Test: Political Economy of IR - UGC NET MCQ

Understanding the Definition of Globalisation

• Globalisation Definition by OECD: The Organisation for Economic Co-operation and Development (OECD) defined globalisation in 1995 as a transformation from separate national economies to a global economy where production is globalized, and financial capital moves freely between nations.

Globalisation, as per OECD, signifies the integration and interconnectedness of economies worldwide, enabling the international movement of goods, services, and capital.

Example of Globalisation

• Technology Sector: The technology industry exemplifies globalisation, with companies like Apple and Samsung producing goods in various countries, selling them globally, and accessing capital markets worldwide.

This example illustrates how globalisation facilitates the exchange of products and services on a global scale, impacting economies and businesses across borders.

• Bretton Woods System
  • A basic economic structure of the world was established by the US after the Second World War.
  • It was the first system to regulate the exchange rate of currencies between countries, requiring each country to maintain a monetary policy that kept its currency's exchange rate within a predetermined range in terms of gold.
• Sea Lanes of Communication (SLOCs)
  • It represents the naval power of hegemony that upholds the law of the sea and ensures freedom of navigation in international waters.
  • These sea routes are commonly used by merchant ships for trade and transportation.
• Bandwagon Strategy
  • It involves extracting benefits by aligning with the existing hegemonic system instead of opposing it.
  • This strategy aims to gain advantages in terms of bilateral trade, investment, and technology transfer to enhance one's own power.
• Guantanamo
  • It refers to a naval base in Cuba that was established by the US.
  • At Guantanamo, prisoners are often denied the protection of international law or the laws of their own country or of the US.
• Therefore, the correct answer is 1-A, 2-B, 3-C, 4-D.

The Concept of Globalisation

• Definition: Globalisation involves the exchange of goods, services, people, capital, and information across national boundaries.
• Key Points:
  • According to WHO, globalisation can be described as the increased interconnectedness and interdependence of peoples and countries.
  • It encompasses the opening of international borders to fast flows of goods, services, finance, people, and ideas, along with changes in institutions and policies at national and international levels facilitating such flows.
  • Globalisation is a free movement of various elements across borders, making Option 4 the most suitable choice.
  • It signifies a process through which activities or undertakings attain a global scope.
  • Globalisation integrates the world into one market, affecting economic, cultural, political, and environmental dimensions.
  • It impacts economies by influencing various aspects such as culture, politics, and the environment.
  • It involves interactions and integration among people, companies, and governments of different nations through trade and investments, impacting various aspects of societies globally.

The correct answer is 1, 2 and 3 only

• South-South Cooperation:
  • South-South cooperation refers to the technical cooperation among developing countries in the Global South. This means that developing countries in regions like Africa, Asia, and Latin America collaborate with each other to share knowledge and expertise, without the involvement of developed nations. Therefore, statement 1 is correct.
  • It is a tool used by various entities such as states, international organizations, academics, civil society, and the private sector to collaborate and share knowledge, skills, and successful initiatives in specific areas like agricultural development, human rights, urbanization, health, and climate change. This cooperation aims to address common challenges faced by developing countries. Hence, statement 3 is correct.
  • India has been a strong advocate of South-South Cooperation and has actively supported many African nations to resist the dominance of developed countries. By engaging in such cooperation, India has strengthened its ties with other developing nations and promoted mutual development. Therefore, statement 2 is also correct.
• North-South Cooperation:
  • The division of “North” and “South” is used to describe the social, economic, and political gaps between developed countries (North) and developing countries (South). This cooperation involves aid, trade, and various forms of support from developed nations to developing nations to address issues like poverty, infrastructure development, and healthcare.

• Group of Seven (G7)
  • It is an intergovernmental organisation that was formed in 1975. Hence, statement 1 is correct.
  • The bloc meets annually to discuss issues of common interest like global economic governance, international security, and energy policy. Hence, statement 2 is correct.
  • The G7 countries are the UK, Canada, France, Germany, Italy, Japan, and the US. Hence, statement 3 is correct.
  • All the G7 countries and India are a part of the G20.
  • The G7 does not have a formal constitution or a fixed headquarters. The decisions taken by leaders during annual summits are non-binding.
  • The recent meeting of G7 countries was attended by India as a guest country. Hence, statement 4 is correct.
  • The meeting provided a template for Indian engagement with the West based on shared democratic values and mutual cooperation.
  • A joint statement on Open Societies was adopted. The statement reaffirms and encourages the values of freedom of expression, both online and offline.
  • It recognizes freedom as a virtue for safeguarding democracy and allowing people to live free from fear and oppression.

