Int'l Political Economy (unit 1)

Post-WWII period of Realism

"Low politics" that weren't as worthy of attention and focused exclusively on security issues (ex: Cold War).

Regime Theory

"sets of implicit or explicit principles, norms, rules and decision-making procedures around which actor expectations converge in a given area of IR" (Stephan D. Krasner). Argues that international institutions or regimes affect the behavior of states (or other international actors). Assumes that cooperation is possible in the anarchic system of states, as regimes are by definition instances of international cooperation.

The North's role in global economy had 3 characteristics...

1) U.S. as the most powerful single state hegemony. Led to a triad of North America, West EU and East Asia. 2) DC-led triad is responsible for largest shares of int'l transaction; 3) Triads conduct most of int'l transactions among each other.

MNCs account for how much of total world exports of goods and services?

1/3rd.

IBRD (World Bank)

188 members that provide long-term loans for post-war reconstruction in Europe and economic development in LDCs. Vital source of financial and technical assistance to developing countries across the globe.

Organization for Economic Cooperation and Development (OECD)

1961 organization with 30 D.C. members and 2/3rds of the world's goods/services. Committed to liberalizing international transactions through globalization efforts.

Bretton Woods Conference (1944)

44 countries met and designed a liberal institutional framework of the post-war global economy. Under U.S. leadership, the North developed liberal institutionalism ideas. Conference designed to regulate international monetary and financial order.

Disproportionates of Marxism

Absolute poverty of working class (under-consumption) + surplus production + economic downturn = accumulation of capital and concentration of wealth + social revolution.

How did the U.S. surpass Britain and become a new hegemony?

Banks and the state helped promote U.S. productivity through investment in industrial production and infrastructure; infant industries grew through protectionist policies which limited imports.

Who became the first state to industrialize in 1780?

Britain (became a hegemony).

3 eras of dependence...

Colonial, Financial-industrial, and Contemporary.

In the cycle of why the revolution hadn't occurred yet...

Competition among capitalist states --> Interimperialist war + downfall of capitalism.

What revived Realist perspectives in the 1970s-80s?

Decline of Cold War and disarray in global econ (OPEC prices increased, decline of U.S. hegemony and foreign debt crisis). A need to bring back states ("Keynesian Revolution") with declination of colonialism. Newly independent states led to growing int'l competition while pressure came on states to promote industry and technology.

What can subsidies do in foreign trade?

Enables workmen to undersell and supplant all competitors in the countries to which those commodities are sent.

Inter-war period of Realism

Extreme protectionism existed with high tariffs and competitive devaluation and nationalism (ex: Fascism).

3 major themes of Regime Theory

Formation, Maintenance, and Results.

What kinds of policies did the U.S. adopt over inter-war period?

Free trade and protective policies. U.S. wanted Britain and France to repay war debts and imposed import barriers, which made it difficult for European revenue from exports.

Critique of Dependency Theory

Fuzzy concepts; exploits not in forms of capitalism alone. Dependency and overemphasis on LDCs. Some LDCs respond differently and inadequately. Marxism is a central problem to private control of means of production since it affects class relations.

Why did U.S. tariffs rise during inter-war periods despite growing economic power?

Harmonized sales tax (HST) and lack of leadership in the economy. Domestic politics from Congress to constituent demands for protectionism. Reciprocal Trade Agreement Act occurred.

Realist critique on Prisoner's Dilemma

IOs serve interests of the most powerful states and those with relative gain concerns. Institutions promote cooperation only if member gains are balanced and equitable.

General Agreement on Tariffs and Trade (GATT)

Prequel to the WTO. Lowered tariffs in multi-lateral negotiations and established rules for conducting int'l trade. Settles trade disputes through procedures.

Dialectical process of Marxism

Primitive communism --> Slavery --> Feudalism --> Capitalism --> Socialism --> Pure Communism.

Two advocates of Neo-Mercantilist theory included...

