Theories of International Political Economy - Vocab

Metropolis

is a large city which is a significant economic, political, and cultural center for a country or region, and an important hub for regional or international connections, commerce, and communications.

Productive Power

is a central idea in Marxism and historical materialism. The productive forces include human labour power and means of production (e.g. tools, equipment, buildings, technologies, knowledge, materials, and improved land).

Gains from Trade

A producer will experience the greatest gain by focusing on those factors and areas of production that yield the highest return. Specialization saves time and enhances overall gains from exchange (gains from trade). ACCORDING TO SMITH, SPECIALIZATION FROM DIVISION OF LABOR ENHANCES THIS. Ricardo also expands on this, claiming that the GREATEST gains from trade come from a country pursuing its area of comparative advantage.

Mass Consumption

Consumerism is a social and economic order that encourages the acquisition of goods and services in ever-increasing amounts. ... In economics, consumerism may refer to economic policies which emphasize consumption. The prosperity of the 1920s led to new patterns of consumption, or purchasing consumer goods like radios, cars, vacuums, beauty products or clothing. The expansion of credit in the 1920s allowed for the sale of more consumer goods and put automobiles within reach of average Americans. ROSTOW - defines age of mass consumption as the leading sectors' shift to durable consumer goods and services. Also begins to move toward the welfare state. Resources tend to increasingly be directed to the production of the consumers' durables and to the diffusion of services on a mass scale.

Bourgeoise

(in Marxist theory) the class that, in contrast to the proletariat or wage-earning class, is primarily concerned with property values. In Marxist philosophy, the bourgeoisie is the social class that came to own the means of production during modern industrialization and whose societal concerns are the value of property and the preservation of capital to ensure the perpetuation of their economic supremacy in society. In the Communist Manifesto, written by Karl Marx and Engels, the bourgeois seeks to replicate itself, but sows the seeds of its own destruction, according to their argument.

International Monetary Fund

A Keynes inspired institution. The International Monetary Fund (IMF) was created in 1945 and is governed by and accountable to its 188 member countries. ... To provide financial assistance to member countries with balance of payments problems, the IMF lends money to nurture those nations' economies. Helps countries strengthen their capacity to design and implement sound economic policies.

World Bank

A Keynes inspired institution. an international organization dedicated to providing financing, advice and research to developing nations to aid their economic advancement. The World Bank was created out of the Bretton Woods agreement, as a result of many European and Asian countries needing financing to fund reconstruction efforts.

Foreign direct investment (FDI)

A foreign direct investment is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct control.

Positive Sum Game

A positive sum game refers to the outcome of a decision or a policy or a negotiation involving at least one agent. And in this outcome a positive sum game occurs when no one wins at someone else's expense - indeed the sum of positives and negatives (wins and losses) is positive. in game theory, a term that refers to situations in which the total of gains and losses is greater than zero. A positive sum occurs when resources are somehow increased and an approach is formulated in which the desires and needs of all concerned are satisfied.

Mercantilism

A term generally applied to state intervention in an attempt to manipulate market outcomes, typically out of some realist or nationalist interest. Classical mercantilism is driven by economic nationalism, competing states restricted imports in an attempt to generate trade surpluses to enhance state wealth and power, and protect domestic constituencies. Typically mercantilism has been centered on colony-mother country relations, with raw materials from the colony being exchanged for the manufactured goods of the mother country. The colony's trade practices, too, are highly restricted by that of the mother country. Mercantilism or economic nationalism seeks to advance domestic industries and interests through the protection of key industries through protective policies like tariffs, subsidies, and other mechanisms.

Agricultural Capitalism

Agrarian capitalism refers to the description of agricultural economy contained in the The Wealth of Nations by Adam Smith. Smith's treatise was a critique of the existing economic conditions and noted two major limitations imposed by government on agricultural economies. One was a limitation on the sale of land, and the other was a limitation on the free movement of labor.

Current Account

As the name implies, the current account considers goods and services currently being produced. The current account deals with short-term transactions known as actual transactions, as they have a real impact on income, output and employment levels of a country through the movement of goods and services in the economy. Includes Imports: Goods/Services, Exports: Goods/Services, Investment Dividends, Government Goods/Services

Cardoso

At the end of World War II, several Latin American countries seemed to be ready for industrialization and self-sustaining economic growth. Instead, they found that they had exchanged old forms of political and economic dependence for a new kind of dependency on the international capitalism of multinational corporations. Cardoso and Faletto offer a sophisticated analysis of the economic development of Latin America. The economic dependency of Latin America stems not merely from the domination of the world market over internal national and "enclave" economies, but also from the much more complex interact ion of economic drives, political structures, social movements, and historically conditioned alliances. While heeding the unique histories of individual nations, the authors discern four general stages in Latin America's economic development: the early outward expansion of newly independent nations, the political emergence of the middle sector, the formation of internal markets in response to population growth, and the new dependence on international markets. In a postscript for this edition, Cardoso and Faletto examine the political, social and economic changes of the past ten years in light of their original hypotheses.

