The European Commission is concerned that the economic downturn may have put the livelihoods of dairy farmers at risk. To try to prevent any problems for farmers, the Commission has re-introduced export subsidies for dairy products. The last time subsidies were paid to dairy farmers was June 2007 and the EU insists that the payment will meet World Trade Organisation (WTO) rules.
EU gives boost to dairy exports BBC News Online (23/1/09)
Questions
- Using diagrams as appropriate, illustrate the impact of the EU export subsidies on the market for milk.
- Additional support for dairy farmers comes in the form of EU intervention – European Commission purchases of surplus produce at a guaranteed price. Using diagrams as appropriate, illustrate and explain how this ‘guaranteed price’ scheme will work.
- Explain the role of the WTO in determining world trade rules.
- Discuss the likely reaction of other countries to the EU’s payment of export subsidies to dairy farmers.
The World Economic Forum has warned that 2009 may see a ‘hard landing’ for China. In the context of China, this does not necessarily mean a recession, but the WEF report does identify a significant possible slowdown in Chinese growth. Given that high growth in China has led to a high level of demand for imports from other countries, especailly for raw materials and semi-finished goods, any slowdown in Chinese economic growth may have significant repercussions in the rest of the world. Any hopes that China and the emerging economies may help the rest of the world through their recessions have been dashed by data showing that even exports from China have been falling in October and November 2008 by 2.2% and 2.8% respectively. This has meant that aggregate demand in China is falling and may cause further problems, not only for China, but for the whole world economy.
China slowdown ‘big global risk’ BBC News Online (13/1/09)
China’s exports in record decline BBC News Online (13/1/09)
China’s exports slump in sharpest decline in decade Times Online (13/1/09)
World Economic Forum highlights Chinese slump as biggest risk to global economy Telegraph (14/1/09)
Chinese exports fall by the biggest margin in a decade Telegraph (14/1/09)
Questions
- Explain the significance of the fall in Chinese exports for the Chinese economy.
- Analyse the principal causes of the fall in the level of Chinese exports.
- Assess how the changes in China’s trade position will affect the exchange rate of the Chinese currency, the yuan.
- Discuss policies that the Chinese government can implement to try to minimise the impact of the fall in exports on economic growth.
The Mount Washington Hotel in Bretton Woods, New Hampshire was the location for a historically significant meeting in the summer of 1944. John Maynard Keynes was part of the British negotiating team at a meeting to plan the post World War II economic order. As a result of the meeting an adjustable peg system of semi-fixed exchange rates was developed and the International Bank for Reconstruction and Development (IBRD – now part of the World Bank Group) and the International Monetary Fund (IMF) were also born. As a result of this meeting the small rural location of Bretton Woods has moved into the economics lexicon. The institutions born out of this meeting have been subject to considerable criticism in recent years and in the first article linked to below, George Monbiot argues that it is unfair to attach this criticism to Lord Keynes. With a recent meeting of the G20 having been dubbed as Bretton Woods II, the original meeting and its outcomes have been thrown back into the limelight.
Keynes is innocent: the toxic spawn of Bretton Woods was no plan of his Guardian (18/11/08)
How Bretton Woods reshaped the world Guardian (14/11/08)
Shaping the world: Bretton Woods 1944 Guardian (14/11/08)
It takes two Guardian (5/12/08)
Questions
- Write a short paragraph summarising the outcomes of the Bretton Woods conference in 1944.
- Explain the role in the world financial system of (a) the World Bank and (b) the IMF.
- Assess the possible validity of the criticisms that have been levelled at the IMF. See particularly the George Monbiot article.
- Using diagrams as appropriate, explain how the system of semi-fixed exchange rates negotiated at Bretton Woods worked to maintain economic stability.
- Examine the principal reasons for the breakdown of the Bretton Woods system.
The G20 Leaders Summit on Financial Markets and the World Economy took place on November 14–15, 2008, in Washington DC. Many commentators dubbed this meeting ‘Bretton Woods II’. Bretton Woods – Mark I was a meeting in the summer of 1944 that set out the foundations for the post World War II economic order. It set up a system of semi-fixed exchange rates and led to the establishment of the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF). Bretton Woods Mark II was perhaps less historically significant, but the world leaders agreed a plan to boost the world economy through tax cuts, higher public expenditure and lower interest rates; something Lord Keynes, the principal negotiator for the UK at Bretton Woods Mark I, would have wholeheartedly approved of!
G20 to back global tax cuts Times Online (16/11/08)
This week, our leaders have a chance to make the world anew Guardian (9/11/08)
A dangerous free-for-all Guardian (11/11/08)
Bretton Woods II – five key points on the road to a new global financial deal Guardian (14/11/08)
G20 summit: ‘The world economy is broken and they need to reflate’ Guardian (14/11/08) Podcast
Doubts raised over prospects of success for ‘hasty summit’ Guardian (15/11/08)
Our chance for a working regulatory regime Guardian (15/11/08)
Questions
- Write a short paragraph summarising the outcomes of Bretton Woods II.
- Assess the extent to which the fiscal and monetary stimulus agreed by the G20 leaders will be successful at minimising the depth of the global recession.
- Discuss the need for regulatory reform of the world financial system (as considered at Bretton Woods II).
- The G20 “signalled a determination to press on with the completion of the Doha world trade round”. Assess the extent towhich this is likely to be successful.
The surprise winner of the Nobel prize for economics this year was Paul Krugman: academic, writer and columnist for the New York Times. He is an economist with a gift for explaining economic principles and concepts in clear and simple terms. However, the award was given, not for his writing skills, but for his work on international trade theory and economic geography.
In praise of ….Paul Krugman Guardian (14/10/08)
Hotdog economics Guardian (13/10/08)
Nobel economics prize: And the winner is ….. Guardian (13/10/08)
Academic and columnist Paul Krugman wins Nobel Prize for Economics Times Online (13/10/08)
Bold strokes The Economist (16/10/08)
Questions
| 1. |
Write a brief paragraph summarising Krugman’s work on trade patterns. |
| 2. |
Define the term ‘economies of scale’. Explain why this concept was important to Krugman’s work on trade patterns. |
| 3. |
Assess the extent to which Krugman’s work has helped to explain the impact of free trade and globalisation. |