Robert Gilpin and Stephen Krasner.

What did EU countries do in response to the Smoot-Hawley Act?

They also increased their tariffs and made world trade drop significantly.

In the interest of IPE, states tend to move from...

a Pareto-deficient to a Pareto-optimal outcome.

A decline in British hegemony occurred due to...

a decrease in productivity relative to the U.S. and Germany and was accompanied with U.S. rise as the world's largest industrial power and only major net creditor pre-WWI.

Tenets of Liberalism

actors include individuals, markets, firms, non-state actors and the state. Positive-sum games with mutual benefits. Socially beneficial equilibrium and optimum use of scarce resources. Sees politics and economy as separate and autonomous areas. Int'l economy functions best if it depends mostly on price mechanisms and the market. Globalization built by technology, change, market forces and int'l institutions. Gov't couldn't stop G process and makes things costlier. Sees demise of the state under globalization and constrains role of state to compete and cooperate w/ other actors.

Hegemonic Stability Theory (HST)

asserts that the int'l economic system is most likely to be open and stable when a dominant or hegemonic state is willing and able to provide leadership, and when other major states believe the hegemony has beneficial policies and can follow in suite.

John Maynard Keynes

believed in Interventionist Liberalism. States should intervene in the economy; a market-generated equilibrium might occur where labor and capital are under-utilized. A solution is to have gov't implement fiscal and monetary policies to increase demand. Public projects to combat unemployment and intervention by gov't helps to rescue and revitalize society rather than replace capitalism.

Friedrich Hayek, Mises, and Friedman

believed in Neo-Liberalism. Criticized IL and favored competition in markets, allocation of resources and strict separation among politics and economics.

Thatcher and Reagan

believed in Neo-Liberalism. Growing pressure to adopt orthodox liberal policies. Emphasized privatization, deregulation, free trade and foreign investment.

David Ricardo

believed in Orthodox Liberalism. Comparative advantages with opportunity costs.

Adam Smith

believed in Orthodox Liberalism. Promoted laissez-faire economics and opposed mercantilism. Explained that there is an "invisible hand" in the markets. Division of labor + interdependence = free trade. Absolute advantages.

John Locke

believed in Orthodox Liberalism; state's primary role is to ensure preservation of property (lives, liberties and estates).

Liberals of hegemonic states

benevolent and seeks to promote general benefits (public goods) rather than self-interest. Relies on rewards rather than threats to ensure compliance by other states. Uses absolute gains to gain attention.

Institutions of Prisoner's Dilemma

bring states together on regular basis; collects info, increases transparency and punishes cheaters.

Neo-Imperialism

ceded territorial occupation and political control, but exerted influence through economic control (foreign aid, FDI) and structural control (KIEOs).

Colonialism

central part of Mercantilism. Source of raw materials and markets for manufacturers.

Marxism

class-based theory involving capital and ownership of industry and people. (Bourgeoisie vs. Proletariat). Production vs. state on either side. Has historical and social contexts. Emphasizes the struggle between social classes.

Tenets of Historical Materialism

classes are the major actors; conflictual and exploitative. Redistribution of wealth and income to achieve equality. Primacy through capitalism of the world economy. Bourgeoisies contribute to globalization and increase profit/surplus accumulation. Highly negative globalizing efforts by preventing states from safeguarding domestic welfare and employment.

Cobden-Chevalier Treaty (1860)

commercial treaty that lowered tariffs throughout Europe.

Tenets

emphasize national power with trade surpluses and relative gains being more important than absolute gains. "Beggar thy neighbor" platform which generates conflicts.

Peace of Westphalia

ended the 30 Years' War and upheld state sovereignty and territorial integrity. Allows states to be treated as equals and independent members without interference from external religious/secular authorities.

Historical materialists of hegemonic states

exploitative and uses self-interest and coercion to enforce compliance.

