For The Goth....Yet Again!
let's try this again, and see if'n it don't work all proper like :P
March 26, 2009
What does globalization mean? a regional phenomenon transformed into a global one
Globalization in the 21st century=>Bretton Woods Agreement 1944
Wider purpose…informed by domestic, economic and political priorities
"Peace through prosperity"
3 mechanisms:
international bank for reconstruction and development (World Bank)
The international monetary fund (The IMF)
The general Agreement of Tariffs and Trade (GATT, Now WTO)
Globalization
1600 The East India Company
Joint stock-Multinational Corperations with exposure throughout the near east India
Raising money
Distributing the risk
Corperations extended their reach and secured their investments through the royal navy and the East India Company…Private Army
Noam Chomsky says Globalization means the triumph of neo-liberal, economic and political ideology
Often with the aid and compliance of "Denationalized Elites" (In Middle East they are referred to as the Arab Façade)
Chomsky says the World Bank, the IMF and the WTO are all under the neo-liberal banner
Those who trumpet globalization speak of it as a rising tide that floats all boats
Ion china and throughout asia a dramatic decrease in the number of people earning less than two dollars a day
ASIA
1981 60% made less than $1.00 US/Day, Today 11% make less than $1.00 US/Day
1981 84% made less than $2.00/Day, Today 40% make less than $2.00/Day
LATIN AMERICA
1981 10% make less than $1.00/Day, Today 9% make less than $1.00/Day
1981 30% make less than $2.00/Day, Today 23% make less than $2.00/Day
SUB-SAHARAN AFRICA
1981 42% make less than $1.00/Day, Today 44% make less than $1.00/Day
1981 33% make less than $2.00/Day, Today 75% make less than $2.00/Day
What does this mean for countries that have school fees? No school for the poor families
Life expectancy
With industrialization comes increased life expectancy
Technology/healthcare
Technology, vaccines, and better diet makes for longer life expectancy
Throughout the developing world since WWII, on average the life expectancy doubled
End of WWII Sub-Saharan Africa life expectancy was 30 years
Life expectancy from WWII to 1980 life expectancy increased to 50 years
Until the revelation of the HIV virus, Malaria was the number one sub-Saharan African killer
Since the HIV epidemic, the life expectancy of sub-Saharan Africa is now 47%
Infant mortality has declined everywhere
Chinese economy produces much more today than 40 years ago. Why? Two factors: capital and education.
Education is the major factor
Throughout the developing world, after WWII 52% of the population was literate
Today 81% percent are literate
Female literacy rate in 1960 59%
Today is 80%
1960 developing world, 24% of children were working
Today 10% of children are working
Criticisms
World bank-"Green Room" negotiations
IMF-voting mechanism-nations vote according to their contribution
The real voting takes place not out in the open, but in backroom deals amongst the rich countries
Criticisms about the WTO
Evolved out of the GATT
Club made out of UN nations
WTO regulations-seek to limit tariff barriers to trade
Non tariffs barriers to trade
EU subsidizes agricultural producers-price goes down
Quintile=20% of something
The top quintile worldwide use 83% of world's resources
March 31, 2009
The triumph of neo-liberalism
Neo-Latin for new
The individual in neo-liberalism is more "thinly sliced"
Adam Smith-classical liberalism
The thickly sliced individual who's self-love includes a knowledge of a greater purpose
"The theory of moral sentiments"
For smith, an individual's merit or demerit is determined by an impartial (disinterested: no personal interest in the outcome of their…) arbiter
Back to globalization and IMF loans
Not the lender of choice but of last resort
IMF conditions imposed on recipient nations…
Structural adjustment programs
Recipient nations get spending in line with income
Infrastructure, water, electricity, health care and education
Lester "Mike" Pearson…recommended that the wealthiest nations contribute 3/4 of a percent of GDP to forgive third world debt.
The triumph of economic and political liberalism
Liberal preconditions for economic growth
Liberal: less likely to be the thickly sliced liberal of Adam Smith's day
1991 Francis Fukyama
Worked in the reagan white house
Fellow of the conservative rand corporation
LIBERAL conservative
"the end of history"=>the collapse of communism
The debate over the best form of social organization…LIBERALISM. The crowned king of social organization
Why?
