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The 26 case-studies
can be used by broadcast companies or production companies to produce their own language
version of 'Inside the Global Economy', and teachers can use the case-studies to
illustrate their lessons.
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| KEY CONCEPTS |
CASE STUDIES |
| TRADE
- AN INTRODUCTION |
|
| There are two principle reasons why
countries trade: Comparative advantage and economies of scale. |
IBM in Japan 7' 32"
The design and production of microcomputers and disk drives was relocated from the
U.S.A. to Japan because of changing comparative advantage. |
Nations as a whole benefit from trade,
however, there are inevitably some losers within countries.
Back
to Beginning |
Mineral exports from Australia
6' 55"
In the early 1970's a boom in minerals caused the Australian dollar to appriciate,
creating a crisis for the heavily protected car industry as imports became cheaper. |
| PROTECTIONISM |
|
| Countries protect their industries
for a variety of reasons, most of which cannot be justified on economic grounds. |
French Agriculture Conflict over
Uruguay Round 7' 09"
The competition between French and U.S. oil-seed growers, arising from protectionist
agricultural policies in France, led to riots in France during the 1992 Urugay Round
Negotiations. |
While protectionist policies help
the targeted industries, the economy as a whole usually loses.
Back
to Beginning |
Do Voluntary Restraints Work?
7' 26"
Voluntary restraints on Japanese cars to the U.S.A. arguably helped the U.S. auto
companies but at a high cost to the U.S. consumers. |
| TRADE
POLICY |
|
| Most countries succumb to the temptation
to pick industrial winners and losers. At best, the track record has been mixed. |
Airbus 7' 26"
Four national governments - England, France, Spain and Germany - Created a unique
partnership to focus research, development and production funding on the creation
of an internationally competitive aircraft industry. It illustrates the rationale
behind the cooperative venture and the costs to the citizens of each of the nations. |
Countries which integrate into the
world economy have been more succesful than those pursuing import substitution strategies.
Back
to Beginning |
Chili 8' 19"
Import substituting industrialisation (ISI) hurt the Chiliean wine industry in the
1950's, 1960's and 1970's. A reversal of these policies in the 1980's allowed Chili
to take advantage of its comparative advantage in the production of wine. |
| TRADE
LIBERALIZATION AND REGIONAL TRADING BLOCS |
|
| In recent years considerable attention
has been given to the formation of trading blocs. This has put a strain on the multilateral
trading system. |
U.S. - Canadian Free Trade Agreement
7' 49"
Geographic proximity, the existence of large bilateral trade flows and frustrations
with the slow progress of the multilateral approach of the GATT encouraged the U.S.
and Canada to sign a free trade agreement in 1989. |
The formation of trading blocs can
help or hurt world trade depending on wether they create or divert more trade.
Back
to Beginning |
Entry of U.K. into EC 7' 10"
Britain's entry into the EC in the 1970's closed the door to markets for nations
like Australia, which were traditional providers of primary products to Britain. |
| LABOR
AND CAPITAL MOBILITY |
|
| International labor migration can
occur for economic and non-economic impacts on the countries of origin and destination. |
Netherlands: Guest workers and
immigrants 7' 31"
The use of Turkish immigrant workers by Dutch bulb and tomato growers has generated
mixed reactions in both the Netherlands adn Turkey. |
The international movement of labor
and capital have been powerful forces behind economic integration worldwide.
Back
to Beginning |
Mexican immigration to U.S. and
Maquiladora program 7' 04"
The flow of capital from the U.S. to Mexico since the 1960's under the Maquiladora
program, has helped to create better jobs in Mexico and stem the tide of immigration
to the U.S. |
| MULTINATIONAL
CORPORATIONS |
|
| Multinationals have become one of
the engines of globalization in the post-war period. |
Ericsson in Hungary 7' 17"
In the earley 1990's the Swedish firm Eriscsson decided to produce telephone equipment
in Hungary, partly to take advantage of lower wages there and partly in response
to pressure from the Hungarian government. |
Host countries have ambivilant attitudes
towards multinationals largely because of concerns about loss of control.
Back
to Beginning |
Smith Corona/Brother 6' 19"
Which is a more American company: Smith Corona, which is U.S.-based but produces
most of its equipment overseas, or Japanese-owned Brother, which produces a large
share of its machines in the U.S.? The U.S. government decided that both were domestic
and foreign. |
| FIXED
VERSUS FLOATING EXCHANGE RATES |
|
| Movements in exchange rates have
large impacts on imports, exports, the rate of inflation, interest rates and the
distribution of income. |
Impact of U.S. dollar fluctuations
in 1980's. Komatsu vs. Caterpillar 7' 13"
In the 1980's, large fluctuations in the value of dollar created serious competitive
problems for companies like Caterpillar and Komatsu, inducing them to make inefficient
production location decisions. |
The system of flexible but managed
exchange rates in the 1970's and 1980's seems to have been able to cope with the
external shocks like the oil crises. However, it has failed to restrain countries
from running large trade imbalances.
