Global capitalism became a dangerous hybrid. On the one hand, investors committed huge sums and expected high returns. On the other, the money often went - through bank loans, bond issues and stock offerings - to borrowers who were not operating by strict rules of efficiency or profit and loss. “Crony” capitalism often meant corruption: contracts won with bribes; favoritism for the well-connected.
But capital flowed freely while optimism and self-deception prevailed. Banks collected interest on loans. “Emerging market” mutual funds rose, because local stocks were buoyed by new investment money. While everyone enjoyed profits, there was a suspension of disbelief. Now comes the reckoning. Capital flight has forced most developing countries to scramble to conserve scarce foreign exchange.
All their choices are bad. Still, some U.S. economists see currency controls as a temporary way of avoiding high-interest rate austerity. A gentler way to achieve the same result would be debt relief: global bankers would write down loans, easing the repayment burden. But so far, banks have shown little interest. A third approach is to attract new long-term capital to replace old short-term capital. But developing countries are reluctant to sell too much of their economic bases to foreigners at fire-sale prices.
Countries cannot expand their economies unless they replenish their foreign-exchange reserves of hard currencies. The IMF- which provides temporary hard-currency loans - has focused only on “reforms” that would enable countries to attract new capital. It might also usefully emphasize debt relief so that the burden of bad lending would be shared between creditors and debtors. But preventing an American or European slump is no less important; either one would deepen the world economy’s downturn. The danger might ease if the Federal Reserve and Germany’s Bundesbank lowered interest rates. As yet, they show no signs of doing so.
Even if the worst doesn’t occur, the world will never be the same. Global capitalism won’t soon regain its aura of infallibility. There was nothing wrong with the theory. Free trade and the free movement of capital would, in a world where everyone worshiped efficiency and profits, enrich all nations. The trouble is that we do not live in such a world.
VOCABULARY
| 1. R.I.P. (requiescat in pace = rest in peace) | покойся в мире (надгробная надпись) |
| 2. transnational mass market | транснациональный широкий рынок |
| 3. destabilizing | дестабилизирующий, нарушающий стабильность |
| 4. inflicting large losses | приводящий к значительным убыткам |
| 5. collapses of economies | зд. резкое ухудшение экономических показателей в странах |
| 6. Blue Chip Economic Indictors | обзор (анализ) деятельности ведущих компаний (США) |
| 7. total value of U.S. stocks | общая стоимость акций компаний США |
| 8. capitalization | капитализация |
| 9. «crony capitalism» | зд. капитализм, основанный на личных связях |
| 10. surplus factories | зд. Неиспользованные производственные мощности |
| 11. mutual fund | взаимные (паевые) фонды |
| 12. to convert | конвертировать (валюту) |
| 13. capital flight | зд. отток капитала |
| 14. ... «a depositor run on their banks» | зд. ... «изъятие вкладов из их банков» |
| 15. interest rate | ссудный процент |
| 16. austerity | жесткие меры |
| 17. economic engineering | зд. управление экономикой; проведение определенной экономической политики |
| 18. finacial statements | финансовые отчеты |
| 19. sour loan (bad loan) | непогашенный займ |
| 20. to cover losses | покрывать (компенсировать) убытки |
| 21. return (s) | доход (ы) |
| 22. bond issue (s) | выпуск облигаций |
| 23. stock offering (s) | выпуск новых акций |
| 24. corruption | коррупция |
| 25. debt relief | списание или отсрочка долговых обязательств |
| 26. long-term capital | долгосрочные инвестиции (капитал) |
| 27. short-term capital | краткосрочные инвестиции (капитал) |
| 28. fire-sale prices | «бросовые» цены; заниженные цены |
| 29. foreign-exchange reserves | валютные резервы; резервы иностранной валюты |
| 30. hard currency | твердая валюта |
2. Переведите текст.
3. Напишите реферат и аннотацию к данному тексту.
«Globalisation»
Topics for discussion
1. The growing integration of national economies is said to have changed the way the world works.
2. The extent of globalisation is exaggerated.
3. Today’s international economic integration is not unprecedented.
4. New technology creates distribution channels that protectionist governments will find it hard to block.
5. Free trade is built upon firmer multilateral institutional foundations (ex. WTO).
6. An attemp to shield economies in face of another crisis would also shield them from powerful sources of growth.
7. Tumbling world stock markets have sent a message: global capitalism is now in full retreat.
1. Дайте ответы на следующие 1.What is world trade?
вопросы без предварительного 2. Is international trade the most obvious
чтения текста: manifistation of a globalising world
economy ?
2. Дайте ответы на следующие 1. Why does it make sense for
вопросы после беглого просмотра countries to trade goods and services ?
текста: 2. How much trade do they do ?
3. And why are there obstacles to
freer trade ?
3. Прочитайте и найдите ключевые слова и предложения в следующем тексте:
TRADE WINDS.
Time was when trade flows were of interest mainly economic to experts and executives of big corporations. But over the past few years, the movement goods and services across national boundaries has become the subject of intense public attention all over the world. To the public at large, trade is the most obvious manifestation of a globalising world economy.
Measured by the volume of imports and exports, the world economy has become increasingly integrated in the years since the second world war. A fall in barriers to trade has helped stimulate this growth. The volume of world merchandise trade is now about 16 times what it was in 1950, while the world’s total output is only five-and-a-half times as big. The ratio of world exports to GDP has climbed from 7% to 15%.
Virtually all economists, and most politicians, would agree that freer trade has been a blessing. However, the economists and politicians would probably give quite different reasons for thinking so.