Asceticism

Austerity is closely related to the ancient concept of asceticism, the art of abstinence practiced by Greek and Roman philosophers, continued by medieval religious writers, and made famous by the theorist Max Weber in his 1922 book Economy and Society. Asceticism has many definitions, usually equating a simple life to a moral one. It is often seen as religious, an ideology based on the fact that present self-denial will enable future liberation from want.But Weber extends the religious and philosophical dimensions of asceticism to economics when he argues that capitalism is inherently ascetic, suggesting that it thrives through self-restraint and hard work. Weber equates asceticism and rationality; austerity, he says, is both sensible and logical, and it provides the individual with inward fulfilment. Thus, when governments pursue austerity policies and accuse their opponents of being selfish and wasteful, they draw on a cultural narrative that views self-denial as ethically, morally, and even spiritually, correct.. Thus, when governments pursue austerity policies and accuse their opponents of being selfish and wasteful, they draw on a cultural narrative that views self-denial as ethically, morally, and even spiritually, correct.

Lenin

BACKGROUND: In the age of mercantilism, national competition was fueled by colonial expansion to gain resources and power by expanding territorial control and influence into the Americas, Africa, Asia, and the South Pacific. Colonial exploitation continued well into the 20th century. LENIN'S BASIC ARGUMENT: Imperialism as a special stage of capitalism: pulls together Lenin s thinking on the workings of monopolistic capitalist imperialism. • Parasitism and the decay of capitalism: the evils of parasitic rentier states

Exports vs Imports

Both import and export are two main activities of a country's international trade. Import appears, when domestic companies buy goods abroad and bring them to a domestic country for sale. ... Export appears when the domestic companies sell their products or services abroad. Sometimes a distinction is made between a balance of trade for goods versus one for services. ... If a country exports a greater value than it imports, it has a trade surplus or positive balance, and conversely, if a country imports a greater value than it exports, it has a trade deficit or negative balance.

Radicalism

By mid-century, thinkers like Karl Marx had turned this language into a powerful critique of capitalism. Marx argued that the politically disenfranchised working classes were victimized in industrial factories, the fruits of their labor stolen and transformed into profits with which the capitalist class created ever-more powerful tools of exploitation. Socialist, communist, and other radical movements demanded political and economic change, some calling for revolution and an end to private ownership of the means of production.

Friedrich List

CHAMPIONED MERCANTILISM. Mercantilism relies on "protectionist" policies that seek to guard national economic interests (e.g. producers) against outside competition. He developed a more-systematic analysis of mercantilism that contrasted his national system of political economy with what he termed Smith's "cosmopolitical" system, which treated issues as if national borders and interests did not exist. A German historian who wrote in favor of protective tariffs and trade retaliations between industrial nations, even if they maintain free trade within each country.

John Maynard Keynes

Cambridge colleagues circa 1940 who transformed the global economy over the 20th century. General Theory of Employment, Interest, and Money (1937) • Keynes originated many basic economic concepts (e.g., GDP) • Sought to help governments manage their economies and maintain full employment. A Cambridge economist and member of the progressive Bloomsbury Society, Keynes founded modern macroeconomic policy approaches (fiscal & monetary) and argued that —if all else fails the government should intervene in the economy. Made economics SEXY.

Industrial Capital

Capital is industrial when it is producing commodities or accumulating capital, and it is financial in exchange. Literally just creates capital. Condition of imperialism: The merging of bank capital with industrial capital, and the creation, on the basis of this "finance capital," of a financial oligarchy.

Wallerstein

Created the world systems theory, encompassing the core, periphery, and semi-periphery countries. The best-known version of the world-systems approach was developed by Immanuel Wallerstein. Wallerstein characterises the world system as a set of mechanisms, which redistributes surplus value from the periphery to the core. In his terminology, the core is the developed, industrialized part of the world, and the periphery is the "underdeveloped", typically raw materials-exporting, poor part of the world; the market being the means by which the core exploits the periphery. Put him in the field with Marxists, he looks at capitalism in terms of its world in the world system.

