Class notes
EC313 (The International Economy in the Twentieth Century) - Notes
- Course
- Institution
The class notes needed for a successful examination.
[Show more]
1 review
By: fegwergeqrgweqr • 1 year ago
Seller
Follow
SuperHoudaLLP
Reviews received
Content preview
Week 1: The First Phase of GlobalisationGLOBALISATION:
- O’Rourke & Williamson (When did Globalisation Begin? 2002): Globalisation: progressive integration of goods markets
(increase in trade), labour markets (increase in migrations) and capital markets (increase in capital flows) from the commodity
price convergence on an international scale (1870-1914)
- Classical Gold Standard (1870s-WW1): fixed exchange rates (£1=$4.875 since 1 gold ounce = £4.24/$20.67) which lowers
currency risks and interest rates of governments with positive records that include Germany (1871), France (1876), Austria
(1879), Japan (1897) and the United States (1900)
FACTORS:
- Transport Revolution ®¯Transport Costs (e.g. 1869: West-Est US transcontinental line, 1869: Suez Canal opening)
- Trade Policies ®Interdependence (e.g. Ricardo (Principles of Political Economy and Taxation 1817), The Economist (1843))
- Information Perfectionism ®Capital Flows (e.g. Gold Standard (1880-1914): fixed exchange rate parity lowers currency risks)
® THREE MAIN INTEGRATIONS: Commodity Market Integration/Labour Market Integration/Capital Market Integration
- OR PARADOX: Protectionism (e.g. Europe/New World: High Tarifs on Agriculture),Colonisation hindrance on growth (e.g.
15% UK Exports), ¯Immigration (e.g. Scott Act (1888): Prohibition of Chinese Immigration in USA)
GROWTH MODELS:
- Adam Smith (The wealth of Nations 1776): Neo-Classical Model: “invisible hand promotes collective welfare” on international scale (i.e.
Increase Labour Division in production process, Increase Specialisation, Increase Productivity, Increase Wealth)
- Ricardo (Principles of Political Economy and Taxation 1817): Comparative Advantage Model: countries entering into international
trade will profit from such trade if they concentrate on the production of those products in which they are relatively most efficient (i.e.
the greatest superiority or the less inferiority)
- Heckscher and Ohlin (1933): Heckscher-Ohlin Model (HO: Development of Ricardo’s comparative advantage model where relative
endowments of the factors of production (land, labour, capital) determine a country's comparative advantage in international trade
since the profitability of goods is determined by input costs (e.g. capital-abundant exports capital-intensive goods)
BACKLASH:
- Stolper and Samuelson (Protection and Real Wages 1941): Stolper-Samuelson Model (SST): Development of Heckscher-Ohlin’s
comparative advantage model where increase in relative price of a good leads increase return from most intensive factor in its
production/decrease return from most intensive factor in its production (e.g. capital-abundant country: price increases with trade,
production increase with demand)
- List (The National System of Political Economy 1840): Infant Industry Argument: temporary protectionism of undeveloped activities
from foreign competition (i.e. competitive because having already increased experiences/reduced costs)
- Cain & Hopkins (British Imperialism 2002): Great Specialisation: process of factors of production specialisation from liberalisation (i.e.
