Re-read slides 58-63 in the attached file andwatch this video and answer the following questions in their own paragraph.https://vimeo.com/149178039
- Define structural adjustment policies.
2. What is the overall objective of these policies? That is, what are they intended to do?
- Identify three types of structural adjustment policies.
- Describetwoways in which these policies been problematic for Jamaican citizens. Be specific.
Lecture 5: The Rise and Fall of the Capitalist Lecture 5: The Rise and Fall of the Capitalist SYP 2450 Global Society 1 The Rise and Fall of the Capitalist We just studied the second component of capitalist culture—the laborer. Examining labor and the mobility, segmentation and disciplining of the labor force is only the beginning, Robbins and Dowty tell us, of an understanding of how the black box is able to transform money into more money. There are other components that need to be examined. We must ask and answer certain questions: How did the entire system develop historically? How did the black box evolve to where it is today? Importantly, how and why did the capitalist evolve from the merchant trader? 2 Brief Detour - Definitions Before exploring answers to those questions, we need to take a brief detour and define some terms related to the economic condition/status of countries, and standards of living for their citizens. These terms all have to do with the issue of development. What is development? What do we mean when we say that a country is experiencing development/has experienced development? What is it that makes a country a developed country? Development is usually understood as economic growth within a particular nation/country. As such development is generally measured at the national level. 3 Brief Detour - Definitions There are a number of measures of development (or of how developed a country is.) Most focus on economic indices. One economic measure is the Gross National Product (GNP): The GNP measures the total value of all final goods and services produced within a nation in a particular year. It measures the value of goods and services, and income of a country's citizens regardless of their location (so even if they are abroad). It does not include income of non-residents in that country. Thus, the income of Americans working in Malaysia, is included in the GNP of the U.S. The assumption is that a higher GNP leads to a higher quality of living, all other things being equal. 4 Brief Detour - Definitions Another economic measure of development is the Gross Domestic Product (GDP) The GDP measures output generated through production by labor and property which is physically located within the confines of a country. It excludes such factors as income earned by the country’s citizens working overseas. [So the income of U..S. citizens working in Malaysia is NOT included in the GDP of the U.S. Rather it’s included in the GDP of Malaysia] A third economic measure, and the one now used by the World Bank, is the Gross National Income (GNI). The GNI measures the total output (local and domestic) a country claims. Like the GNP it includes income earned by a country’s citizens overseas and excludes income earned locally by foreign residents. 5 Brief Detour - Definitions Two Additional Measures: Physical Quality of Life Index (PQLI) – A Non-Economic measure Focuses on: Infant mortality, Adult literacy rate, Life expectancy at birth Measures “quality of life” or well-being of a country [See below slide.] UN Human Development Index (HDI) –A Mixed measure Focuses on life expectancy, combined primary, secondary, and tertiary education, per capita GNI Thus, the HDI, combines well-being AND economic factors It was established to shift the focus of development economics from national income accounting (i.e. economic activities) to policies that are people-centered. Note that a country might have a high PQLI, and a low GNP at the same time. For example, in the 1990s, Cuba had the highest PQLI in this Hemisphere (i.e, North, Central, and South America and the Caribbean) owing to low infant mortality, relatively high rates of adult literacy, and relatively high life expectancy. It’s GNP was, however, relatively low. Holding that neither a purely economic nor a purely non-economic measure is sufficient for describing the condition of a country, the United Nations devised a measure that combines well-being and economic factors in the HDI (see above). 6 Brief Detour - Definitions Related to development is how countries in the world are classified and ranked. Categories have changed historically. After World War II, the world was divided into three geo-political segments* First World: Capitalist Western (West plus Japan) Second World: Soviet bloc – alternative to First World Capitalism Third World: primarily former European colonies Fourth World (added in 1980 to identify marginalized nations.) *Also divided based on spheres of influence with contrary views on government. 