Key Concepts / Terms:
Freedom, authoritarianism, politico-economic model, macro / micro economics, traditional economy, command economy, market economy, mercantilism, capitalism, capitalist development state, democratic welfare capitalism, per capita income, purchasing power, consumption, supply / demand factors, production, distribution, cultural borrowing, cultural dispersion, technological dispersion, mass culture / media, global mass culture / mass media, junk culture, trans-societal technologies, internet, exports, imports, international trade, balance of trades, Pacific Rim, economic super-states, trans-national economic integration, free trade zones, free / fair trade, protectionism, GATT – General Agreement on Tariffs and Trade, Super U.S. 301, multi-national corporation – MNC, economic size, global responsibilities, interdependence
QCC Objective 3: Examine the relationship of independence to interdependence in the world. BST – 1, 2, 3, 4, 10, 13, 14; QBE – 54 – AF / AM
3-1: Distinguish between independence and interdependence and cite examples to support distinctions
3-2: Make generalizations regarding the relationship of independence to interdependence in the world.
QCC Objective 4: Compares nationalism to globalism. BST – 1, 2, 3, 4, 13, 14: QBE 54; AF / AM
4-2: Give examples of historical developments that are evident of nationalism and globalism in history
4-4: Formulate hypotheses regarding the consequences of the world’s move towards globalism
4-5: Appraise the forces of nationalism and globalism in the world today
AF / AM: Appraise the forces of nationalism and globalism in South Africa
Protea – national flower
QCC Objective 6: Examine the conflict between the traditionalists and technology.
BST – 1, 2, 3, 4, 13, 14; QBE – 54 – 59; AF / AM
6-2: Cite examples of how technology has changed the way we live
6-3: Examine the need for high technology and organized information systems in society
6-4: Point out adverse and positive effects of high technology in the world
6-5: Assess the value of technology and balance with traditionalism.
QCC Objective 7: Trace and analyze selected cultural, economic, political, and historical patterns in post-World War II Europe. BST – 1, 2, 3, 4, 13, 14; QBE 54, 55, 57
7-1: Trace in outline form historical developments in selected European countries from 1945 to the present
7-4: Analyze the developments that led to the organization of the European Economic Community and European Union – EEC & EU
QCC Objective 10: Trace and analyze selected cultural, economic, political, and historical patterns in post-WW II Asia. BST – 1, 2, 3, 4, 13, 14; QBE – 53, 54, 55, 57 AF / AM
10-5: Critique U.S. – Japanese trade relations
QCC Objective 11: Trace and analyze selected cultural, economic, political and historical patterns in the post-WW II Americas. BST – 1, 2, 3, 4, 13, 14; QBE – 53, 54, 55, 57, AF / AM
11-2: Outline the common historical roots of Canada and the U.S.
QCC Objective 12: Trace the nature of cooperation and conflict among major ideologies. BST – 1, 2, 3, 4, 10, 13, 14; QBE – 53, 54, 55, 57, AF / AM
12-1: Define and differentiate between cooperation and conflict during the Cold War struggle between the U.S. and former Soviet Union
12-2: Examine the factors that influence political ideology
12-4: Compare and contrast communism, capitalism, and socialism
AF / AM: Research and identify reasons:
- Why the majority of African nations, upon achieving self-determination, originally constructed single party, socialist governments
- Why many of the same nations have recently become multi-party democracies
- Why selected countries resist evolution into market economies and multi-party democracies.
QCC Objective 13: Analyze the world’s balance of power with respect to economic and political competition. BST – 1, 2, 3, 4, 7, 13, 14; QBE – 54, 55, AF / AM
13-1: List international economic alliances and organizations
13-2: Define balance of power.
AF / AM: Assess Africa’s role and place in today’s world balance of power equation with focus on global economic and political influence.
QCC Objective 15: Describe the relationship of multinational corporations and world trade. BST – 1, 2, 3, 4, 10,13, 14; QBE – 54, 55, 59, 60: AF / AM
15-1: Define multinational corporation and give several examples
15-2: Assess reasons why corporations expand operations abroad
15-3: Differentiate between supply-oriented and market-oriented companies
AF / AM:
- Assess multinationals as operations that help bring different cultures closer together
- Describe the infrastructure of Kenya and if it can support multinational corporations operational needs
- Identify several multinational corporations that have branches in South Africa and Kenya and describe challenges they may face in doing business in those two countries.
QCC Objective 20: Trace the history of international human rights issues. BST – 1, 2, 3, 4; QBW – 54, 55, 62, 63; AF / AM
Recognize that a major consideration of any nation’s admission into the European Economic Community and European Union is that country’s human rights policies and record – example: Turkey
- Recognize the importance and effects of international trade to and upon the local, state, national and global economies
- Analyze and assess how transnational economic integration – creation of continental free trade zones – is accelerating the trend towards continentalism and globalism
- Assess how the creation of large free trade zones is altering the world’s balance of power from a bi-polar to a multi-polar arrangement
- Investigate the role multinational corporations (MNC) play in the world economy and determine the responsibilities of operating on a global scale
- Describe how and why the world has changed from a state of U.S. economic domination in 1946 towards one of increasing global interdependence in 2013
- Apply knowledge of international trade by assessing how Turkey’s strategic location and bridge to Europe could benefit both the country and continent.
Performance Objectives: The student will be able or expected to:
- Explain how traditional, command, and market economies operate and identify the differences in each model
- Analyze and compare traditional, command, and market economy model’s need and reasons for engaging in international trade
- Examine selected market economy models – authoritarian capitalist state, democratic welfare capitalism – and describe the relationship between the economic and political realm of each
- Analyze how a country’s politico-economic model may aid or inhibit its ability to successfully export or compete in the global marketplace
- Examine how former communist bloc nations have transformed their command economies into market oriented models
- Figure per capita income and draw conclusions about related purchasing power and a nation’s standard of living from comparative examples
- Recognize that all cultures and societies are unique and that a country’s interaction with and knowledge of another enriches it
- Draw conclusions about the impact of American mass culture – internet, movies, TV, popular music, comic books / cartoons, magazines on U.S. society
- Draw conclusions about the impact of American mass culture upon the rest of the world with a focus on more traditional societies and / or authoritarian governments
- Recognize that the American commercial or mass culture is the nucleus of a burgeoning global commercial or mass culture
- Examine how this global mass culture is dispersed through an expanding global mass media network utilizing trans-societal technologies – worldwide TV transmissions, internet, fiber optics, DVD’s and VCR, jumbo jets – that in turn, hasten cultural uniformity
- Analyze the relationship between trans-societal technologies hastening cultural uniformity, and influencing transnational and global economic integration
- Recognize that international trade tends to raise the standard of living of all nations engaged in it due to some countries excelling more than others in the production of certain types of goods or services
- Be knowledgeable regarding the importance of international trade and the means necessary to maintain balanced trade between countries
- Display understanding or key trade issues such as free trade, fair trade, protectionism, and trade surpluses and how to solve current problems
- Describe the role of GATT – General Agreement on Tariffs & Trade – and U.S. law Super 301 in forging a fair global trading system and resolving conflicts such as dumping, protectionism, and copyright infringement
- Identify the advantages of the global operations of a multinational corporation (MNC), and why some companies become multinational in scope
- Select an MNC, determine whether it is supply-oriented or demand-oriented, and identify the responsibilities its world-wide market participation necessitates
- Display understanding of how the world has changed from a U.S. dominated planet in 1946 to a state of increasing interdependence in 2013
- Display knowledge of the creation of two huge free trade zones, the North American Free Trade Zone (NAFTZ – U.S., Canada, Mexico), and the European Economic Community (EEC) / European Union (EU) and related issues
- Assess if the drift toward regional and global economic integration is ushering in an age of continentalism – North America vs. Europe, Europe vs. Asia and so on
- Assess how evolving economic forces – erosion of U.S. industrial dominance, transformation of the communist world into democratic market economies, new economic super-states (China, Japan, Korea, India, Brazil, Germany, Turkey, Israel) continental free trade zones, etc.) and the emergence of over 100 less developed nations has transformed world leadership into a multi-polar arrangement.
Student Handout #36 – Economics 1 – The Market Economy, a lesson designed to assure:
- Mastery of basic economic knowledge such as why and how goods are produced and exchanged
- Understanding of the market economy’s major components – production, distribution, consumption.
Student Handout #37: Economics II – Alternative Economic Models, a follow up activity:
- Describing the differences between a traditional, command, and market economy
- Evaluating each model’s means of producing high living standards
- Analysis of each system’s need and means to engage in international trade
- Selected examples of cultures that limit global interaction and trade and provision of reasons for doing so.
Student Handout #38: Economics III – Political Economy, a lesson that:
A. Describes the differences between the following three models:
1. Authoritarian (guided) capitalist state
2. Capitalist development state
3. Democratic welfare capitalist state
Finland is a democratic welfare capitalist state that has the world’s best teaching staff
Student Handout #39: Cultural Dispersion and Trans-societal Technologies / Internet, a lesson designed to:
- Examine the impact of America’s mass, popular, commercial culture upon U.S. society
- Illustrate how America’s mass culture is exported by multinational mass culture / media trading companies via trans-societal technologies
- Further illustrate that the U.S.’s mass culture / media has influenced the development of a global mass culture / media
- Provide selected examples of how more traditional / authoritarian societies may be impacted by the exporting of this global mass culture / media dispersed via world wide satellite transmission or the internet
- Depict how the exporting of mass culture / media – films, cartoons, TV programs, popular music (rock, hip hop, jazz, blues), literature, sports – an important form of international trade or commerce via trans-societal technologies tends to hasten cultural uniformity
- Examine links between the development and dispersion of the global mass culture and media, the trend towards the internationalization of culture and cultural uniformity in general, the spread of English as the language of commerce and science, the formation of the global economy and the role of trans-societal technologies in that linkage.
Student Handout #40: Links to the World – is essentially a series of guided questions arranged to help students to:
- Recognize the importance and effects of foreign trade upon the local, state, and national economies
- Become knowledgeable regarding the extent of trade between the U.S. and its largest trading partners and with individual continents in general
- Become familiar with actual hands-on import and export processes (#41 A)
- Become knowledgeable about key international trade rule instruments such as GATT – General Agreement on Tariffs & Trade (#41 B) – and U.S. law Super 301 drafted by Congress to identify nations not conforming to GATT’s established free and fair trade principles, and to force compliance of countries accused of violating GATT by threatening denial of access to specified areas of the American market, if necessary (#41 C)
- Become knowledgeable about the role of the World Trade Organization (WTO) in forcing global compliance to free and fair trade principles, practices, and processes.
Student Handouts #42 A – #42 B – Case Studies of Transnational Economic Integration & Continental Free Trade Zones: North America Free Trade Zone (NAFTZ – U.S., Canada, Mexico – #42 A), and the European Economic Community / European Union (#42 B)
The two foremost examples of economic integration in the world today are NAFTZ and the EU, the two largest and richest markets. NAFTA and the EU have recently been discussing a possible merger to stimulate growth in both continental trade zones.
Student Handout #42 A: NAFTZ – North American Free Trade Zone
The U.S., Canada, and Mexico were each others best trading customers and figured that by removing protectionist tariffs and needless regulations, trade could be dramatically increased. So the U. S., Canada, and Mexico combined their markets to create a free trade zone that today includes 465 million people with a total Gross Domestic Product (GDP) of over $20 trillion. The flow of trade across mutual borders is the largest volume in the world and the benefits of the agreement have outweighed the problems caused by it. The handout teaches basic history, details and provisions of the agreement.
Student Handout #42 B: European Economic Community / European Union – EU
The handout teaches how Europe learned the lessons of WW II to form the EEC in 1958. By 1992, twelve nations had formed the European Union that today includes 27 countries in a unique economic and political partnership. The combined market includes approximately 505,000,000 people / customers with a GDP that is slightly less than the NAFTZ.
Student Handout #44 – World Economic Changes 1946 – 2013: From a U.S. Dominated World to Global Interdependence
The purpose is to teach students:
- Events and trends that altered the world’s condition from one of American political, economic, and military dominance in 1946 to the present state of increasing global connectedness
- Identify factors responsible for increasing internationalization and interdependence
- Recognize the rise of East Asian / Pacific Rim nations manufacturing and exporting competitiveness in world markets
- Identify new economic super-states that have emerged and analyze how their influence is re-shaping global trade relationships and local ways of doing business
- Understand how the emergence of over 120 less developed countries (LDC) since WW II has altered the global balance of power.
Student Handout #45 – Case Study: China – Managing Growth & Change
The aim is to provide a:
- Brief history of the economic modernization that began with official U.S. diplomatic recognition in 1978
- Accounting of the 1989 student’s democracy movement and subsequent government’s crushing of the Tiananmen Square demonstrations
- Analysis of the government’s policy of directing economic growth and change and how long Beijing can stifle political pluralism.
For students to benefit from any unit on international trade, it’s important that they have at least some understanding of economics. Ideally, all students should have Economics as a prerequisite before experiencing Global Studies / International
Relations. But since that is not always the case, Student Handout #36 – #37 – #38
offer a basic overview that will hopefully provide an adequate foundation in the subject to realize all Unit 7 aims and objectives.