Unemployment

Cyclical (Keynesian) unemployment is the deviation of unemployment from its natural rate. The natural rate of unemployment (5.5%) is the normal rate of unemployment around which the unemployment rate fluctuates. Cyclical (Keynesian) unemployment is caused by downturns in the economy that are part of the business cycle. The business cycle is the natural fluctuations in the economy.

Dependency

Dependency theorists argue that "the workings of the capitalist world system tend to perpetuate and reinforce economic inequalities among countries." Northern countries had a "head start" on development, enabling colonial supremacy. • Continued patterns of economic and political domination perpetuate post-colonial dependency, and must be broken.

Economic growth/expansion

Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.

Smoot-Hawley Tariff Act

Following the stock market crash and the onset of the Great Depression, President Hoover approves the Smoot Hawley Tariff, triggering global trade war. This was an Act implementing protectionist trade policies sponsored by Senator Reed Smoot and Representative Willis C. Hawley and was signed into law on June 17, 1930. The act raised U.S. tariffs on over 20,000 imported goods, which further stymied economic activity

Franklin D Roosevelt

Franklin Delano Roosevelt was elected president in 1932. He immediately embarked on an ambitious plan to get the country out of the Great Depression, through a series of programs known as the "New Deal."

GATT

General Agreement on Tariffs and Trade (Oct. 1947). Tariffs should be as low as possible. General Agreement on Tariffs and Trade was a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. • Introduced Most-Favored Nation status (now called normal trade relations) • Multilateral framework to protect against spiraling protectionism • Laid foundation for World Trade Organization World Trade Organization

Engels

German socialist leader and political philosopher, in England from 1849. He collaborated with Marx on The Communist Manifesto (1848). Published in 1848, on commission from the Communist League, the manifesto offered arguments and predictions intended to mobilize the proletariat to overthrow bourgeois (capitalist) states to generate a classless, stateless society

Rostow

He is a modernist, wrote The Stages of Economic Growth, a Non-Communist Manifesto in 1960. According to him, it is possible to identify all societies, in the economic dimensions, as lying within one of five categories, the traditional society, the preconditions for take off, the take off, the drive to maturity, and the age of high-mass consumption.

Absolute advantage

If a producer is superior in a given area of production, Domestic production is the best course of action. In the PowerPoint, we got the example of the US producing the most amount of wheat compared to the UK, 40,000 bushels compared to the UK's 20,000. This means the US should focus on domestically producing wheat, an area of great economical strength, instead of choosing to import this product from somewhere else.

Imperialism

Imperialism as a special stage of capitalism: pulls together Lenin s thinking on the workings of monopolistic capitalist imperialism. • Parasitism and the decay of capitalism: the evils of parasitic rentier states. 5 essential features: 1. The concentration of production and capital developed to such a high stage that is created monopolies, which play a decisive role in economic life 2. The merging of bank capital with industrial capital, and the creation, on the basis of this "finance capital," of a financial oligarchy 3. The export of capital, which has become extremely important, as distinguished from the export of commodities 4. The formation of international capitalist monopolies which share the world among themselves 5. The territorial division of the whole world among the greatest capitalist powers is completed.

Import Substitution Industrialization

Import substitution industrialization is a trade and economic policy which advocates replacing foreign imports with domestic production. ISI is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialized products.

Paul Volcker

In 1981 Paul Volcker raised Fed interest rates, tightening money supply •Inflation dropped, but the U.S. economy fell into recession •Developing world experienced debt crisis

Proletariat

In Marxist theory, the proletariat is the social class that does not have ownership of the means of production and whose only means of subsistence is to sell their labor power for a wage or salary. Proletarians are wage-workers, while some refer to those who receive salaries as the salariat.

Bretton Woods Agreement

In an effort to achieve a new era of monetary and financial stability Keynes advocated for a new, more flexible gold standard that tied the value of the US currency to gold (35$ per ounce) and pegged other international currencies to the dollar. Refers to the international monetary arrangement, agreed upon by the allied nations in 1944 in Bretton Woods, US, that created the IMF and World Bank and that set up a system of fixed exchange rates with the US dollar as the international reserve currency. This was hoped to achieve a new system of rules, regulations, and procedures for the major economies of the world to ensure their economic stability.

Liquidity

In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity is about how big the trade-off is between the speed of the sale and the price it can be sold for.