Back
to Beginning |
Petrodollar recycling in the 1970's
7' 40"
In the mid-1970's, the system of floating exchange rates was able to withstand the
oil shock in a way that fixed exchange rate systems would not have been able to cope
with. |
| MANAGING
CURRENCIES AND POLICY COORDINATION. |
|
| International policy coordination
is a desirable ingredient for smooth functioning of the international financial system
and the global economy; however, there are limits to coordination because of differing
national goals, disagreements over the distribution of gains, and financial constraints. |
Plaza and Louvre Accords 7' 47"
In september 1985 the largest industrial economies agreed to act in unision to lower
the value of the U.S. dollar. |
During the post-war era, exchange
rates have been fixed for extended periods of time. While providing some stability,
fixed exchange rates have also precipitated a number of dramatic crises.
Back
to Beginning |
U.K.: Costs of joining the EMS
7' 32"
In september 1992 the United Kingdom was forced to leave the relativily fixed exchange
rate structure of the European Monetary System because the high interest rates required
to stay in the system were damaging the domestic economy. |
| EXCHANGE
RATES, CAPITAL FLIGHT AND HYPERINFLATION |
|
| International capital movements can
be benificial to both the host and the source countries. However, if these investments
are used unwisely, both sets of countries could see losses. |
Capital flight from Mexico 7'
13"
In the 1980's capital left Mexico in response to collapsing oil prices, poor policies,
and the resulting debt crises. In the 1990's, capital came flowing back to Mexico
when investors felt more conficent of government policies, market reforms, and a
stable peso. |
Exchange rates are influenced by
interest rates, inflation rates, trade balancies, and market expectations.
Back
to Beginning |
Hyperinflation in Argentina 8'
55"
With hyperinflation, Argentina increased the supply of its currency, the Austral,
while the demand for it fell, bringing about a collapse in its value in foreign exchange
markets. |
| DEVELOPING
COUNTRIES |
|
| One of the lessons of the 1980's
has been that developing countries that have unilaterally liberalized trade and promoted
export have prospered. |
Korea vs. Sri Lanka 7' 52"
In the 1960's, South Korea pursued an export strategy and, as a result, has become
a strong economy. In contrast, Sri Lanka pursued an import replacement policy and
failed to equal South Korea's growth record. |
While some developing countries have
prospered, others have not. The challenge for industrial nations is how to help the
poorer countries.
Back
to Beginning |
Aid or trade: Tanzania 7' 45"
In recent year donor countries like Sweden have been evaluating the role of aid versus
trade to developing countries like Tanzania. |
| ECONOMIES
IN TRANSITION |
|
| The former communist countries have
a much bigger challenge in reforming and liberalizing their economies than many of
the developing countries. For decades they carried out very inflationary macro-ecomomic
policies at the same time that prices and exchange rates were fixed at unrealistic
levels. Due to the nature of a central command system, prices and costs bore little
relation to each other or to prices and costs in the rest of the world. |
Privatisation 7' 23"
The experience of the Pavlovo bus factory in Russia is one example of how companies
in the formere Communist countries are coping with the transition to market economies. |
The questions that many of these
countries are struggling with now is wether the process of reform should be swift
or gradual.
Back
to Beginning |
Poland in Transition 6' 30"
Poland enacted both monetary and fiscal contraction as part of its transition to
a market economy. The result was a sharp but short contraction in its economy and
a dramatic drop in its inflation. |
| THE
ENVIRONMENT |
|
| Externalities associated with pollution
have an international, as well as a domestic, dimension. |
Trade versus Environment? 7' 15"
The conflict between U.S. environmentalists and Mexican tuna fishermen over the safety
of dolphins is one example of how free trade and environmental protection have been
viewed as conflicting goals. |
There is a perceived conflict between
the goal of a cleaner environment, on the one hand, and free trade and economic growth,
on the other. Is there a conflict?
Back
to Beginning |
Pollution along the Rhine 7' 13"
The efforts of four nations - Switzerland, France, Germany and the Netherlands -
to combat pollution of the Rhine River and restore salmon as a main foor for those
living along the banks of the river. |
| THE
EVOLVING WORLD ECONOMY |
|
| Human capital (e.g., education &training)
will be a key determinant of changes in living standards in the future, as trade
in products with a high information/service/innovation content rises rapidly. |
The rise of China as an economic
power 7' 19""
The East Asia economies have prospered in recent decades by playing to their comparative
advantage and investing heavily in human capital such as labour and management skill
upgrading. |
As economies evolve and become more
mature, their comparative advantage may shift away from manufacturing to knowledge
intensive (including service) industries.
Back
to Beginning |
Continual Change - Continual Growth
6' 53"
While the U.S. has lost comparative advantage in the production of computers and
some types of microchips, it has gained comparative advantage in computer software. |
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