Furthermore, new analysis has been added on the international political economy of work, labour, and energy. This ensures that Global Political Economy is the most up-to-date and relevant textbook on the subject available. This book is supported by online resources designed to help students take their learning further. Regional Trade Agreements, John Ravenhill 7. Oxford University Press is a department of the University of Oxford.
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To purchase, visit your preferred ebook provider. Also of Interest. Enforced Disarmament Philip Towle. The Ways of the World David Harvey. Individual securi- practice of securitization, which had initially developed ties were increasingly split into tranches, each of which in the s. Before that period, providers of mortgage carried a different level of risk: the higher tranches had finance typically held the loans they had made until the first claim on any income that the lender received; the borrowers repaid them: in other words, they bore all the risk of the lending and typically financed the loans lower tranches would be the first to absorb any losses.
As the demand for mortgage At the beginning of , securitization accounted for finance rose, however, and lenders became increasingly approximately 28 per cent of outstanding credit in the concerned about risk, they developed the practice of- United States: the figures for the UK and the euro zone ten with the assistance of other financial institutions of were 14 and 6 per cent, respectively IMF b: box 1.
That problems which began in the home lending points to per cent in , the largest increase 5 market in the United States could plunge the world since the Second World War IMF b: box 1. Finance for interna- output and global trade fell more rapidly than in the tional trade dried up.
The world economy quickly s—by 13 per cent and 20 per cent, respectively. How lending, output in many developing economies ei- the recession differed from the s, however, was ther went into reverse or declined below the rate of that at least the initial downturn was not so pro- population growth.
Goals see Chapter 13 in this volume by Nicola One reason for the severity of the recession that Phillips. As the potentially massive burden on the public purse for World Trade Organization WTO noted, the rapid the recapitalization of these institutions.
The bail-outs, cou- volume by Eric Thun. As a consequence, the ratio of public ternational governance. The mediation, of which an important aspect was the world economy had enjoyed a sustained long boom, securitization of mortgage debt, had two important continuing on an upward trajectory despite the consequences.
For students of global quickly transformed into a global crisis. Valukas, an examiner appointed by the Brogger The duced remains unclear. The crisis also saw crises in the s and s. Box 1. The inaugural meeting of the G20 took place ex officio basis. The G20 remained a relatively low-profile and low-key The membership of the G20 comprises finance minis- grouping until the recession, when an inaugural ters and central bank governors of Argentina, Australia, meeting of the political leaders of the G20 was held in Brazil, Canada, China, France, Germany, India, Indonesia, Washington, DC in November.
The European Union, represented by industrialized economies that their own grouping the the rotating Council Presidency and by the European Group of Eight G8 —see below was not sufficiently Central Bank, is the twentieth member of the G Canada joined the Brazil. At their meeting in Pittsburgh in September , group in , at its second meeting. One of the were equivalent to 1. Many its foundation. The concerted international re- the international community to it provide an ex- sponse was testimony to how the governance of the cellent illustration of many of the themes of this global economy had changed since the great de- book: pression of the s.
And despite the striking sixteenth centuries. This was a period in which extension of the global market during the seven- despotic monarchs in Western Europe, seeking to teenth and eighteenth centuries, the vast majority consolidate their power against both internal and of commerce continued to be conducted within in- external foes, pushed to extend the boundaries of dividual localities until the advent of the Industrial markets.
In this era of mercantilism, political power Revolution. The introduction of steam power revo- was equated with wealth, and wealth with power lutionized transportation, both internally and inter- Viner Wealth, in the form of bullion gen- nationally. The new concentration of mili- of the world and to a deepening of the international tary power could be projected, both internally and division of labour.
The value of world exports grew externally, to extract further resources. The con- tenfold from a relatively small base between solidation of the state went hand in hand with the and from to , world exports grew at extension of markets. Gradually, most parts of the an annual average rate of 3.
The industrialized countries of the Navigation Acts — , which restricted the world—essentially a Western European core to use of foreign vessels in British trade, enabled it to which had been added the United States and Japan monopolize trade with its ever-expanding empire.
