Unit 3 Gov

Multiculturalism

A perspective recognizing the cultural diversity of the United States and promoting equal standing for all cultural traditions

Self enforcement

The idea that an agreement structures incentives that nobody has a reason to cheat Ex: Paris climate accord

Global economic integration

The integration of national economies into a single global economy this can also be referred to as globalization but globalization is typically use more broadly

Inelastic

The supply of money is in elastic meaning that it is not responsive to price levels instead governments choose whether to increase money supply by printing more money or decrease it by printing less Reason why I supplied her for money is a vertical line and not a curve

Heckscher-Ohlin Theory

The theory that a country will export goods that make intensive use of the factors of production in which it is well endowed. Thus, a labor-rich country will export goods that make intensive use of labor.

Paper standards

The use of paper printed money paper standards have value because the government issuing them say they have value we use these often today

OPEC (Organization of Petroleum Exporting Countries)

an economic association of oil producing nations that is able to set oil prices Include Iran Iraq Kuwait Saudi Arabia Venezuela Libya united Arab emirates Algeria Nigeria Ecuador Gabon Angola Equatorial Guinea in the democratic republic of the Congo

Embargo

an official ban on trade or other commercial activity with a particular country.

World Trade Organization (WTO)

-1995 GATT became WTO -Key difference: DISPUTE RESOLUTION MECHANISM - Institutionalized a dispute settlement mechanism with established procedures for filing grievance, investigating complaints and punishing defection Ex: Group of European countries filed dispute agains George W Bush administration of steel tariffs he imposed, Europeans threatened put tariffs on orange juice (Bush won close election where victory in 2000 depended on narrow margin in Florida) -Designed to ensure that states uphold existing trade concessions (ex: tariffs cuts) negotiated through GATT/WTO -Judicial panel can enforce these obligations by authorizing compensation to injured party in form of trade sanctions (plaintiff has a lot of discretion on where to impose retaliatory tariffs) -Political logic: WTO enforcement capacity keeps global economy open by punishing states pursuing protection -While successful at preserving existing trade concessions, WTO is relatively ineffective over last decade in securing further trade liberalization because of limited support in developed world (US, Europe, Japan, China)

International Monetary Fund (IMF)

-Acts like a bank, oversees capital given by member countries -Created to limit large movements in exchange rates (prevent currency wars from Depression that interrupted trade) Ex: Reason why Europe has common currency (euro), by adopting common currency eliminate exchange rate risk and disruptive effect on trade -Starting after WW2 in charge exchange rate stability and up into 1970s had to get approval before shifted exchange rate significantly (devalued it) which was highly successful -Lender of last resort: Help governments in exchange rate crisis stabilize reserves with loans -Helps when government can't borrow from private capital markets Ex: Extended loans to Europe during Euro crisis -Typically uses it's pool of capital when member experiences balance of payments crisis (doesn't have money to pay immediate debts (loan payments to foreign lenders) -Country needs new loans to pay loan payments but can't -Private investors pull out of country if think won't pay them back or currency will be devalued (sell stocks and bonds) which further hurt stock and bond markets and currency which makes even harder to make loan payments -In crisis appeal to IMF for loan with strict terms -Conditionality: Demands conditions that change economic conditions in country and enhance long term ability to repay -Give money in multiple disbursements to ensure reforms implemented -Often impose real pain on country (ask them to cut tariff barriers and budget deficits) -Power of IMF comes from willingness to lend when no one else will -Voting power not equal in IMF, set by relative contribution to fund -US biggest shareholder so lots of influence -US often relaxes conditions for strategic reasons Ex: Pakistan conditions relaxed by US

Banks/Reserves Global Reserve Currency

-Always keep some money on hand, if people couldn't get money on demand wouldn't deposit it -Biggest banks in world hold US treasury bond as cash or source of reserves Ex: Japanese Central Bank, European Central Bank

Oil and COVID

-April 20 price of oil in West Texas -$37.63 (reflected that demand for oil in US at that time had been met temporarily, so no one wanted to buy) -This is because oil is traded in futures markets (traders arrange contracts to deliver oil on a certain date) Leading up to date promise to deliver oil changes. Don't get oil until the end of monthly contract Collapse of oil prices connected to broader collapse in global demand for oil triggered by COVID lockdowns -People not driving -Flights canceled -Consumers can't benefit from lower prices like usually do because not going out, typically when prices fall saved money goes to other purchases Price of oil has collapsed due to deeper supply issue -Result of political crisis between US, Russia and Saudi Arabia -Prices fallen because too much supply -Producers need to cut oil supply to fix prices but countries can't agree on how to distribute supply cuts -Need to cut back by 30 mbd -US slow to cut back because of debt obligations -March 6: OPEV (Russia) fails to coordinate supply cuts and Saudi Arabia triggers price war and increases production (Targeted US oil (specifically shale) and Texas was collateral damage) -Russia backed out of deal because feared options all benefitted US, which led Saudi Arabia to back out to punish both countries -April cut 10 mbd but not enough to fix -US seen as more at risk when have price wars because in US oil more expensive to get and many companies have taken on debts to expand rigs, pipelines -Saudi and Russia think price war will put US out of business and help them Ex: Comparable to oil issue 1985 and 1986, oil price collapse in 1985 because price war between Iran and Iraq who needed oil $ to fund war effort, Saudi Arabia tried to help by cutting production but Iran and Iraq didn't cut theirs as promised, saudi started price war by returning to producing more, got attention of US so Reagan sent his VP George H. W. Bush to Saudi to pressure them to cut production because worried oil producers in Texas would go out of business, US threatened tariff and Saudi reacted and reached agreement in OPEC, example of declining role of US in global economy -Before US was big consumer of Saudi oil while now China is, plus Trump has pulled back from Iraq and Syria to stay friendly with Russia which has given Saudi more power

Climate Change Science (undisputable facts)

-Average temperatures on the Earth are increasing and human activities since the Industrial Revolution are the main cause -Scientific claims note that carbon dioxide is a heat trapping gas that is in our atmosphere and helps to retain heat from sun once it reaches the earth's surface -Volume of carbon dioxide in the earth's atmosphere has increased significantly since the Industrial Revolution (280 ppm 1800 to 400 ppm 2015) -Average global temperature up 5.5 degrees F from 1800 to 2050 at current rate of emissions

Changes to Fed's Balance Sheet in Last Decade

-Balance sheet is the portfolio of financial assets that it owns -Fed holds US treasury bonds, mortgaged backed securities (bonds made up of mortgages, corporate bonds and foreign exchange reservers -Balance sheet (assets) expanded during 2008 significantly -Less than 1 trillion 2008 -4.5 trillion February 2020 -6.1 trillion April 2020 -Fed buys more assets by creating new money by increasing the reserves for deposits of the banks that have accounts at The Fed (creates new electronic money ("prints money" to buy assets) -Buying assets helps extend capital to private financial institutions so they won't go bankrupt and can continue to led in the crisis -Continued lending helps prevent financial crises by preventing bankruptcies and stimulating the economy

Paris Climate Accord Advantages

-Broad collective agreement: previous agreement the Kyoto Protocol, only had emission reductions for developed counties. Paris deal commits both developing and developed countries to emission reductions. Can't mitigate climate change without developing countries involved Ex: Kyoto Protocol 2005 only developed countries, Copenhagen 2009 broke down with no meaningful agreement -New voluntary approach: Uses voluntary national targets rather than binding agreements with imposed targets to achieve lower emissions. More realistic -Addresses needs of developing countries ($100 billion in "climate finance") to help break out of poverty while not contributing to climate change

Thinking Systemically and COVID

-COVID spread through trade and travel which then hurt the global economy -Global failure to detect and contain outbreaks created new policy challenges for all governments requiring them to address public health and economic crises (strategic interdependence and governments) -As global citizens our lives are now dramatically constrained by these global developments and widespread failures of governments (strategic interdependence and individuals) -Now have to reevaluate our social and economic existence and how it's changing, have to consider trickle down effects of larger systemic strategic pressures