7 Brief Detour - Definitions After fall of communism, the nomenclature/categorization changed, partly because there was no longer a “Second World.” *New categories include: Developed countries (more or less the former First World) Developing countries (mainly former colonies, some industrializing) Least developed countries (poorest) Compare HDI and GNI rankings below. How do they differ? UN HDI Rankings World Bank GNI Rankings What the HDI tells us *Note, that “first” “second” and “third” world are no longer considered appropriate labels (although the terms are still often widely used even by academics). For one thing, it makes no sense to speak of a “first” or “third” world, when there’s no “second” world. See below for what the HDI tells us: http://hdr.undp.org/en/faq-page/human-development-index-hdi#t292n2867 8 Brief Detour - Definitions Last, Immanuel Wallerstein, through his world system theory, has argued that the world is characterized by a global capitalist system. Among the features of this system is the division of the world into three unequal economic zones: Core: Developed countries, with strongest states, markets and capitalist firms. Semi-periphery: Industrializing countries, positioned between core and periphery countries; bear features of both core and periphery Periphery: Less developed countries; with weak state institutions; dependent upon and/or exploited by core countries 9 Rise and Fall of the Capitalist (Merchant, Industrialist, Financier) We now shift our focus to the development of the capitalist. Over the course of history the “capitalist” (or ”merchant adventurer”) has been a merchant (or trader), an industrialist, and the financier. Regardless of the specific activity, term, or historical era, by “capitalist” we are referring to the person who controls the capital, employs the laborer, and profits from the consumption of commodities. Robbins and Dowty provide a historical overview of the evolution of the capitalist (1400-2007/2008), because knowledge of this history is crucial for understanding today’s global distribution of power and money, as well as the origins of the culture of capitalism. They list five specific historical issues/questions that are addressed in this chapter. [Next slide] 10 Rise and Fall of the Capitalist (Merchant, Industrialist, Financier) How did the world become divided between rich and poor? Who controlled the money? How did the level of global economic integration increase, and what were the consequences for the merchant adventurer and others? How do we explain the occasional collapse of national and global economies, (e.g. 2007 in the United States that spread to the rest of the world?) Where did the necessity for perpetual economic growth come from? 11 Rise and Fall of the Capitalist (Merchant, Industrialist, Financier) And they answer those questions by examining major historical junctures (or turning points) in the evolution of the capitalist. This set of lecture notes provides brief summaries of the first two junctures (China in 1400 and Portugal after 1400). It then emphasizes the remaining turning points including the rise of finance led by the Dutch in the 1600s, the era of the industrialist lead by Great Britain in the 1800s, and the formation of the multilateral corporation on the heels of industrialization. Last, it examines the roles played by IMF, World Bank, and the World Trade Organization in restoring global economic interdependence, and the causes of the 2007/2008 global economic crisis. 12 The Era of the Global Trader 1400 China and India are the richest countries in the world. China is the most developed country. The merchant-adventurer is a “trader.” Silk--most desired Chinese commodity. And Hangchow (a city in China) welcomes concentrations of traders from all over the known world At that time trade has little impact on the world for at least three reasons No commitment from political rulers Merchants denigrated (looked down on) by rulers Geography – difficult and dangerous trade routes.; small ships; security issues 13 The Era of the Global Trader 1400 China and India are the richest countries in the world. China is the most developed country. The merchant-adventurer is a “trader.” Silk--most desired Chinese commodity. And Hangchow (a city in China) welcomes concentrations of traders from all over the known world At that time trade has little impact on the world for at least three reasons No commitment from political rulers Merchants were denigrated (looked down on) by rulers Geography: Difficult and dangerous trade routes.; small ships; security issues 14 The Era of the Global Trader After 1400 China withdraws from commercial dominance and Portugal takes over as the leading economic power. Portugal‘s rise to economic dominance was facilitated by: Technological advances in boat building Location (i.e. west coast of the Spanish peninsula and beside the Atlantic ocean). Traders’ attention had shifted from the East to the Atlantic, and Portugal was suddenly at the center of world trade. Existing trading arrangements along the coast of West Africa starting around 1460 Portuguese traders acquired precious ore, and slaves,* from the West Coast of Africa. Slaves were traded in the Azores, Canary Islands and the Caribbean to work on sugar plantations. In the New World, traders extracted gold and silver from Peru, Mexico, Bolivia, etc.* *Robbins and Dowty: “At the time of the conquest of the Americas, there were approximately $200 million worth of gold and silver in Europe; by 1600, that had increased eight times. . .Most of the silver came from San Luis Potosi [Bolivia] The amount of currency in circulation worldwide increased enormously, enriching Europe. 15 The Era of the Global Trader: Birth of Finance The next stage in the evolution of the capitalist is the 1600s, marked by the birth of finance. Text: It was, perhaps, the most important stage. Finance: “the movement of money from point ‘A’ where it is, to point ‘B’ where it is needed.“ Once again, we see the importance of making (more) money with money. And the easiest way of doing so is lending money at interest. Necessary conditions: (a) lending must be culturally permissible; (b) there has to be a pretty good chance the lender will get his/her money back with interest;( c) institutions that facilitate lending, borrowing, investment; (d) IMPORTANTLY, perpetual economic growth—to facilitate profit, and repayment of investors’ loans. 16 The Era of the Global Trader: Birth of Finance How did the merchant adventurer make money by that time? At this stage, 1600s, Holland is at the forefront of global economic dominance, aided by their large merchant fleet and the development