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86 Cards in this Set

  • Front
  • Back
Number of Multinational Corporations
63 Thousand
MNC's account for what fraction of world output
Percent of global trade that is intra-firm
Two Types of Investment
Foreign Direct Investment/ Portfolio Investment
Foreign Direct Investment
Investment tied to ownership and production
Portfolio Investment
No direct view of ownership but a view of markets
Three types of MNC's
5 Benefits of MNC's
-Provide workforce
-Multiplier effect (employment increases and spending increases)
-Increases economic interpendence among states
-Entities that transcend narrow nationalist points of view
Marxist view of MNC's
"Capitalist ecnomoies must expand and become imperialistic to find new markets"
Widens gap between rich and poor (Economic triangle dominates 75% of all trade)
Economic Triangle
North America (US), Western Europe, East Asia
Nationalist view of MNC's
"Companies should have loyalty to the homeland from which they came"
-40's and 60's view of MNC's was beneficial, opposed to recent trends which are more nationalistic
Two types of ownership patterns
Majority/Minority ownership
Majority Ownership
"Ownership of outsourced sector by original father firm"
Minority Ownership
"State that sourcing takes place in wants minority ownership so that they retain some deal of say in the matters of the company"
-reduces capital expenditure and nationalism
Profit Repartriation
-make a profit in one state and relocate it to another state
-money is not always invested back in outsourced sector or state in which sourcing is taking place
Transfer Pricing
-covert mechanism that MNC's utilize in intra-firm trade to reduce tax owed to a host country
-just in time delivery (requires open and fluid system of trade)
Host Country Learning Curve
-most MNC's can initially out whit developing nations
-over time countries realize situation and take advantage of elements such as sunken cost
Gunpowder Revolution
China (1300 CE)
Military Innovations of Napoleonic Revolution
-citizen army as opposed to mass constriction
-embraced nationalism
-warefare based on offense not stalemate
Military Innovation of Industrial Revolution
-machinery as a source of energy in production helped replace humans and animals
-aircraft, ships, tanks and trains could be fueled by combustion engine
-enabled "World War"
Military Innovation of Nuclear Revolution
"We have developed a weapon that can turn everything into nothing"
Weapons of Mass Destruction
-have expanded level of killing i.e. Nuclear Bomb/Anthrax
Methods of countering nuclear weapons (Deterrents)
-Assured Second Strike Capability
-Proven Capability (staggering loss of life in any scenario)
-Present Counter Attack
-Must show that an initial attack will not destroy entire country
Assured Second Strike Capability
"States must be equipped for another attack fro retaliation is almost inevitable
How Could Deterrents Fail?
-False Positives
-Counter Force v. Counter Value
-Launch on Warning (LOW)
-Anti-Satellite Weapons
-Suitcase Bomb
False Positives (deterrent failure)
"Nuclear weapons compress space and time; one must make a split decision as to whether or not it is a false alarm"
-newly nuclear states may not have sufficient techonology to judge properly
Counter Fource v. Counter Value - Multiple Independently-targetable Reentry Vehicle (MIRV)
-Counter Force is much more accurate and much more deadly
-Counter Value is much less accurate and was used early in Cold War
Launch on Warning (LOW)
"A state gives credible evidence and an ultimatum"
Anti-Satellite Weapons
-satellites that can view other weapons (allows states to take out opposition satellites)
Suitcase Bomb
-a state is attacked and it cannot tell by whom it was attacked
Problems w/ Nuclear Treaties
-states can cheat proliferation bans (North Korea)
-no answer to suitcase bomb
-many open ended treaties
-do not reduce number of arms simply limits and caps growth
Strategic Arms Limitation Treaties (SALT I & II)
-did not reduce number but limited growth
-reconfigured forces of each side so that there would be some predictability
Strategic Arms Reduction Tready (START)
-US & USSR reduced nuclear arms significantly
Why Bretton Woods System was adopted
"Peace, prosperity, and democracy was best achieved through unrestricted global governments"
-US favored Bretton Woods b/c they needed to close economic gap (1940's)
Benefits of Unrestricted Trade
-benefit all
-countries would specialize in products they are best suited to produce
3 Principle Pillars of Bretton Woods System
General Agreement of Tariffs and Trade (GATT and latter WTO)/World Bank/International Monetary Fund (IMF)
Balance of Trade
"A state is exporting more than it is importing and a balance of trade deficit means a state is importing mor than it exports"
Balance of Payment
"Larger concept that includes balance of trade that takes into account other ways money comes in and out of a country"
Factors of Balance of Payment
Foreign Direct Investment (FDI)/Interest paid v. interest recieved/Overseas military expenditures/Foreign Aid
Value of Currency
"The value of currency on the international market can have a significant affect on how much it can buy or sell"
-Currency drops can increase a country's exports
Deflation and Inflation
-gov'ts have many ways of stimulating economy
- if a state faces inflation a state can increase taxation or increase interest rates
International Monetary (IMF)
-states give money on a sliding scale as what a country can afford
-a country can pay in dollars, gold, or local currency
-IMF assumes that if a state borrows money it's economy is in peril
-Very stringent on terms
-Conditionality - particularly bitter measures to terms
Reasons for IMF
-to prevent a state htat has a massive balance of payment deficit from defaulting"
-countries go through economic cycles
-if a country faces a balance of payment deficit it must take out another load which IMF will fund
Reasons to Prevent Defaulting