COVID and US-China Trade War

-Can no longer use trade deal to get support in 2020 election because harder to rely on it to help US -Spring 2020 China still hadn't done much of agreed to with spending

Democracy

-Can only be considered a democracy if includes competitive elections (must be free and fair) -Require several other elections to have competitive elections that make it hard -Robert Dahl = premier political theorist of democracy created preconditions to make multi-party elections fair Public Contestation: Must have multiple parties involved in election and the right of citizens to freely express themselves, form associations and receive information from the media (requirements for elections to be free and fair) -Electoral competitions -Individual freedoms protected Inclusion: System must include universal and equal participation by all segments of society -Universal suffrage Ex: If women or ethnic minority systematically excluded from political process is not democratic Democratic Sovereignty: Elections must create powerful decision making bodies like legislatures and chief executives Ex: If have elections but big decisions made by un-elected bodies like military or religious authorities not democratic Ex: Iran has begun to have more elections but it won't be democratic until non-elected powers like religious authorities give up their power

Tension Created When Working With International Organizations

-Can provoke tension with domestic autonomy and sovereignty -Requires delegation to make policy outside of domestic government -By joining international organization, states delegate some responsibility for the making of trade policy to bureaucrats to run those organizations -Bureaucrats have power to influence US trade policy by penalizing what would otherwise be trade policy decisions made by president of congress Institutions can promote cooperation and Amwerican interets Ex: 2002 Bush raised import duties on steel, group of countries challenged this w/ trade dispute at WTO, judicial panel that ruled against US in 2003 and Bush then had to rescind tariffs, changing domestic policy laws in US -Have helped to support US policy goals and reinforce US political leadership over global economy but pursuit of US policy goals can also have real political costs (delegating political authority to international agencies to make decisions), shows cost of international orgs can be having to alter domestic politics/policies Ex: US supported globalization and elimination of trade barriers after WW2, blamed new trade barriers or great depression and period right before WW2 that led to war (interwar period), set up orgs including International Monetary Fund, World Bank, GATT that supported globalization goals and were good for countries involved (supported US export based growth, helped europe come back from economic depression, strengthened alliances, gave international community a stake in supporting economic goals) Ex: When soviet union, saw cost of being left out of American system of globalization Ex: To some Trump's "American First" approach is appealing because grand strategy focuses on protecting national sovereignty which includes criticism of multilateral organizations (NAFTA, WTO, UN, NATO), stresses negative side of international orgs -Can be really hard to get countries to agree Ex: During cold war soviet seat on security council led them to block other's moves and contributed to significant neutralization of the organization

Paris Climate Accord Disadvantaged

-Challenge in executing and deepening Paris deal -Current targets will not meet the target of an increase in global temperature of less than 2 degrees C -Watchdog groups have found countries aren't meeting their voluntary NDCs

Why do countries put in place trade barriers?

-Complication is that Ricardo only has part of the answer with respect to society's interest in free trade -Ricardo tells us international trade increases national income overall, but doesn't mention how this income is divided up among people and industries -Biggest globalization challenge is disproportional gains made by subgroups within national economies

Why Republicans Anti-Immigration

-Concerned immigrants will vote for democrats and give enough shift to make republicans not win -Permanent political status for undocumented immigrants in some states would push states like Texas and Florida democratic (latinos who can vote lean democrat)

Climate Change Denier Political Benefits

-Facilitating and sustaining skepticism about the scale of the scientific consensus supporting the claim that the earth is warming -Imply policy makers don't need to alter economic activity in a way that harms short-term economic growth in the US to try to reverse the environmental effects associated with this warming -Economic costs to cutting carbon emissions include reducing coal production, enforcing high mileage standards on the automobile industry and transformation of electrical grids and heating systems so they rely less on coal and oil -By denying claim rising carbon emissions is bad for the environment, can argue there is no need to slow down production and consumption of fossil fuels

Challenges that Prevent Collaboration Among States

-Free-rider problem plagues provision of international public goods -Distributional conflict among states over who would benefit more from a cooperative agreement -Enforcement of agreements is challenging

Political/Economic Benefits of Dollar's Reserve Currency Status

-Global liquidity or money supply generated via treasury bonds -Government issues treasury bonds when it runs a budget deficit -Ability to rely on foreigners to finance budget deficits helps fund domestic and foreign policies that Americans are unwilling to fund through taxes -Global dependence on dollar is source of leverage for US, lets government implement policies and buy things its people doesn't want to pay for Ex: Under Bush fought Iraq and Afghanistan Wars, government issued tax cut to reduce economic cost on Americans for war and also to fund a new prescription drug program, created large budget deficit which US used treasury bonds to finance, at time China increased amount of treasury bonds owned to push up value of dollar to increase Chinese exports to the US -US not getting exploited by role and Dollar's Reserve Currency Status, it helps US sustain self and handle budget deficit

International Organization's Role in International System

-Help to facilitate cooperation among states -Sometimes have trouble enforcing agreements (Ex: UN) -We think of signing a treaty or agreement will follow in future -Cooperation generally requires concessions and mutual adjustment by all parties -Cooperation can be hard to achieve because governments are sovereign and independent from each other, politically responsible for own people but not necessarily for other foreign governments meaning might face limited penalties from other governments for breaking agreements (governments don't threaten war every time tariffs raised or state doesn't extradite criminal) -International organizations help solve challenges associated with reaching and sustaining international cooperation -Reduce transactional costs associated with reaching cooperation by providing rules, guidelines and benchmarks that structure negotiations -Agreement among states require negotiated settlement Ex: Trade agreement between states agreeing to cut their tariff barriers Ex: Peace treaty where all waring parties stop military hostility as an act of cooperation Ex: World Trade Organization provides rules that shape how states regulate trade with each other and negotiate new agreements (rules: states will negotiate to reduce trade barriers (trade liberalization), when enter negotiation will do under reciprocal basis (when one state offers trade concessions, other must too), enforcement mechanism designed to pressure other states to honor trade concessions make to other (can initiate judicial proceedings within WTO if think concessions violated and can authorize retaliatory tariffs penalties)

Globalization and Immigration

-If look at movement of people across state boundaries as labor, we can see immigration policy is somewhat like trade policy -Open immigration policies remove barriers to the movement of labor and increase globalization -Restrictive immigration policies act like tariffs by raising obstacles that slow down international commerce Can look at the same way we look at distributional effect of free trade -Can see income distributional effects Positives -Immigration increases overall economic growth with movement of labor across national borders -Hi tech wants to employ high skilled work to keep cost down -Agriculture, construction, service wants to employ low skill foreigners to keep labor costs down -Lower label costs benefit consumers because keeps prices lower and increase economic growth. Migrants create demand for goods Negatives -By increasing labor supply in some sectors pushes wages down -Migrants also put pressure on taxpayers due to increased demand for social services

Immigration and National Identity

-Immigration alters racial and ethnic composition of countries -Size of relative minority and majority population change which can accentuate racial and ethnic conflicts Ex: In Europe and US white people making up declining population which makes these majorities feel threatened Ex: In US debates over if english should be the primary language and the national identity rooted in Anglo-protestant culture Ex: Europe concerns about muslim immigration -Concerns seen in strong push for immigrants to know national language and identify as christian Ex: In 2016 election those who switched from Obama to Trump did over fear or losing racial/social/cultural dominance, not economic reasons -Relevant because in upcoming election immigration may be the topic that decides who wins

Immigration and National Security

-Immigration views in Europe and US can be attributed to post 9/11 national security narrative -Both concerned open borders increase risk of terrorist attacks Ex: Attacks in San Bernardino, Paris, Brussels -Fear leads to call for stricter immigration policies, especially for those from countries experiencing war and terrorist activity Ex: Trump's travel bans -More pronounced in Europe especially in countries on front line of migrant crisis caused by Syrian Civil War and instability in the Middle East

