Week 4

Seminar 1 – Case studies from

geopolitics and geoeconomics
GYÖRGY László PhD
ELTE
Content

▪ Thought-provoking videos about

geopolitics and geoeconomics
▪ Questions after each video and
article (taking notes is
recommended)
▪ Discuss the topics
About power – in six minutes
Thought-provoking questions

▪ Which is the best, strongest type, source

of power?

▪ Which form of power can be converted

into which other forms of power?
Confessions of an economic hit man – Interview
Questions: Confessions of an economic hit man – Interview

Why couldn't poor countries really benefit from IMF and World Bank loans, according to
John Perkins?
▪ In reality, the majority of the money went to US companies that built very expensive infrastructure in these poor
countries. These projects did not actually help the nation to prosper, but rather made them more indebted.

What are the main conditions that the U.S. requires from these countries to restructure their
loans?
▪ privatisation of public sector businesses, selling natural resources at low prices, voting with the U.S. on next UN
summit, allowing the U.S. to build miitary bases in its territory etc.

According to Perkins, why do many poor countries turn to China for help rather than the
United States?
▪ These countries have become disillusioned with the United States because they were still exploited by the US
after the end of the Soviet Union and could not benefit from global capitalism.

How is corruption legally embedded in American politics according to Perkins?

▪ Legal forms of corruption enter US government through campaign contributions from corporations, and some
companies also offer highly lucrative "consulting" and lobbying jobs to people in high office when they leave
government.

Why has it become harder for the US to exploit poor countries and maximize corporate
profits according to Perkins?
▪ With the rise of China, the process has become much more difficult, because now two superpowers are again
competing for poor countries.
Thought-provoking question: Do you think the United States is the only
country that still uses this kind of approach for poor countries?

Source: The World Bank data was retrieved from WB IDS API and assembled by David Mihalyi and Balint Parragi.
https://knoema.com/infographics/vsnfkkg/china-has-become-the-developing-world-s-largest-creditor
The Middle Corridor to revolutionize Europe and Asia
Questions: The Middle Corridor to revolutionize Europe and Asia

Which countries and sea are involved in China's Middle Corridor plan?
▪ Kazakhstan, Kyrgyzstan, Uzbekistan, Turkmenistan the Caspian Sea, Azerbaijan, Georgia and
Turkey.
What is Turkey's plan for the Chinese Belt and Road Initiative?
▪ Turkey plans to harmonize its infrastructure development with the BRI along a shared path (for
example Baku Tibilisi railway. Ankara's plan is to become a hub for containerised freight between
China and the European Union.
Why is this corridor so important for Beijing?
▪ Diversification of trade routes is essential for Beijing, as the Malacca Strait and the route through
Russia have become uncertain due to geopolitical tensions. Now the safest (and shortest) route is the
overland route via Central Asia.
What is the Southern Gas Corridor (SGC)? What is the plan with it?
▪ A gas pipeline started from Azerbaijan through Georgia, Turkey, Greece and Albania to Italy. In July
2022, Baku and Brussels agreed to double Azerbaijan's gas capacity by 2027.
How has the Russian-Ukrainian war affected the middle corridor?
▪ Since the invasion, the central corridor has taken one third of the trade of the northern (Russian)
corridor, and output is expected to increase sixfold in 2022 compared to 2021.

Thought-provoking question: Which countries do you think are most interested in

creating a central corridor and which are not? Can this corridor reshape the Chinese-
European trade?
USA vs China, the new global economy
 USA vs China, the new global economy
What were the consequences of globalisation for China and for the US?
• In china globalisation resulted in millions of people being lifted out of poverty but in developed countries like the US it was causing economic pain due to the shift of manufacturing jobs.

What „invention” made globalisation possible and how?

• Globalization was driven by economic policies that created a global marketplace, facilitated by technological advancements that enabled cross-border information sharing, financial
transactions, and cooperation between millions of people and goods by establishing rules that countries and people promised to keep.

How countries are introducing protectionist measures, give some examples.

Countries worldwide are reversing globalization by implementing protectionist policies. India is incentivizing domestic production in key industries like pharmaceuticals and electronics.
• South Korea is providing taxpayer money for green energy infrastructure production.
• Japan is offering financial incentives for companies to relocate production back to Japan and move supply chains away from China.
• Australia encourage domestic processing of rare-earth minerals.
• Nigeria is restricting foreign goods to promote domestic production of items like rice and cement.
• European countries are investing government money and protecting domestic industries in sectors like energy, agriculture, and cars.

What was the expectation about China in the 1970’s and what is the reality nowadays?
• The expectation was that free trade will lead China towards demoratization, instead, China's rapid economic growth and military expansion have challenged the United States' dominance
in the global economic order.