Government's guarantors of natural liberty? and free markets
1. Investment in post-secondary education…why?
The better educated the worker, the more productive and efficient it could generate greater wealth
10 lbs of potatoes
An automobile
Microsoft Word 2007
-------------------
Requires differing
Levels of education
And especially for young women (increase competition)(women hold up half the sky)
Educating women increases gains from human capital
(cost benefit analysis)
Where women are defined by their biology they MAKE BABIES! (Fertility rates high)
Children absorb increases in GDP and per capita GDP
In Quebec, before the quiet revolution (1960) unilingual francophone females finished school at grade 7
Today, women in post secondary outnumber males
In Quebec before 1960-highest fertility rate in west…Today 1.8 births/fertile female (below replacement rate of 2.4)
2. Investment in health care…Why?
Healthy workers are happy/productive workers
Take fewer days off work
More productive and work longer
Up front costs to student and state are amortized over a longer working life…
Healthcare and institutional IQ of industry
Babies:
April 2, 2009
Globalization revisited
Winners and losers
Canada after WWII
Winners-South Korea (14 on UN's list of economies)
Losers-Saharan Africa
China
The global economic crisis
Oops
Glass-Steagal act following the market crash of 1929
Canada-nanny state to neo-liberal agenda
Globalization-better to have been born in a developed nation (Canada). But, if born in less developed world, better to have been born after 1970 (End of WWII and creation of…something?):
A generation after-realize the consequences of state financed development programs
In Canada, better to have been a baby boomer
1945-1980: the golden age of
The Keynesian welfare state
Industrial labour
Location, location, location
Spatially and temporally.
Geography and time
Economic in the Americas shifts from war production to consumer production almost effortlessly
Driven by: Europe and Asia "bombed into the stone age" and needed rebuilding. Gave momentum to domestic industry
Baby boom (bombs made out of small children) 1945-1960
Manufacturing and industrial labour
Dramatic increase in wages and benefits for relatively unskilled but hardworking labour (undereducated)
Not yet subject to competition from lower cost regimes…big wows: single family income, house in suburbia, a new car in the driveway
Politics and the role of the state
Politics informed by Keynes.
Big government has its day
Governments identify social problems (or dysfunctions)
1. Urban "slums"=>urban renewal
2. Education…as a response to technological change
By 1967 post secondary, but not university?
3. Community colleges of arts and technology
24 community colleges in Ontario $144 million/year
K to 5 primary schools
4. Portable, comprehensive, universal healthcare
In Ontario $48 billion this year
Mid 1970s
Commodities produced in lower cost regimes gain access to north American market
1970's oil shock
Mid 1970's OPEC
Dramatic slowdown in economic activity
Unemployment goes up
Government revenue goes down
Government expenses go up
Perfect storm
Milton Friedman
University of Chicago-economist
Government should get smaller
Liberalism is late arriving in Canada, but it's here now
Neo-liberalism has not as much success here as in the states
We have wed liberal capitalism to socialism
Architect of the nanny state: Paul Martin
The dude who dismantled the nanny state: Paul Martin Jr.
Under neo-liberal agenda-government is seen as a problem
April 7, 2009
Shared cost programs
Federal government spent money in areas of provincial concern
1940-$0.50/$1.00
Fifty cent dollars
$0.18/$1.00
Provincial governments have less money for health care=>longer wait times, the closing of hospital beds, the closing of hospitals
Education: closing schools, laying off teacher's assistants, librarians, art, music, drama etc gone the way of the dodo
What about community collages?
1967 your dad could have paid through tuition 1/6 of the cost of his tuition
Today, you pay 1/3 of the cost of your tuition
Tuition hikes in the near future
Since 1980's maybe government has come to be seen as "The Problem"
Amalgamation: if you live in Dundas, Ancaster, Stoney Creek, Flamborough, etc, you don't elect a number of representatives, but ONLY ONE!
Aging infrastructure: roads, bridges, sewer systems, etc
USER FEES!!!!
South Korea-an asian tiger (sometimes associated with the Asian Miracle)
1960 South Korea=>per capita GDP $300.00 US/Year
Ghana=>the same as South Korea
Today, South Korea GDP/Person is $20 000 US
14 on the international list
Ghana GDP/Person is $2 000 US
After WWII Golden age of industrial labour in the new world (North America)
Before the "miracle" south Korea relied on foreign aid and only a few agricultural staples
Rural and economically backward…location
The cold war and the domino theory
IBRD designed to rebuild war torn Germany and Japan to keep both from falling into the arms of the communists
After the Korean war
Early 1950s
A partnership between government and big business and big banks
State capitalism
Looks like mercantilism
To manufacture for the export market and limit competition from foreign economies
Import substitution: manufacturing what might have been imported from elsewhere (Subsidy of domestic manufacturers)
Manufacturing for export
Import substitutions and tariffs
Little spending by Koreans on consumer perishables
Levels of savings increase money in the banks for development of manufacturing
Wages suppressed , increased Korea's competitiveness until 1980s
Since the 1990s, government has withdrawn from management of the economy and Korea has moved to free market capitalism from state capitalism
Walter Rostow and communism (state managed economy)
Disease of transition
Walter Rostow-free marketer
Project undertaken by government: infrastructure
Highways and communications systems (Koreans are leaders in communications systems now)
A system of primary and secondary education
Korea's literacy rate is 99%, equal with most areas
Japan (99%) China (77% and rising)
Singapore and Taiwan (90% and rising)
Canada (99%)
Ghana (60%) one of the highest in sub-Saharan Africa
Uganda (48%)
Zaire (28%)
Correlation between literacy rates and per capita income
Life expectancy in sub-Saharan Africa is 47 years
GDP through sub-Saharan Africa is under $500/person
57 work week in S. Korea
Average rice farmer works 3000 hours a year
Average European or American farmer works 1000 hours
Overall theme, Asia works harder than us. Outliers-stand on the outside, as in exceptional.
