914 393 Europe 1022 30 Europe 1080 3 European Union 2004 REPUB LIES 1quot II Neutral countries V 5 El Warsaw pact NATO member II Europealj Economic Cn rca W Community I amp quotIron Curtainquot Crete Gr quot1 Mediterranean Sea 0 40 M 39 0 400 Km FFICA M Cold War Keynesianism Truman Doctrine US aid will be available to save quotfree people from communist aggression Greece Turkey Containment US foreign policy will revolve around preventing the expansion of Soviet influence NSC 68 National Security Council document drafted by Truman administration in 1950 and circulated among military and economic leaders in cabinet US will use military spending and foreign aid to continue WW2 levels of government activity to prevent Great Depression from recurring Containment 1946 Berlin crisis 19471949 Poland crisis 1949 quotFall of China 19501953 Korean War 1954 France quotlosesquot Indochina Vietnam War begins 1959 Cuban Revolution 30 US interventions in other nations from 1945 to 1960 under Truman and Eisenhower promote American hegemony and economic security by restraining Communist expansion
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