Superpowers - EQ2 - 7.4

Question 1

Define Capitalism

Answer 1

• An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state

Question 2

Define WEF

Answer 2

• A Swiss non-profit organisation that promotes globalisation and free trade via its annual meeting at Davos which brings together the global business and political elite

Question 3

Define IGO

Answer 3

• These organisations now dominate international decision-making
• The members of these global organisations are nation states that uphold treaties and international law

Question 4

Define World Bank

Answer 4

• It provides financial and technical assistance to developing countries.
• It makes development loans to developing countries but within a ‘free-market’ model that promotes exports, trade, industrialisation and private businesses which benefits large, developed-world TNCs.

Question 5

Define OCED

Answer 5

• This organisation is the predecessor to the World Bank and the World Trade Organisation
• Their mission is to improve the economic and social well-being of people world-wide through the promotion of improvement policies

Question 6

Define WTO

Answer 6

IGO established in 1995 that regulates global trade. It has brokered many agreements aimed at promoting open trade and reducing protectionism

Question 7

Define Free Trade

Answer 7

The exchange of goods and services free of import/export taxes and tariffs and quotas on trade volume

Question 8

Define IMF

Answer 8

• Promotes global economic security and stability and assists countries to reform their economies
• Economic reforms often mean more access to developing economies for TNCs

Question 9

What do IGOs promote

Answer 9

• Free trade
• Capitalism

Question 10

Superpowers have a ………………………. influence on the global economy
The USA, EU and Japan - in 2016 accounted for ….% of GDP

Answer 10

Superpowers have a disproportionate influence on the global economy.
The USA, EU and Japan - in 2016 accounted for 60% of GDP

Question 11

Who are the biggest contributors to IGOs

Answer 11

• USA, UK, Germany, France, Japan and Canada

Question 12

What do USA, UK, Germany, France, Japan and Canada all have in common which factors into their influence over IGOs

Answer 12

• capitalist economies
• promote free trade in goods and services across borders.
• are dominated by private enterprise, rather than government-owned companies
• promote wealth creation and accumulation by companies and individuals

Question 13

When were the first range of IGOs created

Answer 13

• Just after the end of the Second World War in 1945, Europe and the USA created a range of global Inter-Governmental Organisations (IGOs)

Question 14

what are IGOs dominated by

Answer 14

• Western capitalist countries and their views

Question 15

Although …………………….. was an early precursor of globalised freed trade the ………………………… led to unprecedented levels of international trade.

Answer 15

Although colonialism was an early precursor of globalised freed trade the opening up of markets after 1945 led to unprecedented levels of international trade.

Question 16

What was Comecon

Answer 16

• Comecon formed by Russia was an IGO to facilitate cooperation
  between socialist and communist

Question 17

Since……………………. the world has been dominated by the…………………….. economic system

Answer 17

Since the end of the Cold War in 1990 the world has been dominated by the free-market capitalist economic system.

Question 18

For much of the 20th Century, capitalism operated ………………………., however as free-market capitalism has become increasingly dominant, …………………………

Answer 18

For much of the 20th Century, capitalism operated alongside socialist planned economies, however free-market capitalism has become increasingly dominant, other systems have weakened

Question 19

Give examples of how as free-market capitalism has become increasingly dominant other systems have weakened

Answer 19

• The collapse of socialist economies in the USSR and Eastern Europe.
• China’s movement away from a socialist economy towards what has been called state capitalism.
• Reform in communist Cuba, allowing limited private ownership of business

Question 20

When was the world bank set up and how

Answer 20

TheWorld Bankis the sister to the IMF and both were set up during theBretton Woods Conferencein 1944

Question 21

What is the purpose of the world bank

Answer 21

• provides finance, advice, and research to developing nations to aid their economic advancement which reduces poverty

Question 22

What does the world bank focus on

Answer 22

• It deals mostly with internal investment (development assistance) projects
• such as building dams, and infrastructure and promoting health and education in developing and emerging countries

Question 23

Who sponsor projects in the world bank

Answer 23

• Usually works with wealthier nations, organisations and institutions as a sponsor of the project

Question 24

Describe the loans the world bank provides

Answer 24

The World Bank issues low-interest loans, grants and/or zero interest credits to qualifying countries to support the development of their economies

Question 25

The World Bank funds projects that otherwise....