S. Korea creates more engineers than U.K., Germany, and
Sweden combined.
S. Korea=Number one in scientific literacy, no. 2 in mathematical literacy. Yanks and Canucks are way below general populaces knowledge about science and math,
Life expectance =74 years (working themselves to death?)
North America is the most wired/highest broadband per capita on the planet
5th place manufacturer of cars: KIA
Since 1960, Korea has moved from being a largely agrarian economy to one where the majority of people work in industry or the service sector
Koreas GDP is ranked 14 in the nation
Literacy is amongst the top
Life expectancy is lower than would be expected
2% live below the poverty line
Korea imports MOST of their raw materials (same as the Japanese)
April 9, 2009
The south Korean economy has been changed from agrarian economy (backward) to the 14th ranked economy on the planet
They excel in electronics, high tech IT, 5th ranked auto maker, ship building,
How'd this happen? Location and the Cold war (American investment)
Denmark is number one in terms of third world assistance, followed by Netherlands, Sweden, Norway
Belgium
We're at the bottom
The Chinese Miracle-Deepak Lal, Yibin Mu
On average, a steel worker would work 2000 hours a year, college prof works 1400 hours a year
Chinese had a "rice farming tradition" (They're used to working hard)
1978
Movement from demand economy=>free(r) market economy
Market Leninism
1949 communist revolution
Mao installed as head of government
Was rural and agrarian
The communist party undertakes "the great leap forward"
Forced collectivisation of agriculture and agricultural revenue
At 1949, it took 80 peasants to feed 100 Chinese.
Need to create surplus agricultural labour
Then formed industrialization, moving surplus agricultural labour to urban industrial locations
Mobilizing human, natural and economic resources for the collectivist utopia…
1975-china produced 140 000 autos/year
1985-china produces 440 000 autos/year
2002-china produces 3.25 million autos/year
2007-china produces 9 million autos/year
Americans use 12 million gallons of gas/day
Jeanie index-level of economic change in an economy
China is .40
Canada .31
US .41
Brazil .59
If there was no social inequality it would be 0
a lot of inequality would be one
1949-life expectancy in japan was 35 years
Today-70 years
China is not a member of the organization for economic cooperation and development, but It qualifies
Male literacy is 95%
Female literacy is 91%
India ("World's largest democracy")
Male literacy is 70%
Female literacy is 60%
Life expectancy
Males 64
Females 65
Today, the private sector accounts for between 68-70% of GDP of china
Before reforms-very little…10% or less
Per capita GDP in china
China has a hot growth rate, so much so that those in charge try to slow it down a bit
Chinese economy has increased 10%/year (10 fold)
India's economy is 2 fold
Purchasing power parody
In 1978 $320 US in china
Today, a 21 fold increase in a 20 year period
Cast of characters (who's who in Chinese economy)
Banks-established in 1949, controlled by state
Commanding heights-heavy industry, transportation, banks-control those and you control the economy
In china, banks are almost completely gov't controlled, except for Hong Kong (British colony)
90% of deposits held by Chinese are in gov't controlled banks
SOE-state owned enterprises-1977 there were many, largely in heavy industry (means of production)
TVE-township and village enterprises-commercial enterprises in rural areas, set up after 1978
The monetization of china's economy
SEZ-Special Economic Zones-found in and around Hong Kong (point of entry of goods coming in to be turned into things like computers) least gov't interference intervention
Also called economic engines, funded by foreign economic investments
Responsible for china's dizzying increase in GDP
Financial sectors, hugely important…in china, but ISOLATED from china
China is member of WTO-WORLD TRADE
Taking down tariff barriers, promote global division of labour which, theoretically, creates bigger wealth for everyone involved
4 factors that contribute to the Chinese miracle
1-efficient and effective growth friendly economic policies
2-Chinese traditions frugality
Value education
Hard work
3-historical demographic opportunity
4-deepening of monetization and division of labour
State owned enterprises are a problem…they are a drain on the economy and will eventually have to disappear. They employ millions of locals
Big problem, to be solved later
Chinese own 1 trillion dollars in American debt, transfers from country to country through government paper
"Social Reconstruction Fund" SRF
Take the 1 trillion Chinese owned government money and invest it in Hong Kong
Investment will reap benefits
If we invest 500 000 000 000 in hong kong investment banks we would get interest,
