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World Economic Systems Final
Terms in this set (34)
According to the 1985 White Paper, what obstacles were standing in the way of a fully integrated "single market" in Europe? What actions were taken to remove those obstacles?
The 1992 Single Market Program was introduced
1.) Physical Barriers: Calls for cooperation between countries to enable free movement of people and products.
2.) Technical Barriers: White paper called for a "new approach" of agreeing on essential health and safety requirements for all member states
3.)Fiscal Barriers: Governments had a tendency to purchase products/services domestically which isnt the most efficient, the White Paper called for an establishment of coordinated systems of competitive bidding
What were the views of Jean Monnet and Charles De Gaulle on European economic integration? What significance do their views have today?
-Jean Monnet, the archtect of European economic unity, proposed creation of a European Bank and Reserve Fund, a "common financial policy."
-Most notably, President Charles de Gaulle of France believed that American economic and military strength represented danger to French sovereignty. Thus, despite his intense nationalism, de Gaulle was willing to abide by the rules of a European common market if it would "do battle abroad" against American competition
What were the motivations for adoption of a single currency in Europe, and what are the possible costs?
-Depth of capital markets
-Diversification of reserve currencies
-National Sovreignty (no independent monetary policy)
-Stability of the Euro (exchange rate dropped immediately after its issue)
What was the purpose of the Common Agricultural Policy in Europe, and what were its original provisions? How has it changed in recent years?
The Common Agricultural Policy was created based on national interests.
-before, farmer's incomes were supported by holding agricultrual prices at high levels.
-CAP opened internal markets and maintained uniform prices
-protected Euro Ag market from import competition through levies
-in 1992, price supports were replaced by direct income support for farmers
What is the Lisbon Treaty? When did it come into force, and what are some of its major provisions? (3)
An international agreement that amends the two treaties which form the constitutional basis of the EU.
-It entered force on December 1st 2009
1. Shifted power to the European Council
2. Switched from unanimity to qualified majority voting in many policy areas
3. Gave member states the right to leave the EU
In what sense has the position of the UK "declined" since the 19th century? List and briefly discuss several possible reasons. Does the trend seem to be continuing?
The UK was the economic and military superpower of the 19th century. Today 22 countries have surpassed them in GDP, and 25 in HDI
-disadvantage of a head start (industrial revolution)
-Policy of Laissez Faire (government not being involved in the workings of the free market. US and others protected industries)
-High Marginal Tax Rates
How did Margaret Thatcher change the operation of British labor markets during the 1980s? How have they changed (or not changed) since that time?
-Her tight monetary policy decreased inflation and increased unemployment; both discouraged unionism.
-Tony Blair, Labor PM in '97 reintroduced minimum wages
What concerns are raised for the future of the UK by the Brexit vote? (3) What is the "Northern Ireland Backstop," and why has that been such a difficult problem?
1.) Disruption of trade ties
2.) establishment of new product quality and safety standards
3.) Brits not able to work in other EU countries as easily
-There's been a lot of tension on the border in the past. Northern Ireland is part of the UK. Republic of Ireland remains in the EU. A backstop is a guarantee that the border remains open regardless of the outcome of trade negotiations.
When did the British National Health Service come into existence, and what are some of its major characteristics? Does it have public support?
-Oldest and largest single-payer health care system in the world. Doctors paid on capitation basis. Brits are very proud of it. Tons of public support
What are the basic characteristics of the "social market economy" in West Germany?
How did the historical legacies of Bismarck and Hitler influence the formulation of the social market economy?
Bismarck - Pragmatic chancellor (1871-90) who united the German states. Developed protective tariffs and comprehensive social welfare system.
Nazis - Private property and totalitarian control. Used rationing, quotas, wage/price controls, encouraged cartels. Labor unions subordinated to German Labor Front.
