International Political Economy
International Political Economy POLS 332
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Chapter 2 Global Shift Changing Geographies ofthe Global Economy What s new The imprint of past geographies 0 Over a period of 300 years or so therefore a global division of labour developed and intensified with industrialization in which the newly industrialized economies of the West led by the Atlantic economies notably Britain some Western European countries and later the US became increasingly dominant in a core periphery configuration Figure 21 0 Some core economies experienced a progressive decline to semiperipheral status during the eighteenth century and new economies emerged especially in the late nineteenth and early twentieth centuries o The broad contours of this core periphery global economic map persisted until the outbreak of the Second World War in 193971 per cent of world manufacturing production was concentrated in just four countries and almost 90 per cent in only 11 countries 0 This longestablished global division of labour was shattered by the Second World War 0 Most of the world s industrial capacity outside North America was destroyed 0 At the same time new technologies were created and many existing industrial technologies were refined and improved 0 world economic system that emerged after 1945 reflected the new geopolitical realities of the postwar period 0 between the capitalist West the US and its allies and the communist East the Soviet Union and its allies I sharp division between East and West I harsh economic and social experiences of the 1930s 0 Outside these two major power blocs was the socalled Third World 0 Both major powers made strenuous efforts to extend their spheres of influence into the Third World 0 Today s world is far more complex than it was even a few decades ago Since 1950 two highly significant political events have occurred 0 the emergence of China into the global market economy 0 and the collapse of the prevailing political systems in the Soviet Union and its Eastern European satellites in 1989 gt the re emergence of Asia as the world s most dynamic economic region Rollercoasters and interconnections Two particularly important features have characterized the global economy since 1950 the increased volatility of aggregate economic growth and the growing interconnectedness between different parts of the world Aggregate trends in global economic activity inherent votality o path of economic growth certainly does not run smooth It s a rollercoaster quotBetween 1870 and 2006 there were no fewer than 255 recessions in a sample of 17 western economies However twothirds of the downturns were over within a year and only 33 lasted longer than two yearsquot Rates of economic growth reached unprecedented levels the period between the early 19505 and the early 19705 became known as the golden age But then in the early 19705 the sky fell in The long boom suddenly went bust the golden age became tarnished then in the early 19905 recession returned 0 spectacular growth in world trade in 1997 followed by far slower growth in o 1998 and 1999 partly related to the East Asian financial crisis and to its contagious effects on other parts of the world 0 acceleration in world trade in 2000 o spectacular bursting of the growth bubble a problem certainly exacerbated though not caused by the 911 terrorist attacks on New York City and by the crisis in the IT dotcom sector of the socalled new economy High growth rates returned once again 0 Then in 2008 seemingly without warning the deepest recession since the late 19205 suddenly occurred Growing interconnectedness within the global economy 3 major dimensions 0 Trade has grown faster than output 0 In the second half of the twentieth century world merchandise trade increased almost twentyfold while world merchandise production increased just over sixfold I Countries are becoming more tightly interconnected through trade flows I reflected in the ratio of trade to GDP 0 huge variation between countries in such trade integration I international trade is bound to be more important for geographically 5ma countries than for large ones the result of a simple size effect in virtually all cases the importance of trade to national GDP has increased significantly as Table 21 shows 0 Trade by regions I Europe is the world s major trading region However almost threequarters of that trade is intraregional that is between European countries themselves I Asia is the second most significant trade region with a little under onehalf of its trade conducted internally I North America also conducts around 50 per cent of its trade internally with an especially large increase in trade involving Mexico Asia and Europe o FDI has grown faster than trade 0 growth of foreign direct investment FDI has outpaced the growth of trade I from 1985 the rate of growth of FDI and of exports diverged rapidly With some exceptions FDI grew faster than trade This divergence suggests that the primary mechanism of interconnectedness within the global economy has shifted from trade to FDI 0 common element is the transnational corporation TNC I number of TNCs has