Statistical discrepancies

In calculating the balance of payments between countries, there are three main accounts to consider: current (currently traded goods between countries), capital (capital investments traded between two countries), and official reserve accounts. Economists also calculate the margin of statistical discrepancy, or basically what can't be accounted for in a country's finances, like if someone walked in with a suitcase full of money, illegally. The statistical discrepancy is equal to gross domestic product less gross domestic income. These two measures are, in principle, the same. The difference reflects less than perfect source data. The difference between gross domestic product (GDP) and gross domestic income (GDI).

Stagflation

In economics, stagflation, a portmanteau of stagnation and inflation, is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high.

Exchange Value

In political economy and especially Marxian economics, exchange valuerefers to one of four major attributes of a commodity, i.e., an item or service produced for, and sold on the market. The other three aspects are use value, economic value, and price. Thus, a commodity has: a value (note the link is to a non-Marxian definition of value) a use value (or utility) an exchange value a price (it could be an actual selling price or an imputed ideal price) Exchange is the practice of releasing property on condition of receiving an equivalent in return. Exchange of labour (i.e., commodity production) is the "cell" of bourgeois society (i.e., capitalism). Exchange of labour is not identical with cooperation or division of labour, but is simply one, historically developed system of social cooperation and division of labour. QUANITATIVE.

Class Struggle

In the Communist Manifesto, class struggle is viewed as a political struggle & engine of history, and it recommends intended to mobilize the proletariat to overthrow bourgeois (capitalist) states to generate a classless, stateless society, where this struggle is eliminated for good.

Core

In world systems theory, the core countries are the industrialized capitalist countries on which periphery countries and semi-periphery countries depend. Core countries control and benefit from the global market.

Periphery

In world systems theory, the periphery countries are those that are less developed than the semi-periphery and core countries. These countries usually receive a disproportionately small share of global wealth.

Official Reserves

Includes foreign currencies and gold.

World War 1

Intense competition among leading economies leads to first industrialized warfare • Aftermath sees continued instability due to weak domestic and international institutions, lack of leadership, and economic crisis. The United States was largely unaffected by the destruction that Europe experienced, and its productive and financial capacity transformed it into the world's largest economy and lender to the world.

Adam Smith

Key Enlightenment thinker, classical liberal economic theorist. Smith is best known for two classic works, The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). Smith laid the foundations of classical free market economic theory. The Wealth of Nations was a precursor to the modern academic discipline of economics. In this and other works, he developed the concept of division of labor and expounded upon how rational self-interest and competition can lead to economic prosperity. He really pushes the concept of the division of labor. "The greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labor." Smith contends division of labor improves workers in three ways: The increase of dexterity in every particular workman • The saving of the time which is commonly lost in passing from one species of work to another • The invention of a great number of machines to facilitate and abridge labor, and enable on mane to do the work of many."

Keynesianism

Keynes originated many basic economic concepts (e.g., GDP) • Sought to help governments manage their economies and maintain full employment. He advocated for governments to depend less on foreign trade and build up domestic capabilities and sufficiency. Keynes economic theories provided a foundation for new policy responses to market failure (e.g., FDR s New Deal). • Mixed government intervention in markets • Adjustment to economic cycles • Promoting full employment (at the risk of mild inflation) Under Keynes's advice governments relied on centralized planning during the economic and political crises of the 1920s and 1930s. • Control of manufacturing • Regulation of industries • Fixing prices • Social welfare policies. During and after WWII, governments intervened to establish price controls as a means of protecting consumers against the instability of price inflation.

Theory of Values

Labor Theory of Value. The labor theory of value is a major pillar of traditional Marxian economics, which is evident in Marx's masterpiece, Capital (1867). The theory's basic claim is simple: the value of a commodity can be objectively measured by the average number of labor hours required to produce that commodity.

Liberalism

Liberal economic thinking asserts the seemingly paradoxical view that individuals operating freely in the pursuit of their own self-interest can achieve the greatest possible collective benefit. Included thinkers such as Adam Smith and David Ricardo.

David Ricardo

Liberalist economic thinker. David Ricardo expanded on Smith's ideas, emphasizing that the greatest gains from trade are found when a country pursues its area of comparative advantage. The law or principle of comparative advantage holds that under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.

Weber

MODERNIZATION THEORY. German (1864-1920). He is the father of modern social science. Employs the "historical sociology" methodology. Mainly, he asks why did the West abandon its traditional values to become mode productive capital accumulators? His answer: religious beliefs.