· #36 – Economics I: The Market Economy
· #37 – Economics II: Alternative Economic Models
· #38 – Economics III: Political Economy
The three sequential lessons were developed to:
- Expose less prepared classes to clusters of key economic concepts
- Guide students through a series of graduated readings first showing how an economy works, then its relationship to the complex global trading system
- Description and comparison of several different models of exporting nations
- Study of neo-mercantilist purpose of exporting goods to create jobs and enrich the nation
Directions: #36 – #37 – #8 – Economics I, II, III
Instruct students to read the handout(s) and fill in all spaces and blanks with the correct term / concept from the list.
Objectives for handout #36 are:
- Gain a working knowledge of how an economy is an organized system of exchanging goods and services
- Understand the role that the system’s basic components or factors perform in producing sufficient goods and services to relatively satisfy a population’s needs and wants
- Ability to analyze why a system does or does not provide a high standard of living for its citizens
Objectives for handout #37 are:
- Understand how the three basic economic systems – traditional, command, market – are organized and function
- Recognize how or why the society’s values and system of exchanging goods and services may advance or depress individual consumption levels, and aid or inhibit its exporting capability and means of earning wealth
- Examine selected national and cultural models reflective of varying levels of resistance to change, and subsequent limitations upon global interaction – and related reasons.
Objectives for handout #38 are:
- Fortification of key critical thinking skills – analysis, synthesis, application
- Describe and compare varying forms of neo-mercantilist or export-driven models – authoritarian capitalist, capitalist development state, democratic welfare capitalism
- Assess how a nation’s politico-economic model and social contract may affect its ability to carve out foreign market shares and raise or maintain the country’s standard of living.
Directions for handout #39 – Cultural Dispersion and Trans-societal Technologies
Introduce handout #39 A – Trans-societal Technology – by assigning as homework. Reinforce notion of living in an electronic global village or traveling on Spaceship Earth with handout #39 B, a Map of Intelsat – International Satellite System, the world-wide network of ground-based transmitters beaming TV signals to orbital relay stations that bend and direct the signals around the globe. This system can link more than 5 billion viewers for special events such as the Olympics, World Soccer Cup, or the baseball World Series.
Handout #39 C – Daily TV Schedules of Selected Nations – lists the lineups of what the globe’s viewers might be watching on the same evening in their respective countries during the 1970’s and 1980’s. The nations were chosen to represent selected areas of the planet. Examine the shows viewers in each nation watch currently and identify the American produced programs. Determine the show’s and country’s values – liberal, traditional, authoritarian. Debate the impact, pro or con, on each of these societies that the programs being viewed might have. Also, what image of U.S. society emerges from these shows, and how might foreign viewers judge Americans as a people.
The phenomena of cultural dispersion probably began with the rise of ancient empires and development of early religions. Each new force or faith enthusiastically spread their culture or new religion or concept of God with the liberal use of their swords. The first modern example of cultural dispersion may be the Renaissance, the rebirth and celebration of learning and art.
Gutenberg’s printing press may also be the first significant trans-societal technology – it democratized knowledge by vastly reducing the cost of information and ideas thus affording the masses increased access. The second could be advances in ship’s designs that made culture transportable and probably paved the way for colonialism and imperialism. The internet is simply the latest and most transformative of all trans-societal technologies.
The 18th Century Jeffersonian ideal of a free press and informed public led to the 19th century reality of the penny press (mass readership) – and yellow journalism (sensational reporting). The invention of radio by Marconi and TV by Philo T. Farnsworth revolutionized communications.
A 20th Century idea of a nation-wide system of radio and later TV broadcast stations electronically connected the American masses. Pioneer entrepreneurs David Sarnoff (RCA, NBC) and William Paley (CBS) produced and broadcast entertainment and news programs that Americans wanted to hear or view. Post-war affluence also fostered a youth culture that took rock n’ roll as its music, the vital beat that now binds teenagers from Manhattan to Manila to Moscow to Manchester.
Television is believed to have been the most influential of all of the trans-societal technologies – the internet combines all of the elements including TV’s video component. TV was popularized in America and later installed in virtually every nation of the world. Many U.S. TV programs, a valuable export, are seen around the world by hundreds of millions of people each week. Speculate on the images of American family life or business practices that some foreigners may gather about the U.S. from the characters portrayed in those series.
After examining handouts #39 A-B-C, poll students on the programs they view and discuss why they watch them. Suggested questions:
- What are your favorite programs?
- Why do you like them?
- To what degree are sex and / or violence featured in them?
- What kind of image of America comes through the TV set?
- Do you think those images affect Americans in any way and, if so, how?
- Do Americans really receive the TV programs they want to view?
- Is TV for information dissemination, entertainment, or a commercial medium?
- Is TV a private or public medium?
- Does / can commercial TV provide all Americans with a product they want to see?
- What role should government or publicly financed TV play in what we see?
- Compare the amount of U.S. programming that is publicly and privately financed with France, Japan, and Russia.
- Does total government funding of the media, especially TV, pose any danger to society? If so, how?
- Do privately financed channels protect freedom of thought, or pose any concerns to society?
- How many students in class learn of news events from TV as their only source? Or the Daily Show and / Colbert Report on the Comedy Channel?
- Given that newscasters personally describe a nightly news broadcast as the equivalent of the front page of a newspaper, and 70% of all Americans receive their information solely from TV, how informed are you – and Americans as a people in general?
- How many Americans only scan the news on their internet browser home page or read an online newspaper? Are print newspapers and even TV newscasts ultimately doomed? Why or why not?
- Is the thought that some day we all might be obtaining our news online sound like a convenience or a potential problem? Explain.
The above questions should lead students to summarize the power of television, and now the internet, to influence, even orchestrate society. The summary should also serve as a bridge to study the next media – contemporary music – more exactly, rock n’ roll, hip hop, drum and bass, punk, reggae, jazz, blues, R & B, country and all other genres. Students should analyze how their own music influences them, next consider how it might influence teens from other countries, particularly from more traditional cultures.
- What are the trans-societal technologies that connect teenagers globally to a common mass youth culture?
- How does this dispersion process occur? How are new songs introduced today and how do they reach your ear?
- How does this network and process make teens more similar than different?
Employ the inquiry method to guide students to understand that:
- American revolution unleashed a spirit of freedom
- Americans value progress and learned to live with change
- American English is a language in which scientific, technological, and artistic notions are easily expressed
- U.S. is a land of immigrants bound together by a common language and set of laws
- Americans had the resources to create and consume popular culture
- Information dissemination and entertainment became large, profitable markets for business
- Entrepreneurs capitalized on the invention of new technologies and resulting commercial applications
- After WW II, America had the political need to combat communism by building Radio Free Europe – Voice of America transmitters that became the U.S. Information Agency under President Kennedy
- America possessed the technology and capital of multi-national trading companies that exported U.S. mass culture (films, music, TV programs, magazines, newspapers, records, tapes, CD and DVD, internet web sites)
- Global mass culture / media developed along with the growth of the global market / trading system.
TV, VCR’s, DVD’s, video streaming, texting may have become the most revolutionary force in the world today. The Egyptian Revolution was directed a great deal from Facebook pages; Syrian rebels place videos on Youtube to get their message out.
In 1970, the South African government targeted Japan as their next great diamond market. Within four years, using saturation-level advertising, a thousand year old engagement tradition was replaced by the groom’s giving a pear shaped diamond ring to his future bride. The late Senator Hayakawa (Dem. – California), a linguistics professor, frequently claimed that TV commercials such as MacDonald’s hamburgers or Kentucky Fried Chicken changed society more radically and beneficially than any communist insurgency.
In 1979, pro-Khomeini supporters usually waited for the TV camera’s red light to blink before screaming “Death to America.” Over the next ten years, TV coverage of democracy movements in the Philippines, South Korea, and Taiwan wore down the authoritarian walls of these guided Asian economies.
Directions: Student Handout #40 – Links to the World
Guide the class through the list of ten questions arranged to make students aware of the internationalization of their local culture, and state and national economies as well. Poll the class on how many students drive foreign cars, own a music delivery system made in Asia, or ate at an ethnic restaurant in the past week? The lesson is short and should take about a class period.
The class should be made aware during the Links to the World lesson that American culture was enriched by the continental U.S.’s lying smack in the crossroad of ideas and items originating from Europe or Asia.
Americans brought their 210 cultures with them. Example: hot dogs and hamburgers – both national dishes were originally foods brought by German immigrants from Frankfurt who favored spicy beef sausages (frankfurters), and former citizens of Hamburg who liked chopped beef patty sandwiches.
Pizza, the most popular U. S. food, was discovered by an American G. I. in Italy during World War II and, who after returning home, started the first pizzeria in Boston in 1946. Both the Pizza Hut and Dominoes pizza delivery have established thousands of units. There are other stories about claims to being the first pizza restaurant in America and they may all be true.
Mexican food – the fastest growing segment of the restaurant industry for about 30 years – overtook Chinese food as the most popular new ethnic cuisine about 20 years ago. However, Chinese restaurants still out number Mexican food restaurants but the gap is narrowing.
Direct ions: Student Handout # 41 – The Importance of International Trade Illustrates how crucial foreign trade has become to America’s welfare. Until roughly 1980, the U.S. economy was heavily protected from foreign competition and nearly self-sufficient. Imports were taxed to price levels that mostly affluent Americans could afford. In general, the U. S.’s huge growing internal market consumed almost all of the country’s goods and services and foreign trade was more of an after-thought than a practice.
However, the energy crisis of the 1970’s awakened America to the growing fact of interdependence and the government began urging business to become more export-oriented. Economists applauded this new drumbeat – it would balance an expanding middle class’ taste for imports, and also cushion periodic recessions caused by fluctuating consumer demand.
Handout #41 C describes the basic powers of Congressional law Super 301 which gave the government the right to punish any nation not conforming to free or fair trade principles. Japan, Brazil, India, South Korea, China and others have been accused of violating GATT either by dumping goods (selling goods cheaper in foreign markets than back home) or protectionist policies such as slapping high taxes on imported goods to price them above domestic demand levels. GATT is an instrument of the World Trade Organization (WTO) which monitors a country’s compliance to free and fair trading rules.
Failure to comply with GATT can ultimately lead to a denial of access to specified segments of the U.S. or other markets. Super 301 is a carrot and stick approach – the carrot of access to the vast and affluent U.S. market is dangled to induce GATT compliance. The stick is denial to violators.
Both the Reagan and Bush Administrations consistently advocated free trade and the Clinton Administration concluded:
- Freeing the flow of goods and services across national borders would increase trade
- Capital investment theoretically would be going to where it was needed, ultimately creating more and better jobs, producing more real wealth, and raising the general standard of living for the many rather than the few.
Large economies of scale help produce mass goods more cheaply and thus win greater market share. For 1960 – 1990, Japan was a very successful practitioner of this plan—and become a tycoon nation in the process. For the past 20 years, China has leapfrogged past Japan into prosperity. Germany also achieved a similar measure of prosperity by earning a reputation for making high quality goods.
Smaller states frequently lack the domestic market size necessary to sustain sufficient economies of scale and struggle to compete globally. Also, conflicting government regulations, trade policies, or tariff levels, cam impede the flow of goods across the borders of even the friendliest of neighboring states.
Reserve approximately 2-3 periods to cover the important materiel in handouts #4l A-B-C.
- How are the three countries – the U.S., Canada, Mexico – similar and different politically, economically, and socially?
- Do Americans know as much about Canada and Mexico as they should?
- Which of the three countries stands to gain more from the pact and why?
- What do Canadians, Mexicans, and Americans fear about the trade pact?
- Has America lost millions of jobs to lower wage Mexico? Why or why not?
- What are the benefits of NAFTZ to us?
Handout #42 B chronicles the history of the European Economic Community’s development and evolution in to the European Union after 1992
In the 1970’s, 12 European countries discovered that they lacked the large domestic populations necessary to create economies of scale that would permit them to compete with U.S. and Japanese industry – today we would add China. After clearly falling behind in the 1980’s, the twelve member EEC decided to integrate their economies by 1992, the first step towards creating a great new nation – EUROPE. This agreement allowed for the free passage of capital, goods, and workers across national borders. The
The larger economies of scale realized aided the EEC nations in becoming more efficient, productive, and competitive again.
The concept of Europe becoming a continental nation like the U.S. took root with the EEC morphing into the European Union in 1992. The EU currently has 27 members and due to the economic crisis of the past 5 years, is facing the toughest challenges to its unity in the union’s short history.
- How did ultra-nationalism in Europe during the 20th Century lead to the outbreak of two world wars?
- After World War II, which six European nations integrated their coal and steel industries and why?
- What is meant by a common market and to what extent were the EEC’s member economies actually integrated?
- What steps did the EEC members take in 1992 to fully integrate their economies?
- How was total economic integration supposed to benefit the EEC / EU members?
- In reality, how has economic integration actually benefitted EU members? Research this subject and show sources.
- How much power does the European Parliament have over each of the 27 member governments?
- Which nations have applied for EU membership and are waiting to join? For example, what is holding up Turkey’s membership?
- Is a 35 – 40 member United Nations of Europe stretching from Iceland to the Urals an impossible dream? Why or Why not?
In terms of size and depth, handout #42B is rally more a 3-4 period long learning packet that contains maps, basic facts, statistical profiles, the EEC and EU’s history. Key issues, and anticipated problems to be solved are furnished or dealt with.
Directions: Student Handout #43 – Multinational Corporations – MNC
Multinational corporations play an extremely important role in international trade. In introducing this 1 – 2 period long lesson on the MNC role and realities, teachers should emphasize the factors of size and reach by comparing selected MNC’s gross annual incomes with selected small country’s GDP’s. Next, relate qualifications to be an MNC:
A. Operate in at least six countries
B. Foreign subsidiaries comprise more than 25% of assets
C. Has sales in the hundreds of millions a year.
Try to bring to life the evolutionary process of a company striving to become an MNC, and its reason for doing so. Use the example of KRAFTCO (handout #43A) to illustrate how a well known MNC functions, or research and discuss a local MNC role and function.