grown exponentially over the past three decades stat p37 0 intrafirm trade I subject not to external market prices but to the internal decisions of TNCs I especially important as the production networks of TNCs have become more complex and as production circuits have become more fragmented 0 relative importance of inward and outward FDI to a country s economy measured by its GDP highly variable among countries 0 Serious structural imbalances in the world economy have emerged 0 pattern of trade balances in manufacturing services and agriculture 0 accumulated result of these three sets of trade balances creates a huge dilemma for the global economy the potential instability created by the fact that some countries have huge trade and current account surpluses whilst others have enormous deficits stats p39 The Changing contours of the global economic map global shifts in production trade and FDI Continuing geographical concentration within the global economy the old and the new 0 Substantial geographical shifts have undoubtedly occurred in the global economic map in the last few decades 0 developing countries share of GDP exports and inward FDI has increased significantly eg p42 0 geographies of production trade and FDI remain highly uneven and strongly concentrated p42 I threequarters of global manufacturing and services production and almost fourfifths of world C 39 39 39r 39 39 are Iin just 15 countries I in the case of FDI More than 80 per cent of outward FDI stock originates from 15 countries half of all the inward FDI in developing countries is concentrated in just five host countries 0 newly industrializing economies NIEs that have become so important in global manufacturing have their agrofood counterparts the newly agriculturalizing countries NACs The BRICsBrazil Russia India China a new phenomenon or a chaotic category these would become the major players in a future world economy big and have experienced rapid rates of economic growth in recent years The US Still dominates the global economy though less so dominance has been much reduced as other competitors have emerged stats p44 substantial changes in the US position as a source of and destination for FDI the US has become significantly more important as an FDI destination Inward and outward FDI are now much more equal than in the past Europe is still a major player but its performance is uneven o The European economy is actually very diverse experiencing uneven rates of economic growth over the past two decades as well as uneven rates of decline in the 2008 recession 0 Germany is by far the biggest European economy in global terms p45 0 The UK second biggest economy has experienced the greatest longterm reative decline but still the world s second biggest source of FDI and second biggest exporter of commercial services 0 Considerable differences in trade performance between individual European countries Whereas France the UK Spain and Italy have merchandise trade deficits Germany the Netherlands and Sweden have surpluses 0 Europe remains a major magnet for inward investment as well as the leading source of outward FDI Emergence of the Transitional economies of Eastern Europe and the Russian Federation 0 Soviet Union coapse gt many countries experienced transitional economies from former command economies into capitalist market economies 0 heavy emphasis on basic manufacturing industries painful in many cases 0 big differences within the group of economies both in terms of their scale and in terms of their potential for growth within a market 0 four most significant economies are the Russian Federation Poland the Czech Republic and Hungary 0 latter three became members of the European Union in 2005 o achieved impressive export performances during the 1990s 0 Much of this growth was underpinned by inward FDI which grew substantially from the early 19905 Back to the future four tigers a dragon and the resurgence of Asia 0 most significant goba shift in the geography of the world economy during the past 50 years 0 twentyfirst century being lthe Pacific Century and of the future belonging to Asia 0 4 major processes 0 The rise of Japan after the Second World War 0 The rapid growth of what came to be called the lfour tigers Hong Kong Korea Singapore and Taiwan followed by the emergence of a second tier of East Asian developing economies primarin Indonesia Malaysia and Thailand o The re emergence of China the dragon as a major participant in the global market economy 0 The potential economic dynamism of India Latin America unfulfilled potential Modest economic performance contrasts markedly with that of East Asia although annual average growth in GDP between 2000 and 2007 in most Latin American countries was a little above the world average Within Latin America itself there is a clear contrast between relatively fastergrowing economies like Chile and Mexico until recently and relatively slowergrowing economies like Argentina and Brazil Mexico During the 1990s the major exception was Mexico stats p51 Brazil Despite a long history of industrialization and some undoubted successes in automobiles for example Brazil s involvement in the world economy is mainly in primary