@5%, the return would be 25 000 000 000/year
April 14, 2009
Global Financial Crisis: 2008-2009
Threat to financial stability of investment banks…Leahman Brothers
Insurance companies…AIG
American International Group
Mortgage bank…Fannie Mae and Freddie Mac
Fannie Mae-Federal National Mortgage Association
Freddie Mac-Federal National Mortgage Corporation
Consequences for homeowners, commodities producers, their employers and customers
The build-up for the housing bubble began in the Clinton administration, burst in 2006...a decade or a little more
Bubble=An increase in housing start-ups (housing good indicator, because it's a person's biggest investment), dramatic decline in retail values, the misapplication of risk controls (Sub prime mortgages, variable rate mortgages-paying no principal with anticipation of house's value increasing, leading to wheeling and dealing), collateralization of debt insurance (Spreading the risk)
Made to put Americans who couldn’t apply for a loan from a commercial bank in a position where they can buy a house (ignoring the risk of zero credit rating)
Sub prime=loans given at a rate lower than commercial banks are able to give to their "good customers"
Investment banks bundled these loans and traded them on the stock market
Called mortgage backed securities
This is spreading the risk
By 2008, 30% of all mortgages issued by Fanny Mae and Freddie Mac were to first time homebuyers who would not have qualified for a mortgage from a commercial bank
1994-2006 housing prices increased by 124%
Housing prices reached a level of 2.9-3.9 times the median household income by about 2000
By 2004 home prices to family income up to four times
On the eve of the bubble burst, home prices had reached 4.6
Value of the house compared to family income 2.9-3.2, then up to 4.0, then to 4.6
The value of residential real estate between 1994 and 2006 spiralling upward
"Leveraging"-borrow at a lower interest rate to pay off a higher interest rate
House hold debt in US in 2007 as % of annual income-130%
The average american owed more than he/she made in a year
In 2007, americans spent 800 billion more than they earned
US gov't owe 14 trillion dollars
In 1974-household debt stood at 640 billion
Last year-14 trillion
2006-for the first time in 12 years, housing starts to drop
Threshold of a looming catastrophe
1. Millions of americans whose credit rating would not have gotten them a mortgage get sub-prime rates
By 2007 9 million homeowners had no or negative equity on their property
By may 2008, housing prices fell by 20%
Millions of sub-prime mortgage home owners are homeless, number has jumped by 80%
1933 congress Glass Steagal act-separates mortgage banks from investment banks (conflict of interest)
1999-Glass Steagal act repealed
Allowed commercial banks to trade in mortgage backed securities, collaterized debt obligations, and structural investment vehicles
Conflict of interest between granting and investing of credit
April 16, 2009
1. Globalization
A rising tide that floats all boats
And 6 liberal preconditions for economic growth
Weave them into the answer
Asia, latin america, sub-Saharan Africa
Increased income, investment in ed, life expectancy, lit. rates, children in the labour force,
2. Globalization
In what way do WTO policies benefit the richest nations?
Is the playing field level? NO!!
Triumph of neo-liberalism, WTO, world bank, IMF benefit developed nations
The playing field was not level
Structural adjustment programs
Non-tariff barriers to trade
EU Canada, USA, and japan
EU subsedizes farmers, effectively keeping out sub-Saharan farmers
3 Canada 1945-1980, 1980, 2009
What went wrong
Federal level-comprehensive healthcare
Provincial level-building of community colleges
Municipalities-infrastructure
What went wrong?
This will be an either or, but you need to understand BOTH
4. Korea and Ghana
What did the Koreans do right?
5. The Chinese "miracle"
After 1978 and
Mau died in /76ish
Move to freemarket, township and village enterprises
What to do with "sunset" SOEs (state owned enterprises) and 1 trillion in us government backed paper
6. The global financial crisis
Leahman brothers, bankrupt
AIG-79.9% owned by the federal reserve bank
Fannie Mae and Mac in conservatorship (administered by federal govt.)
Housing bubble 1994-2006
Value of resale after 12 years
Home prices as a value of household income over twelve years
Clinton and bush administrations and sub-prime mortgages…for what risk remains…the relief
Mortgage banks and fannie and Freddie
Investment banks and sub-prime loans
Frannie and Freddie
Securatized risk vehicles
Mortgages banked securities (as good as gold)
Investment opportunities, risk management
Glass-steagall put in place in 1933 (separate investment banks from mortgage banks) repealed in 1999
Why?
