Global Financial Stability

Big emerging-market economies like Brazil and Thailand have learned that it is better, if you are going to take money from foreign lenders, to borrow from them only in your own currency. In a crisis, that may still leave the value of your currency in danger—as foreign investors sell out their stakes, you will likely suffer a devaluation—but at least part of the risk is then borne by the lender, and you can at least ensure you have enough local funds to service the debts The United States, United Kingdom, and European Union agreed at last year's United Nations climate conference to provide financial support to South Africa in the financial restructuring of Eskom, its ailing power utility. This was both an energy transition strategy and a way of relieving the pressure on the South African government account arising from its implicit responsibility for Eskom's debts. What 2022 has revealed is that the dollar system has the resilience and strength that it does because it is deeply entrenched and buttressed by both commercial and geopolitical interests Wall Street Consensus (Daniela Gabor): Highlights the role of investment bankers, fund managers, and their client borrowers in maintaining the dollar-based global financial network. In major crises this system becomes an overt public-private partnership secured from the top down by the liquidity swap lines extended by the Fed to the major central banks of Europe, Latin America, and Asia. In general, a strong U.S. economy promotes growth and secures the prosperity of American capital and the centrality of U.S. equity markets to global capital accumulation. It also, however, requires a tighter stance from U.S. monetary policy. Right now, it is the latter point that is critical. How severe the tension in the global economy becomes over the coming months will depend above all on how far the Fed's tightening goes, and that depends on how rapidly American inflation cools down. LECTURE 9. THE TEXTILE INDUSTRY. “The cotton business chases cheap”. The T-shirt represents many aspects of cotton’s history. It is universal, almost all of us own one. They are usually inexpensive and the ethics of its manufacture can be controversial. Early Cotton: Archeology and early history show cotton has grown and been used by people in both South and Central America since perhaps as early as 5000 B.C.E. 3000 B.C.E. It is grown and spun in both the Indus river valleys. In early Egypt they knew of cotton, but clothing made of linen was the norm. The spread of cotton to Europe: ● Europe and early Greece used clothing made of wool. ● Like silk, cotton made its way west through trade and war. ● Herodotus, an early Greek historian described cotton as “a wool exceeding in beauty and goodness that of sheep”. ● Alexander the Great invaded India to conquer, and his men found the cotton clothes of the conquered more comfortable than their own. They took things and a lot of what they took was cotton. They made their way back to Europe with all the benefits of the conquest and that fabric, then trade became a factor. By the middle ages cotton is in Europe: ● Muslim traders and later conquerors spread spinning and cotton use to Spain and Sicily. They brought the technology to spin cotton and create cotton fabric. It spread into Europe later. ● Columbus finds cotton in the Bahamas, which the natives are using for clothing and he is impressed by the colors. So he steals some and takes it back with him. ● By 1500, Cotton became more common in Europe. For the most part it was inexpensive. Begins to be grown in America: ● By the early 1610s cotton was being grown in Virginia. ● The Spanish had it grown in Florida even earlier. ● The slave economy in Virginia already existed with Tobacco expanded. To produce cotton and process it you require a large inexpensive workforce, so it means that the British in Virginia and eventually up and down the eastern seaboard introduced an extensive program of slavery. India is a major source of supply: ● For the most part India remained the major source of supply of cotton. It had a fully developed industry and the cotton grew well there. The secret of dying cotton: how to dye it, how to process it, etc. ● They supplied most of Europe in exchange for gold. In the 1600s and early 1700s India was the source of 95% of British cotton. ● Supply is limited by price and limited technology. ● Production is limited by cost, cost is always a limitation but it is also limited by technology, and technology changes the thing. BEIC and Cotton: The British East India Company began to import cotton in the 1690s. Calico, a brightly coloured version, became very popular. Wool and linen makers tried at all times successfully to keep it out. As the BEIC grew in power it was able to sell cotton back into India after processing it in England. The advent of colonial cotton in America and the Caribbean also led to an expansion of English cotton use and production. RESTRICTIONS: ● ● ● ● ● Cotton production was limited by a number of factors: Cotton had to be combed to remove the seeds or it went bad. Cotton needed to be spun into thread in order to be turned into cloth. Thread needed to be loomed to create the cotton fabric. All of these relied on manual labor or rudimentary technology. Industrialism changes everything: The Spinning Jenny: Spinning had been a “craft” taking a place on a wheel in workers' homes. Cotton was spun into thread. In 1764 James Hargreaves invented the Spinning Jenny, which could do 8 spindles at once. Thread was still a bit weak, but it was improving. Richard Akrwright: Richard Arkwright improved upon the concept of the spinning Jenny with his invention of the water frame in 1769. Arkwright added a water powered system which made a much stronger thread. This was required if industrial production was to be possible. One person could do the work of many. Suddenly all of the employment that was required to create cotton thread to fabric was gone and replaced by machines. In 1768, an angry mob destroyed Arkwright’s factory. The power loom: Reverend Edmund Cartwright patented the power loom in 1785, which was improved over the following years to allow faster weaving of more thread. By 1800, the introduction of steam power at each stage made massive productivity possible. The need for more cotton and the restriction created by the need to “comb” the cotton meant only slow increases in yield, even in the new American fields. The solution would be the cotton gin. Patented by Eli Whitney. Created a solution and was able to make people’s hours of work in only a few minutes. Results of the First Industrial Revolution in England: ● ● ● ● ● The first Industrial Revolution in England increased production levels. The cotton cloth output was 21 million yards in 1796. 347 million yards of cotton in 1830. This allowed Britain to dominate the world cotton industry for decades. In 1770, the cotton industry was worth around $600,000. By 1805, it had grown to $10,500,000 and by 1870, $38,800,000. By comparison, over the same hundred years, wool had increased in value from $7,000,000 to $25,400,000 and silk from $1,000,000 to $8,000,000. In Manchester alone, the number of cotton mills rose dramatically in a very short space of time: from 2 in 1790 to 66 in 1821. The work force: In England, children and women were prime sources of labor. It was inexpensive and compliant. The 1833 Factory Act banned children from working in textile factories under the age of nine. From nine to thirteen they were limited to nine hours a day and 48 hours a week. By the time you were fourteen, you were considered an adult. Regulations only work if you enforce them. Conclusion: Cotton facilitated the transition of England into the first industrial power. English technology allowed them to mass produce cotton fabric and gave them global control of this commodity. That strength allowed them to dominate the economies of countries like India. It created a powerful industrial economy and an expanded middle class, but at the expense of horrible working conditions for women and children. Also sustaining their economy by globalization of slavery and production of raw materials