Discuss also the reality of bribery to win a foreign contract, and the U. S.’s Foreign Corrupt Practices Act (handout #43B) to root out corruption in business, both at home and abroad. Summarize lesson by having students:
- Describe the role MNC’s play in the facilitation of international trade
- Identify the responsibilities inherent in world-wide market participation
- Recognize that a salesperson’s sensitivity of local cultures and ability to speak the local language may aid in making a sale
- Recognize that the U.S. trade deficit is a threat to the economy and may lead to lowered living standards in the future if not quickly rectified
- Conclude that the trade deficit will not improve until Americans start Producing more of the goods that the rest of the world wants to buy
- Further conclude that skilled international marketers and salespersons are needed to reduce the trade deficit.
DIRECTIONS: Student Handout #44 – World economic changes 1946 – 2013: From a U.S. dominated world to global interdependence . Begin to examine the map that describes the distribution of the world’s wealth in 1946. Students are challenged to synthesize the changes in the world economy during the past 67 years by replicating a model, or drawing a similar map describing the present world distribution.
The World is One reading is the text for the 1946 map and the student’s directions for replicating a model of the present and what it conveys:
- That the U. S. was the dominant economic, political, and military power at the end of World War II
- That over 120 less developed countries (LDC) have been born since 1946
- The rise of new economic super states, East Asia / Pacific Rim nations that have eroded U. S. industrial dominance
- MNC’s and the global trend towards transnational integration are fostering world inter-dependence.
Students will individually or collectively construct or draw the model of the present for homework, and submit the project the following day. This model summarizes the past 65 years of historical economic change.
Suggested questions for building upon knowledge of world changes 1946- 2013
- Are these changes (1946-2013) signs that the U.S. is declining?
- Or is the U.S. dream of living in a world of prosperous democracies merely coming to pass?
- What changes to you envision for the 2050 and beyond and why?
Directions: Student Handout #45 – Case Study – China 1990 – 2013: A Nation in Transition focuses on the Chinese student’s pro-democracy demonstrations in Beijing’s Tiananmen Square and the government’s bloody crackdown.
Have class review materials about China from Unit 6. Handout #45 presents the causes of the student’s pro-democracy movement and the apparent reasons for the governments harsh regression into previously discredited Maoist behavior.
China’s modernization program began in 1978. Leader Deng Hsiao Ping denounced Maoism as pauperism and declared that it does not matter what color the cat is as long as it catches the mouse (read: capitalist incentives to modernize society and stimulate economic expansion). And there has been much progress as Chinese farmers began feeding the masses, producing surpluses, and growing richer. Special designated economic zones were established and within them many Chinese started businesses, or shared joint ventures with foreign firms.
The great Chinese economic take-off begins:
New technologies were transformed from the West helping China to finally take a modest leap forward. Between 1978 and 1989, an estimated 60,000 to 100,000 Chinese students studied at universities in the U.S., Japan, France, Germany, England, and other places. The students were expected to learn knowledge of advanced technologies, scientific processes, mathematics, computers, business and management systems to help their backward nation achieve rapid modernization.
The students also wondered why western nations seemed so much more advanced and efficient than their homeland. Many concluded that the reason was that western business systems were less constricted by government control.
People in the democratic and decentralized west acted in their own self-interest and could more quickly respond to changing market conditions. In contrast, China, despite promoting market values, remained authoritarian and overly centralized.
Bureaucrats were in the position to act in their own interest — like extorting bribes from those taking the risks. Still, many of the new Chinese businesses thrived to the point where the poorer masses began grumbling about the reintroduction of a class system.
Furthermore, the progress of the new Chinese businesses led to increased political leeway. A combination of students returning from foreign universities in the west and businessmen chafing under political controls began to demand the institution of democracy. This fledgling movement was encouraged and financed by Hong Kong residents worried about their colony being turned over to Chinese communists in 1997 regardless of Beijing’s promises not to tamper with Hong Kong’s social system for fifty years.
In early May of 1989, the students decided that the time was right to demonstrate for democracy. Thousands of students occupied Tiananmen Square non-violently to demand freedom. During the next thirty days, their numbers grew into crowds of hundreds of thousands and captured the attention of the global media.
Reporters flew in from all over the world. CNN began round the clock coverage, CBS delivered nightly broadcasts from the square, while millions around the world watched the demonstrations on TV and rooted for the students to win.
The government appeared weak and ineffectual in dealing with the peaceful and well organized students who were pioneering the use of fax machines in keeping their supporters well informed of events taking place elsewhere.
Students wheel Goddess of Democracy into square that set stage for army to attack. Finally, on June 4, the government apparently felt it was losing control of the situation and might very well fall. After several efforts to drive the students from the square failed because Chinese soldiers had refused to fire on fellow citizens, a sufficiently isolated army unit was found that would perform the dirty deed.
At three A.M., the soldiers attacked with guns blazing and shot an estimated 2,400 students to death. The demonstrators were driven from the square, thousands were arrested, and dozens executed. A sad question is why would a government shoot 2,400 students that it had invested approximately $50,000 in each to educate?
Famous picture of Chinese student standing in way of tanks daring them to run him over – they swerved around him.
Some thought Deng was abandoning the road to capitalism and democracy. Others felt Deng believed that his country’s population was so vast and exceptional that China was beyond western-style democracy. For the past century or two, China had suffered constant internal weakness, division, and misery. The country, like loose grains of sand on a beach –Deng’s words – had been carved up into foreign controlled spheres of influence.
While the Maoist revolution had cost the country dearly in blood spilled and economic stagnation, it had succeeded in centralizing Chinese governmental authority made the country stronger. Deng was quoted that his aim for China was 50 years of authoritarian capitalist development, then when China was strong, big democracy would remain taboo, but little democracy – keeping party officials honest and representative of masses – would be promoted.
Deng’s crackdown risked the loss of ten years of economic growth. Many Americans Americans wanted their government to force the withdrawal of all U.S. companies, an investment of over $14 billion. The pressure to punish China increased when the Beijing government issued the first big lie that nobody had died in the square. Things soon quieted down with little change in the situation. A world-wide network of Chinese opposition groups formed and lobbied against Deng’s government, though they had little or no success in pressuring change.
The U. S. Congress voted to withdraw China’s Most Favored Nation trading status, but the Senate failed to override President Bush’s veto. The President believed that isolating China would hurt the reformers and new enterprises more then it would help them. However, this policy ignored China’s using prisoners as slaves to make goods for export. China, at the time, enjoyed a $10 billion trade surplus with the U.S. – it sold great amounts of textiles and electronics to America but bought much less in return, mainly wheat and other agricultural commodities.
Why did Deng reintroduce long discredited Maoist beliefs? Answer: Primarily to re-impose central control. The consensus among editorialists was that the students literally spat on the aged Chinese leaders ideology that they had believed in for 60 to 70 years. The tough old leaders, fearing a return of unfair and anarchic capitalism, were not going to be easily shoved aside, and fought back to restore order, an absolute of Chinese life.
The Chinese leaders walked a fine line between cracking down and continuing economic modernization. The government mourned the loss of tourist dollars in the short term – the tourists began returning soon afterwards. Few, if any businesses pulled out and most that left returned. One might sum up the situation with the old Chinese proverb; Two steps forward, one step back.
Additional suggested research assignment
A highly recommended lesson for students is to research the impact of government defense spending on their state and local economies. The Pentagon makes available copies of its annual budget, as well as other pamphlets detailing defense contracts awarded; numbers and types of defense establishments, and dollar figure amounts spent on a state by state breakdown. These materials can also be obtained from your Congressperson or U.S. Senator as a constituent service.
The aim of this lesson was to determine defense spending stimulus to the local or state economy. California, Virginia, Texas, and Georgia are examples of states that are enriched by defense spending – that is that the net inflow of dollars far exceeds the outflow of taxes to Washington. Iowa, New Jersey, and North Dakota are states which suffer a net outflow of dollars and are negatively affected by defense spending priorities.
The end of the cold war drastically affected Pentagon spending priorities. A peace dividend of sorts allowed the government to reduce the military’s size and cut the defense budget. The economies of many states and communities were sorely impacted by the dozens of base closings that took place.
Investigate as a class or individual student project whether your state is enriched or hurt by defense spending priorities.
- How many defense facilities exist in your local area or state? What types?
- How many federal tax dollars do these bases pump into the local or state economy?
- How many defense contractors receiving federal money are located in your state?
- Are they satellite industries located near bases?
- Overall, do current defense spending priorities benefit or hurt your state’s economy and why?
- Is your state or community scheduled to have a military base close in the near future?
- If so, how will the loss of these revenues affect the state or local economy?
- What efforts are your state or local leaders making to offset this loss of income?
- Could the closing of a base be a blessing in disguise in that it forced state or local leaders to stop relying on Pentagon tax dollars and seek economic development and diversification? Why?
Student Handout #36 – Economics I – The Market Economy
Directions: Read this introduction to understanding Economics, then fill in the blank lines with the correct term or concept from the below list.
Terms / Concepts: Division of labor, economy, economics, macro / micro-economics, marketplace, laws of supply and demand, production, distribution, consumption, standard of living
The first humans to appear lived in a very primitive manner. They hunted and gathered food, and lived in caves for shelter. Since human beings are social animals, they eventually came to live in groups.
These groups evolved into civilizations upon humans developing ways and means of meeting people’s basic needs such as food, shelter, and protection. The problem of dealing with human’s wants would come later.
These first groups were then faced with four key questions:
1) Who shall produce what the people need?
2) For whom shall these goods be produced?
3) What and how much was needed to be produced?
4) Who should distribute these goods and how?
People living in cities soon learned that a relatively small group of efficient farmers could feed the entire population. This was the beginning of specialization of task or _____________ of _________. This freed others to become builders, healers, priests, artists, and so on. The individual’s selling of his or her labor or goods in exchange of another person’s good or service was the beginning of an _________________.
_____________________ is a social science that studies how an economy actually works. The discipline is chiefly concerned with the description and analysis of the production, distribution, and consumption of goods and services. ___________ – economics is an examination of the general economy, ________ – ___________ a study of individual areas of that system.
___________________ is the systematic manufacturing of a good or service with respect to the commodities quality and cost. __________________ is the transportation and merchandising of the commodity to the consumer.
______________ is the utilization of goods and services to satisfy needs and wants.
Which brings us back to the four basic questions regarding production. In 1774, Adam Smith, a Scottish economist, published a book called The Wealth of Nations.
Smith argued that:
- An economy should be organized as a free market based on the laws of ___________ and __________
- People naturally acted in their own self-interest
- People had needs and wants to satisfy and had to ______________ goods and services
- People had limited incomes so they sought value in spending their hard earned money (a convenient medium of exchange)
- People therefore wanted the best available good at the lowest or fairest price
- Producers, whose self-interest lay in their desire to earn the consumers money, would _____________ these commodities
- Producers would make their income in the form of profits, an amount of money added on to the cost of production.
The __________________ was designated as a competitive arena in which the more
responsive and efficient producers would survive and thrive. The same marketplace also determined:
- How many goods consumers will ______________________
- How many goods producers will need to ___________________.
According to Smith and his economic theory of market capitalism, entrepreneurs (private individuals) would:
- Study the market to determine the goods that consumers wanted to buy
- Risk their capital to produce and distribute the goods or services most in demand
- Efficiently organize the factors of production – capital, land, labor, natural resources and machinery
- Control costs and maintain high quality to sell more goods, earn greater profits, and get rich.
In Smith’s market economy, goods and services are produced for those who can buy them. People will either be producers or workers to earn money to satisfy needs and wants. However, the ___________________ also determines the worth of jobs and the level of wages. For example, a brain surgeon, who requires a long, difficult, and expensive training period, is likely to earn more money than a sales clerk.
Unemployment or the availability of more workers than there are jobs to fill will also depress wages. In addition, entrepreneurs facing the pressure of competition, are forced to hold down labor costs. Obviously, most workers a.k.a consumers will have limited incomes and have to make choices about what they can afford to buy. Indeed, consumers can be ruthless in their pursuit of value, sales, bargains, and so forth.
The ________________________ works in similar fashion for entrepreneurs. The incentives of the market system are to reward those who take risks, or work longer, harder, and smarter. Those who take greater risks may earn higher profit yields, or more easily lose their investment. But those who guess right may earn larger incomes and thus buy more or better goods.
Historically, the individual pursuit of profit has tended to quickly advance society in general. New technological inventions, miracle medicines or drugs, leisure time products / activities, make life easier and better for all of us. They also can make fortunes for their inventors and the entrepreneurs who risked their capital to bring that good or service to market.
The progress in medicine, technology, and education over the past century or two has made survival less and less a factor in people’s lives. The coming of the industrial age has created a vast array of cheap mass produced goods for _______________ to buy.
Today, successful entrepreneurs, professionals, or highly skilled and paid workers often purchase many types of luxury goods and services that signify status differences. More and more, people have started to take for granted, even come to expect, a constantly rising ______________ of _________from their national economies.
The objectives of this lesson were to:
- Gain a working knowledge of how an ______________ is an organized system of exchanging goods and services
- Learn about the system’s basic components of _________________, _______________, and _________________ and the roles they play in the provision of adequate amounts of goods and services to relatively satisfy a population’s needs and wants
- Develop an analytical ability to determine why a system does or does not provide a high standard of living.
