Issues in the International Economy

Abstract

In Chapters 15 and 16 we introduced the ‘open economy’ concepts of the balance of payments and exchange rates. Our discussion in part concentrated on the problems and issues that such concepts posed for national economies. For example, we saw that, because a country cannot ignore a persistent balance of payments imbalance, it may choose to confront potential balance of payments problems by (say) allowing its currency’s exchange rate to float freely against other currencies. Alternative measures to promote balance of payments adjustment are of course also possible. In this final chapter we move beyond national economic concerns of this nature to further explore two key international economic issues. We have previously reviewed the development of international trade policy under the auspices of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), together with the evolution of key aspects of the international monetary system since 1945. In this concluding chapter we consider, first, the issue of globalization and the supposed recent emergence of a new ‘global’ economy. This concept is often invoked, but what exactly does it mean and what is its basis in reality? Second, we consider the problem of economic development in less developed countries. Despite the evident material progress of the established industrial economies, together with a few newly industrialized countries and oil producers, the majority of the world’s nations and population remain relatively poor. We review the dimensions of such ‘underdevelopment’, reflect upon some explanations for its apparent persistence, and finally, using the ‘market versus state’ framework that has been at the core of this book, consider the policy options for assisting economic development in poor countries.