Economic Crises and Global Development: Causes and Impacts
Economic Crises: Causes and Impacts
Origin of Economic Crisis: Keynes
Keynes believed that economic crises happen when people stop spending money, causing demand to fall. He argued that governments should spend money to boost the economy. This spending helps create jobs and gets the economy moving again. He saw government action as key during recessions.
Origin of Economic Crisis: Samuelson
Paul Samuelson built on Keynes’ ideas and said crises happen when businesses and consumers stop spending. He suggested that the government should use fiscal and monetary policies to stabilize the economy. Samuelson focused on balancing growth and avoiding inflation. He was key in spreading Keynesian ideas.
Origin of Economic Crisis: Juglar Cycles
Juglar Cycles are regular economic ups and downs that happen every 7-11 years. These cycles are caused by changes in investment and spending in businesses. When too much is invested too quickly, it can lead to a crash. After the crash, the economy takes time to recover.
Origin of Economic Crisis: Monetary Theories
Monetary theories argue that crises happen when there is too much or too little money in the economy. If central banks print too much money, it leads to inflation. If there’s not enough money, the economy can slow down. The supply of money plays a key role in causing economic crises.
Characteristics of Economic Crisis: 2008
The 2008 crisis was caused by bad loans in the housing market and risky banking practices. This led to a global financial crash, with banks failing and many losing their jobs. Governments around the world bailed out banks and cut interest rates to help recovery. It caused a deep global recession.
Characteristics of Economic Crisis: COVID-19
The COVID-19 crisis was caused by the pandemic, leading to lockdowns and job losses. Businesses closed, and global trade stopped. Governments provided stimulus packages to support the economy. The crisis caused severe economic downturns, with some countries facing long recovery times.
Balance of Payments
Current Account
The current account tracks a country’s imports and exports of goods and services. If a country exports more than it imports, it has a surplus; if it imports more, it has a deficit. It also includes income from investments and transfers like remittances. It shows the country’s trade balance with the world.
Financial Account
The financial account tracks the flow of money for investments, like foreign direct investment (FDI) and buying stocks or bonds. A surplus means foreign money is coming in, while a deficit means money is leaving the country. It helps show how much money is being invested in the country.
Factors Affecting Balance of Payments
Factors like exchange rates, interest rates, and inflation affect the balance of payments. Changes in currency values can make exports more expensive or cheaper. High interest rates attract foreign investments. Government policies, like tariffs or trade agreements, can also affect the balance.
Economic Integration
Examples: Free Market Area, Customs Union
A free market area removes tariffs between countries but does not have a common external tariff. A customs union goes further by also setting a common tariff for non-member countries. Both aim to make trade easier between member countries and reduce trade barriers.
Examples: Common Market, Economic Integration
A common market allows not just free trade but also free movement of people, goods, and services. Economic integration involves deeper cooperation, like shared rules, policies, and sometimes a common currency. The European Union (EU) is a major example of economic integration.
Advantages of Economic Integration Projects
Economic integration can lead to cheaper goods, more jobs, and increased trade between countries. It also encourages investment and helps economies grow. Countries can work together to solve common problems. Integration also strengthens political ties between nations.
Advantages and Disadvantages of Economic Integration
Advantages include increased trade, economic growth, and political cooperation. Disadvantages include loss of national control over certain policies and uneven benefits for some countries. Some industries may struggle to compete, leading to job losses. Smaller countries may have less influence in the partnership.
Global Economic Influence
Video: Trans-Pacific Agreement
The Trans-Pacific Partnership (TPP) is a trade deal among countries in the Pacific region. It aims to lower trade barriers and increase economic cooperation. It covers areas like labor rights and environmental protection. The agreement was designed to counterbalance China’s growing influence.
Video: International Expansion of China
China is expanding its influence through investments and projects around the world, like the Belt and Road Initiative. China builds infrastructure and provides loans to many countries. This expansion gives China access to resources and new markets. It also strengthens China’s role in global trade.
Video: International Expansion of India
India is expanding globally by increasing its trade and investment in sectors like technology and pharmaceuticals. It is also forming strategic partnerships with other countries. India focuses on growing its presence in global markets and improving its global image. The country is emerging as a key player in global trade.
Global Development and Poverty
Introduction & Malthus (Poverty and Development)
Malthus believed that population growth would always outpace food production, leading to poverty and famine. He thought that only disasters (like disease or famine) could reduce population growth. Today, his ideas are challenged by technological progress and better management of resources.
Global Development Today
Global development today is focused on reducing poverty, improving education, and ensuring sustainable growth. While many countries have made progress, some still face major challenges like hunger, poor health, and inequality. The goal is to create more equal opportunities for everyone, everywhere.
The Virtuous Cycle of Asian Countries
In countries like China and South Korea, economic growth leads to improvements in education, health, and infrastructure. This creates better conditions for more growth, which helps lift more people out of poverty. The cycle of growth and improvement continues, creating positive outcomes for the whole economy.
Are Poor Countries Catching Up?
Some poor countries are growing faster than rich countries, reducing the income gap. However, challenges like corruption, poor governance, and lack of infrastructure can slow progress. Countries in Africa and Asia are catching up, but inequalities remain. Economic growth rates are faster in some developing countries.
Multidimensional Index of Poverty
The Multidimensional Poverty Index (MPI) looks at poverty beyond just income. It includes factors like education, health, and living conditions. MPI helps show the different ways people experience poverty. It is used to create better policies for improving quality of life, not just wealth.
New Goals of Development for the 21st Century
The new development goals, called Sustainable Development Goals (SDGs), aim to end poverty, improve education, and protect the environment. These goals focus on making sure that development is sustainable, inclusive, and fair for all. They address both economic growth and social challenges.