PART 3: Implications and Consequences of Globalization Chapter 11 - Foundations of Economic Globalization #1 (Pages )

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1 PART 3: Implications and Consequences of Globalization Chapter 11 - Foundations of Economic Globalization #1 (Pages ) Economic globalization is the process of economies throughout the world becoming more interconnected. Some key events in our modern world have led to the development of economic globalization as we know it today. These events are: * the Bretton Woods Agreement, 1944 The countries that fought against Germany, Italy, and Japan in the Second World War were known as the Allies - the Allies became concerned with how they would rebuild their economies following the war. The Allies met in Bretton Woods, New Hampshire, USA to discuss the problem. They founded the World Bank, the IMF, and GATT; now the WTO. * the creation of the World Bank, 1944 The Allies hoped the World Bank would be able to help rebuild countries devastated by the war so it provided billions of dollars in financial aid to Western Europe following the war. The World Bank today continues to provide loans to member countries in financial difficulty. For countries to receive loans they must meet certain criteria. These criteria include that the country must reduce government debt and corruption; they are also required to promote Western-style free-market policies. * the development of the International Monetary Fund, 1944 (IMF) The IMF was created to work with the World Bank to bring stability to international monetary affairs and help expand world trade. The World Bank is in charge of financial assistance for countries in need. The IMF is also in charge of monitoring exchange rates and providing short-term financial assistance. Both the World Bank and IMF are agencies of the United Nations.

2 * the end of the Cold War, 1989 The Cold War began in 1946 following the Second World War. For more than 40 years, the world was divided between communist countries led by the Soviet Union and the Western capitalist democracies led by the USA. The Cold War was mostly an economic struggle between capitalist and communist countries. Globalization was full steam ahead by the end of the Cold War. People were using computers, watching international events on TV, and doing business around the world. When the USSR collapsed, most communist countries such as Russia and those in Eastern Europe began the transition away from communism. Since 1990, the forces of globalization and capitalism have merged to expand the forces of economic globalization. * the impact of technology and communications Television, computers, the Internet, cellphones, and satellites have made borders seem irrelevant, the most powerful globalizing force being the Internet. Understandings of Economic Globalization We learned earlier that the World Bank and IMF were set up to stabilize international monetary affairs and to help expand world trade. While the World Bank and the IMF DO provide aid to less developed countries, it is not their main function. The money they provide is NOT charity, it is a loan with interest and the World Bank and IMF expects that their loans be paid back in full. The sticking point for many is the conditions that are attached to receive a loan from these institutions - they require countries who want a loan to be adopting free market polices.

3 How would you feel if you could not receive a much needed bank loan because you did not meet a long list of conditions? SUPPORTERS of the IMF and the World Bank say that, in the long run, countries meeting their conditions will benefit from free market policies. But CRITICS believe that the World Bank and IMF should NOT interfere in local economies in this way. To stabilize international monetary affairs, the World Bank and IMF have: - funded Europe s recovery after W.W.II - helped to prevent war-torn countries from becoming bankrupt - helped to regulate the price of goods and services - laid the foundation for post-war economic expansion Read Heavily Indebted Poor Countries (HIPC) on page 184. The information on pages 184 and 185 looks at the pros and cons of the World Bank and IMF controlling so much of the global economy. Who runs the World Bank and IMF? The World Bank and the IMF are controlled by the USA and other developed countries. In 2004, the USA held 16.4% of the total votes in the World Bank. Since any major decisions require an 85% majority, the USA can block any changes that other countries request of the bank. The money provided for the IMF is provided by its member countries and each country pays a certain amount based on the size of its economy. The USA and European Union provide the most money; that is money available to lend to member countries in need. Funds to pay for the annual expenses of running the IMF come from interest payments made by countries that borrow money. Does the IMF help countries? Look at the Green box on page 185 to see what both critics and supporters of the IMF have to say...

4 PART 3: Implications and Consequences of Globalization Chapter 11 - Free Trade #2 (Pages ) Trade liberalization is the process of reducing barriers to trade. Free trade is not a new idea. The planners at Bretton Woods in 1944 wanted a more open system for international trade. People around the world had been seeking out new markets for their surplus goods for a long time (remember imperialism). Another example is that of the coastal First Nations groups in BC. Their huge salmon surplus has provided the First Nations with a viable commodity to trade with neighboring nations for other goods. They have made agreements with other First Nations and other countries to sell their salmon for desired goods. In this section, you will have a chance to examine how trade agreements between certain groups or certain countries has increased economic globalization through increased trade. In the past 20 years, most of the world s economies have become much more integrated. Of the 193 countries in the world circa 2008, 190 of those nations have signed at least one regional trade agreement. Individual countries within trading blocs give special status to their trading partners. Often this involves some form of free trade. Within a free trade area, member countries reduce or eliminate tariffs (or custom duty - see Fast Fact on page 187) and other barriers to trade among themselves. Why is there free trade between Canada, USA, Mexico? Canada and the USA are linked together by a similar history, a close geography, and a long friendly border. Canada entered into a free trade agreement with the USA in Mexico is also linked to the USA by geography and a long border. After free trade began in 1989 with the USA, Canadian business people, banking representatives, and premiers were calling for increased access to other markets.

