Political Power/ Political Economy of China and
India.
➢ Both India and China have a long history, their
histories are very different.
▪ China has been by and large a stable, centrally run state
through
its history with limited periods of instability and lack of a
single authority.
▪ India’s history has been exactly the reverse.
▪ The periods when a single King or political authority
ruled over
even the major part of India’s territory can be counted
on fingers of one hand.
▪ In China’s case there was a deep desire for unification
of the country as a driving force of nationalism in the
20th century. But it was called reunification.
New Pattern of Trade of China and India.
➢ India- China Trade Relationship (2018).
▪ The relationship between the two giants of Asia, and
the world, has been progressing at a tremendous pace.
Both nations have witnessed their share of ups-and
downs over the years. India and China today represents
Asia’s two largest and most dynamic economies which
are emerging as new trend setters in international
relations. The history of bilateral relations between India
and China dates back to mid 1980’s.
▪ The year 1994 marked the beginning of a new era in the
India- China economic relations. In this year a double
Taxation Agreement was signed between India and
China. The government of both the countries also took
the necessary initiative to turn into dialogue partners in
the Association of Southeast Asian Nations (ASEAN).
▪ In 2003, Bangkok Agreement was signed the two
countries. Under this agreement both India and china
offered some trade preferences to each other. India
provided preferences on tariff for 217 products export
from India. In 2003, India and China entered into an
agreement to initiate open border trade via the Silk
Route.
▪ The two countries have also shown interest to take part
in a multilateral trade system as per the WTO
commitments.
▪ China has already been the top trading partners of India
in the recent time. The economic relation between the
two countries is considered to be one of the most
significant bilateral relations in the contemporary global
economic scenario and this trend is expected to continue
in the years to come.
▪ Today, China is India’s largest trading partner; whereas
India is within the top ten of China’s trading partner.
Changes in Global Financial System
❖ New Opportunities
➢ New Markets
▪ Access to the global market place, it means that
expansion is not limited by the size of local markets.
➢ New Sources of Supply Inputs
▪ Firms are not limited to inputs, it is also available
locally.
▪ It is also a source of wide range of commodities, low
prices, high quality, meet specific needs.
▪ Hence, a global market should be place for and hire
global talent or best talent for business.
➢ New Source of Finance
▪ Increase funds to emerging markets;
▪ Should form an expanding set of sources;
▪ There must be a growth of sovereign funds.
▪ Another source of finance (Credits, Equity).
❖ New Risks
➢ Rapid Global Changes
▪ New Competitors;
▪ New Products;
▪ New Technologies.
➢ Changes in Global Scarcities
▪ Reflected in volatility in commodity of prices;
▪ Energy Markets or Commodity Markets which deals
with trade and supply of energy;
▪ Link between energy and agriculture.
➢Financial Market Volatility
▪ Countries managing their own markets;
1. Mortgage Crisis
2. Premium is at- risk
Global Financial Instability
➢ According to Hyman Minksy “Financial Crisis are
endemic in capitalism because periods of economic
prosperity encouraged borrowers and lender to be
progressively reckles”.
➢It will create global imbalance.
➢It will create fiscal and trade deficit. (US).
➢Slow economic growth. (Europe).
➢Undervalued Currency. (China).
Europe Global Reserve Currency
❖ EURO (1Euro Exchange Rate 57.02 Phil Peso).
➢ Global Reserve System – US dollar remains the world’s
currency reserve due to primarily to the fact that
countries accumulated so much of it, and that it was still
the most stable and liquid form of exchange.
❖ Current system is FRAYING
➢ Fraying definition is usually disorderly or protracted
fight, struggle, or dispute.
▪ Changes the value overtime;
▪ Growing lack of confidence in dollar;
▪ Major source of global savings;
➢ Globalization has meant the world is more
interconnected; what happens in one part of the world
has impact on the other parts of the world.
Climate Change – is a long term change in the average
weather patterns that have come to define earths local,
regional and global climates. These changes has a broad
range of observed effects that are synonymous with the
term.
❖Global warming – a continued warming of the
atmosphere as a result of mankind's activities.
▪ Climate change will affect everyone but some
populations will be at greater risk. For example,
countries whose coastal regions have a large population,
such as Egypt and China, may see whole populations
move inland to avoid flood. The effect on people will
depend on how well we can adapt to the changes and
how much we can do to reduce global climate change.
Global Marketing
Global marketing is more than simply selling a product
internationally. Rather, it includes the whole process of
planning, producing, placing, and promoting a
company’s products in a worldwide market.
• Large businesses often have offices in the foreign
countries they market to; but with the expansion of the
Internet, even small companies can reach customers
throughout the world.
❖ Economic Exchange (Global Affairs);
▪ Economic behaviour involves the exchange of one
scarce resource for another. When people engage in paid
work, they exchange their scarce time, effort, and skill for
income, and, when people make purchases, they
exchange their scarce income for scarce goods and
services. Economic activity is driven by the need to
exchange.