The post- it was not until that machinery exports ex- increase in tariffs offset some of the gains from ceeded those of cotton, although by the US had lower transportation costs. Lindert and Williamson become a net exporter of manufactured goods data estimate that nearly three-quarters of the from Mitchell , table E3; and Irwin In Table 9.
To be sure, some nineteenth century, but capital and people moved changes had occurred in the composition of im- relatively freely across the globe, their mobility ports. From to , 26 million come staples in the diet of the new urban working people migrated from Europe to the United States, and middle classes, their aggregate importance in Canada, Australia, New Zealand, Argentina, and European imports had shrunk relative to other Brazil. For the United Kingdom, a larger ular.
Mitchell , table E2. Similarly, Algeria The spectacular growth in international eco- was a larger market for French exports in than nomic integration was not accompanied by any was the United States. For example, if France had a trade convertible into gold although Britain had oper- treaty with Germany in which it had reduced its tariffs ated a de facto gold standard from as early as The gold standard in and turned this into a de MFN principle is the foundation for non-discrimination jure arrangement in Germany and other in- in international trade, and is often asserted to be the dustrializing economies followed suit in the s.
In the United States, the coins, because other metallic coins and banknotes were opposite would occur: an inflow of gold would boost the also used in some countries and bank deposits would be money supply, thereby generating additional economic freely convertible into gold at the specified price. Because British exports do equilibrium automatically in international payments. Cen- not cover the full costs of imports from the United States, tral banks, however, were also expected to facilitate British authorities would have to transfer gold to the US adjustment by raising their interest rates when coun- Treasury.
The discovery of gold in California in , for were experiencing a payments surplus. For most of the example, led to an increase in the US money supply, domestic inflation, and an outflow of gold to its trade period from to , the Bank of England played partners, which in turn raised their domestic price levels. Other cen- Countries on the periphery were particularly vulnerable tral banks—including those of France and Belgium—did to shocks: interest-rate increases in the industrialized not.
Officer These do- would buy the same amount of sterling at the date mestic costs became less acceptable with the rise of their investment matured, and that the US Trea- working-class political representation, and with the sury would convert the dollars back into gold at growth of expectations that a fundamental respon- this time. Meanwhile, they received interest on the sibility of governments was to ensure domestic full sums invested.
The conse- states. The war brought to an end an era of quence was that sterling was generally reckoned unprecedented economic interdependence among to be overvalued by at least 10 per cent, mak- the leading industrial countries. As discussed in ing British exports uncompetitive. Italy—restored convertibility of their currencies at The war devastated the economies of Europe: a much lower price of gold than had prevailed subsequent political instability compounded eco- before Polanyi of England to impose exchange controls—a re- is the classic statement of this argument; on the fusal to convert sterling into gold and a de facto misguided attempts by Britain to restore the con- ban on gold exports.
Other countries followed vertibility of sterling at pre levels, see Keynes suit. Leading countries agreed to reinstate a mod- The Bank of England lost became increasingly concentrated in closed impe- 14 much of its reserves in July and August of that rial blocks. The League of valuation in the brief period in which the gold Nations had established an Economic and Financial standard was restored. Other countries again Organization with subcommittees on the various quickly followed in breaking the link between their areas of international economic relations.
It en- currencies and gold. It also held various conferences after the Wall Street collapse of October This raised US tariffs to histori- approval. The value of world trade de- international political economy; see Hiscox ; clined by two-thirds between and , and Irwin and Kroszner John Ruggie, a lead- sectors. Neither in the period of relative stability following Polanyi , terms embedded liberal- of the pre-First World War gold standard era nor ism, and a commitment to multilateralism Ruggie in the chaos of the s did leading economies For Ruggie , multilateralism is not especially a commitment to maintaining full em- merely a matter of numbers—it involves collabo- ployment on the one hand, and an opening up ration among three or more states, not necessarily of the domestic economy to allow for the restora- all members of the system—but it also has a quali- tion of international trade and investment on the tative element in that the co-ordination of relations other.