commodities agriculture mining products Like India Brazil has enormous economic potential but such potential is far from being realized The persistent peripheries those parts of the world whose economic growth remains very limited most of the continent of Africa parts of Asia and parts of Latin America The microscale cities as foci of economic activity 0 Considerable diversity between cities and local regions within any individual country in terms of economic specializations and growth rates 0 reflects their specific historical trajectory o outcome of very specific political decisions to develop one particular part of a country The mesascale transborder clusters and corridors Cutting across both nationally bounded economic spaces and the highly localized concentrations of economic activity in cities which crosses or sometimes aligns with national boundaries Examples 0 Europe s major economic growth axis can identify a distinctive growth axis running north west to southeast across the core area and cutting across national boundaries quotmost advanced areas of Europe and most of Europe s major international cities lie on or near an axis extending from the northwest of London through Germany to Northern Italyquot 0 The US Mexico Border Zone form of economic and urban development is actually defined and created by the existence of a border between countries Where there is a very marked differential between two adjacent countries The US Mexican border is defined in the starkest of physical terms by a whole string of towns and concentrations of manufacturing activity along its entire length These simply would not exist at least in their present scale and form were it not for the border and the special legislation that created the maquiladora The dynamic global economic map More complicate than that of only a few decades ago In spite of some clear elements of continuity there have occurred some dramatic changes World economic growth has become increasingly volatile shortlived surges in economic growth are punctuated by periods of downturn or even deep recession Major geographical reconfiguration a handful of older core economies still dominate but there are global shifts most important has been the emergence of East Asia Political events in Soviet Union most important influence on the changing geography of global economy Simple global geographical division of labor has been replaced by a far more complex multiscalar structure 39a mosaic of unevenness in a continuous state of flux39 Only a small number of developing countries have experienced substantial economic growth others in deep financial plight organizational and stylistic guidelines for ECONPOLS 332 essays Spring 2012 Name date of words title The era between the late 19th century and the early 1970s can be divided into three periods The first period is characterized by fragmentation globality globalization KEEP BRIEF 1 an informative subtitle here that conveys period and characteristics The characteristic of the period that best supports the argument that this was a period of globalization was According to Frieden 2006 chs and the instructor date of lecture or commenthere you clarify this characteristic of dynamic in general terms and the reason why you think it supports your interpretation The significance ofthis characteristic or dynamic is illustrated by here you can provide two examples from different parts of the period and different parts of the globe that show the impact or operation ofthis characteristic or dynamic here you will have to reference particular pages The characteristic of the period that best supports the argument that this period was also one of globalitywas the Colorado information can be integrated into each subsection or separately at the end of each part Overall then this era has been one of KEEP BRIEF References sample Colorado Department of Personnel and AdministrationNdCoIorado State Archives Colorado History Chronology URL httpwwwcoloradogovdpadoitarchiveshistoryhistchronhtm accessed February 12 2012 Or Colorado Department of Personnel and AdministrationNdColorado State Archives Colorado History Chronology ECONPOLSSSZ RamCt Site accessed February 12 2012 Frieden Jeffrey 2006 Global Capitalism Its Fall and Rise in the Twentieth Century New York WW Norton General Evaluation Rubric 1 Iquot 5 Each part is worth 30 points out ofa hundred 3x30 Each subsection then is worth 15 points I will look closely at whether the dynamic or characteristic supports your assertion 5 pointswhether the examples illustrate the dynamic or characteristic whether the information is stated clearly and accurately whether your comments about Colorado are accurate and whether you have utilized the readings and the lectures appropriately The remaining 10 points will be used to evaluate the overall organization of the essay the quality ofthe brief introduction and conclusion the format including references and in text citation style I do not expect your use every chapter ofthe readings Your essay however should make it apparent that you are familiar with the full range of readings and lectures and that you have used the most appropriate chapters and parts of chapters