Three ways to count the total GDP;
1. Output ▪ This method counts the sum of value added
created through the production of goods and services
within the economy. The sum value is the total value of
the whole economy subtracted by the cost of
intermediary goods.
2. Income ▪ This method counts the total income
generated by the production of goods and services
within the economy, including income earned by
companies, employees, and self-employed people. This
method is the middle ground between the output
method and the expenditure method.
3. Expenditure ▪ This method counts the total
expenditure on all finished goods and services produced
within the economy. The GDP mainly comes from
consumers who buy services and goods.
Global Economy of 21st Century
❖ Global Challenges & Opportunities: Strategy for the
21st Century;
➢ Global Challenges;
▪ Financial Instability
▪ Rising levels of unemployment
▪ Persistent poverty
▪ Ecological Imbalances
▪ Widening Inequality
▪ Nuclear Proliferation
▪ Social tensions, unrest and terrorism
Market Integration
International Financial Institutions (IFI’s) are institutions
that provide financial support via grants and loans for
economic and social development activities in
developing countries.
 include public banks, such as World Bank,
International Monetary Fund and Regional
development banks
 provide loans, grants and technological assistance to
governments as well as loans to private business
investing in developing countries
 plays significant role in the privatization and
regulations of public utilities and natural resources
Classification of IFI:
1. World Bank
2. International Monetary Fund (IMF)
3. European Investment Bank (EIB)
4. Islamic Development Bank (IsDB)
5. Asian Development Bank (ADB)
6. European bank for Reconstruction and Development
(EBRD)
7. CAF – Development Bank of Latin America (CAF)
8. Inter- American Development Bank Group (IADB)
9. African Development Bank (AfDB)
10. Asian Infrastructure Investment Bank (AIIB)
Goals of World Bank
✓ The World Bank is a vital source of financial and
technical assistance to developing countries around the
world.
1. End extreme poverty by decreasing the percentage of
people living on less than $1.90 a day to no more than
3%.
2. Promote shared prosperity by fostering the income
growth of the bottom 40% for every country.
Organizations of World Bank
1. The International Bank for Reconstruction and
Development (IBRD).
2. The International Development Association
(IDA).
3. The International Finance Corporation (IFC).
4. The Multilateral Investment Guarantee Agency
(MIGA).
5. The International Centre for Settlement of
Investment Disputes.
International Monetary Fund
✓ The International Monetary Fund (IMF) is an
organization of 189 countries, working to foster global
monetary cooperation, secure financial stability,
facilitate international trade, promote high employment
and sustainable economic growth, and reduce poverty
around the world
Mission of International Monetary Fund
1. Surveillance – the IMF oversees the International
Monetary System and monitors the economic and
financial policies of its 189 member countries.
2. Lending – A core responsibility of the IMF is to provide
loans to member countries experiencing actual or
potential balance of payments problems.
3. Capacity Development – IMF capacity development
– technical assistance and training – helps member
countries design and implement economic policies that
foster stability and growth by strengthening their
institutional capacity and skills.
Market Integration
– Is a term that is used to identify a phenomenon in
which markets of goods and services are somehow
related to one another being to experience similar
patterns of increase or decrease in terms of prices of
those products.
– The term can also refer to a situation in which the
prices of related goods and services sold in a defined
geographical location also begin to move in some sort of
similar pattern to one another.
– Integration, may be intentional with a governmental
implementing certain strategies as a way to control the
direction of the economy.
– Integrating of the markets may be due to factors such
as shifts and demand that have spillover effect on several
markets.
❑ Markets Integration and How it Works;
✓ Koester of 2017 states that market integration is a
state of affairs or a process involving attempts to
combine separate national economies into larger
economic regions.
✓Integration as a means of stimulating trade and
improving divisions of labor among countries has been
recommended by many economists.
✓ integration can be achieved by different means.
Reducing non- tariff and tariff barriers to trade can be the
main tool for integrating markets.
Forms of Integration
✓ According to Koester of 2017, the following are the
forms of Integration.
1. Preferential Agreement – it involves lower trade
barriers between those countries which have signed the
agreement.
2. Free Trade Agreement – it reduces barriers to trade
among member countries to zero, but each member
country still has autonomy in deciding on the external
rate of tariff for its trade with nonmember countries.
Example: European Free Trade.
3. Customs Union – it represents a higher stage of
economic integration than a free trade.
4. Common Market – It goes beyond a Customs Union in
allowing for free movement of labor and capital within
the Union.
5. Economic Union – It is the highest form of economic
integration.
Example: Conditions of a common market, member
countries also agree to integrate monetary, fiscal and
other policies.
The European Integration
✓The European Integration is a unique economic and
political union between 28 European countries that
together cover much of the continent.
✓The EU was created in the aftermath of the second
world war. The first steps were to foster economic
cooperation; the idea being that countries that trade
with one another become economically interdependent
and so more likely to avoid conflict.
The Four Pillars of the ASEAN Economic Community
1. Single Market and Production Base – the region as a
whole must become a single market and production base
to produce and commercialize goods and services
anywhere in ASEAN.
