What is Economics?

Give some background details.

the allocation of resources in the time of scarcity

Ex: land, labor, capitol

*closely tied with politics because it deals with power

*deals with supply and demand

Explain:

GNP

GDP

PCI

BOP

HDI

GNP: Gross National Product (overall value that nations produce)

GDP: Gross Domestic Product (the average income per person in a country)

BOP: Balance of Payments; Money between countries with respect to trade; good to be a positive amount so you don't have debt.

HDI:  Human Development Index; it is non quantitative numbers; looks at aspects such as health and education.

State: invests and promotes investments; gov't works closely with Big Business; governments demand goods

MNC's:  Generates most wealth; MNCs need the state

IOs: involved more in the details and effects of the situation; involved in debt; ex. United Nations

Individual: has alot of control in what the consumer wants

can be defined in many ways:

Money, Time, Values, Resources

Market:  Through Liberalism and Capitalism; it is essential to creating equity and peace

State:  Socialism; state must help the consumer so the market does not abuse consumers; Gov't must ensure wealth is being distributed.

Community:  "third way economics"; Karl Marx created it; Relevant in most of the developing worlds; Trusts in government as long as it doesnt try to crush the economy.

(same as others)

Realists (mercantilism): believes in whatever works; not just the government or the economy; mercantilism is a type of Realism; Focuses on trade

Idealism (Liberalism/Capitalism):  most related Economic School and IR School; what America has.

Marxism (communism); distrobution of wealth

Balance of Payments

Imports v. Exports

Want this to be a postive number

What is Comparative Advantage?

Trading with countries that produce a specific produce easier and cheaper than your country does.

Truly benefits industrial countries, not agricultural ones.

Autarky: 

when a country isolates itself from the world and tries to "get by"; a realist strategy; sometimes better to fix internal stuff before dealing with international trade;  Example: China

Protectionism:

Use protection to protect their economy; another realist strategy

WTO:  World Trade Organization

-wants to elimanate terrorism to create a truly world economy

GATT: General Agreement on Tariffs and Trade (within WTO)

What is are Free Trade Agreements?

-Between several countries

-agree to trade goods and labor more freely

-don't last as long because markets change

***very difficult to do these effectively

an idealist view of the world

Driven by free market ideas and integrates the economy

Problems:

not everyone can win (competitve)

some say it is a form of western imperialism

will all countries benefit? can people be happy?

Non-industrial so not everyone can win

Floating: follows free market and supply and demand

Fixed: Government fixes the value of their currency in relation to a different currency

Hard:  Means that it has value outside the country

Soft:  means that it doesnt have value outside the country

Central Banks:  Print Money and hold it (like the Federal Reserve)

IMF/ World Bank

Fair Trade: 

-Focused on agriculture; it is the largest sector of employment

-created to overcome big business in agriculture

-created to give a break to the smaller poorer farmers sot ehy can get into internation market

-Industrial Countries are more able to get involved in trade

-When it comes to natural resources, there are many producers and few buyers;  esp in agriculture, prices are more likely to be low

-don't cater to a diversified market

Trade has been around for thousands of years

Trade Defines Globalization

Finding a niche is the cornerstone of free trade

If in a bigger country, it can be more difficult to find a niche

Multi-National Corporations

(they are very powerful)

-Third World, Less Developed Countries

-Defined by Economics

-The countries that do not have modern ideas of institutions

-the economy has not developed modern infrastructure or organization

Country's Characteristics:

-lack of food, water, clothing, shelter

-usually refers to lack of material goods and some people say lack of security

-bad water kills more than cancer

-the city in the global south are the poorest places

Market Theories:  Says that the government doesn't promote the spread of the market; there needs to be a secure base for economic growth and trade

Statist Theories:  (undistributed wealth, corruption common)

-Marxism: sees capitalism as unequal; you need a global govt

-Colonialism: west is overdeveloped and rest of world is opposite

Communitarian Theories:  Market and statist address whats going on in the village; says capitalism and socialism are guilty of "top down"; will argue that you dont create alot of revenue but you create stability.

Debt is a problem everywhere

it is normal for Countries to borrow money and it only becomes a problem when it can't be paid back.

when a country's economy can't generate enough income to pay loans, the interest accumulates and breaks the country.

Interest on Debt does not go away.

Began in the 1970s, most countries of global south gained independency in the 60s; oil was booming and banks had lots of money

-commodity prices were good (esp oil)

-inflation was high (do want to borrow money)

-banks were eager to loan money

What specific group of countries in the global south are not facing too much debt?

Which country has the most debt?

Oil Producing Countries!!!

Brazil

-Developing Countries needed money

-commodities bottomed out in the 80s; inflation set in.

-Money was no longer available to lend

*Structure of the Economy:

-inelasticity with repect to income

-that country may only sell common, cheap goods so the price per item is very low

*Corruption and other political problems

*The International Monetary Fund

-deals with BOP; can be called into aid with "SAPs"

*The World Bank/The World Trade Organization

-WTO wants less restrictions on trade to increase production and revenue, however, this is where the poor and environment gets messed up (to fix problem, income is essential); Similar to SAP

-Structural Adjustment Programs

Helps countries with Debt:

-Would Start by reducing the government sector

-promoting private business in the market place

-devalues currency

Have been mostly successful, but have made living even harder for the poor.