Immigrant legalization programs

A lot of people who came to the country illegally to become official citizens

The US and the UN

-In US securing legitimacy from UN can reduce political costs associated with implementing foreign policy action and help with policy execution -UN reflects global public opinion, easier to gain allies if supported -Steward lip brings up question of why then do US leaders and the world care so much about the UN if it's "worthless", important because has capacity to give political legitimacy on some set of foreign policy Ex: Why did Obama use it in 2014 to promote environmental protection and construct coalition to confront ISIS Ex: Why did Bush in 2002 and 2003 work so hard to get UN approval for war in Iraq -Tension when have to give up some power and make concessions Ex: Tension seen in Trump's criticism of international organizations because of his focus on protecting US sovereignty

Stewart's Criticisms of UN

-Inability to secure durable ceasefire in Gaza in 2014 military conflict between Israel and Hamas -Says decisions are unenforceable or will decide things are unconditional

Bretton Woods Monetary Conferencee

-Institutional precursors to Bretton Wood institutions set up at Bretton Woods conference in New Hampshire for set of monetary organizations -Allies believed collapse of economic cooperation among states in late 1920s helped cause Great Depression -Great Depression helped create conditions that supported more imperialism and facilitated rise of Nazi Germany and Nazi helped precipitate WW2 through attempt to take over world -Idea constructing international orgs that support reduction of trade barriers fosters political cooperation to sustain globalization = peace and economic growth which would prevent new world war -Aligns with policy implications of comparative advantage (free trade = specialization and economic growth) -Exchange rate interventions that drive down currency value, direct economic subsidies to exporting firms, tariffs are bad barriers -Reason don't always do this is because globalization hurts and helps groups differently Ex: Spring 2018 groups called for Trump to put tariffs on imported steel and aluminum, other states said infringed on previous agreements and threatened to file complaint with WTO so Trump added exemptions -States also don't always follow through on free trade because states can cheat and withdraw from cooperative agreements -Ricardo misses idea of challenges of international political cooperation

Domestic Distributional Consequence of Globalization

-International trade helps create jobs in sectors that rely on disproportionately on resources the US possess in abundance -Abundance drives down costs of these factors and makes goods that rely on them as inputs relatively cheaper -Globalization drives down economic returns to owners of scarce factors of production in economy Ex: Unskilled labor is much more abundant in India, so can pay people there less to make goods than could in US Ex: More jobs created in highly skilled labor in US, reason why we export more technology here -Globalization tends to activate domestic political conflict because some groups win and some groups lose -States restrict trade because globalization redistributed gains disproportionally, suffering groups pressure government to not join trade pacs like NAFTA and put tariffs in place Ex: Trump left TPP, renegotiated NAFTA, put tariffs on steel and aluminum to protect American manufacturing workers who voted for him, trade war w/ China

Source of Underlying Conflict in US-China Trade War

-Issues have been around long before Trump but he created problems by challenging them -Chinese economic growth could result in transformation of global distribution of power Issues between countries due to structural factors associated with China's economic rise and fundamental contrast between political and economic systems of the two countries -China's state-managed capitalism creates unfair advantages -US plays more limited role in managing US economy and supporting firms and industries

Immigration Downsides

-Labor groups see lower wages and taxpayers pay more taxes to cover welfare programs for immigrants

Immigration Benefits

-Lower labor costs for agriculture and high tech sectors

Phase 1 Trade Deal US-China Trade War

-Made in January 2020 -Deal eased access for American export into China -Trump planned to use to spark economic growth and use to gain support for 2020 election -Under deal China agrees to spend $200 billion on US exports in key sectors (agriculture, energy, manufacturing, financial services) -China agrees to protect US companies' intellectual property, stop forcing US companies to transfer technology for market access and lift financial service barriers -Have had reforms like this before but not followed through -US agreed to reduce some tariffs but not all

North Atlantic Treaty Organization (NATO)

-Military alliance -Political actor -Rules governing NATOs inner-workings and relations are institutions (rules) and have big effect on international politics Ex: Rule In NATo that an attack on one member state is viewed on an attack on all is at heart of security guarantee of alliance -Have rules that member states can't have territorial claims against other states and maintain democratic form of government solidify peace in alliance and help NATO spread democracy Ex: Some argue the "carrot" or appeal of security that made Eastern Europe join as a result led them to pursue democracy after fall of communism -Formed during Cold War to contain soviet threat, key function was provide military security to Western Europe against possibility of soviet military attack

How Climate Change will Effect People

-More extreme heatwaves (droughts, altered wind patterns, more variability in weather patterns) Ex: warm air can hold more moisture than cold air so some regions might have longer gaps between rain but will have intense rainfall when it does rain -Ocean levels rising which endangers coastal communities (warming of atmosphere melting ice sheets in Antarctica and Greenland) -Sea level has risen 10 inches since Industrial Revolution began -Scientists estimate sea level could rise 3-6 feet by the end of the century -West antarctic sheet could be at tipping point where reaches point where melting can't be halted, loss of this sheet = 10 feet sea level rise -Greenland sheet melted = 10 feet rise -East antarctic sheet melt = 200 feet rise -Scientist say now is crucial, may not be able to get temp back to normal if carbon emissions aren't fixed now

Collective Action Problem Climate Change

-Public good is the cut in carbon dioxide emissions that stabilizes or reduces the concentration of carbon dioxide in the atmosphere -Is a public good because it's costly to exclude someone's (countries and their citizens) benefits of the public good once it's been provided -Could solve by having large actors provide public good on own and absorb cost of free riding. They choose to provide the public good because they benefit enough individually from its supply Ex: Might look like unilateral, radical cuts in carbon emissions by large actors like US or China -Could also implement international agreements to punish noncompliance with enforcement mechanism (coercive approach) -Markets undersupply public goods so might now be able to rely on market solutions which is why international agreements are necessary (will likely need to rely on large actors to solve this)

Monopoly

A market in which there are many buyers but only one seller.

Trump Administration on the Paris Climate Accord

-Obama based pledge for US carbon emission reduction on executive orders ("Clean Power Plan" that allow EPA to curb use of coal to generate electricity and give government incentives to support renewable energy) which could be easily reversed by next president -Trump aimed to protect coal and promote oil drilling -Trump rescinded Obama's orders even before he formally announced withdrawal from Paris agreement -November 2017 formally announced intent to withdraw -US is still part of Paris accord until November 2020 so election could reverse decision again, rule has waiting period to withdraw -UN says no country can leave accord for 3 years and then one year for withdraw to take full effect -Democratic president in 2020 could rejoin Paris agreement but other states would likely question stability of US participation -If Trump re-elected = effective end of Paris agreement -Other countries unlikely to push for emission reductions while allowing US, second largest carbon emitter, to free ride -Easy to reapply and get back into agreement within 30 days

United Nations

-Oversees large bureaucracy that is involved in peacekeeping, monitoring nuclear weapons facilities and programs, children's health, delivery ofc humanitarian relief in wars and natural disasters, protect human rights -Serves important global political functions -Has two main bodies general assembly and security council -All members sit in on general assembly which means there is rarely a consensus since states disagree -Large membership provides political vehicle to secure international legitimacy or broader political acceptance for some foreign policy action -Security council has five permanent members (US, UK, China, Russia, France, all winners of WW2 who set up UN) with veto power and ten rotating members where make most big decisions -State appeal to UN when trying to get international political support for some foreign policy action Ex: US appealed to UN to get support of internationally condemning Syrian regime for chemical weapons attacks on civilians -Many americans not happy with UN, is very financially costly and although agree what UN aims to do are important, feel UN is ineffective) stems from political diversity of its universal membership which makes it so small group of states can block other states from achieving policy goal through the UN

International Organizations

-Political actors in international system -Include individuals and groups from a state -Often members are nation states -Created by member state to fulfill larger set of political goals that their members share -International institution may be important components of international organizations -IOs created to defend certain international institutions -Act to pursue objects -Poses agency and pursue political objectives Ex: UN, NATO, World Trade Organization (NATO)

Trade Deficits and American Jobs

-Politicians use as evidence of unfair trade practices by other countries that are hurting US firms -Think means that foreign government is subsidizing their domestic firms or putting unfair tariffs on US products -Claim that if US firms have limited export access to foreign countries then American firms can't hire US workers -Arguments claim trade deficits undermine competitiveness of domestic firms and put them out of business -Not as straightforward