5 Supporters of NAFTA As a North American Free Trade Agreement (NAFTA) was being debated, supporters of NAFTA argued that if Canada did NOT participate in this agreement, the USA would end up doing MORE business with Mexico then with Canada. It was also seen as important by supporters of NAFTA to compete with other areas of the world since countries in Europe and Asia had already made similar agreements among themselves. NAFTA was signed on in 1994, and free trade has since existed between Canada, the USA, and Mexico. Opposition to NAFTA Those opposed to NAFTA worried about the fact that many Mexican and American workers did NOT belong to labour unions and that these workers earned much less money than Canadian workers and had fewer labour laws to protect them. The critics were concerned with that when NAFTA was ratified (passed into law), factories in Canada would close and relocate to Mexico. In Mexico, owners would pay their workers much less and would not have to worry about unions or labour laws regarding workers safety or protection of the environment. Other argued that the NAFTA agreement could make it difficult for the Canadian government to pass laws designed to protect Canadian culture. Free trade is still a complex topic, as lots of restrictions and regulations are still in place. Figure on page 189 outlines two understandings of the impacts of free trade on Canada. We will outline together what supporters of FREE TRADE say and what CRITICS of FREE TRADE say.

6 Chapter 11 - Contemporary Economic Globalization PART 3: Implications and Consequences of Globalization (Pages ) What is the relationship between trade organizations and sustainable development? Why are there different understandings of economic globalization? There are different understandings of the World Trade Organization (WTO) and the Group of Eight (G8) on how they affect the lives of ordinary people around the world. One view is that these organizations, along with the World Bank and IMF, make the world better and richer. For example, the organization Global Envision believes that economic development and the global free market system are the most reliable and sustainable strategies for global poverty alleviation. Another view (Figure 11-12, page 191), is that these types of organizations simply help make more developed countries richer at the expense of less developed countries. This view is generally held by people in the anti-globalization movement. - (see later on in the notes) World Trade Organization The WTO was formerly known as GATT - General Agreement on Tariffs and Trade which was created in 1947 by 23 countries that believed free trade among member countries would encourage peaceful relations. The WTO was formed on January 1, 1995 and the WTO works to improve trade relations among countries of the world, especially by removing tariffs and other barriers to trade. Most countries in the world belong to the WTO but its like a private club, in that members can only join IF they agree to follow the rules of the club. Countries that ARE NOT members find it very hard to do business. For this reason, China finally decided to join in 2000 but China had to agree to follow the rules and regulations set by the international community. This made China even more attractive to foreign companies to invest in and do business in. China s economy has grown rapidly since The G8 This is a group of the 8 strongest economies in the world. The group, originally 6 members, first met in the 1970 s because of concerns about the economic problems of that era. Today, the group now deals with a wide range of global economic, social, and political issues. The scary thing is that the G8 countries have nearly 50% of the vote in the World Bank and IMF and they also have a significant impact on the policies of the WTO. Name all of the 8 countries of the G8 below:

7 Understandings of the G8 One view of the G8 is that it is simply an elite group of leaders from the richest, most developed countries, with no interest in issues important to the rest of the world. People who support this view, point to the fact that countries such as China or India - two of the world s fastest growing economies - are NOT apart of the G8. They also point out that no African or Latin American countries are NOT included. Another view is that the G8 summits are important in dealing with key global issues and aid to less developed countries. The 2002 summit in Kananaskis, Alberta, focused on 3 priorities: fighting terrorism, strengthening global economic growth and sustainable development, and furthering development in Africa. Addressing climate change and doubling aid to Africa were the major issues at the 2005 summit in Scotland. The G8 leaders pledged to increase aid to Africa by $25 billion by the year The Anti-globalization Movement People apart of this movement argue that the WTO and globalization DO NOT contribute to sustainable prosperity for all people. Formed in 1985, a Canadian anti-globalization group called the Council of Canadians believed that Canada s independence and unique way of life was being threatened by economic globalization. Read the 5 points on page 193 that explains how the Council of Canadians feel economic globalization threatens our independence and unique way of life. Methods of Protest The anti-globalization movement has incorporated various methods of protest including: - public speeches - letters of opposition or support - mass petitions - internet forums and blogs - marches, parades - banners, posters, press statements - sit-ins and fasts - civil disobedience (flag burning, breaking down barriers during meetings) Violence can happen, sometimes it is planned but often it is due to protesters being outside in the heat or cold for a long time. They sometimes feel that one of their members may have been mistreated by police guarding the barricades. The police may lash out at times after being taunted by protesters or when protesters throw things at police. When violence occurs, this often receives a great deal of media coverage.