A classic example is the most-favoured rary basis, from their international commitments nation principle, with its requirement that prod- should these threaten fundamental domestic eco- ucts from all trading partners must be treated in nomic objectives. Moreover, an acknowledgement the same manner regardless of the characteristics of the legitimacy of the principle that governments of the countries involved.
This principle for the should give priority to the pursuit of domestic conduct of trade contrasts, for example, with the economic objectives was also written into the largely bilateral trade agreements of the inter-war rules of the game. The adoption of the prin- years, where governments, rather than applying a ciple of embedded liberalism was a recognition generalized principle to their trade relations, dis- by governments that international economic col- criminated in their treatment of individual trading laboration rested on their capacity to maintain partners.
For the whole of the pe- affairs see Ravenhill, Chapter 6 in this volume. Woods, New Hampshire, to chart the future of the These institutions and the rules for managing in- international economy in the post-war period.
The ternational finance that were agreed became known forty-four governments represented at what was of- collectively as the Bretton Woods regimes. In , ficially known as the United Nations Monetary and a United Nations Conference on Trade and Em- Financial Conference agreed on the principles that ployment in Havana, Cuba, drew up a charter would govern international finance in the post-war www.
For details of the volume. The unprecedented rates of economic growth Aggregate rates of growth, however, disguised achieved in the years after attest to the success substantial variations across different regions of the of the pursuit of multilateral economic collabo- world economy. The gap between rich and poor ration in this period. Global GDP grew at close widened substantially see Figure 1. In , to 5 per cent in the period — Although little difference had existed in per capita incomes the recessions that followed the oil price rises of across various regions of the world.
By the third quarter of the nineteenth , world GDP nonetheless grew at an aver- century, however, a marked gap had developed be- age of 3 per cent per annum, a faster rate than tween incomes per capita in the United States and during any period before Maddison Western Europe on the one hand, and those of the , table 8— Moreover, world trade grew more rest of the world.
Per capita incomes in Africa and rapidly than world production: world exports ex- in most parts of Asia stagnated and in China actu- panded by close to 8 per cent per annum in the years ally regressed for a century.
The internationalized sector con- economies and the rest of the world contin- sequently grew in importance in most economies, ued to widen: the divergence increased rapidly in with important implications for the balance of do- the post era.
Only a handful of previously less mestic political interests on trade policy issues see developed countries LDCs , mostly in East Asia, Hiscox, Chapter 4 in this volume. The poor export perfor- in moving goods between national markets.
And mance contributed to falls in per capita income when foreign investment took off in earnest, in the that occurred in the majority of years between half-century before the First World War, the vast and Growing international in- over the borrowing company. Companies that en- equality has been a fundamental part of the modern gaged in foreign direct investment—that is, the globalizing economy see Wade, Chapter 12 in this ownership and management of assets in more than volume.
In the referred to in some chapters of this volume as post-Second World War years, FDI took off, and multinational enterprises. Figure 1. By , it was estimated that there trade. Contrary to some popular impressions, by the the nature of international trade fundamentally. In end of the s, manufactured exports constituted particular, the composition of trade has changed 70 per cent of the total exports from the developing dramatically since Whereas in the inter-war world.
The share of manufactures in their exports years the composition of trade differed little from had increased threefold since the end of the s that of the previous centuries—that is, it was based UNCTAD xviii. At independent states in the system. In many instances, it involved at the Bretton Woods conference, which was dom- intra-industry trade, that is, the international ex- inated by the industrialized countries of Europe change of products from the same industry.
For and North America, but also included a few of the example, intra-industry trade occurs when Swe- long-independent countries of Central and South den exports Volvo cars to Germany and imports America. Within two decades, almost all of the BMW vehicles from Germany.
As this example colonies of the European countries had gained their suggests, product differentiation by brand name independence. This development had profound im- often provides the basis for intra-industry trade, plications for the international system.
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