POLI 2500 Part 5: Global business, finance

Conditionality is the controversial practice of the __________, by which generally liberalizing political and economic reforms are required of countries agreeing to new loans. IMF
Trade in services includes ___________. Banking and insurance
A ________ would agree that a government’s most useful role is to interfere in economics only to regulate markets in order to help them function efficiently. That is, politics should serve the interests of economic efficiency liberal
Which groups oppose free trade because of its negative impacts? Labor and environmental groups (have had really sustained reasons for opposing free trade and its tied up with globalization more broadly; having to do with where MNCs set up, types of regulatory labor environments they looks for, natural resource extraction)
Explain what’s meant by the term interdependence w/ respect to world trade. Less likely to engage in conflict w/ states that they’re dependent on; much more costly to get the things they need through conflict than if they would just cooperate w/ each other
__________ think it is mutually beneficial for states to be interdependent and believe the goal is diminished or eliminated borders and a global system liberals
___________ believe power and economics are fundamentally entwined and economic classes determine power of the state marxists
_______________ believe that state retains primacy, sets economic structure and policy, and seeks to make gains. Views Interdependence as a negative mercantilists
__________ think interdependence is a good thing and that market should determine a lot of outcomes. liberals
_____________________ feel that global inequality is going to be the outcome of more global integration. They don’t think you can separate power and economics so wealthier people will also control economy. marxists, econ structuralists
nearly every state prints its own money and currency is a hallmark of ______________ state sovereignty
Because of the nature of sovereignty, the international economy is based on _____________, not a world currency. national currency
The rate at which one state’s currency can be exchangedfor the currency of another state exchange rate
The official rates of exchange for currencies set by governments; not a dominant mechanism in the international monetary system since 1973 fixed rate
The rates determined by global currency markets in which private investors and governments alike buy and sell currencies. floating
Most exchange rates are expressed in terms of the world’s most important . currencies
Some inflation is expected, even in a _________ economy healthy
A little _________ means people are getting jobs and wage increases so people are rising prices of goods, which indicates a healthy economy. Small levels of inflation can be handled and are probably good. inflation
If a state has inflation, currency buys __________ than it once didbecause prices for goods are high at a sustained level less
An extremely rapid, uncontrolled rise in prices (meaning very large, yet constantly changing, amounts of currency are needed to buy things, including day-to-day goods) hyperinflation
Hyperinflation can easily get out of control and there is not much government can do besides_________________. Indicative of major issues in economy. print more money
Private investors may buy and sell global currency, which can push up the value of it but if a lot of people are selling it, it can go down. They have some blame for 2008 recession. More regulations have been placed since. short term speculation
States may want to manipulate the value of their currencies. this is called de-valuation
A unilateral move to reduce the value of a currency by changing a fixed or official exchange rate de-valuation
devaluation is at the heart of US-____________ econ conflict recently China
An institution common in industrialized countries whose major tasks are to maintain the value of the state’s currency and to control inflation. central bank
hard currency stockpiles kept by states reserves
The first wave of globalization took place during what time period? 1870-1914
Liberalists’ goals include diminished or ______________ borders between states and a move toward a global economic system eliminated
The _______ was designed to be a forum for dialogue and display of unity among major industrialized states on economic issues G7
The _________ is the central bank of the United States. federal reserve
the idea of a central bank is to divorce the institution from the government toallow decisions not to be influenced by politics
central banks set the discount rate, or the ___________ the government charges when it loans money to private banks interest rate
Central banks control sizable reserves of _____________, but are constrained by the limited share of the world’s money they own. currency
______________ provides loans, credits, grants, technical assistance, and policy advice to developing states to promote economic development the world bank
_____________ coordinates currency exchange, balance of international payments, and national accounts of states IMF
Which of the following best characterizes the “new phase” or “third wave” of globalization that has been proposed by some? Increasing trade in digital goods and services, such as e-commerce and movement of data
The head of the World Bank is always ____________, while the head of the IMF is always ______________. American, European
Regimes and institutions have developed to create and implement norms of behavior in international ___________ interactions economic
Both were dedicated to post war reconstruction after WW2. world bank, IMF
The Bretton Woods system created __________________ and ______________ and set up the dominance of the US dollar backed by ____________ World bank, IMF, gold
goal of world bank eradicate extreme poverty, promote incomegrowth
two components of world bank IDA (International Development Agency), IBRD (International Bank for Reconstruction and Development)
The IMF looks after the stability of the international monetary system
The IMF created the closest thing to _____________. world currency
The IMF coordinates ___________ exchange, balance of internationalpayments, and national accounts. it also gives _________ and assists with capacity development currency, loans
The __________ Consensus has been suggested as a possible replacement for the Washington Consensus, which is a model of market-oriented, liberalizing reform for development assistance traditionally followed by global financial institutions such as the IMF and World Bank. Beijing
How have the IMF and the World Bank changed over the last decade? Developing states are now more represented in terms of quotas and policy priorities in these organizations.