Household indebtedness…and realestate emnity
Banks, insurance companies, and house builders are the biggest spenders in Washington in lobbying, and might contribute to your campaign for re-election
March 26, 2009
What does globalization mean? a regional phenomenon transformed into a global one
Globalization in the 21st century=>Bretton Woods Agreement 1944
Wider purpose…informed by domestic, economic and political priorities
"Peace through prosperity"
3 mechanisms:
international bank for reconstruction and development (World Bank)
The international monetary fund (The IMF)
The general Agreement of Tariffs and Trade (GATT, Now WTO)
Globalization
1600 The East India Company
Joint stock-Multinational Corperations with exposure throughout the near east India
Raising money
Distributing the risk
Corperations extended their reach and secured their investments through the royal navy and the East India Company…Private Army
Noam Chomsky says Globalization means the triumph of neo-liberal, economic and political ideology
Often with the aid and compliance of "Denationalized Elites" (In Middle East they are referred to as the Arab Façade)
Chomsky says the World Bank, the IMF and the WTO are all under the neo-liberal banner
Those who trumpet globalization speak of it as a rising tide that floats all boats
Ion china and throughout asia a dramatic decrease in the number of people earning less than two dollars a day
ASIA
1981 60% made less than $1.00 US/Day, Today 11% make less than $1.00 US/Day
1981 84% made less than $2.00/Day, Today 40% make less than $2.00/Day
LATIN AMERICA
1981 10% make less than $1.00/Day, Today 9% make less than $1.00/Day
1981 30% make less than $2.00/Day, Today 23% make less than $2.00/Day
SUB-SAHARAN AFRICA
1981 42% make less than $1.00/Day, Today 44% make less than $1.00/Day
1981 33% make less than $2.00/Day, Today 75% make less than $2.00/Day
What does this mean for countries that have school fees? No school for the poor families
Life expectancy
With industrialization comes increased life expectancy
Technology/healthcare
Technology, vaccines, and better diet makes for longer life expectancy
Throughout the developing world since WWII, on average the life expectancy doubled
End of WWII Sub-Saharan Africa life expectancy was 30 years
Life expectancy from WWII to 1980 life expectancy increased to 50 years
Until the revelation of the HIV virus, Malaria was the number one sub-Saharan African killer
Since the HIV epidemic, the life expectancy of sub-Saharan Africa is now 47%
Infant mortality has declined everywhere
Chinese economy produces much more today than 40 years ago. Why? Two factors: capital and education.
Education is the major factor
Throughout the developing world, after WWII 52% of the population was literate
Today 81% percent are literate
Female literacy rate in 1960 59%
Today is 80%
1960 developing world, 24% of children were working
Today 10% of children are working
Criticisms
World bank-"Green Room" negotiations
IMF-voting mechanism-nations vote according to their contribution
The real voting takes place not out in the open, but in backroom deals amongst the rich countries
Criticisms about the WTO
Evolved out of the GATT
Club made out of UN nations
WTO regulations-seek to limit tariff barriers to trade
Non tariffs barriers to trade
EU subsidizes agricultural producers-price goes down
Quintile=20% of something
The top quintile worldwide use 83% of world's resources
March 31, 2009
The triumph of neo-liberalism
Neo-Latin for new
The individual in neo-liberalism is more "thinly sliced"
Adam Smith-classical liberalism
The thickly sliced individual who's self-love includes a knowledge of a greater purpose
"The theory of moral sentiments"
For smith, an individual's merit or demerit is determined by an impartial (disinterested: no personal interest in the outcome of their…) arbiter
Back to globalization and IMF loans
Not the lender of choice but of last resort
IMF conditions imposed on recipient nations…
Structural adjustment programs
Recipient nations get spending in line with income
Infrastructure, water, electricity, health care and education
Lester "Mike" Pearson…recommended that the wealthiest nations contribute 3/4 of a percent of GDP to forgive third world debt.
The triumph of economic and political liberalism
Liberal preconditions for economic growth
Liberal: less likely to be the thickly sliced liberal of Adam Smith's day
1991 Francis Fukyama
Worked in the reagan white house
Fellow of the conservative rand corporation
LIBERAL conservative
"the end of history"=>the collapse of communism
The debate over the best form of social organization…LIBERALISM. The crowned king of social organization
Why?