Protectionism

Mercantilism relies on "protectionist" policies that seek to guard national economic interests (e.g. producers) against outside competition: • Tax laws (e.g., tariffs or duties on imported goods) • Regulatory laws (e.g. public health laws, environmental protections) • Quota laws (limits on quantities of certain imported goods) • Anti-dumping laws (laws prohibiting selling below production cost) • Subsidies (e.g., Government supported monopolies)

Hazards of Specialization

National security concerns (Losing complete self-sufficiency in the production of weapons or food (e.g., rice) may present a national security concern). Implications for vulnerable domestic producers, (When a country does not have a comparative advantage in a given factor, imports of that good tend to lower domestic prices of that good.) Protection of national customs and traditions (Work is not just about making money, it is a way of life and a part of our identity. Losing a job and losing an industry can destroy people's way of life, and sense of self.)

Klaus Knorr

Neomercantilism, talks about tariffs? This textbookish volume is ""in the old tradition of political economy""--examining ""all conditions that affect the wealth and power of organized societies and the policy options of their governments."" Professor Knorr's new book turns out to be largely an expansion of his 1973 Power and Wealth with some chapters about imperialism, neocolonialism, etc., tacked on. The revisions are incomplete: the book does not always remember that Britain is now in the Common Market, for example. Nevertheless, it is valuable if read with patience. Knorr's emphasis is on soft speaking, carrot-dangling, and indirect blackmail. Though he makes frequent references to relationships between the advanced and underdeveloped sectors--denying the existence of imperialist domination as far as possible--his soundest paradigms deal with the Soviet Union and Western Europe. As in Power and Wealth, he rightly insists that material assets and weaponry do not equal actual military power and political influence. From this commonsensical notion, elaborated with surveys of economic resources and military craft, he describes how a great power--presumably the U.S.S.R.--can be manipulated, and also how ""public opinion"" must always be considered by ""the elites"" as they weigh formal options--though often ""advantaged groups,"" he observes with sang-froid, are able to carry off maneuvers like economic boycotts which may hurt the population at large. International relations is often a dull subject because it leaves out economic factors and military constraints; Knoff's anti-Communist commitment and his allegiance to the American ""elite"" color his analyses, but do not detract from the actuality of the ploys he outlines. An adequate introduction to the contingencies that make arsenals, trade deals and ultimatums into weapons. ADVOCATES MERCANTILIST PHILOSOPHY.

Traditional Society

One whose structure is developed within limited production functions, based on pre-Newtonian science and technology, and on pre-Newtonian attitudes towards the physical world. Newton is here used as a symbol for that watershed in history when men came widely to believe that the external world was subject to a few knowable laws, and was systematically capable of productive manipulation. The first stage of Rostow's model and the one in which societies begin, is the traditional society. The traditional society stage was prevalent prior to the 1700s, when most societies operated in a relatively stable state and productivity didn't rise or fall dramatically. Trade existed, such as the spice route between Asia and Europe, but it was timely, costly, and more of a luxury than a necessity. Technology was very limited. Humans had access to little more than handmade tools, transportation, and the printing press. That meant that producing goods was very human capital intensive, which created large gaps in income inequality. These societies also relied heavily on agricultural labor because a tremendous amount of labor was required to grow enough food to sustain the societies. HUNTINGTON: Man has less control over his natural and social environment. He expects society to stay the same, while the modern man hungers for change.

Herbert Hoover

Pretty useless when the Great Depression hit, instituted Smoot-Hawley tariffs which did nothing but start a global trade war, making the economy worse. Shantytowns began to pop up, which were labeled "Hoovervilles." Hoover emphasized charity as a way to alleviate Depression, which was obviously unhelpful.

Reparations

Reparations from Germany to France were crippling • Postwar debt to the United States (UK, France, & Russia owed $10 billion) • Inflation and currency fluctuation (U.K. abandons gold standard). In essence, reparations from WWI, particularly from Germany, led to great economic, and later, political instability for Europe.

Marx

Revolutionary socialist thinker whose theories and ideas became popular during the 19th century. His ideas are considered the foundation of communism. He was a strong opponent to capitalism because he believed it only increased class tensions, which would eventually lead to the destruction of a society. Wrote the Communist Manifesto for the Communist League, along with Engels.

Modernization Theory

Seeking an alternative to Communism, scholars proposed an alternative model focused on the stages of development from tradition to modernity. Economic development (human progress) leads to greater political participation (democracy). Or does it? Third World societies can and will undergo the same transformation from traditionalism to modernity previously undergone by the North. • Prescription: Use aid to fuel development.