Trump and US-China Trade War History

-Prominent during Trump administration -Trump has been critical of relationship with China since started campaigning due to position on bringing manufacturing jobs back to the US which allowed him to win -Began negotiating new terms of trade with China in 2017 -Stopped making progress w/ negotiations making Trump take confrontational approach to gain concessions from China around tariffs -Both sides increased tariffs back and forth, creating trade war that slowed trade between them -Beginning of 2020 made progress in trade agreement (Phase 1) but was disrupted by COVID

What International Orgs Do

-Promotes sovereignty which shapes how states interact and defines what can and can't do -Help foster cooperation between states by providing info about national interests which can be used to make predictions about if would cooperate in future

Institution's Role in International System

-Regulate behavior (tell states what can do) -Give clues to what behaviors are accepted by broader international society -Rules designed to minimize conflict in international system -Specification of rules help identify actors and states that violate rules of international system -Provide information about other states in system -Once something is specified as an international institution or norm, codes of conduct can be used to assess behavior, interests and potential threat posed by state or actor Ex: Recognition of sovereign rights designed to be reciprocal, states recognize each other's sovereign rights and agree not to violate each others territorial borders or interfere in domestic political decisions of other state, rules try to prevent conflict between states by letting each set their own domestic laws will regulate actions of people within their borders and threats to other states Ex: When Syrian government violated international norm prohibiting use of chemical weapons by launching attacks against its own people, simultaneously tells world what type of government it is

Immigration Policy Politics

-States with high migration flows have some form of policies that make this possible/support this -Policies adopted effect also based on what say and hows they're enforced -Open migration not typically supported in countries with highest immigration rates -Gap between public opinion levels of immigration and immigration policy -Collective action problem - powerful interests experience concentrated benefits from immigration while the costs are distributed widely across less organized interests -Agriculture and high-tech sectors experience concentrated benefits from immigration = support policy that promotes it -For decades US has preferred same or less amounts of immigration -Great flow of immigrants in US due to policies Ex: Late into term George W. Bush sought comprehensive immigration reform, at time sizable number of free market Republicans supportive of working with Democrats to give legal status to illegal immigrants, Republicans saw as labor benefits for markets lacking labor, didn't do effectively because Bush unpopular from Iraq, aftermath Republicans became tougher on immigration and saw through them presenting national security issues, Trump made immigration an issue -Political polarization in US makes hard to get agreement over immigration

Tariffs in US-China Trade War

-Tariffs increased between both countries July 2018, Fall 2018, June 2019, Fall 2019 -Tariffs on agriculture, iron, steel, machinery, cars, raw materials, finished products -Tariffs reduced trade in both countries and increased cost of goods for consumers -Each time one adds tariff, so does other -China's tariffs aimed to target specific US sectors, specifically ones more likely to support Trump (midwest) to try to leverage elections to make Trump make concessions

COVID and Oil: Texas

-Texas benefits from oil production taxes, will get less tax money because of current situation -Hurt locals economically in West Texas and Houston, collapse of oil prices spills into unemployment and housing markets -Ut and A&M losing funding, both funded by land holdings in west Texas

Federal Reserve Emergency Actions to Limit Economic Fallout of COVID

-The Fed has undertaken extraordinary, unprecedented actions to prevent economic shutdown associated with COVID from triggering global financial crisis -Slowdown of economic activity could accelerate and trigger much broader financial crisis if it spreads to the banks -Extending huge quantities of credit to all types of businesses in the US to keep them afloat and avoid bankruptcies -Used 2008 playbook for inspiration and went way beyond

Greek Financial Crisis 2011-2012

-Triggered by global financial crisis that had begun in US in 2008 -Greek government has long run unsustainable government budget deficits -As crisis spread throughout Europe investors worried about if Greek government could replay their exploding debt levels -In response investors started selling Greek government bonds which drove down price of greek government bonds which increased the interest rate Greek government had to pay to get investors to lend it money -By January 2012 interest rates were unsustainable (30% interest on ten year loans) -Under pressure from IMF, German government and EU, Greek government developed harsh measures of economic austerity where Greece decided to drastically cut government spending and raised taxes to respond to the crisis -These market based pressures which resulted from global capital holders' actions (selling bonds) altered economic policy of Greek government and induced recession in Greece -Policies in response sought to reduce deficit to manageable levels and reassure capital markets, capital holders, investors that the Greek government would eventually repay their debts -Spending cuts and increasing taxes and interest rates slowed down economic activity in Greece and cut economic growth, high interest rates made it hard for new business to get loans

Trump Administration and NATO

-Trump challenging basic foundation of NATO and European security -Says European countries aren't spending enough on their own militaries and defense and expect them to step up (wants them to spend 2% of GDP on military security -Questions trade-off of cost of NATO and its benefits, argues cost of international organizations outweigh benefits -These two thinks Trump is commenting are not new problems and have longtime been an issue for the US and alliance -Trump's approach to issues however is radically different than decades of foreign policy before him Ex: Has called NATO obsolete, has suggested if European members don't increase their domestic defense spending as expected by the treaty the US might not honor Article V of NATO's founding treaty (says any attack on a member is an attack on all members) -Trumps' actions threaten alliance and whole security apparatus that has maintained peace in Europe since end of WW2

The US and NATO Downsides

-Two dilemmas: European shirking, US reluctant hegemon European Shirking -European countries not fulfilling responsibilities to provide own military security by not spending enough of their own money on militaries during and after cold war -After NATO formed in 1950s Eisenhower complained about this, has been common thread since then with all presidents US being a reluctant hegemon -Membership can be costly -Members don't invest enough in own militaries and expect US to pick up slack

How can the Fed do this? (Structural power of the Dollar)

-US dollar is global reserve currency (large segments of international trade conducted in dollars) Ex: Banks around world hold dollars in cash to increase confidence they are capable of defending the value of their home currency -Dollar has value because everyone believes it does and in the capacity of American taxpayers to fund debt obligations of US government Dollars global significance has big implications for Hegemonic Stability Theory and US leadership over the world -Concentration of economic capabilities in US created positive economic benefits for global economy (helps expand international trade and global economic growth) -US supports positive outcomes by providing public goods (like dollar as reserve currency and access to US consumer (public good example: emergency lending from The Fed) US has been center of global economy since 1919 -Has made long term investments in political and economic order that benefits the US Ex: Funded allies in WW1 and WW2, rebuilt Europe with Marshall Plan aid, protects flow of oil out of Middle East, provides military and financial aid to countries opposing soviet union, opens domestic markets to international trade -This has created a dependence o f the US economy and financial capital and has created a steady demand for the dollar (or financial assets denominated in the dollar (treasury bonds)) -This means US can run huge deficit in response to COVID simply because rest of the world needs dollars -Rest of world is going to help US borrow our way out of this crisis without paying nearly any interest on the loans the US government is currently taking out Challenges some core principles of America First -World not free riding on US, instead helping pay some of the costs (with effectively no interest loans) of economic stabilization and recovery in the US -Typically this explosion in deficit financing would cause interest rates to go up (as creditors demand higher interest rates) -Other countries don't have same monetary and fiscal flexibility Global demand for dollars helping Congress to run massive deficits (at zero percent interest) and Fed to print trillions of dollars to backstop US financial institution and the domestic economy

Longevity of Growing US Budget Deficit

-US government will eventually have to raise taxes to handle budget deficit if don't reduce it -If they don't raise taxes on their won, global capital markets will pressure US to do so

Democracy Promotion

-US uses Democratic Peace Theory to validate democracy promotion -Claim democracies = more partners for collaboration, durable international settlements, trade and peace -Democracy promotion and liberal values of protecting human rights typically motivate American foreign policy -Importance of democracy promotion has varied in american foreign policy over time