Government's guarantors of natural liberty? and free markets
1. Investment in post-secondary education…why?
The better educated the worker, the more productive and efficient it could generate greater wealth
10 lbs of potatoes
An automobile
Microsoft Word 2007
-------------------
Requires differing
Levels of education
And especially for young women (increase competition)(women hold up half the sky)
Educating women increases gains from human capital
(cost benefit analysis)
Where women are defined by their biology they MAKE BABIES! (Fertility rates high)
Children absorb increases in GDP and per capita GDP
In Quebec, before the quiet revolution (1960) unilingual francophone females finished school at grade 7
Today, women in post secondary outnumber males
In Quebec before 1960-highest fertility rate in west…Today 1.8 births/fertile female (below replacement rate of 2.4)
2. Investment in health care…Why?
Healthy workers are happy/productive workers
Take fewer days off work
More productive and work longer
Up front costs to student and state are amortized over a longer working life…
Healthcare and institutional IQ of industry
Babies:
April 2, 2009
Globalization revisited
Winners and losers
Canada after WWII
Winners-South Korea (14 on UN's list of economies)
Losers-Saharan Africa
China
The global economic crisis
Oops
Glass-Steagal act following the market crash of 1929
Canada-nanny state to neo-liberal agenda
Globalization-better to have been born in a developed nation (Canada). But, if born in less developed world, better to have been born after 1970 (End of WWII and creation of…something?):
A generation after-realize the consequences of state financed development programs
In Canada, better to have been a baby boomer
1945-1980: the golden age of
The Keynesian welfare state
Industrial labour
Location, location, location
Spatially and temporally.
Geography and time
Economic in the Americas shifts from war production to consumer production almost effortlessly
Driven by: Europe and Asia "bombed into the stone age" and needed rebuilding. Gave momentum to domestic industry
Baby boom (bombs made out of small children) 1945-1960
Manufacturing and industrial labour
Dramatic increase in wages and benefits for relatively unskilled but hardworking labour (undereducated)
Not yet subject to competition from lower cost regimes…big wows: single family income, house in suburbia, a new car in the driveway
Politics and the role of the state
Politics informed by Keynes.
Big government has its day
Governments identify social problems (or dysfunctions)
1. Urban "slums"=>urban renewal
2. Education…as a response to technological change
By 1967 post secondary, but not university?
3. Community colleges of arts and technology
24 community colleges in Ontario $144 million/year
K to 5 primary schools
4. Portable, comprehensive, universal healthcare
In Ontario $48 billion this year
Mid 1970s
Commodities produced in lower cost regimes gain access to north American market
1970's oil shock
Mid 1970's OPEC
Dramatic slowdown in economic activity
Unemployment goes up
Government revenue goes down
Government expenses go up
Perfect storm
Milton Friedman
University of Chicago-economist
Government should get smaller
Liberalism is late arriving in Canada, but it's here now
Neo-liberalism has not as much success here as in the states
We have wed liberal capitalism to socialism
Architect of the nanny state: Paul Martin
The dude who dismantled the nanny state: Paul Martin Jr.
Under neo-liberal agenda-government is seen as a problem
April 7, 2009
Shared cost programs
Federal government spent money in areas of provincial concern
1940-$0.50/$1.00
Fifty cent dollars
$0.18/$1.00
Provincial governments have less money for health care=>longer wait times, the closing of hospital beds, the closing of hospitals
Education: closing schools, laying off teacher's assistants, librarians, art, music, drama etc gone the way of the dodo
What about community collages?
1967 your dad could have paid through tuition 1/6 of the cost of his tuition
Today, you pay 1/3 of the cost of your tuition
Tuition hikes in the near future
Since 1980's maybe government has come to be seen as "The Problem"
Amalgamation: if you live in Dundas, Ancaster, Stoney Creek, Flamborough, etc, you don't elect a number of representatives, but ONLY ONE!
Aging infrastructure: roads, bridges, sewer systems, etc
USER FEES!!!!
South Korea-an asian tiger (sometimes associated with the Asian Miracle)
1960 South Korea=>per capita GDP $300.00 US/Year
Ghana=>the same as South Korea
Today, South Korea GDP/Person is $20 000 US
14 on the international list
Ghana GDP/Person is $2 000 US
After WWII Golden age of industrial labour in the new world (North America)
Before the "miracle" south Korea relied on foreign aid and only a few agricultural staples
Rural and economically backward…location
The cold war and the domino theory
IBRD designed to rebuild war torn Germany and Japan to keep both from falling into the arms of the communists
After the Korean war
Early 1950s
A partnership between government and big business and big banks
State capitalism
Looks like mercantilism
To manufacture for the export market and limit competition from foreign economies
Import substitution: manufacturing what might have been imported from elsewhere (Subsidy of domestic manufacturers)
Manufacturing for export
Import substitutions and tariffs
Little spending by Koreans on consumer perishables
Levels of savings increase money in the banks for development of manufacturing
Wages suppressed , increased Korea's competitiveness until 1980s
Since the 1990s, government has withdrawn from management of the economy and Korea has moved to free market capitalism from state capitalism
Walter Rostow and communism (state managed economy)
Disease of transition
Walter Rostow-free marketer
Project undertaken by government: infrastructure
Highways and communications systems (Koreans are leaders in communications systems now)
A system of primary and secondary education
Korea's literacy rate is 99%, equal with most areas
Japan (99%) China (77% and rising)
Singapore and Taiwan (90% and rising)
Canada (99%)
Ghana (60%) one of the highest in sub-Saharan Africa
Uganda (48%)
Zaire (28%)
Correlation between literacy rates and per capita income
Life expectancy in sub-Saharan Africa is 47 years
GDP through sub-Saharan Africa is under $500/person
57 work week in S. Korea
Average rice farmer works 3000 hours a year
Average European or American farmer works 1000 hours
Overall theme, Asia works harder than us. Outliers-stand on the outside, as in exceptional.
