Economic Dimension of Globalization

The Contemporary World

onomic Order
nternational Economic Order
New International Economic Order
The New International Economic Order (NIEO) was a set of proposals put forward
during the 1970s by some developing countries through the United Nations
Conference on Trade and Development to promote their interests by improving their
terms of trade, increasing development assistance, developed-country tariff
reductions, and other means.
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1976197719781979HISTORY1980198
1198219831984198519861987198819
The term was derived from the Declaration for the Establishment of a New
International Economic Order, adopted by the United Nations General
Assembly in 1974, and referred to a wide range of trade, financial, commodity, and
debt-related issues (1 May 1974, A/RES/S-6/3201). Along with the declaration,
a Programme of Action and a Charter of Economic Rights and Duties of
States (12 December 1974, A/RES/29/3281)were also adopted.
Tenets
1. Developing countries must be entitled to regulate and control the
activities of multinational corporations operating within their territory.
2. They must be free to nationalize or expropriate foreign property on
conditions favorable to them.
3. They must be free to set up associations of primary
commodities producers similar to the OPEC; all other States must
recognize this right and refrain from taking economic, military, or
political measures calculated to restrict it.
4. International Trade should be based on the need to ensure stable,
equitable, and remunerative prices for raw materials, generalized non-
reciprocal and non-discriminatory tariff preferences, as well as transfer
technology to developing countries; and should provide economic
and technical assistance without any strings attached.
Resource Allocation
Mechanisms
Haggard and Simmons claimed that:
A number of social mechanisms are possible to affect
resource allocation in any economic order. An
authoritative allocation mechanism involves direct
control of resources while, at the other end of the
spectrum, more market-oriented private allocation
mechanisms are possible. Most of the debates within
the NIEO occurred over allocation mechanisms, with
the southern hemisphere countries favoring
authoritative solutions.
IDEOLOGY
IDEOLOGY
IDEOLOGY
IDEOLOGY Ideology
IDEOLOGY NIEO proposes central planning, as opposed to
IDEOLOGY free markets. It is based on the (French)
mercantilist idea that international trade would
IDEOLOGY be a zero-sum game (i.e., causes no net benefits),

IDEOLOGY
and on the view that it does not benefit the rich
at the expense of the poor. Some American
IDEOLOGY economists challenge the idea of trade as a zero-
sum game transaction.
IDEOLOGY
IDEOLOGY
IDEOLOGY
LEGACY
Virtually no part of the New International Economic Order was implemented. Instead,
from the 1980s onward, the Bretton Woods framework would be replaced with the
Washington Consensus and economic globalization on terms often described as neoliberal.
Trade in commodities would shift away from state-dominated cartels towards increasingly
financialized markets. The NIEO's emphasis on central planning and state-oriented
resource allocation mechanisms would be almost wholly rejected, even amongst the
(former) Socialist bloc, in favor of economic liberalization
 LEGACY
In Matsushita et al.'s World Trade Organization, the authors explained part of the legacy of the NIEO:
“…tensions and disagreements between developed and developing countries continue: the
latter expect a greater degree of special treatment than industrialized countries have
afforded them. This demand was expressed comprehensively in the New International
Economic Order and the Charter of Economic Rights and Duties of States promoted by
UNCTAD in the 1970s. Although the Charter was never accepted by developing countries
and is now dead, the political, economic, and social concerns that inspired it are still
present. The Charter called for restitution for the economic and social costs of colonialism,
racial discrimination, and foreign domination. It would have imposed a duty on all states
to adjust the prices of exports to their imports. The realization of the New International
Economic Order was an impetus for developing country support for the Tokyo Round of
trade negotiations. Critics of the WTO continue to state that little of substance for
developing countries came out of either the Tokyo or Uruguay Rounds.”
LEGACY
The NIEO can be considered to have something of a spiritual successor in the alter-
globalization movement, which, like the NIEO, owes much to French academic criticism
(generally rooted in Marxist economics) of international trade.
Criticisms on Price
Regulation
The powerful countries of North America
and Western Europe felt threatened by the
NIEO and continuously tried to criticize and
minimize it; according to economist
Professor Harry Johnson, the most efficient
way to help the poor is to transfer resources
from those most able to pay to those most
in need. Instead of this, NIEO proposes that
those poor countries that have monopoly
power should be able to extort these
transfers. In practice such power has caused
most harm to other poor countries.
INTERNATIONAL MONETARY SYSTEM
 TERMS
• REGIMES – ALL THE IMPLICIT
AND EXPLICIT PRINCIPLES,
NORMS , RULES, AND
DECISION –MAKING
PROCEDURES AROUND
WHICH ACTORS
EXPECTATIONS CONVERGE
(KRASHER,1993)
• INTERNATIONAL MONETARY
SYSTEM OR REGIME (IMS) –
REFERS TO THE RULES,
CUSTOMS, INSTRUMENTS,
FACILITIES, AND
ORGANIZATIONS FOR
EFFECTING INTERNATIONAL
PAYMENTS (SALVATORE, 207)
ANDARD GOLDSTANDARD GOLDSTAN
ANDARD GOLDSTANDARD GOLDSTAN
ANDARD GOLDSTANDARD GOLDSTAN
Gold Standard
the gold standard functioned as a fixed exchange rate regime, with
gold as the only international reserve. Participating countries
determined the gold content of national currencies.

