Chapter 10 Flashcards
Cartel
An international trading agreement among producers who hope to control the supply and price of a primary product.
Organization of Petroleum Exporting Countries (OPEC)
- A cartel established in 1960, designed to control/maintain the prices and supply of the oil market.
- Not always successful, struggled to maintain prices in the face of internal economic and political disputes.
- Over the years, oil prices have been more manipulated by war, tensions between countries, and simply the increasing demand for oil by an energy-addicted world.
- The United States is now the largest producer of oil in the world and is not a part of OPEC
Subsidies and their effects
- Countries give tax breaks, provide low-cost (energy and transportation), and offer other various forms of financial support to subsidize domestic producers, who then can lower the price they charge for their products.
- Subsidies effect one part of a country’s economy at the expenses in taxes and prices of the country’s citizenry and also at the expense of foreign competitors.
Tariffs
- Taxes imposed on foreign goods imported into a country.
- Primarily used to achieve economic ends such as the protection of domestic producers.
- Tariff rates are quite low relative to what they once were, but two qualifications are important:
1) Tariff rates for EDCs are generally much lower than those for LDCs, which they believe they need higher rates to protect their smaller industries from being overpowered by foreign competition.
2) Globally and for almost every country individually, the average tariff on agricultural products is much higher than it is on manufactured products.
Newly industrializing countries (NICs)
-The North and South categories are somewhat fluid and do not exactly match the dichotomy between the high-income countries and the low- and middle-income countries.
-Countries within the North that are not EDCs
Ex. Greece, Italy, Spain
-Countries within the South that are not LDCs
Ex. South Africa, Brazil, South Korea
-Countries are becoming much more competitive.
Neocolonialism
Indirect control continues to exist, with the powerfully economically developed (EDCs)of the North dominating and exploiting the less developed countries (LDCs) of the South.
G-77
The Group of 77 has grown to 130 member, and the organization includes all members with UN membership and serves as a vehicle for LDCs to discuss their needs and to press demands on the North.
Gap between North and South, EDCs and LDCs
-Most EDCs lie to the North in North America and Europe, and most LDCs lie to the South in Africa, Asia, and Central and South America
Trade differences
- Dominated by the North
- LDCs dependent on EDCs for export earnings
- LDCs rely on primary products
Investment differences
-Favors the North
Societal differences
- LLDCs (least developed countries)
- -Lower life expectancy
- -Lower literacy rate
- -Poor health
- -Less access to food, water, and sanitation services
Declining conditions is some LLDCs
-Vicious cycle of poverty or extreme poverty and deprivation
Sanctions
- A threatened penalty for disobeying a law or rule.
- Limited success rate but remain a regularly used tool.
Accomplish their goals when:
- Modest goal
- Target politically unstable and weak
- Sender and target friendly and trade with each other
- Imposed quickly and decisively
- Sender avoids high cost to itself
Dependency theory
- Holds that underdevelopment and poverty in the LDCs is the result of exploitation by the EDCs.
- Focus on nationalist efforts and do not believe that the workers of the world would unite if freed of their respective bourgeoisie masters.
- Contend that the EDCs exploitation of the LDCs is driven by the EDCs need for cheap primary products (such as oil), large external markets for the EDCs expensive manufactured goods profitable investment opportunities and low-wage labor.
Protectionism
Using tariffs or nontariff barriers such as quotas or subsidies to protect a domestic economic sector from competition from imported goods or services.