Answer 25

* wouldn't happen because the cost is too high for developing countries * or they cannot raise sufficient funds elsewhere because it is for social and not economic purposes

Question 26

Explain the principle of comparitive advantage

Answer 26

- countries prosper first by taking advantage of their assets in order to concentrate on what they can produce best, - and then by trading these products for products that other countries produce best. - this means that liberal trade policies sharpen competition, motivate innovation and breed success - multiplying the rewards that result from producing the best products, with the best design, at the best price

Question 27

What are liberal trade policies

Answer 27

- policies that allow the unrestricted flow of goods and services

Question 28

Describe how protectionsism can block free trade in wealthy nations

Answer 28

* the temptation to ward off the challenge of competitive imports is always present * richer governments are more likely to yield to protectionism, for short term political gain — through subsidies, complicated red tape, and hiding behind legitimate policy objectives such as environmental preservation or consumer protection as an excuse to protect producers

Question 29

What are the consequences of drifting into protectionism

Answer 29

* Protection ultimately leads to bloated, inefficient producers supplying consumers with outdated, unattractive products * In the end, factories close and jobs are lost despite the protection and subsidies * If other governments around the world pursue the same policies, markets contract and world economic activity is reduced

Question 30

One of the objectives that governments bring to WTO negotiations is to prevent...

Answer 30

* a self-defeating and destructive drift into protectionism

Question 31

What are the misconceptions about comparitive advantage

Answer 31

* A country does not have to be best at anything to gain from trade. * That is comparative advantage * I can be confused with absolute advantage * It is often claimed, for example, that some countries have no comparative advantage in anything * That is virtually impossible

Question 32

Why is trade important

Answer 32

* to keep the global economy working effectively, as any barriers to trade will limit growth

Question 33

Describe how the WTO was set up orginally

Answer 33

- In 1947 the **General Agreement on Tariffs and Trade** (**GATT**) was set up to aid economic recovery after World War II by reconstructing and liberalising global trade - Initially it was a **multilateral** treaty between 23 countries to remove cross-country trade barriers

Question 34

Describe how the WTO developed in the 90s

Answer 34

* GATT was superseded by the WTO in 1995 as an international global trading organisation with the power to mediate and settle trade disputes

Question 35

How many people have signed GATT and what does that ensure

Answer 35

* 164 countries, at present, have signed the agreement * to ensure that producers of goods and services, along with exporters and importers, are protected and help manage their businesses

Question 36

What is the purpose of the WTO

Answer 36

It aims to reduce barriers and promote free trade between countries whilst ensuring that trading nations keep to the agreed international trade rules through sanctions hoping to create a more even ‘playing field’

Question 37

The WTO has been a force for ...................., with ..... & ....... ...........

Answer 37

**globalisation, with both positive and negative effects**

Question 38

What are the positives of the WTO

Answer 38

- Powerful TNCs support the WTO for its positive impact on international economic growth - the WTO has lowered trade barriers - increased trade among the member countries with average tariffs being 1/10 of what they were in 1947 when GATT was founded

Question 39

# Limitations of the WTO Local communities?

Answer 39

* The WTO is currently focused on programmes of poverty reduction, by removing farm subsidies in developing countries to stimulate efficient production * in many developing countries, cheaper imports then undercut local farmers --> increasing the wealth gap ---> hurting local communities

Question 40

# Limitations of the WTO West?

Answer 40

* conflict of interest - most powerful countries in the WTO may be disadvantaged by limiting trade. * (unlike IMF and World Bank) the WTO operates a system of 'one country, which in theory is fairer to developing countries * no votes have ever been taken at the WTO --> Decision-making is by mutual agreement ---> most bargaining favours the EU and the USA

Question 41

# Limitations of the WTO self-interested actions

Answer 41

* although ‘one country one vote’ consensus, countries will be influenced by what’s in their economic interest to vote for

Question 42

When was the IMF created

Answer 42

- Created in 1944 at the United Nations, Bretton Woods Conference

Question 43

Why was the IMF set up

Answer 43

* Along with the World Bank, its purpose was to bring financial stability to the world after World War II * and avoid repeating the currency devaluation that contributed to the 1930s Great Depression

Question 44

What is the purpose of the IMF

Answer 44

* promotes global economic stability by supporting countries in economic difficulty

Question 45

Give 4 roles of the IMF

Answer 45

- Aims to create global financial stability. - Stabilises currency to prevent global shocks in the financial system. - Acts as a mediator to countries with disagreements over trade. - Establishes trade agreements for countries wishing to become more integrated in global trade.