Under the Mercantilist platform...

exports would increase and imports would decrease.

"Embedded liberal compromise"

formed by John Ruggie in Interventionist Liberal theory. Post-war efforts to maintain open liberal int'l econ. were embedded in societal efforts to provide domestic security and stability for the populace (ex: welfare states and safeguards).

Economic Nationalism

founded by Alexander Hamilton and Friedrich List with intent to enhance Industrial Revolution. Includes gov't intervention, protectionism and industrialization.

KIEOs and liberal economic theory involves...

free flow of goods and capital throughout the world promotes prosperity.

Zero-sum games

game theory mode in which one player wins and the other loses.

United Nations Conference on Trade and Development (UNCTAD)

gives priority to Southern interests of LDCs as a permanent organ of the UN Gen. Assembly. Supports LDC protectionism and has special/preferential treatment to challenge liberal-economic order of the North. Limited to serving as a pressure group for Southern interest.

Historical materialism

includes all class members; involves bourgeoisies who use state power to sustain capitalism. Exploitative and promotes equitable distribution of wealth and income.

Realism

includes the State; intervenes in economy to allocate resources and is conflictual. Enhances power of the state in the int'l system. Involves the security dilemma as well as relative gains and zero-sum. Prioritizes politics over economics.

Liberalism

includes the market, trans-borders, MNCs, IOs, regimes, etc. Establishes and enforces property rights to facilitate market ops. Harmonious and enhances aggregate social welfare.

Smoot-Hawley Act (1930)

increased U.S. tariffs to the highest level in the 20th century.

Trade surplus

increases exports and decreases imports.

Classical Realism

involved mercantilism and issues of trade surplus, colonialism, protectionism and other industries.

Neo-Mercantilism

involves productive capacity as a greater means than wealth. Gov't spending for various programs, regulation of industry, capital control, and change in interest rates. Subsidies for R&D, state-owned corps. and state-distributed banking credits.

Critics of mercantilism argue that...

it encroaches individual freedom because of intrusive state regulation; it contributes to the continuous cycle of EU wars.

Because Great Britain was opposed to mercantilist policies...

it prevented other countries from climbing the ladder of development trying to use the same policies.

When Britain shifted from mercantilist policies toward free trade in the 1830s...

it removed most of its industrial trade restrictions. It also repealed the Corn Laws.

KIEOs stand for...

keystone international economic organizations. (examples: IMF, IBRD, WB and GATT)

Realists of hegemonic states

mixed/in-between. Seeks general and personal benefits, but relies on coercion when necessary to achieve goals.

Mercantilist Period (1500-1740)

national power; power and wealth (gold and silver). State accumulates wealth to build up armed forces by seeking trade advantages. Increases exports and decreases imports of manufactory products.

International Monetary Fund (IMF)

organization built from the Bretton Woods System using international liquidity as a platform. Currently houses 188 members.

Treaty of Westphalia (1648)

origins of the modern state system.

International political economy (IPE)

paralleling interaction between the state, market states, and multi-national corps (MNCs) at the international level.

"Keynesian Revolution"

platform based on demand and not supply. Went against Neoclassical theories by showing how government action could change the level of unemployment, via deficit spending (fiscal stimulus) such as by public works or tax cuts, and changes in interest rates and money supply (monetary policy). Became strong after the Great Depression.

Instrumental Marxism

politics subordinate to economics; state policies reflect interests of the capitalist class exclusively.

Imperialism

portrayed the world as hierarchical, with some societies engaging in conquest and control over others.

Global hegemons of Prisoner's Dilemma

prevent cheating by providing public goods and coercing other states to abide by agreed rules and principles.

Capital

privately-owned means of production.

Orthodox Liberalism

promotes "negative freedom"; freedom of the market to function with minimal interference from the state. Government is limited mainly to actions that promote functioning of the market.

Realist input on Regime Theory

regimes are arenas for acting out power relationships.