The G20 represents what portion of the world economy or global economic output: 85%
_________ are companies based in one state with affiliated branches of subsidiaries operating in other states. MNCs
the legal avenue for MNCs to pursue grievances against states for breaking agreements. investor state dispute settlement
Investment in tangible goods such as factories and office buildings (including ownership of a sizable fraction of a company’s total stock). foreign direct investment
Many MNCs may fear _____________ by host states, in which the companies’ assets and wealth are taken by the state in violation of the investment agreement with their host states. nationalization
How does the IMF assist countries in balancing their economies? By allowing states to borrow against their deposits of financial reserves and repay the loans in subsequent years
.In recent years, China has maintained a low currency value, relative to other states, in order to ____. Promote exports and boost export-related industries
The IMF looks at states’ ___________ to determine the monetary position of state balance of payments
Building a factory in a foreign country is an example of __________. Foreign direct investment (want a physical footprint in another country)
What is the international business environment most conducive to the creation of wealth by MNCs? Stable international security so investments aren’t threatened
Industrialized states turn __________ policy over to semiautonomous central banks to ensure discipline in printing money monetary
Some multinational corporations sell goods, whereas others, such as McDonald’s sell _________. services
What institutions were created at Bretton Woods? What was Bretton Woods designed to do? brought states together, sets up post war international economic system, creation of IMF and World Bank, and was designed to regulate currency/markets, give out loans for war devastated countries now for developing countries
In the world-system, the regions that mostly manufacture goods are the __________. Industrialized regions
A lack of technical and administrative skill levels was one challenge faced by former colonies ______. Upon their winning independence
Both IMF and world bank have been criticized as being part of Washington consensus
in the ___________, you invest in capital stock and that gives you more votes. Its all based on how much you invest in these institutions, the more you invest the greater your quota will be and more of a vote you will have. world bank
summary of all the flows of money into and out of a country balance of payments
The ______ is the biggest vote share in both institutions. Agenda for these institutions will favor wealthy states, reforms on vote share system have been brought up because developing states need a say too. US
Investment in tangible goods such as factories and office buildings (including ownership of a sizable fraction of a company’s total stock) FDI
stocks and bonds portfolio investment
capital flows FDI, portfolio investment
World bank and IMF both based in DC and have __________ voting system weighed
3 types of balance of payments current account, flows of capital, changes in reserve
The Washington consensus tales a ____________ approach to helping developingstates market-oriented
IMF and World Bank scorecards since creation 1) create stability, access to capital for WWII states- Success2) promote economic development- Mixed success3) integrate economies into capitalism- Mostly success
Liberalizing reforms often tied to agreements for assistance in Washington consensus Privatization, Floating currency, Ending subsidies, Opening economy to trade, investment
Individual states and _______ can have great influence overglobal economy IGOs
types of MNCs Industrial (most common; US dominance; ExxonMobil)Financial corporations (banks most often; Visa)Services (US dominance; McDonalds, airlines)
A world currency created by the International Monetary Fund (IMF) to replace gold as a world standard. Valued by a “basket” of national currencies, the SDR has been called “paper gold.” special drawing right
a standardized set of economic and political reforms asked of states in return of their financial aid. Washington consensus
FDIs represent long term investments in a state
controversy over MNCs centered around MNC power is increasing and Many MNCs are larger than the economies of entire states
______________________ feel MNCs generate wealth across the globe and should be welcomed by states liberalists
_______________ feel MNCs will increase regulatory “race to the bottom,” inequality between Global North-Global South econ-structuralists
MNCs must follow laws of host states
The _______ has never lost a Investor-State Dispute Settlement (ISDS) US
National govts must comply with rulings of the Investor-state dispute system
printing and circulating money monetary policy
taxation, spending (federal government) fiscal policy
monetary policy orgs are ______ and _____. Fiscal policy orgs are _____ and _____ IMF, central banks. G7, G20
major industrialized economies G7
The G7 used to be G8 but ___________ got yeeted Russia
G7 is a conference for heads of state/government, and is more of a __________ for dialogue than governance. It is intended to show unity among developed economies towards global ______________. forum, economic issues
world’s most powerful developed anddeveloping economies G20
Since 2008, G20 meet as heads of state in annual summits, where most work gets done on ___________ and in informal meetings sidelines
G20 meetings produce “_______________” that focus on economic growth, trade, and social, political issues Action plans
G7 meetings focus on _________ states developing
Globalization is characterized by greater levels of _____________ and cooperation. integration
Last meeting in Germany showed strain in ______ and was characterized by a split between protectionist, anti-protectionist states and a split between liberal, illiberal states G20
The last G20 meeting had more ________ leaders, and the agenda was refocused to address that. populist
At G20 meeting, the US was isolated on climate change
China, Germany filling US leadership void in G20. China would like to lead IMF
Financial integration has advantages, but carries risks as well: an economic crisis in one state can spread to another and another.
Globalization has led to momentous changes in many areas of international relations.Global financial markets and institutions are as ____________ as they have ever been. integrated
because of globalization, some industries will not be able to compete with foreign competitors, people will lose jobs and economies may be depressed as a result. When people look to blame someone for this, _____________ can be sparked and populist rhetoric- makes states want to focus on only themselves. This can manifest in resentment against immigrants (xenophobia) and the states where jobs seem to be going. nationalism
We are in the _____ wave of globalization and have already seen tremendous changes in economy, politics, etc. 2nd
looking at globalization negatively, while it may benefit some states it does not and cannot benefit everyone, has bad impact of state sovereignty, you should try to withdraw from greater integration. Protect yourself from drawbacks drawbridge up
net benefit is bigger than any of the downsides. Globalization on average benefits states and cannot be reversed. drawbridge down
globalization provides economic benefits drawbridge down
globalization has hurt states’ economies drawbridge up and its own the rise
New players in 3rd wave Digital technology (Estonia) Rise of China, emerging economies Small business competing with MNCs
benefits of 3rd wave Innovation, productivity
drawbacks of 3rd wave if moving into e commerce there will still be people who will lose jobs, some potential economic depression, states who cannot create digital footprint will fall behind, developed states most likely to offer higher educated workers
If a multinational corporation such as General Motors were to make an agreement with the developing state of Guatemala to lease land for an initial term of 15 years and build a manufacturing facility for automotive production, this would be an example of what type of investment? FDI

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