Globalization influences our daily life positively and negatively. Joe, Angela, and Elizabeth summarized various issues which are caused by or accompanied with economic globalization. Also, as many of you gave a report, the so-called “Bretton Woods Institutions” which consist of the World Bank, the International Monetary Founds (IMF), and the General Agreement on Tariffs and Trade (GATT) (replaced by the World Trade Organization (WTO) in 1994) in 1946 have been the key facilitators of economic globalization in addition to Multinational Corporations (MNCs). Their motivations and actions are justified by theories of “Economic Liberalism”.
1. What are the core elements of economic liberalism?
2. How do merchantilists/statists and radicals criticize economic liberalism?
3. Based on the economic liberal theory, IMF enforces structural adjustment programs (SAP). What is it? What are problems of SAP?
4. As Marti presented, today the World Bank and IMF and other aid agencies promote sustainable development. What is it? How is it different from the traditional concept of economic development based on economic liberals? Who should be the responsible to promote sustainable development?
1- Economic liberalism starts with the idea that individuals act in self-interest (rationally) to maximize their gains and minimize the opportunity cost of their actions. Markets operate on this condition and are efficient if left alone. Government interference hinders this process and, therefore, is discouraged. Another idea is that free trade maximizes wealth for everyone involved. Markets are geared towards trade which, if done according to comparative advantage, is highly efficient and provides the best outcome for everyone.
ReplyDelete2- Mercantilism criticizes its acceptance of economic interdependence and limited concern for state power. In economic liberalism, there is no need to restrict imports, leaving domestic industries unprotected and resulting in unemployment, which may be detrimental to state power. Statists see the capitalist system that economic liberalism entails as the cause of conflict in society. To many radicals, the Bretton Woods institutions are tools used by capitalists to bring profits to the north and blame them for further cementing global economic inequality.
3- Structural adjustment programs target countries with large debt, over-valued currency and/or large fiscal deficits with the aim of eliminating debt and rejuvenating stifled economies. The IMF offers assistance to these countries if they implement policies that help achieve these goals. The criticisms of the SAPs are that they often support authoritarian regimes and don't put enough emphasis on poverty reduction.
4- Sustainable development is a concept that ties economic development to concern for the environment and renewable resources. It differs from the "development" of economic liberalism in that it condemns certain actions that may be taken to spur economic growth, particularly those that involve the exploitation of scarce resources and cause harm to the environment. In this view, future economic growth can't occur unless steps are taken to protect the environment. Sustainable development also calls for the IMF and World Bank to focus on human development instead of projects that would burden the environment and to reschedule debts in LDCs when they put too much stress on natural resources in trying to pay it off.
Devvora Olalere
ReplyDeletePS 2810
07/24/09
Globalization
1. Economic liberalism is the pursuit of self-interest in a free, competitive economy, which achieves the greatest good for the greatest number in international no less than in the national society. In more detail, the theory of economic liberalism is based in the harmonious nature of international economic relations. In the world of free market, the states do no interfere with economic transactions across national boundaries. Through free exchange of commodities removal of restrictions on the flow of investment, and an international division of labor, everyone will benefit in the long run as a result of a more efficient utilization of the world’s scarce resources. Therefore, the national interest is as well served.
2. On the other hand, mercantilism criticizes economic liberalism as being anarchic, inherently conflictual and hence inefficient. Mercantilists believe in the creation of powerful states that are dedicated to pursuit wealth and economic power by singling out certain industries for special tax advantages; they promote exports over imports and encourage education and technological innovation in an attempt to become more completive. Mercalists also believe that all states cannot benefit simultaneously, but they have to be competitive so that they will enjoy more surpluses than the other states. In addition, radicals hold the same view, as they think that economic liberalism is conflictual. According to them, there is no harmony, as one state’s gain is another’s loss and the poor is getting poorer and the rich is getting richer.
3. SAPs are IMF policies and recommendations aimed to guide states out of balance-of payment difficulties and economic crises. The IMF dealt less with developed countries and more with the developing ones. It provided long and short term loans at below-market interest rates for countries in all sorts of economic difficulty. Governments were using the IMF to produce changes in policies that they desired, but unfortunately, these changes did not promote economic growth or poverty reduction and the country was put in debt due to the amount of loans it had to pay.
4. In the 1990s, sustainable development, an approach to economic development that tries to reconcile current economic growth and environmental protection with the needs of future generations became part of the World Banks’ repertoire. It is based in the idea that development that is sustainable and not damaging to the environment is possible thus it has to be accomplished. For economy liberalism as the environment is not the major concern of the free trade and the governments cannot have a big effect on it. In order for sustainable development to occur, economist should work together with environmentalists and the World Bank, with the aid of UN and governments should be responsible for it underneath certain rules and regulations that protect the environment and allow the contribution of loans to countries.
Liberal economics is based on the recognition that states differ in their resource endowments (land, labor and capital). Goods and services should be bought and sold in a free market system with no strings attached. Individuals and governments buying and selling currencies determines the actual value of one currency as compared with other currencies. There is a supply and demand for each national currency and the prices of each currency constantly adjust according to market supply and demand. Economic actions of individuals are largely based on self-interest, and by allowing individuals to act without any restrictions from the goverment, etc will produce the best results.