In 1990, when Germany was unified, what options were considered for the monetary system, and what option was adopted? What were the arguments for and against the option that was chosen?
should East and West maintain separate
currencies, at least temporarily, linked through a
flexible exchange rate, or should Eastern
Germany be merged quickly into the Western monetary
East was merged into the Western monetary system.
When Germany was unified, what was the original plan for privatization of industry, and what method was eventually adopted? What are the advantages and possible disadvantages of the system that was adopted?
-OG plan for privatization was creation of an independent holding company to take possession of state enterprises, farmland, and other state-owned property and eventually redistribute ownership to citizens
-ACTUAL plan: privatize as quickly as possible. Return ownership from nazi taken property to former owners where possible, enterprises sold to strategic investors
Describe the institutional framework and the practical significance of the West German system of codetermination.
workers are given a voice in the management of their companies. German employees are able to participate in management through works councils and through representation on corporate supervisory boards.
-Codetermination, they found, had exerted very little influence on the overall direction of corporate policy
What were the Hartz Reforms in Germany? Why were they adopted, and what are the positive and negative results?
A set of recommendations submitted by a committee on reforms to the German labour market in 2002. Included wage subsidies and grants for entrepreneurs to start new businesses.
-PROS: the fact that German unemployment rate has fallen substantially.
-CONS: wages have stagnated at relatively low levels and the public hates the reforms.
What is "indicative planning"? What was the purpose and institutional structure of indicative planning in France after World War II? What remains of it today? (needs work)
Planning initiated after World War II to rebuild the capital stock. The government urged compliance through influence over nationalized industries and banks, monetary and fiscal policies.
How does French social welfare expenditure compare to the levels in Scandinavian countries? How is most of it spent?
Redistribution of Income - Long tradition of economic inequality. Since 1970s, rising percentage of national income devoted to social welfare programs. Now it has bypassed Scandinavian countries as having the highest level of social spending (as % of GDP) in OECD. In the French case, about 81% of the expenditures go into health care and care for the elderly.
Discuss the systems of collective bargaining that have operated in Sweden. What was the "Basic Agreement," and when was it concluded? What is "centralized collective bargaining" ?How have these worked? Have they grown stronger over time?
1. Basic Agreement: labor market treaty signed between the Swedish Trade Union Confederation and the Swedish Employers Association. Accepted in 1938.
2. Centralized Collective Bargaining- Unions wanted wage solidarity. Employers wanted more orderly bargaining. Wage negotiations take place at a national level and are binding. System has weakened due to disagreements about it
What is wage solidarity?
Largest wage increases to the lowest paid workers
In Sweden, what is an "active labor market" policy? What is its purpose?
Includes programs to increase the demand for labor, programs to tailor labor supply to new job openings, and to match supply and demand through job information and placement services. Unemployment benefits are less generous in Sweden than OECD average
What major historical developments caused some countries in Central Eurasia to have stronger cultural and economic ties to Western Europe than others? Does this background have significance today?
1.) the Mongol conquest in 13th-15th centuries devastated Central Eurasia, severed Western ties, and caused Russian capital to move to Moscow, which became the "Third Rome" after the fall of Constantinople.
2.) Peter the Great in 18th century introduced Western science & tech, but avoided Western political though and economics
What was the Soviet system of War Communism? Did the economy perform well during those years?
It was the economic and political system that existed in Soviet Russia during the Russian Civil War from 1918 to 1921. The policy was adopted by Bolsheviks to keep towns & the Red Army stocked with food and weapons. Strict centralized control and strict rationing.
-The population suffered as a result of the war. Moscow lost 53% of its population at the time *****
there was a large fleeing of cities for the country side bc the people there had a better chance of feeding themselves. 90% of wages were paid with goods rather than money
Describe Lenin's New Economic Policy. Why was it established? Why was it eventually replaced?