Understanding Pacific Pumas

• Pacific Pumas Definition: Pacific Pumas is a political and economic grouping of countries along Latin America's Pacific coast. These countries share common trends of positive growth, stable macroeconomic foundations, improved governance, and an openness to global integration.

The Correct Answer

The correct answer is 1 only.

In News

• Recent Events: Peru's fifth president in five years, Manuel Merino, was forced out of power after just five days due to massive protests in the country.

Important Points

• Geographical Information: Peru is a country located in western South America.
• Location: It is bordered by Ecuador, Colombia, Brazil, Bolivia, Chile, and the Pacific Ocean.
• Diversity: Peru is a megadiverse country with various habitats, including the Andes mountains and the Amazon Basin rainforest.
• Relation to Pacific Pumas: Peru is a part of The Pacific Pumas, sharing characteristics of positive growth and global integration.
• Capital: The capital of Peru is Lima.

Analysis of Challenges in the Global Economy for Emerging Economies

• Effect of Increase in U.S. Federal Reserve Interest Rates:
  • If the Federal interest rate in the USA rises, it leads to a scenario where U.S. citizens tend to save more and spend less, resulting in decreased investments in countries like India in terms of Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI).
  • This increase in savings by U.S. citizens leads to a reduced flow of dollars in international markets, causing the value of the dollar to appreciate against other currencies, including the Indian Rupee. Consequently, the Rupee depreciates in value against the dollar, impacting the economy of emerging countries like India negatively.
• Impact of Uncertainty in Prices of Commodities such as Crude Oil:
  • International crises affecting the supply of crude oil can result in a scarcity of oil in the market, leading to a surge in crude oil prices within India.
  • Emerging economies like India heavily reliant on imports of crude oil will have to allocate more foreign reserves to purchase oil at elevated prices, thereby affecting their economic growth adversely.
• Consequences of Retreat from Globalization and Increasing Protectionism:
  • Retreating from globalization and adopting protectionist measures may signify a move towards a closed economy, limiting international trade and financial transactions.
  • Such protectionist policies hinder the free flow of goods and services across borders, impacting economies like India negatively by restricting market access and potentially leading to trade wars.

Understanding the Agencies of Globalization

• Multinational Corporations (MNCs): MNCs play a significant role in globalization by facilitating cross-border flows of goods and services. They also collaborate with local producers to integrate markets globally, fostering investments and enhancing international trade.
• Nation-State: The nation-state is compelled to align its domestic agendas with the global economic, social, and political landscape under the influence of globalization.
• Media: Media serves as a vital agent of globalization, facilitating the exchange of information and culture across different regions. It acts as a medium through which global interactions and connectivity are established.
• Market: Globalization is closely linked to open markets, promoting international trade, capital mobility, and human resource movement. This environment encourages the emergence of multinational corporations and fosters global economic integration.

Key Points about Globalization

• Globalization is driven by increasing cross-border flows of goods, services, money, people, information, and culture.
• MNCs are key players in globalization, enhancing international ties through market integration and trade promotion.
• The nation-state must adapt its policies to align with global economic dynamics.
• Media plays a crucial role in global interactions, facilitating the exchange of information and fostering global connectivity.

Additional Insights on Globalization

• Immanuel Wallerstein defines globalization as the triumph of a capitalist world economy interconnected through a global division of labor.
• Anthony Giddens views globalization as a state of interdependence among individuals, groups, and nations in a globalized world.
• Roland Robertson defines globalization as the compression of the world and an intensification of global consciousness.

The Most Disruptive Event in the Bretton Woods System

• The suspension of convertibility of dollar into gold in 1971:
  • The suspension of the convertibility of the U.S. dollar into gold in 1971 was a crucial event that led to the disruption of the Bretton Woods system.
• Key Points:
  1. The Bretton Woods system, established in 1944, aimed to create a stable international monetary system with fixed exchange rates tied to the U.S. dollar, backed by gold.
  2. Countries agreed to maintain their currency values within a narrow band against the U.S. dollar and intervene in foreign exchange markets to stabilize their currencies under this system.
  3. Due to economic pressures and rising inflation in the United States, the U.S. government found it challenging to uphold the fixed exchange rate and redeem dollars for gold at the promised rate.
  4. President Richard Nixon's decision to suspend the dollar's convertibility into gold on August 15, 1971, marked the end of the gold-backed system and a significant departure from the Bretton Woods framework.