Semi-Periphery

Semi-periphery countries have organizational characteristics of both core countries and periphery countries and are often geographically located between core and peripheral regions as well as between two or more competing core regions. ... Today, the semi-periphery is generally industrialized.

Specialization

Specialization is when a nation or individual concentrates its productive efforts on producing a limited variety of goods. It oftentimes has to forgo producing other goods and relies on obtaining those other goods through trade. Specialization saves time and enhances overall gains from exchange (gains from trade). A producer's area of specialization depends on their natural factor endowments (e.g., land, labor, or capital). l In addition, there may be other determinants of economic advantage (e.g., technology, education).

1920s Boom

The 1920s have been called the Roaring '20s and for good reason. ... New technologies like the automobile, household appliances, and other mass-produced products led to a vibrant consumer culture, stimulating economic growth.

Bloomsbury Group

The Bloomsbury Group—or Bloomsbury Set—was a group of associated English writers, intellectuals, philosophers and artists in the first half of the 20th century,[1] including Virginia Woolf, John Maynard Keynes, E. M. Forster and Lytton Strachey. This loose collective of friends and relatives was closely associated with Cambridge University for the men and King's College London for the women, and they lived, worked or studied together near Bloomsbury, London.

Samuel Huntington

The Change to Change: Modernization, Development, and Political Order in Changing Societies. Proposes nine characteristics in modernization process: Modernization is revolutionary, complex, systemic, global, lengthy, phased, homogenizing, irreversible, and progressive.

Corn Laws

The Corn Laws were tariffs and other trade restrictions on imported food and grain ("corn") enforced in Great Britain between 1815 and 1846. They were designed to keep grain prices high to favor domestic producers, and represented British mercantilism, since they were the only mercantilist laws of the country. Britain later was encouraged by liberal economic thinkers like Adam Smith to abandon these laws in favor of freer trade. The writings of Smith, Ricardo, and other liberal economists encouraged Great Britain to specialize and abandon trade protections in favor of freer trade relations boosted national wealth through increased gains from trade (i.e., the Wealth of Nations).

General Theory

The General Theory of Employment, Interest and Money of 1936 is the last and most important book by the English economist John Maynard Keynes. The British economist John Maynard Keynes argues that the belief that markets naturally tend towards full employment is a fallacy, and that state interventionism is therefore necessary to overcome economic slumps.

Underdevelopment

The Marxist theory of imperialism explains dominant state expansion while the dependency theory explains underdevelopment. ... For the dependency theorists, underdevelopment is a wholly negative condition which offers no possibility of sustained and autonomous economic activity in a dependent state.

New Deal

The New Deal was a series of programs and projects instituted during the Great Depression by President Franklin D. Roosevelt that aimed to restore prosperity to Americans. When Roosevelt took office in 1933, he acted swiftly to stabilize the economy and provide jobs and relief to those who were suffering. The New Deal was a series of programs, public work projects, financial reforms and regulations enacted by liberal Democrats led by President Franklin D. Roosevelt in the United States between 1933 and 1936. They responded to needs for relief, reform and recovery from the Great Depression.

Calvanism

The Protestant work ethic, the Calvinist work ethic or the Puritan work ethic is a concept in theology, sociology, economics and history that emphasizes that hard work, discipline and frugality are a result of a person's subscription to the values espoused by the Protestant faith, particularly Calvinism.

Roaring 1920s

The U.S.-led recovery from WWI was driven by an unprecedented consumer revolution thanks to a host of new inventions: electric appliances, radios, home refrigerators, and automobiles. However, the growth of the 1920s was fueled by a period of increasing reliance on debt as a means to finance personal consumption, agricultural production, and investment.

Capital Account

The capital account is a record of the inflows and outflows of capital that directly affect a nation's foreign assets and liabilities. It is concerned with all international trade transactions between citizens of a given country and citizens in other countries. Includes Capital account, Financial Investments