Tooze Reading

-Written during economic collapse March + April 2020 -Economic shutdown and lockdown to prevent virus spread which led to unemployment and need for governments to bail out businesses through loans -Article notes global economy has 3 economic centers of productive power: US, China, Europe -Three centers have weaknesses existed before COVID -China: Growth propped up by too much debt -Europe: Lack of common fiscal policy which complicates coordinated response by EU, financial crisis in Italy could devalue Euro -US: Political polarization makes hard to agree and get response coordinated -System held up temporarily by US economic policy from US technocrats now and in 2008 (Treasury and The Fed) -Asks questions moreso than making arguments -Asks if traditional source of leadership (US treasury and Fed) have enough tools to weather crisis and keep global economy afloat -The pandemic will either hasten US decline by undermining ability of President and congress to respond or bring US together and strengthen it in face of common threat -US elections extra important going forward with US role in global leadership and general response and success of response to the pandemic

Specialization

A focus on a particular activity or area of study

Customs Union

A group of countries committed to (1) removing all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy. Ex: The European Union which later became a common market

Kyoto Protocal

166 Nations met in 1997 in Kyoto Japan to negotiate a treaty to reduce carbon emissions to below 1990 levels by 2010; Climate talk updates in Copenhagen, Mexico City, Durban S.A. and Warsaw Included cap and trade approach which allows country to sell their unused the mission rights to other countries Has nothing mandatory Avoid pressure and tension

Devaluation

A large scale downward adjustment and exchange rate This is why some countries adopt capital controls

DACA (Deferred Action for Childhood Arrivals)

A 2012 law that allows people who came to the U.S. as children to request amnesty and work authorization without deportation for up to two years at a time.

Currency speculators

Actors who attempt to leverage small differences in the values of currencies across the exchange rate markets around the world to make money off of an anticipated decline in a currency value

Allied Powers

Alliance of Great Britain, Soviet Union, United States, and France during World War II.

Family-based migration policies

Allows citizens and legal residence to sponsor family members for visas

Distributional stake

Amount of which something affects an outside party Ex: Trade dispute between US and European union that goes before the WTO has effects on everyone not just the two countries Ex: If countries like China and Russia agree to sanctions that are warranted for a country like North Korea some actors within China and Russia might disagree because of the fact the sanctions could have on their business

Washington consensus

An array of policy recommendations generally advocated by developed-country economists and policy makers starting in the 1980s, including trade liberalization, privatization, openness to foreign investment, and restrictive monetary and fiscal policies.

Capitalism

An economic system based on private ownership of capital Jobs in market for jobs determine moreso by capital and private ownership

European union

An international organization of European countries formed after World War II to reduce trade barriers and increase cooperation among its members.

Krasner Reading

Argues US should concentrate less on democracy promotion and more on encouraging "good enough" governments (greater security, economic growth, better provision of services by authoritarian regimes -Presents approach as middle ground between doing nothings and being too aggressive -Way to learn to live with dictatorship by fostering better governance within them without pushing democracy on them Main elements of promoting good enough governance -Sorts states into 3 groups (consolidated democracies, transitional countries and despotic regimes) and says each category needs different foreign policy approach -Consolidated democracies: US needs to maintain alliance and trade agreements with them to sustain successful democracy -Transitional countries: Us should work w/ other democracies to gently nudge countries toward greater democracy by finding and supporting good, local leaders -Despotic regimes; Democracy not viable in short-term, US should also identify good, local leader (regardless of if support democracy) and provide them assistance to improve security, economic growth and supply important services like healthcare Critiques -Dictatorships are multi-faceted regimes that can engage in good enough governance while also acting in ways that are in direct conflict with US interests and values -Approach lacks guidance in scenarios like one in Hong Kong Ex: China provides good enough governance (offer strong economic growth, security, provision of services like healthcare) but also persecutes weaker minority (place in oppressive re-education camps), threatened Hong Kong with new national security law that restricts its autonomy and democratic opposition, Hong Kong looking to democracies for support against China's increasing authoritarian grip US had taken to very different approaches to authoritarian regimes -Presidents like George W. Bush tried to transform dictatorships into liberal democracies to try to remake countries to be like US that works in all countries popular since Wilson -Presidents like Trump and to a lesser extent, Obama, are taking a more hands-off approach, instead demonstrating success of democracy through showcasing well-functioning US political system, doing little to promote democratic regime change on ground, borrows from isolationsism and offshore balancing Both approaches flawed -In case of active democracy promotion put in a lot of resources but in most cases trying to remove long standing authoritarian regime is unsuccessful and backfires, especially when military used -US and other western democracies bad at executing democratic regime change Ex: Iraq, Afghanistan -Withdrawing from world's trouble-spots equally damaging, avoids problems letting radical elements gain strength which motivates them to attack US and interests Ex: Al-queda camps hiding in plain sight in Afghanistan until 9/11 attacks -Highlights common dilemma, there's a no-win situation, get involved in costly overly ambitious efforts fail but also avoiding problem areas leaves us open to attack

Current account balance

Balance of trade between exports and imports

US-China Relations and COVID

Before COVID -Over years China rose economically to point threatened US global leadership -Obama 2nd term intentionally tried to align with countries surrounding China to create strategic opportunities to contain China's expanding political influence if necessary -Trump initiated trade war to try to contain China by pressuring China to open markets to strengthen US manufacturing -So far countries want to avoid rivalry and trade with each other US view of China change with COVID -US public beginning to dislike China, blame them -Makes being "tough on China" talking point for election -Before covid had trade deal signed January 2020, Trump planned to use to spark economic growth and use for leverage in election -Trump careful to blame China for pandemic because want phase 1 deal to be executed because financial gains could help with economic recovery, although chance of phase 2 unlikely (instead went after WHO and cut funding) Trump Response -President has made efforts to show restraint to not upset China (stopped calling it the Chinese virus) -US upcoming elections complicate things, politicians on both sides trying to deflect blame by shifting blame for COVID to China -Hostility stoked by elections could create tension and failing relations between countries -Broader decoupling between China and US, both sides trying to focus inward which raises concerns of getting medical goods from China, US likely to support US businesses to bring support and manufacturing back to US (doing through bailouts) -See absence of leadership in this crisis compared the 2008 and 9/11, we've reached a Gzero world -Move away from globalization and as economies decouple businesses could lose export opportunities (can compare to great depression, unilateral policies and decoupling made it worse and it effected everyone globally) Global cooperation necessary and what it looks like -Public health challenges create externalities for world (Ex: China didn't contain covid, now effects everyone) -Need to coordinate public health response through WHO and share knowledge, supplies, help developing world, coordinate testing so no shortage, need to coordinate food access too Ex: Trump has withdrawn support for WHO which could cause issues or will US step up and be in charge, question of who will step up if WHO can't -Need to coordinate economic response (fiscal tax bailouts, monetary policy to prevent financial crisis, open trade policies to preserve global supply chains, economic aid) -Hard to coordinate because popular response has been to cut ties (especially travel) What happens if we don't coordinate? -Fear surrounding covid coming back in countries that get covid under control through trade and travel so limited coordination -Causing us to question costs of globalization, later can't go back to previous supply chains -Globalization fuels crisis but need global cooperation to help Role of Hegemonic Stability Theory -Aligns with situation, decline of hegemon limits international cooperation (see with US, moving to Gzero world) -US showing this, pandemic pushing US to supply less public goods -The Fed's actions push back against this, US preserving influence through Fed by trying to limit economic costs -US and China both have economic benefits of preventing political conflict which is why want to cooperate and has started to stabilize relations currently, incentives to cooperate for economic recovery period

Treasury Bonds

Bonds issued by the federal government, when the US "borrows" money from foreigners -Kind of like IOUs -How government pays for budget deficit

General Agreement on Tariffs and Trade (GATT)

Came before the WTO Multilateral international organization designed to support reduction of trade barriers on a reciprocal basis -Expectations that any concession by one state should be done by other Provided a series of rules that would guide negotiating rounds (multilateral bargaining efforts) during Cold War -Led by US and fairly successful, membership in GATT boosted overall trade flows of members during Cold War -Didn't have mechanism to handle trade disputes resulting from agreements (no enforcement capabilities), GATT rules expected trade disputes handled on bilateral basis (two countries involved in agreement, leverage issues)