Politicians, by and large, praise greater trade because it means more exports. This, in turn, purportesly means more jobs - and, if the exports involve sophisticated products such as cars or jet engines, more “good” jobs. The American government, zealous to promote exports, has even produced estimates that try to show how many new jobs are created by each $1 billion of American sales abroad.
This is misleading. A big export order may well cause an individual company to add workers, but it will have no effect on a country’s total employment, which is determined mainly by how fast the economy can expand without risking inflation and by microeconomic obstacles, such as taxes that deter employers from hiring or workers from seeking jobs. America, where exports are a relatively small fraction of GDP, has fuller employment than Germany, where exports loom larger.
Gains from trade
To economists, the real benefits of trade lie in importing rather than in exporting. Politicians frequently urge consumers to favour domestically made goods, and portray a widening trade deficit as a Bad Thing. But economists know that the only reason for exporting is to earn the wherewithal to import. As James Mill, one of the first trade theorists, explained in 1821:
The benefit which is derived from exchanging one commodity for another, arises, in all cases, from the commodity received, not the commodity given.
This benefit arises even if one country can make everything more cheaply than all others. The basic theory that explains this, the principle of comparative advantage, has existed since Mill’s day. His contemporary, David Ricardo, usually gets the credit for expounding it.
To see how this theory works, think about why two countries - call them East and West - might gain from trading with one another. Suppose, for simplicity, that each has 1,000 workers, and each makes two goods: computers and bicycles.
West’s economy is far more productive than East’s. To make a bicycle, West needs the labour of two workers; East needs four. To make a computer, West uses ten workers while East uses 100. Suppose that there is no trade, and that in each country half the workers are in each industry. West produces 250 bicycles and 50 computers. East makes 125 bikes and five computers.
Now suppose that the two countries specialise. Although West makes both bikes and computers more efficiently than East, it has a bigger edge in computer-making. It now devotes most of its resources to that industry, employing 700 workers to make computers and only 300 to make bikes. This raises computer output to 70 and cuts bike production to 150. East switches entirely to bicycles, turning out 250. World output of both goods has risen. Both countries can consume more of both if they trade.
At what price? Neither will want to import what it could make more cheaply at home. So West will want at least five bikes per computer; and East will not give up mpre than 25 bikes per computer. Suppose the terms of trade are fixed at 12 bicycles per computer and that 120 bikes are exchanged for ten computers. Then West ends up with 270 bikes and 60 computers, and East with 130 bicycles and ten computers. Both are better off than they would be if they did not trade.
This is true even though West has an “absolute advantage” in making both computers and bikes. The reason is that each country has a different “comparative advantage”. West’s edge is greater in computers than in bicycles. East, although a costlier producer in both industries, is a relatively less-expensive maker of bikes. So long as each country specialises in products in which it has a comparative advantage, both will gain from trade.
Fair deal
Some critics of trade say that this theory misses the point. They argue that trade with developing countries, where wages tend to be lower and work hours longer than in Europe and North America, is “unfair”, and will wipe out jobs in high-wage countries.
It is generally accepted that trade with poor countries has been one of the factors reducing the wages of unskilled workers, relative to skilled ones, in the United States. That said, the threat to rich-country workers from developing-country competition is often overstated.
For a start, it is important not to confuse absolute and comparative advantage. Even if developing countries were cheaper producers of everything under the sun, they could not have a comparative advantage in everything. There would still be work for people in high-wage countries to do.
Moreover, it is not true that countries with cheap labour always have lower costs. Wage differences generally reflect differences in productivity; companies in low-wage countries often need far more labour to produce a given amount of output, and must deal with less efficient communications and transportation systems. In most cases hourly wages are not decisive in determining where a product is made.
Suppose that the “fair traders” succeed in eradicating international differences in production costs, so that a given product cost precisely the same to make in different countries. In that case, no country would have a comparative advantage, and hence there would be no trade. Rich-country workers, who are also consumers, would lose.
At first blush, real-world trade patterns would seem to challenge the theory of comparative advantage. Most trade occurs between countries which do not have huge cost differences. America’s biggest trading partner, for instance, is Canada. Well over half the exports from France, Germany and Italy go to other European Union countries. Moreover, these countries sell similar things to each other: cars made in France are exported to Germany, while German cars go to France, dependent largely upon consumers’ differing tastes rather than differences in costs.
The importance of geography and the role of similar but different products appealing to diverse tastes expand our understanding of why trade occurs. But they do not overturn the fundamental insight of the theory of comparative advantage. The agricultural exports of Australia, say, or Saudi Arabia’s reliance on oil, clearly stem from their natural resources. Poorer countries tend to have relatively more unskilled labour, so they tend to export simple manufactures, such as clothing. So long as relative production costs differ between countries, there are gains to be had from trade.
Enter the state
What is confusing, perhaps, is that comparative advantage is often the product of history and chance, not of differences in natural resources or workers’ skills. A stark example is America’s civil-aircraft industry. There is no God-given reason why the production costs of jumbo jets, relative to other goods and services, should be lower in America than in Japan. But they are: America’s early embrace of airmail, its large purchases of military aircraft and the great public demand for air travel in a large country all helped American plane makers get big early on, allowing them to achieve per-plane costs lower than those of foreign competitors.
A logical question follows: if comparative advantage can be created, why should governments not help create it? The idea is that through subsidies, such as those given by several European nations to finance the European-made Airbus passenger jets, governments can promote their own national champions and hobble foreign rivals. Since the late 1970 S. a stream of theoretical research has shown that governments can use such “strategic trade policy”, in principle, to make their own citizens better off.