U.S. political and economic influence in Latin America grew and the U.S. government proudly proclaimed its hegemonic position in the early twentieth century. The U.S. adopted the Roosevelt corollary to the Monroe Doctrine as a response to the specter of European intervention and to Latin America’s inability to get its economic and political affairs in order. Espousing a moral obligation to bring democracy to the rest of the world, President Wilson sent U.S. troops to occupy several countries. This combination meant that hegemony and “democratic promotion” were one and the same. With U.S. businesses demonstrating greater interest in the entire region, the dollar diplomacy era saw U.S. investors and troops move ceaselessly, as diplomacy and money worked closely together. Only with Franklin D. Roosevelt’s enunciation of the Good Neighbor Policy did the United States assert the integrity and sovereignty of Latin American countries. By the end of World War II, however, the Good Neighbor Policy would be largely discarded, replaced by the exigencies of the Cold War.

This chapter describes the impacts of space weather on technological systems including satellites, radio communication, and ground systems such as power grids. It provides an overview of different satellite orbits and the physics that determines their orbital periods and velocities. Impacts of space weather on orbital lifetime due to atmospheric drag are discussed as are the variety of radiation impacts on satellites through total ionizing dose (TID) and single-event effects (SEE). A variety of radio communication impacts on high-frequency (HF) systems and microwave systems used by global navigation systems (such as GPS) are described. Supplements introduce the field and approach of systems engineering to tackle large complex problems and projects.

Chapter 1 provides a brief overview of the current state of international economic affairs. Before starting to analyze how the current economic interactions can be better understood, it is useful to provide a brief, nontechnical overview of the long-run developments of the world economy, which is done under the term “globalization.”1 Section 5.2 shows that there are different types of globalization and that the term is interpreted in different ways by different people. This book will focus on economic globalization. Sections 5.3 and 5.4 then provide an overview of “recent” history by analyzing the development of global trade and income flows since 1960, both in total and per capita. Most of the remainder of this chapter focuses on “long-run” history. First, by providing an overview of the developments of income per capita over a 2,000-year period (section 5.5). Second, by discussing globalization in history and the two waves of globalization for trade flows (section 5.6). Third, by analyzing the role of the price wedge in globalization for trade flows (section 5.7) and for capital and migration flows, both with their own waves of globalization (section 5.8). Section 5.9 concludes. Note that the link between globalization and income inequality is analyzed in Chapter 10.

Chapters 1, 3, 4, and 5 already indicated several times that countries that are relatively open to influences from the outside world tend to benefit in the economic development process. This chapter focuses on one particular aspect of open-ness,1 namely through the flow of international trade in goods and services. Other aspects of open-ness are discussed in other chapters; for migration, see Chapter 3, for investment, see Chapters 7, 9, and 17, and for ideas, see Chapters 7, 8, 16, and 18. This chapter focuses on three main aspects. First, it provides information on the size and direction of international trade flows. Second, it explains the underlying reasons for these flows, based on market size, love-of-variety, heterogeneous firms, and differences in technology and factor abundance. Third, it highlights the benefits from trade flows, the so-called gains-from-trade, associated with the underlying reasons for these trade flows.

The chapter describes the physical properties and important processes of the Sun’s interior, surface, and atmosphere including the physics of heat transfer and electromagnetic radiation. The different features of each of the main solar regions (core, radiative zone, convective zone, photosphere, chromosphere, and corona) are described and illustrated. The learning tool called concept mapping is described and used to highlight how to frame ideas, physical concepts, and systems into a graphical organizational manner to help assess understanding.

The balance of payments accounts capture money flows between residents of an economy and non-residents. Major components of the balance of payments are: the current account encompassing trade in goods and services, factor incomes, and cash transfers; the capital and financial account capturing the transfer of assets and liabilities; and the official settlement balance reflecting purchase and sale of foreign reserves by the central bank. In principle, the balance of payments must balance, meaning a surplus in one component of the accounts must be matched by a deficit elsewhere. In practice, gaps, which can be sizable, are ascribed to a fourth component of the accounts given as net errors and omissions. The record of recent decades shows Emerging East Asia running large balance of payments surpluses offset by substantial reserve accumulation by the region’s central banks. China’s balance of payments surpluses and reserve accumulation have been particularly enormous in absolute terms, but sudden reversals in central bank flows have also been sizable indicating a large buffer of reserves is warranted.

