Politics of the World Economy - Assignment Example

Free Rider This would be occurring when the common man would be enjoying good service without paying anything and that would mean that people would be enjoying good without paying for the cost and there would be a danger that the good would be under provided.( Day, R.H. 1983) GATT The general agreement on Tariffs and Trade could be said as a multilateral trade agreement that has been signed between 150 countries and the purpose of GATT has been to make sure that there has been substantial reduction in tariffs and elimination of preferences and other trade regulations.( Debreu, G. 2004.) The Unholy trinity The unholy trinity has been that in international economics it has been impossible to get three economic factors together like a fixed exchange rate, free capital movement and an independent monetary policy. The country would be always forced to choose either two parameters of three parameters that have been discussed. Foreign Direct Investment FDI is that form of investment in which the business interest of the investor of the company has been served in an area that is outside the investors nationality of orgin.That means the company would be functioning in an area outside the domestic area. TRIP Trade Related Aspects of Intellectual Property Matters. It has been considered as the most controversial element of WTO.Trip would be dealing with intellectual property rights and there has been accusation that developed economies would be difficult for poorer countries to implement. Conditionality IMF conditionalities: The loans would be supporting the balance of payment made by other countries and there would be macroeconomic conditionality’s that has been used to reduce the external flow .There would be conditions that would be used when giving development aid and that has to be termed as conditionalities. Core Periphery The theory has been that a region would be increasing the economy and their role would be that the near areas would be developed economically. The areas that are having the high economic growth would be called the core areas and the nearby areas would be called the periphery areas and it is the duty of the core areas to develop periphery areas. There would be joining of peripheral areas that would be looking at development of core areas. BIS Bank for international settlements The need to strengthen financial systems worldwide has led to the development for banking institute and that has been used with Basle Committee on Banking Supervision is establishing an Institute for Financial Stability. The institute role would be to organize the high-level seminars directed at key policy making officials in central banks and supervisory agencies; the provision of training on a regional basis for groups of senior officials that implement policies. Question no 2 French President Nicolas Sarkozy said, in light of the global financial crisis, ‘we must rethink the financial system from scratch, as at Bretton Woods’. What lessons can be learned from the original Bretton Woods: the fixed currency regime, the IMF, WB and GATT/WTO?( The economic crisis of 2008 has led to the debate on the global economic governance and the main cause for the failure has been that it has been accustomed to the failure of national governance. The global recovery would be linked to large current account imbalances and international policy coordination would be strengthening the global recovery. Global governance should not be related only to economics and that should be also related to other streams like human rights and there has to be a bigger role for the IMF. At the original Bretton Woods meeting, the founding fathers would be designing a system like the International Clearing Union that would be used to get the financial and exchange rate stability, a Global Bank that would be used to finance reconstruction and development and an International Trade Organization to promote free trade and stabilize commodity prices. These three pillars would be termed as IMF,World Bank and GATT. The Bretton Woods institutions, has been started from the year 1944,with the IMF started by John Maynard Keynes and Harry Dexter White, the two main persons of Bretton Woods meeting.( Foley, D.K. 1994) They were started with the intention of guardian of global liquidity, a function that it was supposed to fulfill by monitoring the stable exchange rates and there would be providing steps to overcome the cyclical balance of payments. The IMF has become the provider of crisis to the developing countries and the developed countries have not been giving much importance to this. There were no financial programs that has been designed for rich countries and IMF was not involved in corporate macroeconomic governance and the erosion of United Nations system along with the Breton Woods system of multilateral agencies would have to be considered. The legitimacy of the IMF has been questioned these days and future of the IMF has been questioning. The US has been upholding the private enterprise and there has been demand for access for corporations and there have been more tolerance, protectionism and investment controls and there has been a strong role for government in managing the economy. ( Goodwin, R.M. 2007) There should be relationship between economic weight and resources that has been made to an organization and the share of governance. There has been accusations of biasing towards European countries by IMF.Public health has been reached a very large proportion of GDP and the debt could be short term and there would be roll over problems. Question no three Using Liberal theory, explain why small, weak states would be the worst off from a collapse of the WTO. In your answer, describe the basic tenets of liberalism and the threats facing the WTO There has been an instance in which the WTO has been helping small and weaker states and any weakening of the WTO would mean that the small nations would be at disadvantage. There has been a belief that big states and nations would be winning more concessions from WTO and that has been because that larger states would be winning concessions and they would be making credible retaliatory threats against the offending member. GDP has been the most important part and bilateral trade flows has been also used for finding the increased legislation. There have been inconsistent findings and that would give current measure of economic power. Economic retaliation would be affecting coalitions and size of the economic sanctions would not increase the likelihood of compliance, though the results are difficult to interpret. There would be developing of WTO economic growth that could capture global attention. The experience of Asian economies would be giving the lesson that adoption of outward-oriented developed strategies would be helping to harness trade as an engine of growth and alleviate poverty.( Foley, D.K. 2007.) Trade l of the Doha Round would be helping the small and weak states the most and the main problem with developed economies is that they do not have the capacity or infrastructure to reap benefits from global trade. There has to be aid that would be helping the economies to strengthen their capacities through outward market-oriented reforms to participate in the process of globalization. Regional multilateral development banks like ADB have been involved from the start of WTO’s Aid For Trade Initiative that was launched at the WTO Ministerial Conference in 2005.There has to be a need access to infrastructure, like transport, telecommunication networks, modern custom facilities, and financial resources to make the necessary transition to develop open, market systems and other key services that drives globalization and that would mean that WTO would be affecting the small and weaker state’s economy. There has been increased threat to WTO in the form of increasing resistance to WTO trade policies and ADB and that would mean that the failure of WTO in not preventing the global finical crisis and that would mean there has been more criticism against WTO. World economy has been a system of markets, that would be connecting profit maximizing enterprises and consumers, would be operating according to laws of demand and supply and comparative advantage. World economy would be expanding the voluntarily and would be becoming a single integrated whole, leading to convergence of living standards everywhere, with minimal role of governments. Powerful state use control over cross border trade and cross border investment would be looking at the role of WTO. The issue of multilateral trade liberalization for small states would be the prime discussion when WTO falls apart and WTO has to be alert to prevent the economic disaster and frauds and that would be helping to gain the confidence of the general public. References Day, R.H. 1983. The emergence of chaos from classical economic growth. Quarterly Journal of Economics 98, 201-213. Debreu, G. 2004. Excess demand functions. Journal of Mathematical Economics 1, 15-23. Foley, D.K. 2007. Resource allocation and the public sector. Yale Economic Essays 7, 43-98. Foley, D.K. 1994. A statistical equilibrium theory of markets. Journal of Economic Theory 62, 321-345. Goodwin, R.M. 2007. A growth cycle. In: C.H. Feinstein (Ed.), Socialism, Capitalism and Economic Growth: Essays Presented to Maurice Dobb. Cambridge, UK: Cambridge University Press, pp. 54-58. Read More