ReplyDeleteThe core elements of economic liberalism are Humans act in rational ways to maximize their own welfare. In regards to the relationship between the individual and the state, the views of economic liberalism is that individual act rational and create markets for goods and the distribution of goods.. These markets work best and eliminate inefficiency when left free from government. There is free trade through nations and hopefully trading gaps eliminated. There is the comparative advantage (ie) and states will specialize in certain things, this is due to the labor force, and free trade between states and try to be on equal terms. There is the absolute and the comparative, absolute advantage is where the state with the greatest advantage has the most economic activity, ie if you’re the best at producing something then you are the only supplier even if there is not an comparative advantage.
ReplyDeleteThe statists or mercantilism is a protectionist philosophy, the best interest of the state is taken in mind and that is that placing tariffs is best. The idea is that it is necessary to act in the best interest of the state and if that means that export is the most important function of the economy. Marxists on the other hand believe that first people together act in cooperation but as a hole when 2 societies are put together economics causes conflicts. These theories are exactly opposite of economic liberalism.
The problem with SAPs is that they fund and build unscrupulous regimes, they care more about the return on their development and deconstruction of tariffs, rather than democracy or welfare of those most impoverished.
The Bretton Woods model has a focus on reducing debts, lowering taxes, possible creation of revenue in other fields, and finally apply UN environmental regulations. There is four ways to currently think about development, and sustainable is the second one that the book states This is the idea, but Bretton Woods is not favored by all but it has held up for fifty years so it is here to stay, for now.
Question 4
ReplyDeleteSustainable development is an approach to economic development that tries to reconcile current economic growth and environmental protection with the needs of future generations. This approach was developed by the World Bank in the 1990's. Sustainable development is different from the past approaches used in the early decades. In the 1950's and 60's the World Bank funded large infrastructure projects such as building damns. In the 1970's they started funding projects that involved health,education and housing to help improve the quality of life for the poor. In the 1980's they switch their focus to relying on the private sector to help restructuring economies and states torn apart by conflict.
However, in the present much concern has been placed on the environment due to the effects of global warming, pollution and the depletion of some of our natural resources.. Renewable resources are at the heart of this focus. For economic development to happen the state must take measures to protect its resources. In addition the state should develop programs that will promote funding on research and exploitation of renewable resources.
Organizations like the World Bank need to work along with developing states for "sustainable development to be successful.
Good. But, how shold we change the current assistant system for sustainable development by the World Bank and IMF?
ReplyDeleteEconomic liberalism is a free-market left to the individual. In economic liberalism the government does not interfere with the economy. However, it is up to the state to provide what is needed to allow a free market or capitalism (roads, canals, schools, etc.)
ReplyDelete-Brent Stapleton
1. The core elements of economic liberalism is a hands off economy. The competitive market should be able to take care of themselves. The market would bring around national interests. The government also gives the rights tools to help the market keep running.
ReplyDelete3. Adjustments are targeted to tackle the most important problem large debt, and help economies that are struggling. The IMF puts things into play and gives authoritive troops to help enforce
Elizabeth Lukowski
1. The key elements of economic liberalism is a general freedom to do business. Buyers and sellers come together and set prices bases on what both parties agree upon, since the two parties have conflicting objectives, they met at a point that is mutually beneficial to both of them. There is a degree of government involvement though. The government makes sure that all parties play by the rules (prosecuting those who steal) provide a currency to trade in and provide the infrastructure to move the goods and services from seller to buyer.
ReplyDelete2. They are disturbed by the ideal of the craziness of the whole ideal. They would like to see a more state centralized economy, which puts the nation, in their minds, on stronger footing, exports over imports, strong protection over domestic industries and a population that is suited to the state’s economy. They are also in favor of price controls and tariffs.
4. The concept is different than the economic liberal theory because it takes into account the impact of the economy outside of dollars and cents. It’s not possible to sell lumber if there are no trees or if the water is so polluted trees won't grow. It’s pretty much protecting the economy from itself. It is different because the old ideal of an economy is efficiency the new ideal is efficiency with respect to future profits. For instance it’s more efficient to recycle a aluminum can then to dig it out of a mountain, process it and ship it to the can maker. It’s not a revolution, its only evolution in the market. Everyone needs to be responsible, from individuals to multinational corporations. in the more developed countries technology makes it easier to be sustainable in developing countries where land and labor are inexpensive a carrot and stick approach is needed, help them become sustainable if they choose not to, hit them with tariffs and embargos.
the above comment is from
ReplyDeletejoe puleo
ps2810
Antoinette Golston
ReplyDelete1.) Economic Liberalism and its structure is really defined in great detail by the General Agreement on Tariffs and Trade. Trade is supported by economic liberalism through globalization and through different organizations such as the IMF. It is also important when considering economic liberation to stand for nondiscrimination and the rights to protect all individuals who partake in free trade.
2.)Merchantilists/Statists criticize economic liberalism by stating that liberalists do not exhibit safe security. The also enforce strategic outlines and guides as well as expand prices so that in will be harder for economic liberalist to export goods and make substainal amount of profit.
3.)Some of the Structural adjustment programs that the IMF enforce are the Heavily Indebted Poor Countries which is in place for forty- one countries that are in financial debt. This particular program is set in stone so, that they will simply be eligible to recieve assistance.
4.)Substainal development is defined as an approach to economic development that tries to reconcile current economic growth and environmental protection with the needs of future generations(255,Mingst).
It is important for the state, as well as the country and the individual to be responsible for economic development if we do not work together in order together as a whole to savor the resources on our planet and to make sure the planet does not pollute in poverty. If we do not take responsiblity globally we will suffer tremendeously.