Pin Maker

The hypothetical "Pin Factory" was Smith's conceptual model, or thought experiment, of a modern capitalistic enterprise. The primary significance of the pin factory was to illustrate the benefits of division of labor ,as noted by the other answers. The specialization of the individual workers in the pin factory was also used to support the "Invisible Hand" self-organization principle of the market-namely that the metal cutter, pin drawer, roller, finisher, etc all worked together in order to increase productivity and thus the wealth of the society. When Adam Smith first starts talking about the pin makers of England, it might seem like he's just picking any random class of people to talk about. But what he's actually doing is using these people as a symbol for how the division of labor can make workers super efficient. When he first talks about pin making, Smith speaks as though one person were responsible for making a single pin from scratch (not exactly a dream job). In this instance, he writes that: workman not educated to this business [...] could scarce, perhaps, with his most industry, make on pin in a day, and certainly could not make twenty. (1.1.3) That's not much of a product for a full day's work. One measly pin. But what happens if we take all the different skills involved in making a pin and divide those jobs among eighteen different people? In this case—boom:[The] important business of making a pin is, in this manner, divided into about eighteen distinct operations. (1.1.3) Now instead of one person making a pin, you have eighteen specialists who pass the pin along a sort of assembly line. And in this situation we find that these people "could, when they exerted themselves, make among them about twelve pounds of pins in a day" (1.1.3). That's a whole lot more pins for everyone to, um, enjoy. What Smith is getting at here is that things become way more efficient once you get people to get really specialized and specific in what they do. And that's what modern progress is all about: efficiency and productivity. And the lesson we learn from the pin makers can be applied to making almost anything, from cars to cell phones to—sure—more pins.

Degree of Government

The most important political distinction among countries concerns not their form of government but their degree of government. The differences between democracy and dictatorships are less than the differences between those countries whose politics embodies consensus, community, legitimacy, organization, effectiveness, stability, and those countries whose politics is deficient in those qualities. The United States, Great Britain and the Soviet Union all have different forms of government, but in all three systems the government governs, and all differ greatly from the modernizing societies of Asia, Latin America, and Africa.

Gunder Frank

The neo-Marxist dependency theory rejects the view that the people of LDCs are responsible for the failure of their societies to develop. Instead, Andre Gunder Frank, the leading dependency theorist, suggests that lack of development is because Western nations have deliberately under-developed them.

Gap Hypothesis

The primary of politics is the lag in the development of political institutions behind social and economic change. Gap hypothesis: source of instability is the speed of industrialization, gap between economic development and political development produces instability -> modernization is the problem (the path to development produces instability) Gap forms between aspirations and expectation and satisfaction of these wants. Produces social frustration.

Stopler-Samuelson Theory

The proposition of the Heckscher-Ohlin Model that a rise in the relative price of a good raises the real wage of the factor used intensively in that industry and lowers the real wage of the other factor. When two economies trade, if there is a factor in the economy that is scarce, and it is plentiful in the other economy, when you open trade between those two economies, the price of the scarce good will go down based on the imports you bring in.

Satellite

The term satellite state designates a country that is formally independent in the world, but under heavy political, economic and military influence or control from another country.

Preconditions to take off

There is a period of transition between the traditional society and a society that takes off, and for a certain time that society is establishing the preconditions for take-off. These preconditions are mostly marked by an increase in productivity, such as was found in Europe during the 1700s and 1800s. A number of factors came together to make productivity increase; for example, population hit a critical mass that made agriculture take up such a high percentage of labor, which provided opportunities for the establishment of educational institutions, banks, and a market for luxury goods.

National Wealth

Total monetary value of the capital, goods and services, including net foreign balance and tangible assets, owned by a nation at a particular period of time. Used in a nation's overall economic analysis and planning. Net worth or net wealth given by gross assets minus liabilities. Also called national net worth.

Stages of Development

Using these ideas, Rostow penned his classic "Stages of Economic Growth" in 1960, which presented five steps through which all countries must pass to become developed: 1) traditional society, 2) preconditions to take-off, 3) take-off, 4) drive to maturity and 5) age of high mass consumption.

Protestantism (Weber)

Weber came to believe that the Protestant ethic —particularly the values of Calvinists and other austere Protestant sects— was at the heart of the spirit of capitalism

Comparative Advantage

When a producer is superior to others in multiple areas of production, the area of comparative advantage is the one that offers the best return. Below, the U.K. is better at producing both wheat and iron, but should focus on iron for a greater return (30,000 wheat, 20,000 iron, should focus just on iron because they can make more of it, and profit more overall).

Take Off

When the preconditions for take-off are met, a society can take off. Educated individuals start inventing new processes and tools, and access to capital through financial markets and banks make it possible to produce goods and services on a larger scale. This requires a different type of skill set from human laborers, so the economy shifts from agriculture to production. This increases wages for everyone, taking the economic structure from a structure of kings and servants to a wealthy class, middle class, and lower class. A lower class still exists at this stage, either because of social norms that discriminate against people or simply because the number of middle class jobs are fewer than the total number of people.

