Question

Using the Policy Trilemma framework, what are the similarities and differences between the Second and Third Globalizations?

A) The Second Globalization saw significant trade liberalization but limited capital mobility, while the Third Globalization emphasized both trade liberalization and capital mobility.

B) The Second Globalization emphasized currency stability and capital mobility, whereas the Third Globalization prioritized currency stability and trade liberalization.

C) The Second Globalization focused on financial stability and capital controls, while the Third Globalization emphasized financial stability and trade openness.

D) The Second Globalization prioritized currency stability and trade openness, while the Third Globalization emphasized currency stability and capital controls.

Answer 1

The Second Globalization was characterized by significant trade liberalization with limited capital mobility, while the Third Globalization emphasized both trade liberalization and increased capital mobility.

Step-by-step explanation:

Using the Policy Trilemma framework, we can differentiate the characteristics of the Second and Third Globalizations. During the Second Globalization, trade liberalization was significant, but capital mobility was limited due to various capital controls implemented by countries. However, the Third Globalization has been marked by an increased emphasis on both trade liberalization and capital mobility. This has led to deeper financial integration and the prevalence of floating exchange rate regimes, thereby increasing the influence of mobile capital owners and financial investors.