POL 271- Ch. 9: International Political Economy

The building of factories and investing in facilities for extraction of natural resources is called ____________ investment.

foreign direct

In the 1950s, the World Bank changed its emphasis from reconstruction to development. What types of projects does the World Bank currently support?

infrastructure projects

The ____________ problem arises when states are rescued from the consequences of their reckless behavior, providing little incentive to change that behavior.

moral hazard

Economic liberalism argues that ____________ is (are) the engine of growth or vanguard of the liberal order.

multinational corporations

What factors must a country take into consideration when thinking about its ability to produce specific products?

natural resource base

The Grameen Bank is an example of a(n) ____________.

nongovernmental organization (NGO)

If each country engages in trade, using the comparative advantage model, each state gains by specialization and minimizes its ____________.

opportunity costs

Alexander Hamilton, the United States' first secretary of treasury, advocated protectionist policies to achieve what objective?

protect the new nation's manufacturers

Statists are best aligned with which political counterpart?

realism

Which dimensions of the EU are found in NAFTA (North American Free Trade Agreement)?

reduction in tariff barriers

Which economic theory or theories view MNCs as both potentially good and bad for state interests?

statists

What are the Bretton Woods Institutions?

the World Bank and the IMF

The initial responses to the Global Economic Crisis of 2007-2010 were...

unilateral

What is comparative advantage?

whichever good can be made the most efficiently as compared to other goods within a state should be produced by the state

What is absolute advantage?

whoever makes a good the most efficiently as compared to other states should produce the good

What is the World Bank?

-A global lending agency focused on financing projects in developing countries; formally known as the International Bank for Reconstruction and Development -established as one of the key Bretton Woods institutions to deal with reconstruction and development after World War II

What is radicalism?

-A social theory, formulated by Karl Marx, that posits that class conflict between owners and workers will cause the eventual demise of capitalism -offers a critique of capitalism

What are some early multinational corporations (MNCs)?

-British East India Company -Hudson Bay Company -Dutch East India Company

Identify 3 ways global capital moves.

-Foreign direct investment (FDI) includes the building of factories and other facilities -Portfolio investment (PI) includes investments in stocks and bonds of a country -MNCs play major role in movement of capital, both in form of FDI and PI

What is the General Agreement on Tariffs and Trade (GATT)?

-Founded by treaty in 1947 as the Bretton Woods institution responsible for negotiating a liberal international trade regime that included the principles of nondiscrimination in trade and most-favored-nation status -reformed as the World Trade Organization in 1995

What is the World Trade Organization (WTO)?

-Intergovernmental organization designed to support the principles of liberal free trade; includes enforcement measures and dispute settlement mechanisms -established in 1995 to replace the General Agreement on Tariffs and Trade

What are some criticisms of international financial institutions?

-MF bailouts come with conditions -Dissatisfaction of developing countries -Moral hazard problem

What are critiques of economic liberalization?

-Mercantilists Radical theorists: -Blame MNCs for stunted development -Major decisions made in financial centers of world -Question specific institutions or policies -Weighted voting in IMF and World Bank• -Usurp local decisions

Define mercantilism.

-State-centered economy wherein the state seeks to build economic wealth as an instrument of state power -Strong central government for taxation and maximization of exports --> military power -Exports over imports and industrialization over agriculture -Protect domestic industry, high tariffs -Intervene in trade to promote employment

What is the International Monetary Fund (IMF)?

-The Bretton Woods institution originally charged with helping states deal with temporary balance-of-payments problems -now plays a broader role in assisting debtor developing states by offering loans to those who institute specific policies, or structural adjustment programs

Why do multinational corporations (MNCs) participate in international markets?

-decrease transportation expenses -avoid trade barriers -get incentives from the host government

What are typical IMF (International Monetary Fund) structural adjustment programs?

-economic reforms -trade liberalization -government reforms -privatization

What are the principles associated with the General Agreement on Tariffs and Trade (GATT)?

-preferential access in developed markets to products from the South -nondiscrimination in trade -support of trade liberalization

What types of economic policies are encouraged under the Washington consensus?

-privatization -liberalization of trade -open competition -tax reform

The Organization of the Petroleum Exporting Countries (OPEC) produces about ____________ percent of the world's oil.

40%

States that are not members of the Organization of the Petroleum Exporting Countries (OPEC) share ____________ percent of the world's oil.

60%

What did Adam Smith state regarding the economy?

Adam Smith wrote the idea that humans are rational and self-interested: -Markets will develop when people act in rational ways -Market will regulate itself and set prices for goods and labor -Markets needs to be free from government interference

What is sustainable development?

An approach to economic development that tries to reconcile current economic growth and environmental protection with the needs of future generations

____________ developed a theory known as comparative advantage that argued states should produce and export those goods, which they can do efficiently.

David Ricardo

The ____________ Round is the most recent round of GATT/WTO trade negotiations.

Doha

____________ is an example of southern efforts to promote an international economic system more favorable to developing states.

NIEO (New International Economic Order)

What is the most-favored-nation (MFN) principle?

Principle in international trade agreements when states promise to give another state the same treatment in trade as the first state gives to its most-favored trading partner

What is a portfolio investment?

Private investment in another state by purchasing stocks on bonds, without taking direct control of the investments

What is the Washington Consensus?

The liberal belief that only through specific liberal economic policies, especially privatization, can development result

According to Adam Smith, market competition will ensure that prices are kept low. What is required for this to happen?

There are many competing buyers and sellers.

Economic liberalism argues that ____________ will lead to greater economic development for all states.

a clear separation of economics and politics

____________ in the 1960s and 1970s is frequently cited by statists as an example of successful mercantilist policies.

Japan

What is statism?

Modern version of mercantilism; use of state power to achieve economic and social goals

The General Agreement on Tariffs and Trade (GATT) became a formal institution known as the ____________ in 1995.

World Trade Organization

What is direct foreign investment (DFI)?

building factories and investing in extraction of resources