Question 46

The main aim of the IMF is to allow the currency to................................ between ..... global member countries

Answer 46

* be exchanged freely and easily * 190

Question 47

Explain how the IMF is funded

Answer 47

- The IMF is funded by quota subscriptions - Member states pay according to the size of their economy; with voting rights based on quotas - These quotas ensure that member countries always have enough **foreign exchange** to continue to do business with the rest of the world

Question 48

If member countries run into trouble, they can turn to the IMF for....

Answer 48

* advice and financial assistance

Question 49

What have the IMF also set up

Answer 49

* Structural Attachment Programs (SAPs) which promotes capitalism through the conditions attached to loans

Question 50

What sort of countries are usually under IMF programs

Answer 50

* developing, emerging or countries that have faced financial crises

Question 51

# Criticisms of the IMF membership

Answer 51

* 2016 - 189 members in IMF * its members are not all equal - their individual voting rights are proportional to the amounts that they have invested in the Fund * Eight individual countries control 47% of the votes between them

Question 52

# Criticisms of the IMF The IMF has been criticised for lending with...

Answer 52

*  imposed conditions on how a country runs its economy along with making payback a priority on the loan; *  often forcing financial concerns ahead of any social care

Question 53

# Criticisms of the IMF Westernisation

Answer 53

* Up to now, most of the IMF's work has reflected US and European policies in managing issues such as international debt * E.G 1980s & 90s - the main donor nations decided to impose conditions on many borrowing countries * that forced developing countries, often in Africa, * to cut spending on health and education in return for stabilising or extending their debt repayments

Question 54

When was the World Economic Forum (WEF) founded

Answer 54

1971

Question 55

What is the WEF

Answer 55

Swiss non-profit that acts as a forum for discussion between business, politicians and IGOs

Question 56

How does the WEF operate

Answer 56

- Meetings of the WEF take place each year in Davos bringing together politicians, businesses, economists, religious groups, media groups and many others - The aim is to discuss global issues such as ongoing conflicts, climate change and economic systems - It is intended that this will promote global links and provide ambitious solutions to global issues

Question 57

What are the aims of the WEF

Answer 57

- It aims to bring businesses and governments together, encouraging public and private co-operation - It promotes free trade and is in favour of TNCs

Question 58

In what way is the power of all IGOS compromised

Answer 58

All IGOS set up by ‘western’ nations promote free trade and capitalism (dependency theory)

Question 59

What are the limitations of the WEF

Answer 59

* Political scientist Samuel P. Huntington believes the that 'Davos Man' (the WEF is mainly men) * has little need for national loyalty, * views national boundaries as obstacles * & sees national goverments only useful function is to facilitate the elite's global operations * national voters' instincts can sometimes conflict with the WEF's globalised ideas e.g Brexit (growth in pro-natioanlist views)

Question 60

In 2016, the USA controlled ........%

Answer 60

16.5

Question 61

Why did the world bank gain a bad rep in the 70s and 80s

Answer 61

* for financing projects that were either environmentally damaging (eg. rainforest clearance), * or so costly that borrowing countries were unable to repay their loans

Question 62

# Ivory Coast Case Study The IMF did not allow the Ivory Coast to receive aid until.....

Answer 62

2013 when its government agreed to set up commercial courts and allow free presidential elections

Question 63

# Ivory Coast Case Study After economic reforms ..................

Answer 63

4.4 billion (US dollars) of debt relief was approved by the IMF & World Bank

Question 64

# Ivory Coast Case Study Investment from the IMF & World Bank in education and training has depended on Govt creating a...

Answer 64

more competitive banking sector

Question 65

# Ivory Coast Case Study What bans are still in place

Answer 65

- The UN still bans diamond exports from the Cote d’Ivoire after the country used them to finance civil war in 2005

Question 66

# Ivory Coast Case Study Describe how cocoa bean exports have changed

Answer 66

* After minimum wages agreements and investments in road infrastructure were achieved in 2011, the country was allowed to export cocoa again * The most recent exports are led by Cocoa Beans which represent 29.4% of total exports

Question 67

# Ivory Coast Case Study Describe the change in exports

Answer 67

* During the last five years the exports of Cote d'Ivoire have increased at an annualized rate of 2%, from $11.6B in 2010 to $12.7B in 2015