Thinking Systemically and the International System

Complex, global aggregation of people, organizations, ideas, rules and natural resources -Connects the interests and actions of governments, MNCs, political activists and individuals -Creates situation of strategic interdependence among these actors, their choices and interest depend on what others do -Everyones actions affect each other

Hegemonic Stablity Theory

Concentration of economic and political power provides public goods to international system

Externalities

Costs or benefits of some transaction by people not involved in transaction

Externalities

Costs or benefits that accrue to parties that are not directly involved in the interaction who are third parties

Markets

Decentralize institutional arenas in which individuals firms and states meet to exchange products and services

Critiques of Democratic Peace Theory

Democracies that are established with well developed likely to have peace -States under democratic transitions are more likely to experience war than even established dictatorships Ex: During breakup of Yugoslavia democratic transition helped to fuel inter-state conflicts between successor Yugoslav states like Serbia, Croatia, Bosnia and Herzegovina Others have note alternative explanations for absence of war between democratic states (particularly after WW2) -Having common enemy of soviet union explains peace in Western Europe (Great Britain, France, West Germany) after WW2 -Great power settlements, not democracy, explain peace after WW2 (peace is product of US hegemony in Western Europe and Soviet hegemony in Eastern Europe, superpowers maintained peace with countries in their own spheres of influence + nuclear standoff between great powers kept from fighting each other)

Distributional Conflict Over Climate Change

Distributional struggle within countries -Coal vs solar, oil vs general public -Some industries benefit others hurt -Changes costly to government and consumers -Big job loss for those working in fossil fuels who would likely lobby -Wealth redistribution Distributional struggle among countries -Developed (US, Europe) vs developing (BRIC: Brazil,China, India, Russia) -Variation in carbon emissions across countries means different levels of preparedness for changes -Think developed countries should shoulder burden since they urbanized before were penalized for carbon consumption and caused most problems with climate now -US: carbon consumption in electricity, transportation, industry -Europe: Less in transportation -Industry (and carbon emissions shifting to developing world, caps on emissions limits their economic growth Distributional conflicts across generations -Big issues will be seen later on -people of future don't have a vote -Politicians might listen to current constituents, not future ones -Easier to kick costs to people later

International Migration

Dramatically grown over time -Since 2000 number of international migrants has grown by nearly 50 percent from 173 million to 258 million

Shirking/Drift

Drift - When an agent behavior begins to evolve from its original mandate into other areas which in part is due to bureaucratic culture or incentives for institutional survival Shirking - When the agent fails to carry out its assigned task. with too little oversight or control from principals, agent behavior may deviate in suboptimal ways

Causes of Democratic Peace

Electoral constrains raise the political costs associated with wars -Wars have big cost on human life and economically -Encourages trying to make settlements Institutional checks and balances make peace settlements more durable because democracy helps to solve the commitment problem -Can lobby congress or other organizations if not upholding peace status quo -Hard to change peace settlements domestically once set -Peace settlements stay longer with democracies Ex: Separation of legislative and executive branch Shared democratic identity: Democracies externalize norms of conciliation and compromise with each other and there is less political support for using military force against fellow democracy -Both sides want to preserve peace -Public less likely to support military force if other side is democratic

Diffuse enforcement

Enforcement is provided by members of the system rather than by central authority Ex: WTO, UN Ex: Has downsides for example Bush cannot get approval from UN for Iraq war

Budget Deficit

Expenditures exceed (tax) revenue

Transaction costs

Extra negotiation cost of doing business

Command economies

More of the economic decisions are effectively made are influenced by government officials rather than by private individuals responding to market pressures Decisions on where people can work and what they do are more so regulated by the government

Multiple principles

Multiple states that delegate responsibility to an international organization multiple principles often disagree about particular policies Ex: IMF

Current account deficit

Short term trade deficit And be negative because of balance of payments Persistent current account deficit result in larger debt owed to foreigners

Standard Trade Theory (Heckscher-Ohlin)

Globalization alters the distribution of income within an economy as it increases the aggregate (total) income of the economy as a whole Ex: Seen in declining size of manufacturing sector in US and growing size and incomes of high tech industries -Sectors where labor in exported good are cheaper benefitting general public, but US workers in these sectors hurt by globalization -Hurt groups lobby for tariffs to protect self make less money as result Ex: Automobile industry in US has declined after bankruptcies of GM and Chrysler in 2008, factory workers once making $30/hour lost jobs when company moved labor to Mexico where cheaper, now workers do new job at Walmart for $12/hour

Monetary contraction

Government control the money supply by contracting the money supply which helps to combat inflation by increasing the interest rate and making borrowing more expensive

Central banks

Government created bank second service banks for private bankers one example of this is the federal reserve system in the US

infant industry argument

New industries in developing countries must be temporarily protected from international competition to help them reach a position where they can compete on world markets with the firms of developed nations. Idea based on economic writings of Alexander Hamilton in Frederick list

Rotating credit institution

How lending works for the IMF Each country gives money is sort of insurance policy since all trading money is connected

Common market

Illuminate barriers to trade among its members does Lauren one cost of cross-border trade this illuminates tariffs among members while establishing a common external tariff

Public Good

Non-excludable and non-rivalrous -Activates free rider problem -In this case, free riding looks like failing to limit your own carbon dioxide emissions -Countries see benefits but don't change policies, rely on hope other countries will do the work and they too can reap the benefits without doing anything

Global Patterns of International Migration

In general global migration patterns involve a net flow of people from less developed countries to developed countries -US, Saudi Arabia and Germany are top receiving countries -India, Mexico, Russia, China are top sending countries -Not case for developing countries like Turkey that bear main burden of refugees (taking refugees placed mainly on neighboring developing countries who are far more unequipped to take in refugees) While US has largest cumulative number of migrants, migrants make up large portion of population of other countries Ex: United Arab Emirates, Saudi Arabia, Australia, Canada

Competitive markets

In perfectly competitive markets high quantities of buyers and sellers prevent any one actor of setting the terms of any exchange Ex: Have enough demand that sellers don't attempt to negotiate because know someone will be willing to pay their prices

Inflation

Increase in prices due to depreciation

Globalization

Integration of national economies into a single global economy Ex: Can see in steadily increasing levels of imports and exports Ex: When look round our home, a lot of our stuff is sourced from abroad like cars, iPhones (parts of it come from all around world, economic pieces from all over the world)

What does Global Economic Cooperation look like?

Joint reduction in tariff barriers (tariff cooperation) Ex: Both states reducing tariffs to give each more access to their domestic economies -Risk some domestic firms that are less competitive going out of business -Cooperation also creates opportunities that can offset losses More exports to customers through foreign economy -Can be mutually beneficial if both sides make concessions Monetary cooperation: Multiple countries coordinate monetary policies Ex: synchronize interest rate change to preserve stable exchange rates -Exchange rate changes can alter trade patterns Ex: Rising exchange rate of dollar can make exports more expensive to foreigners (reducing US exports) -Sometimes states manipulate their exchange rates by implementing expansionary monetary policies (cut interest rates at home = cuts down value of their currency abroad making their exports more competitive which can act like a trade barrier) Ex: In early 1930s Great Depression worsened when countries withdrew from the gold standard (fixed exchange rate regime) and devalued currency to increase exports, as result more and more countries did this = protectionist policies and exchange rate volatility to global economy, other countries increased tariffs created momentum for Smoot-Hawley Tariffs US 1929) -Exchange rate manipulation decreases trade and economic growth -Goal = create policies to stabilize exchange rate Ex: In exchange rate regime where want to increase exchange rate, ask other to do same to preserve stability Foreign aid or development loan -One government provides extended emergency aid to other country experiencing temporary budget crisis or shortfall Ex: During European financial crisis in 2009, 2010, 2011 with Greece, Ireland Spain and Portugal got loan packages from governments like Germany and international agencies like the European Central Bank and IMF so they could prop up their economy, pay short term debts and try to reduce downward recessionary pressures in their domestic economies Emergency Lending

Migration

Large scale movement of people both in and out of states so effects differ across countries