S. Korea creates more engineers than U.K., Germany, and
Sweden combined.
S. Korea=Number one in scientific literacy, no. 2 in mathematical literacy. Yanks and Canucks are way below general populaces knowledge about science and math,
Life expectance =74 years (working themselves to death?)
North America is the most wired/highest broadband per capita on the planet
5th place manufacturer of cars: KIA
Since 1960, Korea has moved from being a largely agrarian economy to one where the majority of people work in industry or the service sector
Koreas GDP is ranked 14 in the nation
Literacy is amongst the top
Life expectancy is lower than would be expected
2% live below the poverty line
Korea imports MOST of their raw materials (same as the Japanese)
April 9, 2009
The south Korean economy has been changed from agrarian economy (backward) to the 14th ranked economy on the planet
They excel in electronics, high tech IT, 5th ranked auto maker, ship building,
How'd this happen? Location and the Cold war (American investment)
Denmark is number one in terms of third world assistance, followed by Netherlands, Sweden, Norway
Belgium
We're at the bottom
The Chinese Miracle-Deepak Lal, Yibin Mu
On average, a steel worker would work 2000 hours a year, college prof works 1400 hours a year
Chinese had a "rice farming tradition" (They're used to working hard)
1978
Movement from demand economy=>free(r) market economy
Market Leninism
1949 communist revolution
Mao installed as head of government
Was rural and agrarian
The communist party undertakes "the great leap forward"
Forced collectivisation of agriculture and agricultural revenue
At 1949, it took 80 peasants to feed 100 Chinese.
Need to create surplus agricultural labour
Then formed industrialization, moving surplus agricultural labour to urban industrial locations
Mobilizing human, natural and economic resources for the collectivist utopia…
1975-china produced 140 000 autos/year
1985-china produces 440 000 autos/year
2002-china produces 3.25 million autos/year
2007-china produces 9 million autos/year
Americans use 12 million gallons of gas/day
Jeanie index-level of economic change in an economy
China is .40
Canada .31
US .41
Brazil .59
If there was no social inequality it would be 0
a lot of inequality would be one
1949-life expectancy in japan was 35 years
Today-70 years
China is not a member of the organization for economic cooperation and development, but It qualifies
Male literacy is 95%
Female literacy is 91%
India ("World's largest democracy")
Male literacy is 70%
Female literacy is 60%
Life expectancy
Males 64
Females 65
Today, the private sector accounts for between 68-70% of GDP of china
Before reforms-very little…10% or less
Per capita GDP in china
China has a hot growth rate, so much so that those in charge try to slow it down a bit
Chinese economy has increased 10%/year (10 fold)
India's economy is 2 fold
Purchasing power parody
In 1978 $320 US in china
Today, a 21 fold increase in a 20 year period
Cast of characters (who's who in Chinese economy)
Banks-established in 1949, controlled by state
Commanding heights-heavy industry, transportation, banks-control those and you control the economy
In china, banks are almost completely gov't controlled, except for Hong Kong (British colony)
90% of deposits held by Chinese are in gov't controlled banks
SOE-state owned enterprises-1977 there were many, largely in heavy industry (means of production)
TVE-township and village enterprises-commercial enterprises in rural areas, set up after 1978
The monetization of china's economy
SEZ-Special Economic Zones-found in and around Hong Kong (point of entry of goods coming in to be turned into things like computers) least gov't interference intervention
Also called economic engines, funded by foreign economic investments
Responsible for china's dizzying increase in GDP
Financial sectors, hugely important…in china, but ISOLATED from china
China is member of WTO-WORLD TRADE
Taking down tariff barriers, promote global division of labour which, theoretically, creates bigger wealth for everyone involved
4 factors that contribute to the Chinese miracle
1-efficient and effective growth friendly economic policies
2-Chinese traditions frugality
Value education
Hard work
3-historical demographic opportunity
4-deepening of monetization and division of labour
State owned enterprises are a problem…they are a drain on the economy and will eventually have to disappear. They employ millions of locals
Big problem, to be solved later
Chinese own 1 trillion dollars in American debt, transfers from country to country through government paper
"Social Reconstruction Fund" SRF
Take the 1 trillion Chinese owned government money and invest it in Hong Kong
Investment will reap benefits
If we invest 500 000 000 000 in hong kong investment banks we would get interest,
@5%, the return would be 25 000 000 000/year
April 14, 2009
