Lecture Notes: Global Economy and Economic Theories

Introduction to Globalization and Economic Concerns

• As the 20th century ended and the 21st century began, globalization intensified.
• Mixed views on globalization: some feared, others welcomed it.
• Events like September 11th raised new concerns about global economy and terrorism.
• Global interdependence is inevitable.
• Key question: Is globalization ultimately positive or negative?

Historical Battle of Economic Ideas

• Century-long debate on control of economies: governments vs. markets.
• The narrative of capitalism's rise at the end of the 20th century.
• Technological and political changes drove the new global economy.
• A revolution in economic ideas was essential.

Influential Economists: Keynes vs. Hayek

• John Maynard Keynes: Advocated for government intervention during economic difficulties.
• Friedrich von Hayek: Opposed government interference, believed markets would self-correct.
• Keynes dominated mid-20th century economics.

The Context of Early 20th Century

• Early globalization with technologies like telegraph, telephone, steamships, and railways.
• Economic boom ended with World War I.
• Post-war Europe faced economic chaos and hyperinflation.

The Great Depression

• Stock market crash in 1929 led to the Great Depression.
• High unemployment, economic despair.
• Keynes proposed government intervention to manage economies.

World War II and Economic Policies

• WWII stimulated economies; Keynesian policies helped manage wartime economies.
• Post-war Bretton Woods Conference established World Bank and IMF.

Post-War Economic Policies

• Britain and other countries adopted Keynesian economics.
• Mixed economies with state and private ownership emerged.

The Rise of Planning and Socialism

• Soviet Union's success inspired planned economies worldwide.
• Countries like India adopted central planning.

Chicago School and Free Market Economics

• Hayek and Friedman at the University of Chicago challenged Keynesianism.
• Emphasized minimal government and free markets.

Shift in Economic Policies

• Stagflation in the 1970s discredited Keynesian economics.
• U.S. under Nixon and Carter struggled with inflation and unemployment.

Thatcher and Reagan: Free Market Champions

• Margaret Thatcher and Ronald Reagan implemented free market reforms.
• Thatcher privatized state-owned industries in the UK.
• Reaganomics focused on tax cuts and deregulation in the USA.

Impact of Free Market Reforms

• Both leaders influenced global economic policies.
• Privatization and deregulation spread worldwide.

Conclusion

• The shift from government control to market-driven policies marked the end of the 20th century.
• Debate remains on the balance between markets and government intervention in economies.