Brezhnev Doctrine

Policy proclaimed in 1968 and declaring that the Soviet Union had the right to intervene in any Socialist country whenever it decided there was a need Removed end of the Cold War in addition to removing the threat of Soviet military intervention invention to prop up increasingly unpopular communist regimes

Paris Climate Accord

Major international climate agreement adopted in December 2015 -Is example of collective action problem and difficulties of international cooperation to provide a public good -Goal: Lower carbon emissions to limit negative outcomes of climate change -Adopted by over 190 counties -Important role played by US (Obama) in final terms of the agreement -China also took lead -Agreement on the process by which states would submit voluntary reduced CO2 emission targets to keep average global temperature increase below 2 degrees C with ultimate goal of less than 1.5 degrees C above 1800s Main Components -Nationally determined contributions (NDCs) that are voluntary and not legally binding (designed to work through politics to use naming and shaming) -NDCs adjusted every five years with expectations of additional cuts as time goes on -Goal of this is to work politically by forcing governments to make public commitments to how they'll address climate change and then let domestic groups and state use this as pressure for compliance -Fund to transfer $100 billion dollars from developed to developing countries every year from 2020 to 2025 (to compensate for fact developed countries are more responsible for this problem due to their earlier industrialization and how these changes risk limiting economic growth of developing countries, goal to help promote economic development)

Global Reserve Currency

Many international transactions outside of the US occur in dollars -Dollar referred to as reserve currency Ex: Price of oil on global markets quoted in dollars, to make big oil transactions buyer must first buy dollars -When capital holders think earning will fall in value because the currency used for those investments value will falls , move that capital into a safer currency, generally dollar Ex: Euro and Yen -When economic markets fall like in 2008, there is a flight to safety (investors sells stocks and bonds denominated in other currencies and purchase US treasury bonds with those funds because these bonds are considered the safest investments in the world -Money is a medium of exchange that facilitates growth and specialization -National governments supply domestic economy -Global Reserve Currency status is source of economic and political power for the US, creates steady demand for financial assets like US treasury bonds that are denominated in dollars -Global economy depends on the US government to run a budget deficit

Fed Monetary Policy Actions March - April 2020 COVID

March 3: Dropped Federal Funds rate target from 0.25 to 0.00 (interest rate Fed charges largest banks for overnight loans (short term interest rate)) -Designed to give banks access to capital so they can turn around and lend it to customers Used multiple rounds of quantitative easing (asset purchases that increase size of balance sheet) (also used in 2008) -Designed to reduce long term interest rates -Long term debt instrument used for high value purchases (cars, homes) -Fed buys bonds that use mortgage payments as collateral to encourage financial institutions to keep mortgage rates low for consumers (hope is that low interest rates will stimulate/stabilize construction and home industries and create jobs -3/15: Announce purchases of $700 billion (treasuries and mortgage backed securities) -3/23: Announced that purchases are open ended (new) Previously Fed only directly lended to large financial corporations and large banks Direct lending to large corporations (new) -Goal to stabilize big industries in the US and discourage layoffs and prevent bankruptcies -Treasury (the US taxpayer) provides a backstop to take on up to $75 billion in loses April 9: Indirect lending to small and medium size businesses (new) -Funding 95% of loans originated by other domestic financial institutions April 9: Direct lending to state and local governments, up to $500 billion (new) -Social distancing = less spending meaning that tax revenue from state and local taxes are going down which could cause new job losses as states and local governments have to lay off publicly funded employees (ex: teachers) to fill budget holes Swap lines (exchange dollars for foreign currencies to 14 most trusted central banks) -Extending credit in form of dollars -Important because dollar is the world's reserve currency -When foreign governments borrow from US banks have to repay debts in dollars which is harder to do by raising value of dollar (demand for dollars and treasury bonds have increased because are especially desirable in unstable times like now) March 31: FIMA Repo Facility (Foreign and International monetary authorities) - Fed will lend dollars (create reserves to foreign actors that hold and post US treasury bonds as collateral (new) -In March worried foreign financial institutions might sell treasury bonds to raise cash and cover losses which drove down price of these bonds -Fed told central banks they'd lend them dollars to ease pressure on their currencies and reduce urgency for foreign investors to sell treasury bonds

Contagion

Mass protests against authority rulers are spread through contagion and extensive and rapid dissemination of models that share key characteristics

Nondiscrimination

Means that countries cannot apply different trade policies to similar product from two different countries Ex: One of the key principles of the GATT

Safeguards

Mechanism that allows the government to put in place temporary tariffs in order to protect workers in the face of foreign competition

Store of value

Money helps reduce transaction costs by serving as a store of value. this creation of common currency generates system that actors can use to buy and sell goods as long as everyone agrees on the value of currency

Remittances

Money migrants send back to family and friends in their home countries, often in cash, forming an important part of the economy in many poorer countries Immigrants arrive in US to work and send some of earnings back to family in home country -Immigration and remittances represent redistribution of wealth from developed to developing ones -Remittance responsible for substantial amounts of capital in Latina America, Asia and Africa -600 billion dollars in remittances worldwide in 2017 (increased more than 5 times since 2000) -Remittances represent way more of redistribution of wealth to less wealthy countries than foreign aid (in 2017 foreign aid only $200 million) Advantages -Unlike foreign aid and other capital can't be withdrawn and unconditional because they are family -Avoid government structures (avoid corruption and costly government overhead) go directly to those in need -Fill in gaps in market, provide social insurance, credit and investment in countries that lack these markets Ex: Trump threatened to use as leverage to pay for border wall, said would use executive orders to stop remittance payments unless Mexico funded wall

Depreciation

Money supply increases and value decreases

Coordination problems

Occur when actors agree that it would be optimal for them to cooperate but they disagree about what form the cooperation will take Ex: When countries want to trade agricultural products but cannot agree on rules and regulations for those products and their health standards such as if things can be genetically modified

Monopsony

Occurs when there is only one consumer in a market sometimes government set themselves up as monopsony consumers. Forces all enterprise to sell some product to them first before the government then resells the same product to all consumers in a domestic market

Negotiating rounds

Periodic meetings among WTO members aimed at broad hair for ductions across the range of product categories these typically last multiple years and often focus on broad aspects of trade policy that a proven challenging for bilateral trading relationships Ex: Geneva round created GATT Ex: kennedy rounds Focused on use of anti-dumping tariffs Ex: Uruguay Round created WTO

How can International Organizations resolve challenges of cooperation

Provide enforcement mechanisms to deter cheating (typically withdraw concessions if don't follow through) -WTO: judicial panel (two states do judicial hearing, if find didn't follow through can impose retaliatory tariffs) -IMF: conditionality (provides emergency lending to countries that face balance of payments crisis (can't pay foreign debts at end of year or month, IMF helps but requires conditions (raise taxes, cut spending, liberalize trade, cut inflation) met and give out loans in small chunks with threat of withdraw if don't follow through) Helping to reveal information about state interests -Joining trade organization requires concessions that are often domestically costly -When state joins lock their future government into set of future economic policies, reducing uncertainty that they might change policies later -Provide clarity on long term willingness of states to abide by these agreements -Cost of joining provides info about willingness of government to follow through in future agreements Monitor compliance -IMF issues country reports where experts make sure governments follow their economic obligations -Provides neutral third party to make sure everything is fair Reduce distributional challenges -US has more influence in IMF, influence set by amount of money a country has given to the reserve pool of capital the IMF holds, so US has more voting power in IMF so can shift distribution of power -In WTO distribution fo power is equal, judicial panel is a lot more neutral than IMF, equalizes playing field between larger and smaller economies

Demonstration affects

Similar behaviors and events undertaken by different actors in different locations in response to concrete examples of significant political shit change such as the overthrow of an autocratic regimes

Capital account

Ratio of capital outflow's to inflows When the capital account is in surplus the country is borrowing more money than it is lending