Zero Sum Game

Zero-sum is a situation in game theory in which one person's gain is equivalent to another's loss, so the net change in wealth or benefit is zero. A zero-sum game may have as few as two players, or millions of participants. Zero-sum games are found in game theory, but are less common than non-zero sum games. Poker and gambling are popular examples of zero-sum games since the sum of the amounts won by some players equals the combined losses of the others. Games like chess and tennis, where there is one winner and one loser, are also zero-sum games. In the financial markets, options and futures are examples of zero-sum games, excluding transaction costs. For every person who gains on a contract, there is a counter-party who loses.

Tariffs

a tax or duty to be paid on a particular class of imports or exports.

Free Market

an economic system in which prices are determined by unrestricted competition between privately owned businesses. In economics, a free market is an idealized system in which the prices for goods and services are determined by the open market and by consumers. In a free market the laws and forces of supply and demand are free from any intervention by a government, by a price-setting monopoly, or by other authority.

Economic Bases of Power

can be defined broadly as the capacity to influence other states through economic means. It is composed of a country's industrial base, natural resources, capital, technology, geographic position, health system and education system.

Autarky

economic independence or self-sufficiency. Autarky is the quality of being self-sufficient; the term is usually applied to political states or their economic systems. Autarky exists whenever an entity can survive or continue its activities without external assistance or international trade.

Private Property

is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property, which is owned by a state entity; and from collective (or cooperative) property, which is owned by a group of non-governmental entities.

Finance Capital

is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide their services to the sector of the economy upon which their operation is based, i.e. retail, corporate, investment banking, etc.

OPEC

is defined as an abbreviation for Organization of Petroleum Exporting Countries, which is a union of oil producing countries that regulate the amount of oil each country is able to produce. An example of OPEC members are Saudi Arabia, Iran and Iraq.

Gilded Age

is defined as the time between the Civil War and World War I during which the U.S. population and economy grew quickly, there was a lot of political corruption and corporate financial misdealings and many wealthy people lived very fancy lives.

Inflation

is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation — and avoid deflation — in order to keep the economy running smoothly.

Social Welfare Programs

provides assistance to needy individuals and families. The types and amount of welfare available to individuals and families vary depending on the country, state or region. Roosevelt's New Deal instituted many new measures of social welfare, including the Social Security Act of 1935.

Industrial Capitalism

refers to an economic and social system in which trade, industry and capital are privately controlled and operated for a profit. This is the dominate economic system in the United States and the developed world. Consequence of the development of capitalism.

Economic nationalism

refers to an ideology that favors state interventionism in the economy, with policies that emphasize domestic control of the economy, labor, and capital formation, even if this requires the imposition of tariffs and other restrictions on the movement of labor, goods and capital. In many cases, economic nationalists oppose globalization or at least question the benefits of unrestricted free trade. Economic nationalism is the doctrine of mercantilism, and as such favors protectionism.

Neoliberalism

supports fiscal austerity, deregulation, free trade, privatization and greatly reduced government spending. Neoliberlism is often associated with laissez-faire economics, a policy that prescribes a minimal amount of government interference in the economic issues of individuals and society. The Road to Serfdom by Friedrich Hayek is a non-fiction analysis of how economic planning, when used to replace the markets, leads to totalitarianism and the evils inherent within.

Dialectical materialism

the Marxist theory (adopted as the official philosophy of the Soviet communists) that political and historical events result from the conflict of social forces and are interpretable as a series of contradictions and their solutions. The conflict is caused by material needs. Mode of production in society sets the parameters for the political economy, economic structure determines social and ethical relations of society, and dialectical contradictions between the forces and relations of production provoke change.

Balance of Payments

the difference in total value between payments into and out of a country over a period. In calculating the balance of payments between countries, there are three main accounts to consider: current, capital, and official reserve accounts.

Feudalism

the dominant social system in medieval Europe, in which the nobility held lands from the Crown in exchange for military service, and vassals were in turn tenants of the nobles, while the peasants (villeins or serfs) were obliged to live on their lord's land and give him homage, labor, and a share of the produce, notionally in exchange for military protection. Defined as a Medieval European political, economic and social system from the 9th to 15th century. An example of feudalism is someone farming a piece of land for a lord and agreeing to serve under the lord in war in exchange for getting to live on the land and receiving protection.

Division of Labor

the main focus of Adam Smith's The Wealth of Nations lies in the concept of economic growth. Growth, according to Smith, is rooted in the increasing division of labor. This idea relates primarily to the specialization of the labor force, essentially the breaking down of large jobs into many tiny components, usually with one person doing only one specific task, so that overall efficiency and output is increased.