Global Financial Crisis: 2008-2009
Threat to financial stability of investment banks…Leahman Brothers
Insurance companies…AIG
American International Group
Mortgage bank…Fannie Mae and Freddie Mac
Fannie Mae-Federal National Mortgage Association
Freddie Mac-Federal National Mortgage Corporation
Consequences for homeowners, commodities producers, their employers and customers
The build-up for the housing bubble began in the Clinton administration, burst in 2006...a decade or a little more
Bubble=An increase in housing start-ups (housing good indicator, because it's a person's biggest investment), dramatic decline in retail values, the misapplication of risk controls (Sub prime mortgages, variable rate mortgages-paying no principal with anticipation of house's value increasing, leading to wheeling and dealing), collateralization of debt insurance (Spreading the risk)
Made to put Americans who couldn’t apply for a loan from a commercial bank in a position where they can buy a house (ignoring the risk of zero credit rating)
Sub prime=loans given at a rate lower than commercial banks are able to give to their "good customers"
Investment banks bundled these loans and traded them on the stock market
Called mortgage backed securities
This is spreading the risk
By 2008, 30% of all mortgages issued by Fanny Mae and Freddie Mac were to first time homebuyers who would not have qualified for a mortgage from a commercial bank
1994-2006 housing prices increased by 124%
Housing prices reached a level of 2.9-3.9 times the median household income by about 2000
By 2004 home prices to family income up to four times
On the eve of the bubble burst, home prices had reached 4.6
Value of the house compared to family income 2.9-3.2, then up to 4.0, then to 4.6
The value of residential real estate between 1994 and 2006 spiralling upward
"Leveraging"-borrow at a lower interest rate to pay off a higher interest rate
House hold debt in US in 2007 as % of annual income-130%
The average american owed more than he/she made in a year
In 2007, americans spent 800 billion more than they earned
US gov't owe 14 trillion dollars
In 1974-household debt stood at 640 billion
Last year-14 trillion
2006-for the first time in 12 years, housing starts to drop
Threshold of a looming catastrophe
1. Millions of americans whose credit rating would not have gotten them a mortgage get sub-prime rates
By 2007 9 million homeowners had no or negative equity on their property
By may 2008, housing prices fell by 20%
Millions of sub-prime mortgage home owners are homeless, number has jumped by 80%
1933 congress Glass Steagal act-separates mortgage banks from investment banks (conflict of interest)
1999-Glass Steagal act repealed
Allowed commercial banks to trade in mortgage backed securities, collaterized debt obligations, and structural investment vehicles
Conflict of interest between granting and investing of credit
April 16, 2009
1. Globalization
A rising tide that floats all boats
And 6 liberal preconditions for economic growth
Weave them into the answer
Asia, latin america, sub-Saharan Africa
Increased income, investment in ed, life expectancy, lit. rates, children in the labour force,
2. Globalization
In what way do WTO policies benefit the richest nations?
Is the playing field level? NO!!
Triumph of neo-liberalism, WTO, world bank, IMF benefit developed nations
The playing field was not level
Structural adjustment programs
Non-tariff barriers to trade
EU Canada, USA, and japan
EU subsedizes farmers, effectively keeping out sub-Saharan farmers
3 Canada 1945-1980, 1980, 2009
What went wrong
Federal level-comprehensive healthcare
Provincial level-building of community colleges
Municipalities-infrastructure
What went wrong?
This will be an either or, but you need to understand BOTH
4. Korea and Ghana
What did the Koreans do right?
5. The Chinese "miracle"
After 1978 and
Mau died in /76ish
Move to freemarket, township and village enterprises
What to do with "sunset" SOEs (state owned enterprises) and 1 trillion in us government backed paper
6. The global financial crisis
Leahman brothers, bankrupt
AIG-79.9% owned by the federal reserve bank
Fannie Mae and Mac in conservatorship (administered by federal govt.)
Housing bubble 1994-2006
Value of resale after 12 years
Home prices as a value of household income over twelve years
Clinton and bush administrations and sub-prime mortgages…for what risk remains…the relief
Mortgage banks and fannie and Freddie
Investment banks and sub-prime loans
Frannie and Freddie
Securatized risk vehicles
Mortgages banked securities (as good as gold)
Investment opportunities, risk management
Glass-steagall put in place in 1933 (separate investment banks from mortgage banks) repealed in 1999
Why?
Household indebtedness…and realestate emnity
Banks, insurance companies, and house builders are the biggest spenders in Washington in lobbying, and might contribute to your campaign for re-election