The NEP was a temporary retreat in the 1920's from extreme centralization and strict socialism. It was established to hold power after the Kronshtadt Rebellion. Inadequate grain production for the urban workforce caused Stalin to re-centralize production
In Soviet central planning, what was a material balance table? Suppose that the table for ball bearings shows a deficit. What options are available to clear the deficit, and what problems are associated with these options?
During the Soviet industrialization debate of the 1920s, what positions were taken by Bukharin and Trotsky, and what were their arguments? What position did Stalin eventually support?
-Nikolay Bukharin and the right believed that socialism must be strengthened in Russia before it could be carried to the outside world.
-Trotsky and the left adopted the former position, arguing that rapid development
of heavy industry and military production was necessary to support the worldwide socialist revolution
-Stalin initially aligned himself with the right, but problems with grain procurement in 1927 turned him against the peasants and provoked the return of forced requisitioning
How were investment decisions made in centrally planned economies? How does this compare with the methods used in capitalist countries?
-Government officials dictate public investments. Determine the structure of output, and let that determine the required structure of capital stock.
-In a capitalist country, investment resources will
flow to a particular sector of the economy if the rate of return in that sector, adjusted for risk, is higher than the market rate of interest.
What were some of the important factors that caused the decline and fall of communism in Central Eurasia? (4)
1. Soviet economic growth slowdown
2. East-West normalization
3. Polish pope encourages rise of labor movement in Poland
4. Failed coup attempt in 91, dissolution of Soviet Union
At the "starting line," what were a few of the significant differences in the initial conditions that may have influenced the relative success or failure of different countries in Central Eurasia in their market transitions? (4)
1. having a background in the Austro-Hungarian empire gave a historical advantage
2. Low unemployment except in Yugoslavia
3. Super overvalued currencies in Soviet Union and Romania
4. budget deficits in USSR, Poland, Romania
For countries that are making a transition from planned to market coordination, what are the arguments in favor of a "shock treatment" approach? (3)
a. interdependence of market institutions
b. preempt political opposition
c. aggressive programs in Central Eurasia are generally associated with milder transformational recession (but both of these may reflect historical and initial conditions).
For countries that are making a transition from planned to market coordination, what are the arguments for a more gradual approach? (3)
a. "first things first"—legal and social foundation
b. key sectors first? agriculture?
c. careful preparation, avoid mistakes
d. spread pain of adjustment
What is the difference between "managed privatization" and "spontaneous privatization"?
Managed- initiated, audited, and regulated by a state property agency
Spontaneous- initiated and undertaken by the managers and employees of a state enterprise
How are African demographic trends affecting the future of the global economic and social system? What might cause you to be concerned and/or hopeful regarding those trends?
Escalating birth rates and higher life expectancy are rapidly increasing the population of Africa where, according to the UNICEF Generation 2030 Africa report, the current 1 billion-plus populous is expected to double within the next 35 years and its under-18 population to increase by two thirds to almost 1 billion.
Unless governments act quickly and collaborate with private and education sectors alike, the growing population is going to significantly intensify existing challenges on creating meaningful job opportunities to address youth unemployment in each market/country. Related to unemployment levels; larger populations who will also live longer will continue to challenge social services and welfare systems.
How did the histories of colonialism and slave trade affect African economic development? Is there evidence that these factors continue to affect African development today?
Slavery grew enormously after Americas were discovered in 1492, revealing a huge labor shortage in the Western Hemisphere. Native populations were decimated, creating labor shortages. Africa lost 23 million to the slave trade, including many of the healthiest, strongest, and most skilled workers and craftsmen.
The slave trade caused long-term and continuing harm to economic development, because it damaged trust within and between tribal groups, reducing cooperation and the effectiveness of local governments.
What are some of the factors holding back agricultural productivity in Africa? According to the textbook, how have African systems of agricultural production and land tenure changed through the years, and what forces have caused these changes?
he irrigated share of Africa's cropland is less than a quarter of the world average. Only 4 percent of crop areas are irrigated in sub-Saharan Africa.
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