In what was does the US changing its economic policy to reduce free trade?
government spending bills like the CHIPS Act, Subsidies are provided to vital industries such as critical minerals, cars, and clean energy, Tariffs are imposed on imports to protect domestic
producers from global market competition, Restrictions are placed on American companies selling certain products to China, Increased scrutiny is applied to investments from countries like
China.

What are the four factors that drive the shift in economic policy in the US?
protecting workers, addressing climate change, strengthening supply chains, and countering China's rise.
Thought-provoking question: Protectionist trade policies will bridge or widen the
economic inequality gap between developed and developing countries?
The economies that benefit from the fracturing globalisation
 The economies that benefit from the fracturing globalisation

What events led to the rethinkhing of globalisation?

• Brexit, the election of Donald Trump, US-China trade war, the COVID-19 pandemic, middle eastern conflicts and the Russia-Ukraine war

What impact would a full fractruing of the global economy have?

• It would eliminate 7% of the global GDP, which is equivalent of the French and German economies combined

What are the connector economies and who are they?

• Connector economies, such as Vietnam, Poland, Indonesia, and Mexico, are navigating the geopolitical divide by attracting factories
from both the US and China and taking advantage of their neutrality.

What is nearshoring, can you tell other countries than Mexico where nearshoring is prominent?
• Nearshoring is the practice of moving business operations to nearby countries to save costs and improve logistics, benefiting from
closer proximity cultural and ideological similarities.
• Examples – Germany  V4 countries, France  Morocco, Tunisia, Australia  New Zealand
 Thought-provoking questions

Should connector states prioritize

regional alliances over global ones to
enhance their strategic positioning
and economic benefits?

Can connector states effectively

bridge the gap between competing
superpowers, or do they risk
becoming battlegrounds for
influence?
The US Inflation Reduction Act (IRA) & international response
Questions: The US Inflation Reduction Act (IRA) & international response incl the EU
Green Deal Industrial Plan
What are the main objectives of the Inflation Reduction Act (IRA) and what is its estimated budget?
▪ Reduce US net greenhouse gas emissions by 40% compared to 2003 levels by 2030. The estimated budget is $369 billion. It is expected to lead to an
economic boost of nearly one percent of GDP by 2030.

What will these investments result in according to the IRA guidebook?

▪ These investments will reduce energy costs for families and small businesses, accelerate private investment in clean energy solutions across all sectors of the
economy and in all corners of the country, strengthen supply chains from critical minerals to efficient electrical appliances, create good-paying jobs and new
economic opportunities. The Act will strengthen the US position in global competition with China, particularly in the manufacture of electric vehicles and other
green industries.

What is the EU countries' problem with the IRA?

▪ EU countries are worried about losing competitiveness, especially in the EV industry: the EV consumers in US can earn tax breaks of 7500 USD but only if the
vehicle final assembly is in North America where at least half of the value of the vehicle battery components are also manufactured in US. Some of other
subsidies such as aggressive solar manufacturing and hydrogen incentives are available only to American firms.

What does this act encourage international manufacturers to do? Can you give examples?
▪ Some manufacturers plan to open new facilities or relocate existing facilities to the United States in order to benefit from the provisions of the bill. We are
already seeing announcements from large corporates about reducing their workforce in Europe and moving jobs to the US: In February 2023, Ford announced
that it would cut nearly 4,000 jobs in Europe, mainly in Germany and the UK, and create 2500 jobs in battery manufacturing in the US.

What are the four pillars of the EU’s Green Deal Industrial Plan?
1. predictable and simplified regulatory environment. (Net Zero Industry Act, Critical Raw Materials Act, Reform of the electricity market design)
2. faster access to funding (REPowerEU, InvestEU, the Innovation Fund and proposed European Sovereignty Fund)
3. enhancing skills (Net-Zero Industrial Academies, combined with measures to facilitate third-country nationals' access to EU labour markets and priority sectors,
and the underlying private financing of skills development.)
4. open trade for resilient supply chains (free trade agreements, critical raw materials club, clean tech/net-zero industrial partnerships)
Thought-provoking questions

▪ What is the real long-term goal with building independent US green industries?
▪ Why is it more difficult for the EU to pass and universally apply a legal act like the IRA?
▪ Can the EU build its own green industry and become self-sufficient in green products?
Who controls the world?
Thought-provoking questions

▪ What risks do the results pose to the world economy?

▪ What does network control mean?
▪ Can economic and political power be separated?
▪ Let’s give an example of a large company that has more revenue than a state!
▪ Does this mean that this company also has more power than the state?
▪ What can a global corporation do, and the state cannot?
▪ What can the state do, and the global corporation cannot?
Thank you for your attention
GYÖRGY László PhD