-when countries default they have nothing that can be reassessed
-banks will loose money and cannot pay principle interest to investors
Floating Exchange Rate
-the value of a country's currency based on supply and demand
-corporations often devide profits in different currencies
Options when a country suffers balance of payment deficit
-MUST take out another loan if it needs to repay previous loan
-states may lower currency
-states may force another country to strengthen its currency
-states may increase tariffs
Pre-1971 Economic Market Line
-US gold standard
-states fixed their currency to USD
-states' economies did not plummit when they suffered a balance of payment deficit
-USD was most stable currency
Post-1971 Economic Market Line
-US experienced first balance of payment deficit in 1971
-abandoned gold standard
-US devalued USD
-US backed out of fixed exchange rate
General Agreement on Trade and Tariffs (GATT) & later World Trade Organization (WTO)
-states produce the goods they have the natural ability to produce
-most favored nation status
-reciprocity (no state gives something for nothing)
"Nations should use a transparent methods of exports/imports (tariffs)"
Most Favored Nation Status
"If one member sets a tariff, the same tariff is applied to all states attempting to export to the tariff creating state"
Problems w/ GATT
-Non-Tariff Barriers (NTB's)
-Intellectual Property Rights
-Social Causes
-Voluntary Expert Restraint (VER)/ Orderly Market Arrangement (OMA)
Non-Tariff Barriers (NTB's)
-measures states take to keep out foreign products and cause them to push domestic products
-examples are quotas, environmental standards, and safety standards
Intellectual Property Rights (IPR)
-patents and trademarks only reward innovative and capitalistic individuals and companies
Social Causes
-states can establish a tariff through a social cause such as child labor or human rights
Voluntary Expert Restraint (VER)/ Orderly Market Arrangement (OMA)
-during a time of crisis states may set a number of units produced to help another state
Agriculture-related problems w/ GATT/WTO
-agriculture economies want tariff barriers reduced but are opposed by developed countries
-service sector economies are pushing for reduced barriers on services
International Bank for Reconstruction (IBR)/ World Bank
-International Development Association (IDA)
-International Financial Corporation (IFC)
-created to in order to prevent Soviet advance into crumbled Western Europe
-project lending organization
International Development Association (IDA)
-soft loans with lower levels of interest
-World Bank gives money to the poorest of poor (countries that would not be able to attract loaners)
International Finance Corporation (IFC)
-encourages foreign direct investment (poor countries do not many FDI's: civil wars, poor living, poor health)
-World Bank assures MNC's that invest in poor countries, that they will not loose money
Criticisms of World Bank
-the world bank has been focused on development and not environmental standards
-aid is not affecting actual standard of living
-focused too much on project spending
New International Economic Organization (NIEO)
"Theoretical revisions of Bretton Woods System"
3 Elements of NIEO
-southern countreis wanted northern tax money as aid stating that it was in the best interest of the north to have an economically viable south
-Generalized Scheme of Preference: developed countries
-International Commodity Agreement (ICA)
International Commodity Agreement (ICA)
"States whose markets are predominantly focused on one material store product until time of crisis when all countries who produce this commodity support whole"
-funded by north
Dependency Theory
"Markets work to institutionalize; markets tend to trap states and people in certain situations of development"
Three Groups left by Bretton Woods System
"A level of interdependence that exists where boundaries almost cease to exist"
Examples of Border indifferent entities
-Drug Cartels
-Terrorist Groups
-Migrating Populations
Global Village
-Culture has been globalized (particularly US culture)
-Currency trade
-Language is globalized (needed to conduct business)
Effects of Globalization
-national governments will loose much of their control (loose control of markets, economies, and social trends)
-cultural homogenization (cultural backlash)
Realist Conception of Morality
"Morals have no place in policy, there should only be a rational view in the best interest of the state"
Defense of Morality
"If God did not exist anything would be possible"
-morality requires sovereign states to be held accountable
-interfering international community
Catholic Laws of War
-an enity must first be attacked and then may attack in defense
-there must be an equal and reciprocal attack (reciprocity)
"An action is moral if it brings the greatest good to the greatest number - suspend all personal interests; very pragmatic"
"Certain moral principles are RIGHT and if one acts in a certain way they are in effect saying it is correct for all others to do the same"
Export Platforms
"A place companies set up labor because it is cheaper"
"Producing goods overseas primarily for export back home"
Adam Smith
-the father of modern economics
-economically liberal view
Comparative Advantage
"People produce goods which are more efficient and beneficial to produce"
Collective Goods
"Security, law, and education"
"The philosophy that economics and politics are related, that politics should come first, and that economic activity should serve the interests of the state"
"Money given to industries to allow them to comparitively compare to foreign products"
"In economic integration there must be at the start a central gov't and lower level political units would retain some powers"
"Opposed to a supranational entity which starts with cooperation from the bottom up"
"Some centralized political institutions, but states retain sovereignty"
Moral Relativists
-argue that moral judgements are just mere opinion concerning which there is no point in arguing"