2. Competitive Economic Region – the region must
emphasize on the competitiveness of its production and
capacity for export, as well as the free competition inside
of its frontiers.
3. Equitable Economic Development – to receive the
benefits of the EAC, the people and business of ASEAN
must be engaged into the integration process of the AEC.
4. ASEAN’s integration into the globalized economy –
ASEAN must not be isolated but an integrated part of the
global economy.
Core Principles of the ASEAN single market and
production base;
1. Free flow of goods
2. Free flow of services
3. Free flow of investment
4. Free flow of Capital
5. Free flow of skilled labor
Globalization – Refers to the trend towards a more
integrated global economic system.
Two key facets of globalizations are:
1. The globalization of Markets
2. Globalization of production
Globalization of Markets - merging of historically distinct
and separate national markets into one huge global
marketplace.
Globalization of Production - sourcing of goods and
services from locations around the globe to take
advantage of national differences in the cost and quality
of factors of productions like labor energy, land and
capital.
The Emergence of Global Institutions
1. World trade Organizations (WTO) – which of
responsible for policing the world trading system and
ensuring that nations adheres to the rules established by
WTO treaties.
2. International Monetary Fund (IMF) – which maintains
order in the international monetary system.
3. Word Bank – which promotes economic development.
4. United Nations (UN) – which maintains international
peace and security, develops friendly relations among
nations, cooperates in solving international problems
and promotes respects for human rights and is a center
for harmonizing the actions of nations.
United Nations
✓ The United Nations is considered as the world’s
leading international organization that has an
indispensable part of the global political arena.
✓ The United Nation Charter clearly spelled out the
following basic principles of International Relations;
1. To maintain international peace and security;
2. To develop friendly relations among nations;
3. To cooperate in solving International problems and in
promoting respect for human rights; and
4. To be a center for harmonizing the actions of nations.
Anti- Globalization Protests
✓ Anti- globalization protesters now turn up at
almost every major meeting of a global institution.
✓ Protesters fear that globalization is forever
changing the world in a negative way.
Ethics
1. Sarbanes Oxley Act – Protect Investors.
2. Utilitarian Approach – It strives to achieve the greatest
good for the greatest number.
3. Kantian Ethics – always respect humanity in others.
4. The Friedman Doctrine – Business Ethics – monetary
policy and quantity theory pf money became known as
monetarism.
5. Universal Declaration of Human Rights – rights and
freedom of individuals.
6. The righteous moralist
7. Ethical Dilemma
8. The naïve Immoralist
9. Ethical Strategy
International Trade
1. Exports and Imports – Export Management –
Balance of Payments Account – Current account Balance of Trade Equilibrium
2. Restrictions on Trade – Tariffs – Import Quotas –
Administrative Trade Policies
3. Free Trade Theories - Trade Creation
4. Counter Trade – Buybacks – Barter – Offset –
Switch Off – Counter Purchase
Religion and Globalism clash over the fact that religious
evangelization is in itself a form of globalization.
5 major religions
Judaism
1. Monotheism
2. Ten Commandments of moral and religious conduct
3. Torah: Written records and beliefs of the Jews
4. Founder: Abraham
1. Followers are called Jews
2. Believe that God made a covenant with
Abraham and his people (Israelites)
3. Adherents are worldwide, but most are in
Israel
4. Holy book is the Torah (= the first five books of
the Old Testament of Christian Bible)
5. Worship in a Synagogue Christianity
Christianity
1. Monotheism
2. Jesus as Son of God
3. Life after death
4. New Testament: Life and teachings of Jesus
5. Establishment of Christian doctrines by early church
councils
6. Worship in a church
7. Holy Book: Bible
Islam
1. Monotheism
2. Muslim name for their God is Allah
3. Muhammad, the prophet
4. Holy Book: Qur’an (Koran)
5. Mecca and Medina
6. Started his religion in Mecca, Saudi Arabia. This is the
holiest city in
7. Muslims worship in a mosque
8. Muslims must follow the Five Pillars of Islam:
a. Stating the Faith
b. Prayer 5 times/day facing Mecca
c. Charity to poor
d. Pilgrimage (Hajj)
e. Fast during Ramadan
Buddhism
1. Founder: Siddhartha Gautama (Buddha)
2. Four Noble Truths
3. Eightfold Path to Enlightenment
4. Spread of Buddhism from India to China and other
parts of Asia,
resulting from Asoka’s missionaries and their writings
5. Basic Tenets of Buddhism
a. The world is full of suffering
b. Meditation is our only escape
c. Nirvana is the ultimate goal
d. Follow the Eightfold Path
Hinduism
1. Many forms of one god
2. Reincarnation: Rebirth based upon karma
3. Karma: Knowledge that all thoughts and actions result
in future consequences.
Eightfold Path
1. Right Understanding
2. Right Thought
3. Right Speech
4. Right Action
5. Right Livelihood
6. Right Effort
7. Right Mindfulness
8. Right Concentration
Caste System
a. Good Karma
b. Ok Karma
c. Bad Karma
d. Untouchables
Hindu Gods
a. Vishnu
b. Shiva
c. Brahma