We have used American private enterprise, a change and progress oriented system, as one model for examination. In Economics II (handout #37), market capitalism will be compared to the traditional and command models.
Review / discussion questions:
- List and answer the 4 key economic questions that human beings have faced since the earliest civilizations.
- What is an economy? Identify an economy’s basic components and describe the role each plays in the provision of adequate amounts of goods and services to relatively satisfy a society’s needs and wants.
- Why is Adam Smith considered the father of the market system and his book The Wealth of Nations the bible of capitalism?
- Explain Smith’s theory and the workings of the market system with regards to prices and wages.
- Identify and discuss historical factors that have influenced people to become less worried about survival and more concerned about their wants
- Is an economy’s function to provide a constantly rising standard of living?
Student Handout #37 – Alternative Economic Models
Directions: Read this follow-up lesson, then fill in the blank lines with the correct term or concept from the below list.
Terms / Concepts: Economy, economic model, market economy, traditional economy, command economy, freedom, authoritarianism, laws of supply and demand, marketplace, capital(ism), production, distribution, exports, imports
What is the function of an _______________? Is an economy’s purpose simply to provide a community with enough food and shelter to sustain life? Should an economy be expected to produce a constantly rising standard of living for all members of society, and how to achieve that ambitious political goal? Should goods and services be doled out equally despite the fact that some members of the community contribute more to society than others?
Should an economy operate in accordance with the:
- Laws of supply and demand
- Powerful leaders grand / utopian vision
- Political theorist’s revolutionary idea about work and property ownership
- Reverence for tradition and the past?
How should change be viewed – as threatening, somewhat beneficial, or as progress?
All of the above questions deal with the values and beliefs of a society. Values are the heart of any culture. They influence human behavior and economic practices too. Therefore, cultural values such as religion are likely to determine the nature of an ______________ _____________ that a society may construct. A state’s history, and its quantity and quality of natural and human resources, are other important factors to also be taken into account.
In the previous lesson (Economics I), we examined how a _________________ economy works. Let’s review its basic rules and functions. Once again, an _______________________ studies the _________________ to determine consumers ________________ for a particular _______ or __________. If demand appears sufficient to possibly make a ____________ (incentive or motive), the entrepreneur may then act to ______________ (make) and ______________ (bring) the good or service in demand to the ______________.
The critical dynamic of the market economy is the ______________ to enter the open and fluid marketplace. In this competitive arena, producers seek to gain advantage based on cost, quality, or image. The reward for more efficient or effective producers – suppliers – is a large share of the market. For the consumer, it is the availability of inexpensive, high quality goods or services. The individual’s ________________ of choice and self-interest supposedly drives producers to satisfy consumer’s every need or want.
It was not always so. Until a few hundred years ago, all economies were ________________ . Definition – tradition:
- Handing down of information, beliefs, and customs by word of mouth or by example from one generation to another without written instruction
- An inherited pattern of thought or action (as a religious practice or social custom)
- Cultural uniformity in social attitudes or custom.
Which means that you tend to do things the way you’ve always done them. For example, a boy becomes a farmer like his father and all the generations of farmers before him. An Eskimo tribe may only fish through the ice and ignore bears, seals, walrus, or other alternative sources of food because they don’t hunt.
The Amish people of Pennsylvania hold on to the old world ways they brought from Germany by resisting modern conveniences such as cars and electrical appliances, especially radio and television.
In 2013, the Islamic peoples of the Middle East are being torn by the Arab Spring modernization aims and commitment to their still very traditional societies. Many Muslims view western technology and culture as simply another form of American or European imperialism. Both conservative Shiites and Sunnis have expressed deep concerns about being under attack from western ideas and notions – western technology, popular culture, materialism, banking and management systems.
Islamic societies are not wholly traditional by any means. Muslims usually uphold the private property rights of market economies, often support the humanist principles of socialist economies, and may even dictate production codes and quotas such as in command economies.
The recent Arab Spring demonstrations are a sign that traditionalism is breaking down in the Middle East too as young people seek the freedom and prosperity of western societies. The demonstrations were often orchestrated through information and directions listed on specific Facebook pages, or tweets (Twitter) and other forms of social media.
In general, authority, institutions, lifestyles, and one’s place in a traditional society become relatively fixed. The individual or groups benefitting most from the economy gain a self-interest in maintaining the status quo. Change may come at their expense and cause them to squash innovation and reforms. A static society is the usual result. China’s building the Great Wall that kept out invaders is the most famous example of a vital people that declined because the wall also kept new ideas out too.
Traditional societies often practice political ____________________________.
Favoring blind submission to authority
2 Concentration of power in a leader or elite not constitutionally responsible to the people
Historically, these elites have taken different forms:
- Monarchial or other inherited political line
- Religious class – churches and priests dominate society
- Economic groups / leaders control the means of production – land, capital, natural resources, or monopoly of a market.
After the fall of the Roman Empire, the Catholic Church dominated European life for the next thousand years. During this period of feudalism, priests and nobles such as the lord of the manor governed serfs through a complex set of obligations. Life for the peasants was basically wretched, though their needs were met at a subsistence level. The church promised the peasants salvation in the hereafter, if the serfs paid indulgences which amounted to bribes.
Most Europeans were content until Martin Luther challenged this arrangement.
Luther protested that:
- Church and nobles lived richly and the people poorly
- Christians were truly blessed if they lived well on earth instead of waiting to go to heaven
- Religious leaders should take a vow of poverty and not live as a parasitic class
- Economic life should not be rigidly controlled.
This great change in belief about the role of the individual, competition, and making money is called the Protestant Reformation. Sociologist Max Weber claimed that the origins of capitalism and the market system which Adam Smith espoused lay in the shattering of the Catholic Church’s grip on Europe. It may have also fostered the development of market capitalism two centuries later by influencing the American Revolution against monopolistic British mercantilism.
Again, _________________ societies do not stifle all change, only that which the elites believe threaten cherished values or may greatly destabilize society. In reality, not all change is positive. ______________ economies are susceptible to wild, herd-like speculations that can needlessly wipe out millions of people’s jobs of fortunes
Most capitalist economies regulate the free market to some extent so as to protect
people from financial ruin or injurious practices. Case in point, the sub-prime mortgage frauds and reckless real estate speculation that caused 2008 Great Recession
It was communist theoretician Karl Marx who railed out against the capitalistic system’s excesses. Marxism was a political reaction to injustices perceived as inherent in capitalism. A worker’s labor, proclaimed Marx, was just as important as the capital that the entrepreneur risked. The workers deserved to share the profits equally along with the boss or capitalist.
The ____________ economy was born with the Bolshevik Revolution in Russia in in 1917. Lenin and Trotsky adapted Marx’s theory to a Czarist Russia that had yet to go through a Protestant Reformation or capitalist stage of development that the dialectic claimed was first necessary. Lenin, and later Stalin, centralized the Russian economy to restructure it along socialist ideals.
Vladimir Lenin Leon Trotsky
The state, in the name of the people, seized all property, resources, and means of production to fairly provide for everybody. A series of five year plans were designed to build Lenin’s utopia that outlawed political opposition. The profit motive and the laws of supply and demand were derided as bourgeois values and rendered taboo.
Control over every aspect of Soviet life tightened. A giant bureaucracy was created and designed to make provision for every Soviet citizens need. This led to over-centralization, mistakes, and inefficiency. The communist party claimed infallibility responded with secret police, prison camps, and mass murder.
Although Lenin is quoted as saying that the capitalists would sell him the rope to hang them with, the truth is that the Soviets feared becoming dependent on Western bankers and industries for imports of money and goods. Thus, the less developed Soviets lagged behind the market economies in living standards and had little to in the way of exports that the West wanted. Furthermore, political tensions led to a ban on any trade that might have technological or military applications. The Soviets tried hard to close the gap by subversion and stealing secrets and wound up limiting contact even more.
On paper, the idea behind the command economy sounds hopeful and humane. In reality, the results are mixed at best. Numerous other communist utopias have followed Lenin’s: Mao’s China, Castro’s Cuba, Ho’s Vietnam and many more. All of these highly touted workers paradises ultimately degenerated into even more impoverished police states than resource rich Russia.
The Russians tinkered with Lenin’s political dream for more than seventy years and finally admitted failure at making it work as a productive economy. In a positive sense, people do receive the five guarantees: jobs, food, shelter, education, and health care. In a negative sense, much work is makeshift, food shortages rampant, mismanagement rife, corruption pervasive, and living standards low, at least compared to the Western __________________ economies of America, Germany, Japan, France and others.
Most communist countries have acknowledged that their _________________ economies produced neither comparable living standards nor desirable material goods. The few holdouts remaining, Castro’s Cuba and Kim Jung Un’s North Korea, risk total economic collapse yet resist transformation. Cuba is experimenting with limited private ownership approaches that are providing a little economic improvement for a small amount of people.
From 1987 to 1990, Russia initiated a bold three year long experiment that raised the following questions:
- Could market communism, the merging of two opposing ideas, work?
- To what degree could a command economy be privatized and decentralized short of becoming a market economy?
- Could the laws of supply and demand be married to central planning without canceling the other out?
- Could economic freedom be instituted without yielding similar measures of political freedom too?
After three years of also trying similar reforms, Poland and Hungary abandoned market socialism for radical privatization plans. In March of 1990, Russia itself followed suit. Ironically, market socialism is what the Chinese have been employing– relative economic freedom without political freedom. Observers wonder for how long the Chinese government can withhold political freedom from a people becoming economically empowered.
The seventy year long global battle for men’s minds as to which produced the superior social system was answered. The ideological struggle that occasionally lapsed into local hot wars and even threatened the planet with nuclear annihilation ended. The idea of the market economy and liberal democracy as the more dynamic of the two competing systems is clear. Upon that realization, the world began to integrate economically and cooperate militarily.
In Economics II, we analyzed and compared dimensions and dynamics of ____________ , _______________________, and ________________ economies. Increasingly, freedom, individualism, human rights, greater efficiency, and higher living standards trumped a theoretical utopia that promised far more than it delivered. In Economics III, we will investigate related forms of capitalism, market economics, and liberal democracy.
Review / Discussion Questions:
- What is the function of an economy? Is the expectation of a constantly rising standard of living an economic or political goal and why?
- Identify the cultural values of the market, traditional, and command economies, and discuss how each set shapes individual behavior and expectations?
- Do traditional economies stifle all change? Why? Describe examples.
- Why have command economies found it so difficult to make provision for needs and at least some wants for all of its citizens?
- What area the problems inherent in central planning and state ownership of all resources and wealth?
- Why has the market economy proven to be more productive and efficient than the traditional and command models?
- How come societies that recognize individual freedom, the laws of supply and demand, and the profit motive tend to have higher living standards?
- Which of the three models is likely to have greater levels of imports and exports and why? How does international trade affect living standards?
Student Handout #38 – Economics III – Political Economy
Directions: Read this last of the three overviews of economic systems, then fill in the blank lines with the correct term or concept from the below list.
Terms / Concepts: Freedom, authoritarianism, politico-economic model, mercantilism, competition, capitalism, capitalist development state, social / economic contract, democratic welfare capitalism, per capital income, purchasing power, consumption, exports, imports, international trade, balance of trade, East Asia / Pacific Rim nations, protectionism
- How does a poor and underdeveloped land progress economically?
- What is the best political and economic model for a developing country to employ?
- How does a poor nation obtain the necessary capital, natural resources, and technology to advance from an agricultural to an industrial society?
- By what means can or should a country expand economically until it becomes rich and secure?
Those are four primary questions that all developing countries must reckon with on the road to becoming a major economic power. In past centuries, nations such as Britain and France achieved wealth and influence by colonizing foreign peoples. The mother country and its merchants benefitted by buying their colony’s raw materials cheaply, then returning them in the form of profitable and highly taxed goods.
Back home, the state limited competition by tolerating and even licensing some producer’s or merchant’s right to monopolize basic markets. A defect in this system called mercantilism was that the lack of _________________________ made the price of domestic goods and services costly, and wages and living standards for workers low.
In Economics I & II, we learned about Scottish economist Adam Smith who published a book (The Wealth of Nations) and theory that instructed how nations become rich. Smith argued that a new __________ -____________ _________ called democratic_________________ was superior to ___________________ because it stressed _______________________ between producers, a tension that lead to increased production of cheap mass goods and raise living standards for consumers. He also urged government not to interfere in markets and only regulate them so as to prevent injurious and unscrupulous practices or criminal activities.
Adam Smith and David Hume – Scottish economists and friends
America was one of the first countries to try out Smith’s theory and also respond to the four primary questions. The U.S., a resource rich and comfortable English colony, wished to become affluent and powerful like its mother country. America revolted against Britain’s restrictive mercantile politics in order to benefit from the _______________ and opportunity of the market economy. The U.S. then became the world’s first capitalist development state, a model that has been emulated many times in the past two hundred years.
It worked like this. Alexander Hamilton, Secretary of the Treasury under President George Washington, protected the U.S.’s fledgling industries by placing tariffs on cheaper European ________________ to make them less price competitive. Furthermore, U.S. farm commodities – tobacco, cotton, grains, dyes – and late manufactured products, were exported to create a favorable ____________ of _________. Hamilton’s industrial policy of _________________ transformed the economy so that more money flowed into the U.S. than flowed out. Eventually, the U.S. became a rich, secure creditor nation and opened its markets to other new ____________ ________________ models.