Gold – Believed to guarantee a non-inflationary stable economic

environment, a means for accelerating international trade (Einaudi,
2001|)
Inter-War period
consequences and the wish
to return to peace and
prosperity impelled the allied
nations to start a new ins in
the framework of the united
nations monetary and
financial conference in
Bretton woods, new
Hampshire (US), in July 1944
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• After the Great Depression in 1930’s there was a need for an organization to
create a system for exchange rate stability
• The word bank and international monitory fund (IMF) were created after
world war
• Need for reconstruction of countries economies affected by world war 2 & for
the development of underdeveloped nations.
• IN 1947 THE GENERAL AGREEMENT ON TARIFF & TRADE
(GATT) WAS FORMED
• IN 1995 THE WTO REPLACED THE GATT
• HAS 164 MEMBERS
• LOCATED IN GENEVA
• AIM: TO IMPROVE THE WELFARE OF THE MEMBER
COUNTRIES BY LOWERING VTRADE BARRIERS
Objectives of World Trade Organization
WTO has the following advantages:
• Promoting peace within nations
• Handling the disputes constructively
• Helping consumers by providing choices
• Encouraging good governance
• Stimulating economic growth
• THE UNITED STATE TREASURY PASSED PROPOSAL IN 1943 FOR ITS
ESTABLISHMENT
• THE USA PROPOSAL IS KNOWN AS “WHITE PLAN” & UK’S
PROPOSAL “KEYNES PLAN” BECOME THE BASIS FOR THE
INTERNATIONAL MONETARY & FINANCIAL CONFERENCE AT
BRETTON WOODS IN 1944.
• 44 NATIONS IN THIS CONFERENCE
• IT CAME IN TO BEING TO PROMOTE ECONOMIC AND FINANCIAL
CORPORATION AMONG THE MEMBER COUNTRIES WITH A VIEW
TO FACILITATE THE EXPANSION & BALANCED GROWTH OF
WORLD TRADE
Objectives of International Monetary Fund
(IMF)
• ESTABLISHED IN 1964, GENEVA
• PROMOTE THE DEVELOPMENT – FRIENDLY INTEGRATION OF
DEVELOPING COUNTRIES IN TO THE WORLD ECONOMY
• AIMS: TO HELP SHAPE CURRENT POLICY DEBATES & THINKING ON
DEVELOPMENT WITH A PARTICULAR FOCUS ON ENSURING THAT
DOMESTIC POLICIES & INTERNATIONAL ACTIONS ARE MUTUALLY
SUPPORTIVE IN BRINGING ABOUT SUSTAINABLE DEVELOPMENT.
• MEMBERSHIP-- 194
OBJECTIVES OF UNCTAD
GLOBAL ECONOMIC VOLATILITY
GLOBAL ECONOMIC VOLATILITY
GLOBAL ECONOMIC VOLATILITY
GLOBAL ECONOMIC VOLATILITY
GLOBAL ECONOMIC VOLATILITY
GLOBAL ECONOMIC VOLATILITY
GLOBAL ECONOMIC VOLATILITY
Volatility
• Definition: It is a rate at which the price of a security increases or
decreases for a given set of returns. Volatility is measured by calculating
the standard deviation of the annualized returns over a given period of
time. It shows the range to which the price of a security may increase or
decrease.
Description: Volatility measures the risk of a security. It is used in option
pricing formula to gauge the fluctuations in the returns of the underlying
assets. Volatility indicates the pricing behavior of the security and helps
estimate the fluctuations that may happen in a short period of time.
If the prices of a security fluctuate rapidly in a short time span, it is termed
to have high volatility. If the prices of a security fluctuate slowly in a longer
time span, it is termed to have low volatility.
Economic volatility in the 21st century
Countries ranked by least to most
volatile real GDP per capital growth
Idiosyncratic and Aggregate
Economic Risk
Aggregate Economic Risk
Vulnerability to events which affect aggregate outcomes such as
broad market returns, total economy-wide resource holdings, or
aggregate income.
Idiosyncratic Economic Risk
Factors that affect an asset such as stock and its underlying
company at the microeconomic level.
How does globalization fit in with
these dynamics?
• Globalization is one of the core factors that induce reallocation
• Globalization involves globalized financial markets.
GLOBAL NORTH & GLOBAL SOUTH
GLOBAL NORTH & GLOBAL SOUTH
GLOBAL NORTH & GLOBAL SOUTH
GLOBAL NORTH & GLOBAL SOUTH
GLOBAL NORTH & GLOBAL SOUTH
GLOBAL NORTH & GLOBAL SOUTH
GLOBAL NORTH & GLOBAL SOUTH
References
• https://economictimes.indiatimes.com/definition/volatility
• https://www.wto.org/english/res_e/booksp_e/glob_soc_sus_e_chap4_e.pdf?fbclid=IwAR2R9dYJ
4hngK2vH_liOZiJ_DlkHgiC8IEy7-API-k6O5-SxyqFmCuT7tzg
• https://www.rgs.org/CMSPages/GetFile.aspx?nodeguid=9c1ce781-9117-4741-af0a-
a6a8b75f32b4&lang=en-GB