Government Intervention in Globalization: Regulation, Trade and Devaluation Wars

225 Pages·2008·1.337 MB·English

by  Carlos M. Peláez, Carlos A. Peláez (auth.)

Government Intervention in Globalization
Also by Carlos M. Peláez and Carlos A. Peláez
INTERNATIONAL FINANCIAL ARCHITECTURE: G7, IMF, BIS, Debtors and
Creditors
THE GLOBAL RECESSION RISK: Dollar Devaluation and the World Economy
Government Intervention
in Globalization
Regulation, Trade and
Devaluation Wars
Carlos M. Peláez
and
Carlos A. Peláez
© Carlos M. Peláez and Carlos A. Peláez 2008
Softcover reprint of the hardcover 1st edition 2008 978-0-230-22221-2
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this work in accordance with the Copyright, Designs and Patents Act 1988.
First published 2008 by
PALGRAVE MACMILLAN
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registered in England, company number 785998, of Houndmills, Basingstoke,
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Palgrave Macmillan in the US is a division of St Martin's Press LLC,
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Palgrave Macmillan is the global academic imprint of the above companies
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Palgrave® and Macmillan® are registered trademarks in the United States,
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ISBN 978-1-349-30776-0 ISBN 978-0-230-22834-4 (eBook)
DOI 10.1057/9780230228344
This book is printed on paper suitable for recycling and made from fully
managed and sustained forest sources. Logging, pulping and manufacturing
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A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Peláez, Carlos Manuel.
Government intervention in globalization : regulation, trade and
devaluation wars / Carlos M. Peláez, Carlos A. Peláez.
p. cm.
Includes bibliographical references and index.
1. Commercial policy. 2. Globalization – Economic aspects.
3. Financial institutions, International. 4. International business
enterprises. I. Peláez, Carlos A., 1976– II. Title.
HF1359.P426 2008
337—dc22 2008030688
10 9 8 7 6 5 4 3 2 1
17 16 15 14 13 12 11 10 09 08
To Magnolia and Penelope
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Contents
List of Illustrations xi
List of Abbreviations xiii
Acknowledgments xvi
Introduction, Scope and Content 1
1 The World Economy, Prosperity and Conflicts 13
Introduction 13
The world economy 13
The causes of prosperity 14
Institutions 17
Historical reversals of globalization 18
The human face 19
Taxation 21
Financial globalization 22
Economic development 23
Summary 24
2 International Official Institutions 25
Introduction 25
The G7 and the G10 26
The international financial institutions 26
The IMF 27
The World Bank 28
The BIS 29
The multilateral development banks 30
The WTO 31
The central banks 31
The Federal Reserve System and US regulators
and supervisors 33
The European Central Bank 35
The Bank of Japan 36
The Bank of England 36
The UN 37
Summary 38
Appendix: open market operations in practice 38
vii
viii Contents
3 Banks and Capital Markets 40
Introduction 40
Commercial banks 40
Investment banks 44
Governance and exit 46
M&A 47
Leveraged buyouts 48
Hedge funds 49
Private equity 50
Summary 52
Appendix: security prices, yields
and hedges 52
4 Risk Management and World Trade,
Investment and Finance 57
Introduction 57
Risk management 57
Value at risk 61
Credit-risk models 61
Stress tests 63
World trade 64
Financial flows and FX 66
FDI, equities, securities and derivatives 68
Summary 70
Appendix: financial risk 70
5 The Theory of the State 75
Introduction 75
The first best of efficiency and satisfaction 75
The theory of second best 77
The public interest view 78
Public goods 79
Imperfect information 79
Government failure 80
Transaction costs and property rights 81
The new institutional economics 83
The economic theory of regulation 84
Rent-seeking and public choice 85
The view of disclosure and regulation 86
Applied welfare economics 87
Summary 87
Contents ix
6 International Trade of Goods and Services 89
Introduction 89
The gains from trade 89
Distortions 92
Trade openness 93
The political economy of trade 93
Antidumping and safeguards 95
Trade and employment 97
Trade and wages 98
Offshore employment 101
Summary 101
7 Trade Agreements 103
Introduction 103
Characteristics of trade agreements 103
Economic wellbeing and trade agreements 105
The European Union 106
NAFTA 109
APEC 110
ASEAN 111
MERCOSUR 113
OPEC 114
Summary 115
8 Poverty, the Environment and Climate Change 116
Introduction 116
Poverty and inequality 116
Regional, international and global public goods 120
The environment 121
Climate change 123
The HM Treasury review 123
The UN IPCC 124
The economics of climate change 125
Summary 126
9 Financial Globalization 128
Introduction 128
The role of finance in growth and efficiency 128
Financial repression and restraint 131
Financial globalization 134
Capital account liberalization 137
Financial crises 141
Summary 144