Alexander Hamilton, First U.S. Treasurer
But that does not guarantee that a poor country will prosper. Nor is it certain that the people will enjoy individual _______________ or economic liberty. Market economies are not immune to politics or cultural values. It helps if people have a history of _______________, entrepreneurship (risk-taking), a strong work ethic, and the ability and means to create wealth.
There are three basic types of capitalist development states:
- U.S. model of liberal democracy and market capitalism based on individual freedom
- Democratic welfare capitalism
- Authoritarian capitalist development model
The liberal _____________ model was so named because it was born during a conservative _______________ age and was consider liberal for its time. In a democratic political system, a social and _____________ contract is forged between the state and the people. The government may make promises to improve the economic condition of the people who through the expression of their collective will, may also establish expectations on the party in power. The political declaration of individual economic rights and behavior determined that nature of society’s preferred __________-___________ ________.
Some governments may provide their citizens with many benefits and protections. Such generous __________ ____________ are a common part of democratic welfare capitalism found primarily among the rich countries of Scandinavia, Western Europe, and to a lesser extent, Canada and America. Capitalism creates the wealth that socialistic governments redistribute to supposedly create a fair and more equitable society. The people’s willingness to pay taxes determines the measure of benefits and protections they will receive.
The more expensive the ____________ ____________, the higher the wage and tax rates needed to sustain it. These higher wage and tax rates may result in more costly goods and services that may drive foreign consumers to balk and substitute with cheaper or lower quality goods from poorer nations with lower wage rates. As the economy slows, the country may have to consider lowering wages and tax levels or a revision of their __________ __________ by scaling back benefits and protection from risks.
Democracy came later to Asia than North America and Europe. The peoples of East Asia and the Pacific Rim, particularly the Japanese who had democracy thrust on them by the U.S. after World War II, tend to limit individualism for the welfare of the group. Other countries such as Taiwan, South Korea, and Singapore constructed successful authoritarian capitalist development models for quick and guided economic growth.
The governments borrow capital from richer nations to buy raw materials, technology, or develop an industrial infrastructure (ports, roads, railroads, airports, factories, airliners, more efficient agriculture). _____________ ___________ states expect their people to work long hours at low wages. This initial price advantage helps their cheaper ___________ carve out foreign market shares.
In the meantime, the developing country follows up with more upscale exports of still relatively cheap goods to penetrate more industries or expand current market shares. Surplus capital is routinely funneled back and reinvested in untapped markets, higher productivity levels for existing ones, procurement of more raw materials, newer technologies, better machinery and facilities, or improved product lines. Living standards rise more slowly than corporate profits in order to maintain price and / or quality advantages.
By 1988, South Korea had developed enough to host the Olympic Games. Korean students and workers used the glare of the global media to press for democratic government, higher wages, and better living conditions. The Korean leadership gave in to all demands to assure a successful Olympics and recognition as a new economic super-state. Shortly after, Taiwan, with the world’s largest per capita gold reserves, followed suit. Singapore has pursued a slower course and is evolving from the guided democracy stage.
The biggest challenge to ________________ _____________ states is to keep their home markets protected while benefitting from the global trend towards freer trade. Unfair trading practices though can lead to foreign retaliation. China, $6 trillion GDP and $4,000 – $6,000 ____ _________ _______, is the foremost example of a ___________ ________________ _______________ .
The Chinese live with far fewer protections and much more risk than the Scandinavian and Western European countries. Americans, in comparison to Europeans and Japanese, enjoy the highest levels of personal _____________, but live with more stress and risk than other highly developed nations.
Which then is the best development model? If you said the American model, remember that the U.S. was rich in resourceful people and raw materials. If the European ___________ ______________ __________ model, be prepared to pay higher taxes and have less disposable income for personal ________________.
If China and its exporting empire, expect to receive lower wages and living standards. Every developing country must decide which is the most appropriate model for itself. In past decades, many African and Asian nations chose the Soviet’s command model as the likeliest path to quick development and fair income distribution. Nearly all suffered serious economic failure and poverty and shed the _____________ model for a more market-oriented system.
Review / Discussion Questions:
- What are the four primary questions that an underdeveloped nation must reckon with?
- Which is the best politico-economic model for an underdeveloped nation to employ and why?
- Describe why a developing nation might or might not select the following models:
A. Capitalist development state
B. Authoritarian capitalist model
C. Democratic welfare capitalist model
- Why are most developing states today rejecting the command model?
- What problem must a capitalist development state such as China eventually face? Is it time for China, who is getting old before it is rich, to evolve into a democratic welfare capitalist model? Why? How?
- Which is more important and why?
A. High per capita income
B. High quality of life
C. High disposable income / purchasing power
E. Group welfare
F. More freedom with more risk
G. Less freedom but cradle to grave security
Student Handout #39 A – The World is One / Spaceship Earth
Directions: Read and discuss the following handout, examine the diagram of the Intelsat Satellite System, research how the Internet and television utilize this trans-societal technology, and simulate a global TV newscast or produce a global browser home / web page.
Terms / Concepts: Cultural dispersion, technological dispersion, global culture, global media, mass media culture, junk culture, trans-societal technologies, world-wide satellite transmission, Internet connectivity, interdependence
Cultural Dispersion and Trans-societal Technologies: The World is One
Much has been written about Spaceship Earth, One World, Global Village, Information Super-Highway, and Internet connectivity to make us aware of a basic modern truth – the well being of all of us on earth depends on a world-wide network of dependents on. Unfortunately, it usually takes an occasional jolt like an energy or financial crisis to remind us of our mutual dependency.
Spaceship Earth at Disney’s Epcot Center Spaceship Earth logo
Some examples of how other countries help maintain our standard of living are the coffee on our breakfast table, the rubber tires on our cars, and literally the clothes on our back and shoes on our feet. Interdependence is not an empty glib phrase; indeed, it forces us to ask hard questions:
- What happens to the U.S.’s balance of payments when an American purchases a VW not made in Germany, but instead in Chattanooga, or a Nissan made in Tennessee or Mississippi?
- What are the effects on the lives of the people – their jobs, living conditions, local community?
- How are inflation and unemployment rates affected by the value of the dollar?
Global involvement has become the norm. All nations are impacted by air pollution, communication satellites, TV, internet, and the increasing mobility of people. Many business persons fly around the world, not just every year, but every month. They may likely have a transfer at Atlanta’s airport, the city’s largest employer (80,000), as an estimated 95 million passengers will pass through it this year.
Most people until recently were scarcely aware of their shared existence beyond the limits of their nation or ethnic group. Cultural, anthropological, biological, and historical links have always existed, even when they were ignored. Now the openness of humanity appears daily across our media in the form of oil spills, the destruction of rain forests, and military actions.
The more our technology advances, the more vulnerable we seem to become. A cyber-attack can cause a breakdown in an electric power plant that throws an entire section of the country in to darkness. An industry-wide strike cripples one facet of our lives, or our internet connection goes down for just a few hours and we feel disconnected.
Perhaps the most important single element in the global culture is the development of systems of global communications and transportation. These systems are based on technologies developed for the most part within the past century. The tools comprising these technologies are familiar to all of us – printing press, newspapers, magazines, books, telegraph, telexes, telephone, fax, email, cinema, radio, internet, streaming videos – motor vehicles, transcontinental roads, trains and trans-continental rail networks, trans-national pipelines for carrying fuels and electricity.
Global distribution of English speaking peoples – primary language and working knowledge of English is the language spoken in all airport take-off and landing towers around the world. These tools of communication and transportation individually and collectively serve to link people in one part of the world to another. This linkage function is readily visible by looking at the map on a following page describing the most elaborate and rapidly developing communication system in existence – the Intelsat satellite communication network. The system by 1975 already linked 150 countries together via thousands of earth stations.
Student Handout #39 B – Map of Intelsat – International Satellite System – 1975
Intelsat Satellite System – 2013
Student Handout #39 C: – Evaluation of Effect of TV Programs upon U.S. Society
What is the nationally syndicated cartoonist Jules Feiffer saying about the effects of TV on Americans? Granted, Feiffer’s opinion is quite harsh, but TV does shape our behavior in ways that we may not be aware of. Marshall McLuhan, the late media philosopher, claimed that TV shrunk the earth and created an electronic global village. However, many teachers also believe that the internet and TV are both responsible for shortening U.S. students attention spans, thus making it more difficult to teach today’s children.
By the time a child is six years old, he or she will have watched nearly 10,000 TV commercials; by 16, more than 100,000. What is the effect on young children and teens with regard to satisfaction of needs or wants? Do Saturday morning cartoons for children sometimes seem designed more to sell toys than to entertain them? Are American kids children or the world’s youngest and smallest consumers?
A recent census learned that Americans watch 7 hours and 1 minutes of TV daily.
- What is the effect of such heavy TV viewing upon reading?
- A family’s engaging in a conversation, or just sharing time together?
- Does watching TV enhance or stifle one’s imagination?
- How are our social, cultural, or political values affected by the barrage of messages imploring us to buy this, or that, or be like some famous person modeling or selling us a car or underarm deodorant?
These same questions can be asked about the effect of the internet and smart phones that youth are so engaged with: example – texting, video games, and tweeting. TV programs and certain web sites are among America’s most popular exports. What is the effect of these shows and web sites on more traditional societies?
What are the images that foreigners may perceive about the U.S. from such shows and web sites? Why are there so many shows with aliens as part of the theme when an alien has never appeared? Is it because presenting aliens to the public is easier to deal with in story lines than minorities for example?
Student Handout #40 – 1970’s TV night-time program lineup in selected countries
Survey the above TV listings in eight selected countries and compare shows playing on TV’s in those countries on one particular night in the 1970’s. Many of those forty year old shows are still playing on U.S. cable channels. Imagine how these shows were perceived in those eight countries by the audiences.
Student Handout #40 A: 1989 examples of European TV program listings
Student Handout #41: Links to the World
Terms / Concepts: Cultural borrowing, cultural dispersion, imports, exports, foreign consumer items, ethnic / religious influences, video streaming
- Draw conclusions about the relationship between the quality of your life and the rest of the world
- Analyze the level of internationalization of local culture and community by identifying local influences or examples in your city and metropolitan area.
Directions: Divide class into four or five groups. After settling in, you will have one class period to discuss and answer all questions listed in the reading; Who Among Us? Select one member of the group to act as recording secretary. Your focus is to recognize how your life is linked to other parts of the world, and to see what your community would be like without these links.
Who Among Us:
- Drives a foreign car?
- Has traveled overseas? Where?
- Has a friend or family member who has traveled or is working overseas? Where?
- Is wearing something made in a foreign country?
- Has hosted or recently met someone from another country?
- Belongs to an organization with members or programs in other countries? Church, scouts, 4-H, YMCA, Rotary, Sister Cities?
- Has eaten in an ethnic restaurant recently?
- Has worked for a multinational corporation headquartered in another country?
- Speaks or understands another language?
- Belongs to a religion with roots in another country? Christianity, Judaism, Islam, Buddhism.
Student Handout #41 A: Importance of International Trade
Terms / Concepts: International trade, export market, balance of trade,
- Recognize the importance and effects of international trade upon the national, state, and local economies and an individual’s standard of living
- Be knowledgeable about the extent of foreign trade between America and individual countries / continents
- Be introduced to and familiar with major international trade issues and problems such as trade imbalances and unfair trading practices.
Directions: Read the following handout to gain an understanding of the importance of international trade, the extent of trade the U.S. has with the rest of the world, and major trade issues and problems, then answer the summary questions.
- One out of every seven manufacturing jobs in this country produces for the export market.
- One out of three acres of American farmland produces for the export market
- Nearly two out of every five dollars of U.S. corporate profits now result from multinational corporation activities.
- The U.S. depends on imports for one-third of the key industrial raw materials it uses.
Those four facts should make clear just how important and profitable international trade is to the U.S. economy. Ideally, international trade is a mutually beneficial arrangement to both buyer and seller and serves the interests of both countries involved in the transaction.
A favorable balance of trade means that a country exports as many goods and services as it imports. During the 1970’s, U.S. manufacturers exported enough products much of the time to offset high volumes of imported oil. However, during the 1980’s, America imported more than $640 billion than it exported and had to finance that debt too.
And then America experienced a similar trade imbalance in the 1990’s and from 2000 to 2013. Regardless, international trade creates jobs. When more products are being purchased overseas, more labor is necessary to manufacture the products and more professional people are needed to develop the international markets. Of course, internet pipe allows those tasks to be carried out from overseas today.
The U.S. Bureau of Labor Statistics suggests that for every billion dollars of real exports, 40,000 to 70,000 jobs are created at home. Therefore, expanding exports of American products is an effective means of maintaining high employment levels.
A third major advantage of international trade is a broader tax base which results from increased sales volume. This means more revenue for the individual, the city, and the nation.
The results of international trade are both financially desirable and culturally rewarding. Through business contacts overseas by phone, letter, telex, fax, email or visits, one learns new ways of conducting business according to the local or national customs.
The Japanese, for example, often require days of discussion and consideration before concluding a business transaction. There are certain customs and courtesies one should always keep in mind when doing business with the Arabs, Chinese and other peoples. One is faced with new languages, different foods, customs, and habits, all of which sensitizes the businessman to deal with these diversities. Through international trade, our world becomes smaller as we physically travel long distances in short periods of time and learn to adjust to various cultures.
Perhaps with the increased awareness encouraged by international trade and exchange, countries and peoples around the world can learn to help each other live peacefully together.