Chapter 1 already demonstrated that there are big differences between countries in terms of income per capita. Figure 7.1 provides an indication of how big those differences really are using a logarithmic scale for 191 countries, together accounting for more than 97 percent of the world population. The population-weighted average income level is $16,672. This ranges from a low of $754 for Burundi to a high of $120,376 for Macao. The average income level in Qatar is thus 160 times higher than in Burundi. Macao has a small population (about 0.6 million people) and is the casino capital of China. There are also large differences, however, for countries with large populations that do not depend on a single economic activity for generating their income. The USA is the richest sizeable country in terms of population (about 328 million people). It has a per capita income level of $62,513; this is 83 times as much as Burundi (12 million people), 28 times as much as Ethiopia (112 million people), 13 times as much as Nigeria (201 million people), nine times as much as India (1,366 million people), and more than four times as much as China (1,397 million people). This chapter explains to some extent the main causes of these big differences.

As the above quotes indicate, mankind has emphasized the importance of education for long-run economic development and prosperity for a long time. The return on investment in education, which includes knowledge spillovers, is high and important for development (see Chapter 7). It is thus painful to realize that even in the year 2020 there are still about 260 million out-of-school children and adolescents worldwide, mostly in developing nations (see section 13.9). As our life span has expanded (see Chapter 14), so has the time we spend learning at school. The rising complexity of today’s society requires us to master new and more complicated skills. It is essential to learn the basic skills associated with completing primary education. For most tasks, it becomes ever-more important to acquire more advanced skills associated with completing secondary education. For an expanding range of more complicated tasks the skills associated with completing tertiary education are required. This chapter evaluates these requirements and their relationship with economic development, taking the quality of education into consideration. It also analyzes and evaluates how the teaching process works in more detail, through learning effects, peer effects, target level, and teacher effort. A well-functioning school system using motivated and well-educated teachers is essential for development in all nations.

Macroeconomic stabilization in emerging economies calls for managing both internal and external balance within a policy space constrained by global capital flows and debt sustainability pressures. Emerging East Asia has crafted an approach to meeting this challenge that involves the exchange rate as policy instrument. But while the economics of the system have proven effective, the politics can run afoul of US strictures on "currency manipulation". This is a source of ongoing tension. Viewing East Asian exchange rate policy through the framework of this text, the macroeconomic motivation for the policy behavior is clear. And motivation is determinative for establishing "currency manipulation" under IMF rules. Advantaging exports through a depressed currency is a side effect of, not the motivation for, accumulating foreign reserves to back exchange rate stabilization. A broad pattern of leaning against currency volatility through both buying and selling of foreign exchange is evident in Emerging East Asia. Countries elsewhere would do well to learn from this model.

It is hard to overstate the importance of agriculture in economic development. If one takes a long-term view, the gradual change from hunter-gatherer societies to sedentary food production created a food surplus and enabled people to spend time on other activities than the daily hunt for food. This extra time could be used for innovation in the agricultural sector itself, but also for other activities.

Money is created by the banking system issuing liabilities against itself. Under a fiat money system, nothing of intrinsic value backs the money supply. Viability of the system depends on shared faith. Central banks issue liabilities in the form of currency and deposits held by commercial banks in exchange for acquiring assets in the form of domestic government securities, foreign securities, or loans to commercial banks. These central bank liabilities constitute the monetary base. Commercial banks issue liabilities in the form of demand deposits held by the public in exchange for making loans. Commercial banks are constrained in money creation by the need to hold reserves with the central bank at a required ratio relative to demand deposits. The central bank must manage growth in the monetary base to maintain economic balance: too slow keeps the economy from performing at its potential while too fast causes inflation to rear up. To keep the economy on an even course, the monetarist school, led by Milton Friedman, advocates steady growth in the money supply. A pattern of inflation falling with slowing money growth shows up for Emerging East Asia between the 1990s and the 2000s.