Developments in the Global Economy —
WEC14 notes

What globalisation is and what caused it: trade liberalisation, the growth of trading blocs, cheaper transport and the rise of TNCs, the impact of FDI on the recipient country, and the possible benefits and the possible costs.

• aWhat Globalisation Looks Liketrade as a proportion of GDP · transnational companies · foreign direct investment · migration
• bWhat Caused Ittrade liberalisation · trading blocs · political change · cheaper transport and communications · the rise of TNCs
• cFDI by TNCsreasons for FDI · the impact on the recipient country · judging an FDI project
• dThe Possible Benefitseconomic growth and tax revenue · economies of scale · consumer surplus · more choice · living standards
• eThe Possible Costsdisplaced workers · exploitation of workers · environmental impact · transfer pricing · income inequality

Why countries trade and what shapes trade: comparative advantage, patterns of world trade, the terms of trade, the WTO and the four types of trading bloc, why governments restrict trade and how, and who gains and who loses.

• aSpecialisation & Comparative Advantageabsolute and comparative advantage · opportunity cost · the assumptions · the limitations
• bPatterns & Volume of World Tradeemerging economies · changes in comparative advantage · bilateral agreements · trade flows
• cThe Terms of Trade & When They Changecalculating the terms of trade · relative inflation rates · export revenues · living standards
• dTrade Liberalisation, the WTO & Trading BlocsWTO · free-trade areas · customs unions · trade creation · trade diversion
• eWhy Governments Restrict Trade & the Tools of Protectioninfant and geriatric industries · national security · dumping · tariffs · quotas
• fWho Gains & Who Losesconsumers · producers and governments · living standards · equality

International money flows and competitiveness: the balance of payments and how to correct an imbalance, what moves a floating exchange rate, exchange rate systems and intervention, the Marshall-Lerner condition and the J-curve, and how international competitiveness is measured and raised.

• aThe Balance of Paymentscurrent account · capital and financial accounts · causes of a current account deficit
• bCorrecting an Imbalanceexpenditure-reducing · expenditure-switching · supply-side measures · global trade imbalances
• cWhat Moves a Floating Raterelative interest rates · purchasing power parity · capital flight · speculation
• dExchange Rate Systems & Interventionfloating, fixed and managed rates · foreign currency transactions · quantitative easing
• eWhen the Rate ChangesMarshall-Lerner condition · J-curve effect · competitive depreciations
• fMeasuring & Raising Competitivenessrelative unit labour costs · relative export prices · non-price factors · international competitiveness

Absolute and relative poverty and how each is measured, the causes of changes in poverty, income and wealth inequality on the Lorenz curve and Gini coefficient, and the causes and impact of inequality.

• aAbsolute & Relative Poverty$3.00 a day · headcount · median income
• bCauses of Changes in Povertygrowth · education · benefits · tax · aid · conflict
• cMeasuring Inequalityincome vs wealth · Lorenz curve · Gini coefficient
• dCauses of Inequalitywithin countries · between countries
• eThe Impact of Inequalityincentives · savings · migration · life expectancy
• fDevelopment & CapitalismKuznets hypothesis · economic change · free market

How governments spend, tax and borrow, and the policies they use — public expenditure and its share of GDP, the effects of tax changes, fiscal deficits and the national debt, five policy tools, and the limits to controlling TNCs.

• aPublic Expenditurecapital vs current · transfer payments · changing age distributions
• bPublic Spending as a Share of GDPproductivity & growth · crowding out · levels of taxation
• cTaxes: Types, Incentives & Revenuedirect vs indirect · progressive, proportional & regressive · Laffer curve
• dTax Changes & the Macroeconomyreal output & employment · the price level · the trade balance · FDI flows
• eFiscal Deficits & the National Debtautomatic stabilisers · structural vs cyclical · debt servicing · intergenerational equity
• fMacroeconomic Policies in Usefiscal · monetary · exchange-rate · supply-side · direct controls · the 2008 crisis
• gTNCs & the Limits of Policytax avoidance · transfer pricing · inaccurate information · external shocks

Growth and development: the HDI and other measures, the economic and non-economic constraints on development, market-orientated and interventionist strategies, and industrialisation, tourism, aid and the international institutions.

• aMeasuring Developmentgrowth and development · HDI · other measures of development
• bConstraints: Commodities, Savings & Currencycommodity prices · primary product dependency · Prebisch-Singer · Harrod-Domar · capital flight
• cConstraints: People, Debt, Credit & Infrastructuredemographic factors · debt · access to credit and banking · infrastructure · education and skills
• dNon-Economic Constraintscorruption and poor governance · civil wars and terrorism · migration
• eMarket-Orientated & Interventionist Strategiestrade liberalisation · promotion of FDI · microfinance · human capital · buffer stock schemes
• fOther Strategies & International InstitutionsLewis dual-sector model · tourism · aid and debt relief · World Bank and the IMF · non-government organisations