International trade, by providing larger total markets than just the home country, encourages mass production. This is important, even in the U.S. and is of even greater importance to a smaller country like Japan whose population is less than half the size of America’s.
Major U.S. trade partners 1989
America’s top trading partners – 2013
Examine the 1989 trade figures and identify those countries that are the U.S.’s top trade partners and look at the volumes of trade between each. Next, examine America’s top trading partners in 2013.
- How much has U.S. international trade – imports and exports grown in the past 24 years?
- How has the list of top trading partners changed? How does this new list reflect changes in the world economy and trade patterns the past quarter of a century?
- Assess the current balance of trade. How much is America’s monthly trade imbalance? (See above chart – US international trade in goods and service.)
- How much is America’s current trade imbalance?
Student Handout 41 B: Basic Steps to Exporting
Concepts: Import – export terms
1. Become familiar with actual import – export processes
2. Simulate the importing and exporting of a good
1. Getting started
A. What can be exported?
B. What to do first?
2. Selling the product or service
A. What are the best methods of reaching the foreign market?
B. Where can marketing information be obtained?
C. How can the export market be evaluated?
D. Are there special programs to assist in locating buyers?
E. What are the various channels of distribution?
F. What legal aspects of exporting should be considered?
3. Two important contacts – your banker and freight forwarder
A. Where can I get help on financial questions?
B. Where can I get help on shipping and packing questions?
C. Can credit information be obtained on foreign buyers?
4. Replying to the inquiry
A. What is the best way to communicate?
B. Do I need to know a foreign language?
C. Must the price be quoted in foreign money?
D. Should the sales materials be translated into a foreign language?
5. Quoting a price
A. Are their special rules?
B. How should the export price be determined?
C. What is the price quotation?
D. Should the domestic selling price be used?
6. Getting paid
A. What are the different methods of payment?
B. Will I be paid in U.S. dollars?
C. What kind of financing and credit insurance is available?
D. What about currency restrictions and fluctuations?
E. What is a letter of credit?
7. Shipping the goods
A. Are export licenses required?
B. Is special documentation required?
C. What about import duties and taxes in the foreign country?
D. What are the different ways to ship?
E. Do I need special insurance?
F. Are there special packing requirements?
Some state departments of commerce offer additional services to manufacturers desirous of exporting, supplementing the activities of the U.S. Department of Commerce and working in cooperation with it. An example of the kinds of assistance state governments can offer business is the publication of newsletters. The International Trade Division of the Indiana Department of Commerce publishes Trade Winds which includes among its regular features columns headed
Want to buy and Want to sell?
The following terms are a sampling of situations applying only to foreign trade and its special conditions.
Common carrier – a corporation, partnership or individual which hires to transport
persons or commodities and which is governed by special laws, such as accepting all
business offered them within their regulations
Confirmed letter of credit – a letter of credit which has the confirmation of an American bank, the confirmation gives the credit prestige and responsibility since the issuing bank may not be well known to the buyer
Consignment – the physical transfer of goods from a seller (the consigner), who retains title, to the consignee, who acts as selling agent by selling the goods for a commission, remitting the net proceeds to the consigner
Convertibility – the ability of the holders of a currency to exchange it for foreign currency in the open market
Evaluation – the lowering of the trade value of a nation’s currency in relation to other currencies by revising the ratio to a new agreed standard brought by government decision
Forwarder – an independent business which makes shipments for exporters for a fee
Free port – a port in a foreign trade zone which is open to all traders on equal terms and in which goods may be stored duty-free while awaiting re-export or sale within the country where the port is located
Lading (clean bill of) – covers goods received in apparent good order and condition and without qualifications
Export guide – steps for shippers:
- Prepare Domestic Bill of Lading for movement of cargo to pier or airport, and sends copy to his forwarder along with packing list
- Checks bill of lading, number of packages, marks and numbers, description of cargo, foreign destination, gross weights of each package shipped, local party to be notified
- Marks cargo plainly to show gross / net weights, cubic measurement, foreign destination, identification marks, country of origin
- Motor carrier secures interchange agreement with a steamship company or air cargo transporter for containers
- Accepts cargo for transit to port
- Advises freight forwarder of shipper’s local representative of cargo’s arrival at Port
- Obtains the following information from forwarder or representative: name of vessel / flight number, sailing / flight date, pier number and location / air cargo location, location of any special permits needed to clear hazardous / oversized cargo for acceptance by ocean / airport terminal
- Obtains dock receipt / flight receipt from forwarder to accompany cargo
- Contacts terminal operator to make appointment for special handling / equipment, if required at least 24 hours before delivery
- Forwarder provides dock / flight receipt and special permits, if any, to delivering motor carrier
- Checks dock / flight receipt for completeness: name of shipper, name of vessel or air carrier, ports of loading / discharge, number and type of packages, description of cargo, weight and dimensions of packages, marks and numbers
- Moves his / her truck on line upon arrival at pier / air cargo facility
- Terminal operator issues pass to driver at gate house
- Checks drivers papers: Dock / flight receipt, permits
- Calls driver for unloading
- Assigns driver a checker and an unloading spot
- Driver unloads vehicle and obtains dock / flight receipt
- Terminal operator retains original dock / flight receipt
- Driver surrenders gate pass at gate house
- Terminal operator forwards dock / flight receipt to steamship / air cargo company
- Steamship / air cargo company issues Bill of Lading to shipper or agent
Locations of U.S. duty free business areas or foreign trade zones
Student Handout # 41 C – Global Free and Fair Trade Principles – the General Agreement on Tariffs and Trade – GATT
Terms / Concepts: International trade, free trade, fair trade, protectionism, dumping, GATT – General Agreement on Tariffs and Trade, distribution rights, copyright, trademark protection
- Display understanding of (so as to practice) free and / or fair trade principles
- Recognize (so as to counter) unfair trading practices such as protectionism (domestic taxes that make imports less price competitive) and dumping (pricing goods cheaper in foreign markets than in domestic ones)
- Develop awareness of (so as to prevent) the illegal copying of goods that have legitimate copyright and / or trademark protection status
- Become knowledgeable about (so as to support) the role of GATT (General Agreement on Tariffs & Trade) with regards to forging a freer and fairer global trading system, and resolving conflict caused by dumping, protectionism, or copyright infringement.
Directions: Read the following description of GATT’s aims, how it functions, and evaluate GATT’s present effectiveness in realizing its objectives, then answer the summary / review / discussion questions. GATT is a major component of the World Trade Organization that regulates the global trading system.
The General Agreement on Tariffs and Trade (GATT) was a multilateral agreement regulating international trade. According to its preamble, its purpose was the substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis. It was negotiated during the United Nations Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was signed in 1947 and lasted until 1994, when it was replaced by the World Trade Organization (WTO) in 1995.
GATT held a total of nine rounds.
Source: Wikipedia, Free Encyclopedia
Summary / Review / Discussion Questions
- What were the reasons for GATT’s inception in 1947 and the aims and hopes of its founders?
- How does GATT function?
- Describe GATT’s major improvements during the 47 year long evolutionary period leading up to the 1994 Uruguay Round.
- How would you assess or evaluate GATT? Was it successful and why?
- Why was the World Trade Organization created to replace GATT?
- Assess and evaluate the success of the World Trade Organization (WTO)?
Student Handout #41 D: – U.S. Congressional Law Super 301
Terms / Concepts: International trade, balance of trade, free / fair trade, principles, protectionism, GATT – General Agreement on Tariffs & Trade, Super 301, trade instrument policy (club / weapon)
- Become knowledgeable regarding America’s commitment to the practice of trading freely and fairly with all friendly nations
- Recognize that U.S. policy is based on the belief that a free and fair global trading system is the tried and true means of securing a more peaceful and prosperous future for all of the nations of the world
- Apply this belief or set of principles to U.S. government support for and adherence to GATT
- Display understanding that U.S. Congressional Law Super 301 was created to be foreign policy instrument that forces compliance of nations believed in violation of GATT
- Recognize that Super 301 is viewed by some as a trade policy club or weapon to force GATT compliance (the stick) – by denying them areas of the powerful U.S. economy – the world’s largest market (the carrot.
Directions: Read handout #41 D – U.S. Law Super 301: Trade policy or club? , then answer the summary questions.
U. S. Law Super 301 – Trade Policy or Weapon?
The 1988 Omnibus Trade Act passed by Congress required the President to identify countries and unfair practices that impose the greatest barriers to U.S. exports. This upgrading of Section 301 of the Trade Act of 1974 – Super 301 – was designed to force the President to more aggressively combat unfair trading practices, and help reduce an ongoing trade deficit – which is still going on.
The first step is negotiations aimed at eliminating questionable practices; then, if unsuccessful, consider imposing retaliatory measures. The aim of this trade policy tool was to create an ever-expanding multilateral trading system based upon clear and enforceable laws. The rules were enlarged and further clarified during the Uruguay Round of GATT meetings in December 1990. Over 100 nations met two years later in Geneva, Switzerland, to develop regulations for covering agriculture trade and new areas such as services, investment, and intellectual property rights.
The U.S. identified six specific priority practices in three priority countries. They are as follows:
- Quantitative Import Restrictions, including import bans and restrictive licensing, imposed on Brazil
- Exclusionary government procurement practices in the satellite and supercomputer sectors in Japan, which bar foreign suppliers
- Technical barriers to trade in the forest products sector in Japan, which imposed unnecessary obstacles to imports
- Trade-related investment measures in India that prohibit or burden foreign investment
- Barriers to trade in services, specifically the closure of India’s insurance market to foreign insurance companies.
The above categories were not all of the major trade barriers facing American exporters, only the most important. The U.S. looked forward to working constructively with Japan, Brazil, and India to resolve those issues expeditiously.
With respect to Japan, the President directed the Departments of State, Treasury, Commerce, and Labor to work with the USTR on a number of structural adjustment matters. These included impediments to trade, big-rigging, market allocation, group boycotts plus a special focus on the rigidity in distribution system and pricing mechanisms. Other trade barriers around the world that were addressed were trade distorting national subsidies and agricultural policies.
The statute has already produced some constructive results. Market-opening measures with South Korea regarding import restrictions and investment barriers were achieved. U.S. negotiators also made substantial progress in obtaining improvements in intellectual property protection with China, Colombia, and Taiwan. Retaliation took many forms such as increased tariffs, quotas, or fees on services. For example, the U.S. considered taking action against the French who resisted elimination of agricultural subsidies for domestic farmers.
Summary / Review / Discussion Questions:
- What is the phrase the best describes America’s trade policy?
- What type of world is that policy designed to bring about, and how is that to be achieved?
- What role should the U.S. play in realizing the goal of a free and fair global trading order, hopefully producing world-wide peace and prosperity?
- How influential a role should the U.S. play in the WTO? How vigorously should America pursue its own economic interest?
- Is Super U.S. 301 a trade weapon? Is the law the correct way or means to deal with trade problems? How is the policy similar to holding a golden carrot in one hand and a big old stick in the other?
- Which nations are priority countries and why?
- How can enforcement of the rules be improved?
- What are the problems inherent in protecting intellectual property?
- What steps should the U.S. take with regards to disputes over agricultural subsidies to Japanese, Korean, and French farmers?
- How hard should the U.S. pressure some of its major trading partners and allies?
Student Handout #42 A: Case Study #1 – Transnational Economic Integration / Formation of Continental Free Trade Zones – North American Free Trade Agreement – NAFTA: U.S, Canada, Mexico
Terms / Concepts: Transnational economic integration, free trade, FTA – free trade agreement, continental free trade zones, economic size
- Recognize the Canada, America, and Mexico are neighbors and each other’s largest trading partners
- Synthesize how the free flow of goods / services between friendly nations such as Canada, the U.S., and Mexico – excel in the production of certain goods and services – or possess some vital raw materials or natural resources that the others do not – and thus can benefit from freer trade
- Explain how the freer and untaxed flow of trade across the U.S., Canadian, and Mexican borders may result in less costly factors of production for entrepreneurs, and a greater array of goods / services for consumers
- Analyze why and how the integration of the Mexican, American, and Canadian markets enlarged the three economies and produced a higher standard of living for the three population groups
- Be sensitive to the fact that while the U.S., Canada, and Mexico are very similar and friendly neighbors, there are also differences that may stress the agreement at times.
Directions: Read handout #42 A: Case Study #1 – NAFTZ, then examine assess to what degree NAFTA has benefitted the three populations.
History of relations:
NAFTZ Super Transportation & Trade Corridor
It has been said that Canada and the U.S. share a continent, a history and culture, a language, but not quite the same dream. Some Canadians believe that their political and economic values have more in common with Scandinavia than American laissez-faire capitalism. Canada’s frontier is the north, not their west which is very well settled indeed. The U. S. fought its way to liberty, and Canada evolved to nationhood by declining revolution.
Canada was a British colony until 1867 when it was organized into a confederation. The reason was that the English feared that America, healed from the Civil War, might seize Canada. In 1812, the War Hawks of the South and West wanted to annex Canada and attempted to take Toronto. In 1870, President U.S. Grant angrily reacted to a dispute over fishing areas by declaring; “Take Canada, and wipe out her commerce.” – he did neither. President Benjamin Harrison also expressed a desire to annex the country. Not until 1943, when Franklin Roosevelt called on William Lyon Mackenzie, did a U.S. president even visit Ottawa.