Cause human and ecological displacement

***America's relation to debt

-We break all the debt rules, all the time

Why?

-we created the system

-our debt fuels the entire global economy

-over half of the US debt is held by foreign countries

*Bi-Lateral: 

Where one country invests aid in another country.

Example:  USAID- focuses on projects such as education health and infrastructure

*Uni-lateral:

-International organizations (IOs); one country only involved

-agency to country.  ex: United Nations

Disaster Relief Models:

-deals with short term effects of a disaster

Missionary Model:

-oldest type of aid; operate at the local level

-short or long term; mostly christian affiliations

-based on charity

Oxfam Model:

-Grew after WWII; is an I.O.; goal is to engage with communitry over a long term to help out; more of a partnership.

*It is an essential Energy Source

-could be one of the most important commodity ever

-basis of all modern business

-modern world built on oil

*(The Fungability of Oil

-it is very versitile (energy source, mobility, manufacuturing, construction, etc...)

***You come in contact with oil everyday!!!

*7 sisters:

-the seven oil companies that built the oil economy

the 7 oil companies that built the oil economy

-Exxon, Mobile, Gulf, Texaco,Chevron, BP, Royal Dutch Shell

-5 of the 7 are American Companies

*1900

*John D Rockafeller

-he created the first oil company

-he was the precursor to big business

-created the first oil monopoly called Standard Oil

*the first Oil Monopoly created by John D Rockafeller

*1911

-Allowed America and Britain to monopolize oil

-Established the US's hegemony in the Middle East

*Oil Producing Export Countries

*1960

*Saudi Arabia

Demand for Oil was increasing dramatically bc people were getting cars and oil producing countries began to nationalize their production giving them more of the profit

Bad because the US got less oil.

-Technological break throughs allowed oil to go back down

-Energy Consumption Dropped

-New Supplies were found in places such as the North Sea

*the point where oil production is largest in a country

-doesn't mean that you run out of oil, just means that you can't produce a greater amount

-key indications are no new projects

*US and Mexico has already peaked

1: Saudi Arabia

2: Russia

What is central to US foreign policy and for how long?

What is the most sensitive area of US Foreign Policy?

Oil; since WWII

OIL!!!

The US wants to keep good relations with top oil producing countries like S.A. because we require so much oil.

We depend on each other because they need our demand and money and we need the oil.

There is speculation that they have ties to Terrorism

*Religion (Christianity v. Islam)

*Competiviness between the US and other countries for oil.

*Israel (Islam v. Judism but we are allies with them)

*Oil is the only thing stabilizign the Middle East's Economy

-we need to keep Oil producing Countries internally stable.

*Human (or womens) Rights/ Environmental Standards

Should America continue to spend money to keep the Oil lanes open?

Should America reform our Energy Policy?

Does our dependence on Oil create enemies for the US?

Should the Govt and big business make finding an alternative to oil a priority?

What are PetroStates and how will this become important in the Future?

What are some examples of PetroStates?

*Countries that have reserves of Oil

-as oil becomes more scarce, countries will get more competitive for oil.

*Iran, Canada, Russia, Saudi Arabia, Venezuela

*shortages = higher prices

*Suburban Sprawl

-everything based on the function of oil

-Would become the American Way of Life

*Industrial Agriculture

-prices of goods depend on oil prices

*Transportation

-interstate system helps US grow economically

*Informatioin Economy

-everything is made of plastic (oil product) so the ways things are electronically delivered (server farms) uses lots of energy.

*Global Wealth Shifts

-wealth will leave the producing countries and power will shift too

*Political Instability

-countries that lose wealth may become unstable; corruption

*Rejection of OPEC

-Rogue Countries  that are oil producers want to make deals too

*Aid Mobilization of Poor

-some of the oil producers use their to help the poor countries

*New Global Allignments

-Economic and Political; ppl will team up against others

*New Energy Paradigm

-Mixture of different energy sources

-Second Largest economy in the world (after US)

-Largest Manufacturer in the World

-Largest Energy Consumers in the world

-Second largest Oil consumer

-400 of the 500 Fortune 500 companies relate there

-80% of Walmart products make in China

-Was still going through internal issues; communists were active

-suffered 20-30 million dead from Japanese invasion

-Communism Grew after the War.

-(1949-1976)

-First communist ruler of China; changed China to a Modern Economy from a fuedal one.

-Created a new economic plan (Autarky)

-many ppl died under him bc of collective farming

-(1976)

-great warrior (fought with his armies)

-Started an open door policy in China

*Authoritarian Systems

-wants stability and predictability and this type of govt gives that.

-lots of restrictions on speech and human rights

How many jobs should be sent to china?

How dependent are we on Chinese goods?

How will the competition for Oil between the two powers play out?

*Both have huge militaries

*Taiwan:  What will the US do if China invades it?

*Japan: Major trading partner with US but what if the Chinese try to alliance with them along with Korea against the US?

*Middle East/Oil:  What if China alliances against the US with middle eastern countries and we get less oil?

-25% of the chinese population is extrememly poor and live in bad conditions

-Tibet:  China annexed Tibet destroying hundreds of temples and lots of culture.

*Aging Population

-need someone to follow but they have child restrictions

*Energy Shortages

*Loss of Farmland

-bc of suburban sprawl

*Health and Pollution Problems