Liberalist input on Regime Theory

regimes are persuasive and significant phenomenon in IR.

Corn Laws

restricted Britain's agricultural imports through the centuries.

Neo-Liberalism

returned to orthodox with OPEC oil price shocks coupled with prolonged global recession after 1974.

Lenin

saw the highest stage of capitalism; colonies (superprofits for capitalist firms) and helps to avert economic crises. Uses part of super-profits to bribe the working class in home countries with high wages. Eventually delayed a whole revolution.

NAFTA

serves purpose to promote open markets among all member states.

The Andre Gunder Frank's strain

solution for Dependency Theory, involving a break of linkages with the core and a socialist revolution to bring social justice and equality.

The Fernando Henrique Cardoso-Enzo Faletto's strain

solution for Dependency Theory; sees that dependent development could work well.

Structural Marxism

state is relatively autonomous from direct political pressure by the capitalist class by providing welfare and other benefits. The state placates workers and gains support for capitalism.

Tenets of Realism

states are unitary, rational actors seeking to maximize benefits while minimizing costs of pursuing objectives (realism-based). Permits globalization and hegemony.

World Trade Organization (WTO)

successor of the GATT platforms; 157 members. Became the main global trade organization of today.

Interventionist Liberalism

supports some gov't involvement to promote more equality and justice in a free market economy. "Self-regulating markets" forced the problems of Great Depression to rise.

Reciprocal Trade Agreement Act (1934)

tariff-setting authority with Congress' help to the President. Authorized the president to negotiate with foreign nations to reduce tariffs in return for reciprocal reductions in tariffs in the United States. It resulted in a reduction of duties.

Dependency Theory

tenet of capitalism in core countries; autonomous development decreases in peripheral countries.

Which two IOs resulted from the Bretton Woods Conference?

the IMF and the Int'l Bank for Reconstruction and Development (IBRD) or WB.

What did Hamilton argue in favor of economic nationalism?

the U.S. could preserve independence and security only by promoting development through industrialization, gov't intervention and protectionism. Wanted infant industries to be controlled by protectionism instead. Favored export subsidies to make U.S. goods more competitive abroad while offsetting subsidies by foreign states.

Classical Mercantilism

theory that a country's power is dependent on wealth (gold and silver) to purchase vital trade goods and build strong armed forces.

Institutional Liberalism

thinks some outside involvement is necessary to supplement markets, and favors strong international institutions like WTO, IMF and WB.

Raul Prebisch

thinks that LDCs are suffering from declination in trade with DCs in the core. Dependence of LDCs on primary product exports puts up market disadvantages in Dependency Theory. LDCs should adopt import substitution industrialization policies to protect infant industries and desires to impose trade barriers.

Current mission of the IMF?

to foster global growth and economic stability. Provide policy advice and financing to member states in difficulties and works with developing nations to achieve macro-economic stability and reduce poverty.

Previous mission of the IMF?

to monitor a system of fixed or pegged exchange rates and provide short-term loans.

What did Friedrich List argue in favor of economic nationalism?

wanted protectionism as well over infant industries; manufacturing of industrial goods and investing in education/technology was essential. Production of wide variety of goods and services was desirable for nat'l wealth/power. Favored division of labor and thought that free trade overemphasized natural peace/harmony while underestimating national rivalries and conflict. In a "cosmopolitan" world there wodl be no free trade until states competed with each other equally.

Absolute advantage

when a country can produce a particular good at a lower cost than in another country.

Comparative advantage

when a country can produce a particular good at a lower opportunity cost.

In the political scientist perspective of markets...

without markets, the state gets to allocate resources.

In the economist perspective of states...

without the state, there would be price mechanisms and market forces determining the outcome of economic activities.

"Gravediggers"

working class that caused the collapse of capitalism.

Prisoner's Dilemma

zero-sum game theory mode in which one player chooses to cooperate while the other confesses/defects.