Mexico is the most different of the three countries. Its people speak Spanish and are predominately Roman Catholic. The country is the poorest of the three but the economy is growing and the middle class expanding. Mexican migration into the U.S. the past thirty years has made them fastest growing ethnic group. The current immigration reform bill has been held up by ultra conservatives demanding that the secured border be even more so.
Mexican – U.S. relations, though cordial in recent years, has often been strained. Many Mexicans view America past invasions of their country, meddling in their internal affairs, as a cause of their internal weakness and poverty
A current tension between the U.S. and Canada has been over extension of the Keystone Pipeline from Alberta’s tar sands production sites to Texas and the Gulf of Mexico. President Obama has held up the project over environmental concerns from the pipeline route through the Sand Hills region of Nebraska. The two governments have been negotiating over route adjustments and possible pipeline rupture protections.
TransCanada, the oil producer, exporter, and pipeline builder, counters with:
Further research the Keystone Pipeline issue to decide which side you are on:
TransCanada or Friends of the Earth.
A recent issue with Mexico was the country’s demand that the U.S. further de-regulate the trucking industry by permitting Mexican trucks access to U.S. interstates and roads. Driver safety and truck maintenance standards were the major concerns. Mexican trucks have just started cruising U.S. highways to deliver freight and produce.
Summary / Review / Discussion Questions:
- Assess how similar and different Americans and Canadians actually are. Use historical references and recent statistics to develop your perspective. Repeat assessment with the other partner, the people of Mexico.
- Why did the U.S., Canada, and Mexico agree to combine their markets and operate according to free trade principles?
- In your opinion, how much does the average American know about Canada? Mexico? Why?
- How much did you know about Canada before reading this handout? Why?
- Why are Americans so unknowledgeable, and perhaps even indifferent, towards their important neighbors to the north and south?
- Assess how successful NAFTZ has been in satisfying U.S., Canadian, and Mexican expectations of increased trade and economic growth, and a greater array of consumer goods and services?
- Assess how successful NAFTZ has been for the U.S.? Has NAFTZ produced a net gain in jobs for Americans and increased trade with Mexico and Canada?
Student Handout #42 B – Case Study #2 – Transnational Economic Integration – Formation of Continental Free Trade Zones – European Union
Terms / Concepts: Nationalism, economic self-sufficiency, free trade, transnational economic integration, continental free trade zone, EEC – European Economic Community, EU – European Union
- Recognize that the European countries past policies of intense nationalism and economic self-sufficiency led to repeated war between the leading countries of Europe
- Synthesize how and why twelve European nations apparently learned the lessons of history and in 1992 agreed to combine their economies of limited size into a single great market
- Display understanding of how this integrated market – now 27 nations and growing – overnight became one of the largest and richest in the world
- Explain how the integration was accomplished:
- · Abolition of tariffs placed on goods moving between member nations
- · Allowance for free movement of labor in search of jobs in member countries
- · Common policies applied in area of agriculture, transport, industry and trade with the rest of the world
- Evaluate if the European Union will realize the long held vision (Victor Hugo, Winston Churchill, Paul Henri Spaak, Charles de Gaulle) of an eventual United States of Europe.
Directions: Read handout #42 B, the European Union, and answer the summary questions. In class, take into account the past history of Europe while assessing the EU’s possibly evolving into a United States of Europe.
European countries have warred with each other for a thousand years, though not continuously. The three major causes of these conflicts have historically been intense nationalism, self-interest, and a mistaken belief that economic self- sufficiency assured physical security.
Those were the lessons of history Europeans supposedly learned from World War I (1914 – 1918) in which twenty million people died. Regardless, only twenty years would pass before Europe again exploded into an even more terrible conflict. This second World War (1939 – 1945) in which fifty million died, ended with England and France exhausted, Germany shattered, and the United States and Soviet Union replacing Europe as the new superpowers.
British Prime Minister Winston Churchill called out for a United States of Europe, an idea first conceived in 1848 by Victor Hugo who wrote the famous novel Les Miserable. But all of the countries would not join and those in Central Europe that came under the control of Russia from 1946 to 1989 were not permitted to. The low countries – Belgium, Netherlands, Luxembourg – were interested in cooperating and formed the Benelux economic union.
In 1959, Robert Schumann, the French Foreign Minister, expressed the notion of a European Coal and Steel Community that produced and freely traded iron and steel. The idea of making trade easier by getting rid of customs duties between member countries was a big first step towards creating a common market.
France and Germany fought three wars in 70 years over the coal and iron rich border region called Alsace – Lorraine. The reason was that whoever had the most iron ore and coal could produce more steel – they would have more heavy weapons and dominate Europe militarily – that shows how important a development this was.
Map of Benelux countries – Belgium, Netherlands, Luxembourg
In 1951, Belgium, France, Italy, Luxembourg, Netherlands, and West Germany formed the European Coal and Steel Community. The first president of this new ECSC was Frenchman Jean Monet. The Chancellor of West Germany, Konrad Adenauer, was heavily involved too. The lessons of history were apparently finally being applied.
In 1957, the six nations met in Rome, Italy, to expand the treaty into a truly common market or official European Economic Community – EEC. This progress towards unity also led to the creation of a European Atomic Energy Community (Euratom), to promote peaceful use of nuclear energy.
The common market concept is to dismantle barriers to trade, travel, free movement of labor and capital. The EEC wrote common policies for agriculture, transport, industry, and foreign trade. It also protected members from goods exported to Europe from countries that weren’t members.
This common external tariff or customs duty makes it harder for outsiders to compete with existing members – Hamilton’s own industrial development policy for the new United States. However, as the economic strength of the EEC increased, and to ward off retaliation against EEC exports, the customs duties were steadily decreased. The EU and the U.S. / NAFTZ are currently negotiating over combining their two gigantic markets.
Expansion of Common Market / European Economic Community / European Union The sustained peace and rising living standards of EEC members were signs that common market policies worked. Denmark, Ireland, and the United Kingdom – England, Wales, Northern Ireland, Scotland – joined in 1973. Greece joined in 1986 with Spain and Portugal entering in 1986. Spain and Portugal almost immediately became the two fastest growing economies in Europe.
After the collapse of communism in Central Europe, the Baltic States – Estonia, Latvia, Lithuania – applied for membership along with the new and divorced Czech and Slovak Republics, Hungary, Poland, Bulgaria and Romania.
EEC – EU expansion 1992 – 2013
NAFTA’s population is 465 million with total GNP of over $20 trillion. EU’s population is 504 million with total GNP of $17 trillion. European Union economic crisis challenges unity and slows trend towards a United States of Europe
From the Economist Magazine: A very short history of the crisis
Summary / Review / Discussion Questions:
- Identify the European Union nations by writing their names in the appropriate blank map spaces below.
Observe the dotted lines dividing Germany which represent the western and eastern sectors. They were two different Germany’s until Nov. 9, 1989.
- What were the effects of WW II on the people of Europe?
- Which three countries joined together in 1947 to help each other in economic affairs?
- Give three reasons why EEC founders formed a common market and what is meant by that term?
- Which interest does each of the European Parliament members represent, their nation’s or the EU’s?
- Discuss the feasibility of European nations someday renouncing sovereignty completely and accepting European Parliament governance exclusively?
- What is the feasibility of the European Union evolving into a United States of Europe?
- What nations make up the Council of Europe and why is it not to be confused with the European Union?
Student Handout #43 – Multinational Corporations – MNC
Terms / Concepts: Multinational corporation, economic size, global responsibility, foreign subsidiary
- Recognize that the creation of multinational corporations was an important development regarding the trend towards global trade and interdependence
- Identify the advantages of the global operations of a multinational corporation
- Explain differences between supply-oriented and market-oriented MNCs
- Give reasons why some companies become multinational in scope
- Compare the economic size of selected small nations and large multinationals and deduce the potential problems caused by global operations
- Utilizing an example of an MNC, identify and list the global responsibilities world wide market participation necessitates
- Research and gather data on a local MNC, then prepare and submit a brief describing the company’s worldwide operation and related philosophy.
One of the most significant economic developments in international trade during the 20th century was the growth of multinational corporations, often referred to as MNC’s. These are simply businesses, usually very large, that operate in many countries.
As companies increase their business relations with other countries, they tend to become more involved with overseas operations. They often establish their own plants for production or merchandising in the foreign country and are identified by three characteristics:
- Company operates in at least six countries
- Company has annual gross sales in the hundreds of millions of dollars
- Company has foreign subsidiaries that comprise at least 20% of its total assets, sales, and labor force
Additional important characteristics are:
- Direct foreign investment in productive facilities
- Company is likely engaged in research and development processes
- Management and stock ownership are multinational
Another factor is whether the MNC is:
- Supply oriented – demand far exceeds supply leading to virtually limitless expansion and expectation of profitability (exclusive technologies, competitively price and desirable high value goods / commodities
- Market-oriented – company expands on careful analysis of market or demand factors; potential profitability may warrant market entry and expense of investment.
Coca Cola is an example of an MNC that was originally supply-oriented and spread to more than 200 countries. However, as competitors such as Pepsi entered the market, Coke had to become market-oriented. Pepsi was supply-oriented when it had exclusive control of the Soviet market during the 1970’s. Coke entered the Soviet market in the 1980’s and forced Pepsi to become market-oriented as sheer availability no longer sufficed.
Evolution and functioning of an MNC
The evolution of an MNC generally proceeds through a number of basic steps.
Stage 1: Company exports, selling its products through overseas distributors
Stage 2: Involves the establishment of overseas sales subsidiaries
Stage 3: Company builds plants abroad, either for local assembly or complete
production. This state constitutes direct foreign investment
Stage 4: Regional production subsidiaries are given full operating authority and the
parent company’s role becomes one of planning and coordination. This
independence marks the maturing of the MNC.
The basic functioning of an MNC may be seen in this hypothetical example. ABC International of Chicago has plants in Buffalo, New York, and Greensboro, North Carolina. The plants produce component parts, which are then shipped to ABC’s Turin, Italy, plant for final assembly. The Turin plant may have been financed by banks in Zurich, Switzerland, and insured by London insurance companies. Finally, the assembled and finished product is shipped for Genoa, Italy’s largest port city, to world-wide markets, including Chicago.
MNC’s are about 20 to 30% of the world economy – American MNC’s are about 40% to 50% of the U.S. economy. The largest American MNC has gross sales that exceed the GNP’s of 125 nations.
Some reasons why companies become multinational:
- The search for more profits. Many U.S.-based MNC’s generate more profits from their foreign operations than their domestic activities
- Development of natural resources at their source. Oil and mineral companies especially obtain the advantages of vertical integration
- Taking advantage of lower wages and cheaper capital. Many manufacturing companies have been motivated by this and moved their factories to China and other East Asian nations
- Tapping foreign markets. Most of the output of U.S.-owned firms abroad is purchased by foreign rather than U.S. markets
- To diversify product lines. This minimizes risks due to business cycles, labor strife, or supply interruptions
- Circumventing tariff barriers. Strategy is building productive facilities in foreign countries to avoid protective tariffs
- Investing in third world countries. Often LDC’s – less developed countries – experience rapid growth and offer MNC’s special incentives (tax breaks, protected markets, exclusive distribution rights) to build more plants in their countries
- Licensing arrangements. Initially, a company with a strong technological advantage may license a foreign-based company to produce the product. Later this may lead to the licensee being bought by the licensor. Or the licensing arrangement is terminated because the licensor can earn more by building facilities in the foreign nation.
Just as a large firm enjoys certain advantages over a small firm, MNC’s add others such as access to world-wide pools of talent, finance, and research and development. MNC’s also enjoy wider options as to when and where they will produce and market their products. Because of this, some MNC’s become virtual monopolies, enabling them to charge more than a normal price for their products and to prevent the entry of new competitors into the field.
Some experts debate whether MNC’s contribute or undermine a nation’s welfare. MNC proponents see them as removing international barriers, promoting world-wide exchange, and developing a nation’s relative advantage such as abundant natural resources, skilled labor, etc. Opponents point to undesirable monopolistic characteristics and the domination of underdeveloped countries by foreign investors.
Kraft Foods overseas philosophy was to let local autonomy prevail as foreign products were not to be mere extensions of U.S. consumer lines, but were specifically developed to meet the needs and tastes of the countries Kraft’s subsidiaries operate in. With pre-packed cheese, Kraft discovered that the English prefer cheddar while in Germany, consumers shed cheddar in favor of Swiss cheese. Despite Philadelphia Brand cream cheese being well received, Kraft had to overcome a problem of limited refrigeration space in German super-markets.
Problem of the Corrupt Foreign Business Practices
Unfortunately, bribery is sometimes the only way for a U.S. business person to win a contract from some foreign governments or businesses. Nigeria – which has been referred to as a kleptocracy – and Iran, Mexico, and Angola, at the height of their oil booms – were notorious for their wide scale corruption. Singapore, in contrast, maintains an anti-corruption squad whose broad powers of investigation have produced a civil service that rarely seeks graft of any kind.
The prevalence of bribery – called baksheesh in the Middle East – may be traced to the existence of all-powerful states. Typically, governments have been the major dispenser of capital, land, and contracts. The state also dominates trade, investment, and the means of production. Contrary to the West, Middle Eastern countries have lacked a business class powerful enough to challenge the government’s grip on the economy.
In India, Indonesia, Mexico, Philippines, and many other nations, low government salaries have often motivated officials to seek supplements through bribery. In Japan, the flow of money into politics from business for favors or protections was so great the scandals became common. In America, the Grant, Harding, Nixon, Reagan and Bush 43 Administrations were exceptional for the degree of corruption or influence peddling performed by public officials.