wage convergence between Europe/New World) which creates winners (e.g. Industrial Capitalism) whilst losers (e.g. UK Landowners) ® -
- wage convergence (HOS model specialisation): Western Europe (i.e. labour and capital abundant so specialised in manufactured goods
and ↑wages) and New World (i.e. relatively resource abundant so specialised in resource intensive good and ↓wages)
︎
Findley and O’Rourke (World Trade 1780-1914: The Great Specialization 2009):
- 1 - Worldwide Military Conflict: Napoleonic Wars (1803–1815), Opium Wars (1839-1860), Spanish-American War (1898):
Mercantilism (economic theory which promotes interventionism in the economy (i.e. focus on wealth accumulation) to improve
state power at the expense of rival power since the amount of world wealth is believed static), Protectionism (e.g. 1815: UK
Corn Laws: exclusion of foreign grain from markets), Continental Blockades (e.g. 1807-1814: ¯5% US/¯3% FR/¯2% UK Welfare),
Trade Diversion (i.e. FR/UK Imperial Preferences)
- 2 - First Industrial Revolution (1760s-1840s): Asymmetric Economic Shock (i.e. economic gains to european powers from
transport revolutions that allow exports), Worldwide Economic Shock (economic gains to worldwide nations from transport
revolution that allow imports) ® Liberalisation (1840-onwards): Corn Laws Abolition (1846: UK), Cobden-Chevalier Treaty
(1860: UK-FR Abolition of prohibition of imports) (e.g. 1815-1914: 3.5% Intercontinental Trade Growth/y)
- 3 - Slave-Trade Abolition (e.g. 1807: UK, US): Factor Growth: Commodity Prices convergence (e.g. 1840-1914: UK-US wheat
price gap equalisation = freight use growth), Immigration (e.g. 1820-1914: 60M EU migration to New World), Capital Flows (e.g.
1870-1914: 7%-20% FDI/World GDP) ® Pomeranz (Great Divergence 1981): Great Divergence (1760s-1980s): process of
emergence of the western world as the wealthiest civilisation which creates a North-South Divide (e.g. 1760s-1870s:
¯India/China Wages since Unlimited Labour Supply)
- 4 – New World Development from Independence: Lewis (Economic Development with Unlimited Supplies of Labour 1954):
Dual-Sector Model: assumption that the New World (NW) growth rate is explained from the transition from the Subsistence
Sector (i.e. High Labour Supply with High Land Availability but Diminishing Marginal Returns) to the Capitalist Sector (i.e. High
Labour Supply with High Wages) (e.g. EU: Industrial Commodities Exports, NW: Primary Products Exports)
Hatton and Williamson (The Age of Mass Migration 1998): Age of Mass Migration (1840-1914): “Emigration Life Cycle”: process of
emigration of European population towards New World because of the cumulative process of Industrialisation (i.e. EU-NW Decline of
wage gap), Natural Increase (i.e. EU Strong fertility rates), Emigrants Stock (i.e. NW improvement of living conditions) which creates an
emigration curve (i.e. bell curve: strong growth, saturation, decrease) (e.g. 1910: US Labour Force = 24% Higher than without Emigration /
Real Wage = 15% Lower than without Emigration), Political persecusians (e.g. Pogroms on Russian Empire Jews/1848 Failed German
revolutions)
Week 2: The Aftermath of the First World War (Retreat from a Globalized World)
GOLD STANDARD:
, - Gold Standard (1880-1914): international system which includes fixed exchange (i.e. based on parity to gold), money supply
(i.e. based on gold reserves), adjustment mechanism (i.e. based on balance of payments disequilibria) Germany (1923), the UK
(1925) and France (1926)
- Hume (Of the Balance of Trade 1752): MECHANISM (WORDS): auto-adjustment mechanism of the Balance of Payments (BOP)
(i.e. accounting record of all monetary transactions between a country and the rest of the world) that ensures the stability of the
system. A country that has a current account deficit (i.e. total value of exports is lower than the one of imports) loses gold threw
the payment of imports from other countries. This declines the money supply which implies a price deflation whilst other countries
experience an increase in prices. The deficit correction towards the equilibrium level takes place over the long-run once its goods
become more affordable in the global market, such that its exports will rise at the same rate that imports fall.
- Mechanism Adjustment (Theory): BOP Deficit Leads Gold Outflow Leads Decrease Money Supply Leads Decrease Home Prices
Leads Increase Exports/Decrease Imports Leads Deficit Correction
Eichengreen (The Origins and Nature of the Great Slump Revisited 1992):
- Mechanism Adjustment (Actual): Insufficient gold flows for adjustment/Use of currencies as reserve (e.g. GBP)/Open Market
Operations (OMO) used to neutralise gold inflows (e.g. competitive deflation)
- System Structures: Credibility (i.e. belief in the Central Bank to maintain the currency convertible to gold at the promised parity
thanks to its reserves) Cooperation (i.e. belief in international cooperation to share an interest in the system)
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller SuperHoudaLLP. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.21. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
52355 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now