Bribes are a part of nearly every culture; indeed, most languages provide a word for them and some of these terms are:
Brazil – jetinho
France – pot au vin
Germany – trink gelt
Honduras – pajada
Hong Kong – hatchien
Iran – roshveh
Italy – bustarella
Japan – wairo
Malaysia – makan siap
Mexico – mordida
Nigeria – dash
Peru – coima
Russia – vzyatha
America – payoff
Zaire – tariff de verre
This fairly universal practice usually results in higher taxes or more expensive goods and services for consumers. From time to time, American businesspersons desiring to land big contracts have been caught trying to bribe key foreign officials. The U.S. government’s reaction to occasional scandals has been legislation that is well meaning, but which places American business people at a disadvantage in competing with foreign companies whose leaders may turn a blind eye to corruption.
Summary / Review / Discussion Questions:
- What are the characteristics of a multinational corporation?
- Describe the evolution of a hypothetical company into MNC status and how it might function
- Identify five MNC’s that have larger gross sales than the gross national product of a similar number of countries. Compare their economic sizes, then discuss the responsibilities that an MNC’s global participation necessitates
- Select an MNC that interests you, then research its global operations and assess whether the company is a responsible participant in the global economy
- How are corrupt foreign practices a problem for MNC’s doing business abroad?
- What U. S. law governs American foreign business dealings and what penalties may be assessed if the FCPA law is broke?
Case Study: You are an American sales rep of a large U.S. aviation firm. Aware of your country suffering a large, annual trade deficit, you stand to win a defense contract to supply $3 billion worth of jet planes to a less developed country. The profit to your firm will be more than $300 million with your commission approaching $3 million. You have been setting this deal up for nearly two years and desperately want to close it. Just as contract signing time arrives, a leading general instructs you and your company to place $6 million in a Swiss bank account or the order will be given to a less scrupulous foreign competitor. What should you and your company do?
World Economic Changes 1946 – 2013: From a U.S. dominated planet to global interdependence
Terms /Concepts: world economic changes, technological and cultural dispersion,
economic super states, less developed countries (LDC’s), multinational corporations (MNC’s), imports / exports, interdependence
- Synthesize world economic changes 1946 – 2013 and subsequent evolution into world interdependence
- Identify new economic super states and describe the increasingly important role these countries are playing in today’s global economy.
- Explain how technological and cultural dispersion has led to greater uniformity of human relations and ways and means of countries doing business such as multinational corporations (MNC’s) and free trade zones.
- Evaluate how the world and the distribution of it’s wealth has changed since 1946 by examining the map illustrating the 70 countries per capita incomes (in 1949 dollars) then reproducing a map describing the 2013 per capita incomes of today’s more than 210 nations.
- Examine current global economic trends so as to be able to make long term projections about future needs and preparations for meeting them.
- Make reasonable predictions about state of the world in 2050 bid constructing a global model based on 2013 statistics and current trends
Map of Per Capita Incomes in 70 Countries in 1949, in 1949 dollars purchasing power
Global distribution of wealth 2013
The 20th Century, especially the second half of it, has been called the American Century. Examine the above economic and political map that illustrates the world’s distribution of wealth as it was in 1949, a year in which the United States was involved in more than 40% of all international trade.
The reasons for America’s domination was that it had emerged from WW II with the largest capital reserves, and its industrial infrastructure intact. In contrast, two U.S. wartime allies, Britain and France, were reeling and their former empires dissolving rapidly. A third ally, Soviet Russia, as a result of its communist bloc leadership, engaged the democratic capitalist world in a struggle for world dominance instead of building a peaceful international trading order.
Furthermore, the aggressors, Japan and Germany, were occupied by allied military forces, near starvation, and lay in ruins. The U.S. devised the Marshall Plan which provided billions in aid to reconstruct the war ravaged nations of Europe and vanquished Japan. Nationalism, meanwhile, was sweeping Africa and Asia, more than doubling the number of nations from the 70 that existed in 1949. Make a list of the ten richest and ten poorest nations in 1949. Towards the end of this reading, you are going to make a similar map for 2013 and compare them.
The aim of this lesson is to:
A. Recognize changes in the world distribution of wealth since 1949
B. Identify countries that have become new economic super-states
C. Determine how and why the world has changed since the end of WW II
D. Assess America’s place in the interdependent world of 2013.
The German and Japanese economies revived. By 1989, both countries strong work ethic, attention to detail, commitment to quality and innovation on U.S. technologies and business practices had made them the new global industrial standard. The proof is in the 1989 world trade figures in which the Germans enjoyed a $134 billion surplus, the Japanese a $100 billion surplus – $50 billion with the U.S. alone – while the U.S. claimed improvement due to only enduring a $108 billion trade deficit.
The USSR, similar to the U.S., also grew impressively the first twenty years after WW II. However, Russia eventually weakened itself due to:
- Stalin’s takeover of Central Europe which engaged Russia in a costly Cold War struggle with the U.S. and democratic capitalist allies
- Further draining of treasure in the financing of numerous Third World liberation movements and countless insurgencies
- Brezhnev Doctrine that committed Russia to prop up socialist governments wherever threatened
- Years of rule under Brezhnev which are now routinely referred to as the Age of the Great Stagnation
- Expensive arms race with the U.S. in the 1980’s that nearly bankrupted the USSR, accelerated its decline, and widened the growing technological gap with the West.
Global alcohol consumption levels – red is highest
Once closed, secretive, and enigmatic, Russia officially joined the family of nations and became part of the global village / global culture. Some Russian politicians are interviewed so frequently by western media that they are household names in Europe and America. Where once tribes joined together to form more powerful arrangements (nationalism), today countries are joining together to form larger free trade zones in order to carve out stronger positions in the competitive global economy.
The USSR, the last great classical empire, scrapped subjugation for friendly confederation and trading relationships based on self-interest and market realities. Even during the Soviet era, in the cramped Russian apartments, one was more likely to have found a picture of Mickey Mouse or Mick Jagger of the Rolling Stones than of Karl Marx. Historically, Ray Kroc, builder of the MacDonald’s restaurant chain, may have been a greater revolutionary force in positively affecting the lives of more people than socialist icons Marx, Lenin, Trotsky and other fathers of communism.
What is the role of the U.S. in a multi-polar world of numerous, powerful, economic competitors – China, India, Germany, Brazil, Japan, Korea? Has America done too good a job of fostering a world of prosperous democracies? After 65 – 70 years of Pax Americana, can the U.S. shed its role of global policeman and be content as a simple trading nation?
Or will U.S. economic strength further erode and America become a second-rate commercial and industrial power? Is it necessary for the U.S. to rebuild its economic strength and regain the preeminent position it held for the most part until the 1980’s?
Summary / Review / Discussion Question
World Map – 1946: Pink – British Empire / colonies, Gold – Soviet Union, Blue – French colonies
- Describe the state of the world in 1946. Why was the U.S. the leading economic power after WW II?
- How and why did American mass culture become the nucleus of the global mass culture?
- How did generous U.S. foreign policies, MNC’s, and technological and cultural dispersion help competitors to win market share away from numerous U.S. industries?
- Identify the major trends, events, and mistakes that had to the erosion of U.S. economic strength, then research why America’s global technological dominance has also dissipated?
- Who are the new economic super-states and how has their emergence helped foster the change from a bi-polar arrangement to a multi-polar world?
- In general, how has the world changed between 1946 and 2013? Who are the ten richest and poorest nations today? Identify ten important countries that did not even exist in 1946.
- Using a world map, lego blocks or other materials, or specialized computer software, reconstruct the 1946 map into a 2013 version that reflects the changes in the distribution of the world’s wealth over the past three generations. Upon conclusion, predict what ten countries will be richest nations in the world in 2050 – also the ten poorest.
Unit Test – International Trade: Importance, Impact & Issues
Short Answer Part – 30 Items @ 2.5 Points Each = 75 Points
A. Matching – 20 points
1. freedom __________ A. favoring a concentration of power in a leader
or elite not constitutionally responsible to the
2. authoritarianism ___________ B. individual liberty, restraints on power of
state’s ability to control people
3. macro-economics __________ C. political values shape economic behavior of
people and role / structure of state
4. politico-economic __________ D. economy values ideals, religion, stresses
model security, stability, old ways of doing things
5. traditional ____________ E. study of entire discipline of economics, view /
analyze whole system
6. command ____________ F. economy in which private producers seeking
profit provide goods / services for consumers
based on laws of supply and demand
7. market ____________ G. centrally directed economy in which
government provides all goods / services
8. mercantilism ____________ H. exporting nation limits imports to carve out
foreign markets, develops domestic industries,
gain rapid increase in national wealth / power
9. capitalism _____________ I. followed feudalism, strict government
regulation of economy; enriches nation
through establishment of foreign colonies,
10. capitalist _____________ J. system characterized by private / corporate
development ownership of capital goods / investment,
state production / distribution / prices determined
by private individuals in relatively free market
C. Fill in the blanks with one of the following terms / concepts: (10 * 2 = 20 points) production, mass culture / media, purchasing power, trans-societal technologies, consumption, per capita income, cultural / technological dispersion, international trade, balance of trade, economic super-state
11. __________________ is obtained by dividing a country’s population total by its
gross national product (GNP)
12. _________________ determines real wealth, how much one’s income really
buys, accurate measure of a people’s standard of living
13. _________________ is the satisfaction of human needs and wants through the
purchasing of goods and services
14. _________________ is the creation of goods and / or making them available for
Satisfaction of human needs / wants
15. ____________________ is the dissemination of a nation’s values, ideas,
information, products, etc. to other parts of the world
16. ____________________ aid the movement of people / dispersal of ideas,
products, information, culture, etc., to other parts of the world
17. ___________________ is the exporting of surplus goods / capital to enrich the
nation and importing of other country’s products to raise standard of living
18. ___________________ is the measure of a country’s exports and imports, a
favorable condition being one of equality or a surplus of exports
19. ___________________ a nation whose economic size, power, and exporting
capability allows it to play a major role in global trade, investment, aid
programs, politics, and / or mass culture
20. __________________ are companies that operate in at least six countries, have
annual sales in the hundreds of millions of dollars, have foreign subsidiaries that
comprise a minimum of 20% of total assets, sales, labor force
C. Multiple Choice (20 points)
21. The Pacific Rim is:
A. West Coast of America and Canada
B. Far shoreline of Hawaii
C. Deep underwater valley / ridge in Pacific Ocean
D. Aggressive exporting nations of East Asia
22. Trans-national economic integration may be defined as:
A. Interstate commerce between the 50 U.S. states
B. Corporation establishing foreign subsidiaries on a global scale
C. Merging of two or more nation’s markets through elimination of restrictive
regulations, tariffs to realize a freer flow of trade, capital, labor across
E. Company’s establishment of different phases of production in different
23. The most profound example of transnational economic integration in the world
A. International Business Machines – IBM
B. European Union
C. North American Free Trade Zone – NAFTZ
D. B and C
24. GATT, the General Agreement on tariffs and trade is:
A. National system of free trade zones
B. Gentlemen’s agreement to engage in protectionist activities
C. Canadian – U.S. agreement to practice fair trade
D. Set of global free and fair trade principles and accords for members nations
to abide by with regards to international trade
25. Super U.S. 301 is:
A. American trade instrument designed to force World Trade Organization
member nations to comply with free / fair trade principals and accords
B. Four lane transcontinental highway running from Canada to Chile
C. 3,000 mph plane, supersonic Concorde’s successor
D. New jet fighter plane that can fly into the atmosphere and shoot down space
26. World’s two most prosperous economic super-states, both defeated in World
War II, today, with limited defense forces, have become major powers through
global commerce and trade.
A. China and South Korea
B. Russia and America
C. Great Britain and France
D. Japan and German
27. A reason why a company might become a multinational corporation
A. Take advantage of cheaper labor costs
B. Tap foreign markets
C. Develop natural resources at their source
D. All of the above
28. Identify more popular examples of American mass media / culture that have also
become an important part of the burgeoning global mass culture.
A. English language, Rolling Stones, Beatles, Jaguar, fish n’ chips
B. McDonalds, Coca Cola, film / movies, TV, cartoons, rock n’ roll, slang, t-shirts
C. Sony, sushi, Honda, hi-tech, haiku, Toyota, hen
D. Sputnik, Stoly, Gorky Park, caviar, Putin
29. Most of the former communist bloc nations transformed their command economies and single-party dictatorships into:
A. Authoritarian capitalist development states
B. Even more rigid Stalinist models than in past
C. Varying degrees of multi-party democracies and market economies
D. Islamic Republics and traditional economies
30. Since 1946, the world has evolved from one of U.S. domination to:
A. USSR domination
B. Capitalist domination by Wall Street and London bankers
C. Everything being made in China, Japan, and Korea
D. Global interdependence
Essay Part: Locate the below table listing The Changing World Economy and
examine the transformation of the U.S. economy between the early 1960’s and the late 1980’s. Research the figures for 2013 and describe the changes that have taken place since 1989. Analyze and evaluate why these changes have occurred over the past 50 years. Explain how and why a formerly self-contained America has become a champion of international trade, part of an interdependent world economy, but also runs trade deficits annually with much of the world.
Answer key for matching, fill in the blanks, multiple choice items
11. per capita income
12. purchasing power
15. cultural / technological dispersion
16. trans-societal technologies
17. international trade
18. balance of trade
19. economic super-state
20. multinational corporation
23. D – B & C