Trade balance

Ratio of exports to imports

Exchange Rates

Reflect differences in the value of respective currencies; price of one currency in terms of another -As dollar appreciates, can buy more units of a foreign currency -As dollar depreciates can buy fewer units of foreign currency -Shape price of conducting international trade -When dollar appreciates important increase (foreign goods are cheaper) -When dollar appreciates exports go down because they are priced in dollars and more expensive to foreign consumers -Depreciating helps exports and slows imports Ex: Chinese government's exchange rate policy helps stimulate more exports of Chinese products to US, policies prevent protectionist backlash in US, more Chinese imports carry risk of displacing American's manufacturing jobs, US manufacturing firms accuse Chinese government of unfairly supporting Chinese businesses by manipulating exchange rates. American firms pressure government to impose tariffs on Chinese goods to offset advantage created by manipulating exchange rates -US companies care about US exchange rates and big trade partner's rates -Large swings in exchange rates alter trade patterns between countries and can undermine profitability of US firms when trading with foreign businesses

Interest rates

Reflect the cost to borrow money and are how much of the return you get back from loaning some amount of money

Factor Endowments

Relative quantity of key factors of production like land, labor and capital in US -Relative factor endowments say that relative college graduates in US versus China set relative prices of these factors as inputs into the production process -Because US has lots of skilled labor (college grads), cost of hiring college graduates in cheaper that getting resource that is more scarce in the US like land with oil reserves on it -In some trade model varying consequences of globalization stem from factor endowments

International Institutions

Rules of the game in society (humanly devised constraints that structure incentives and interaction) -Rules that govern human interactions -Like most rules tend to include reward good behavior and punish bad -Tell us what is and isn't permitted -Influence politics by channeling behavior in a certain incentives that reward good behaviors and actors and punish bad -Include norms and laws -Vary in effectiveness for different states -Provide standards of behavior international community uses to evaluate actions of others and how to respond -Domestic: don't speed, don't steal, must win majority of electoral votes to become president -International: sovereignty, chemical weapons taboo -Are unable to "act" and have no leader, are human constructions that constrain behavior

Democratic Peace Theory

Says that the likelihood of military conflict between any two states decreases when both are democracies -Does not suggest democracies are more peaceful in general than non-democracies -Democracies fight with authoritarian states at sam rates authoritarian states fight wars with each other -Democracies tend not to fight wars with other democracies, over past two centuries had become rare -From 1816 to 2007 wars where democracies fought on opposite sides accounted for 1/20th of one percent of all military deaths

Public contestation

Requires multiple parties compete in elections but also that citizens have the right to freely express themselves form associations and receive information from alternate sources in the media

Democratic sovereignty

Requires that elections must result in the establishment of truly powerful decision making bodies

Capital controls

Restrictions on cross-border capital flows that segment different stock markets; limit amount of a firm's stock a foreigner can own; and limit a citizen's ability to invest outside the country -Used by China to address trilemma

Principal-agent relationship

State as principals delegate to an agent, an organization, to accomplish some tasks. this delegation typically entails a loss of control from the principal and the extension of autonomy to the agent

Neighborhood effects

States tend to emulate the level of democracy or autocracy if their neighboring states this creates regional environments that are more or less conductive to the emergence of democracy

Political business cycle

States that government may engage in stimulus close to elections effectively manipulating the economy for political purposes this is why central banks are typically independent

Monetary expansion

Stimulate economic growth that can lead to inflation because the money supply expands in this case the interest rate is lower and making borrowing less expensive and lowering the pay off to saving

Reciprocity

Stipulates if a trading partner extends concessions by lowering its tariff on a countries exports that country should extend concessions at a similar value by lowering trade barrier to import from the trading partner Ex: One of the twin principles of the GATT

Barter

System in which people trade possessions to obtain things They need

Mundell-Fleming Trilemma

Tension between three goals of monetary policy autonomy exchange rate stability in Capitol mobility -It's a government wants all of these but can never have all three they must choose two Following Brettonwoods US has decided to allow open capital flows and maintain monetary policy autonomy but has a floating exchange rate system

Diffusion

The spread of a common policy or phenomenon across space and time

Money supply

The amount of money in circulation. The money supply helps determine a currency value in the money supply is low in currency is hard to come by it is more valuable.

Federal Reserve

The central bank of the United States -Like the bank of the largest banks in the US -Large banks hold deposits at The Fed -Responsible for regulating banking system in US -Makes monetary policy (issues money and regulates supply of money in the domestic economy by influencing interest rates, providing credit and ensuring US banks implement sound lending policies so they don't go out of business and lose depositors money) -Unique part of US government because of its insulation from pressure by elected officials, often described as politically independent -Once someone is elected to The Feds Board of Governors, it is very difficult for the president to remove them -Important because chair of The Fed can implement policies it believes are best longterm for the country (goal is to insure low inflation and high levels of employment)

Specialization

The concentration of the productive efforts of individuals and firms on a limited number of activities

Floating exchange rate

The currency is floating the government does very little to influence the exchange rate instead currency value is determined largely by market forces in fluctuates from day to day relative to the value of other currencies Ex: US dollar

ICC

The international criminal court was created by the Rome statute and international treaty that country sign and then ratify in order to become members. Do US preferred that the UN Security Council would have a permanent seat and veto to decide what the court investigated. Others preferred otherwise because he didn't want the US to be overly involved in what the ICC did. Compromised by making it so the ICC decided who to investigate for member states but those who are not members states had to be selected through the security council Ex: Under bush in 2001 US said they were going to withdraw because wanted to limit ability to investigate US military personnel instead decided to enact laws limiting investigation through bilateral treaties that prohibit expedition of US personnel such as with Afghanistan

Global Governance

The management of international relations through international law, institutions and organizations Ex: 1864 Geneva Convention Over treatment of wounded combatants Ex: 1865 international telegraph convention over communication management across state boundaries

Capital Flows

The movement of money for investment, trade or business production -Make possible for foreigners to invest in American economy Ex: Honda and Toyota build factories in US and employ Americans workers to sell to US consumers Ex: Sovereign wealth funds in China and Saudi Arabia use huge pools of investment funds to lend money to the US government by buying US treasury bonds -US government uses foreign capital inflows to run large budget deficits and spend more money most years than it takes in as tax revenue Ex: Strong demand particularly important during COVID when US budget deficit and debt grew significantly in small amount of time

Why is political cooperation hard to achieve?

The problem of contracting over time: states cheat -Partner might not remove trade barriers if think partner won't honor their side of the deal Uncertainty about political interests of other states -States can lie Ex: 2016 campaign Hillary Clinton gave speech to Goldman Sachs but wouldn't hand over transcript when competitors asked her to Monitoring compliance -Might decide cost of concessions isn't worth it if other side likely to cheat Distributional hurdles: which side is getting a better deal? -Even if both sides benefit, one side might get more -Have to remember relative gains are more important than absolute gains Ex: Issue with Trump's critique of global economic order, he focuses on unfair trade practices, ignoring that despite them, as a whole US still benefit despite them

Dispute Settlement Mechanism

The procedures within the GATT and WTO for resolving disagreements about trade policy among countries. It includes consultation, recommendation by a three-person panel of experts, and the possibility of appeal.

Tragedy of the Commons

This tragedy encourages overuse of common pool resources (like the atmosphere, bodies of water or fisheries) because individuals making consumption or use decisions of the resources don't bear the full social consequences of their overuse -Tragedy emerges with public property of common-held resources for which is is difficult (costly) to restrict their use (consumption) -Divergence between private benefits and social costs: Individuals choose not to take on any individual responsibilities associated with conservation because it's irrational. By choosing to forgo consumption of some common-pool resource, you run the risk of it running out before you get to do so since other people want to consume it too -Competition eliminates incentive to do right thing Ex: If factor switches from coal to solar can be costly and they may even go out of business while those still using coal succeed -Resources get depleted Ex: oil fields, common grazing land, overpopulation, fisheries, atmosphere -Part of reason why we have been unable to reach environmental accord to limit carbon dioxide emissions -Can't simply solve with a tax, any solution carries with it a set of distributional implications, some groups are going to win and others lose -Hard to define property rights over a common pool resource like a river which leads to overuse and limits incentives for conservation

Waves of democracy

Three basic periods of democracies that have occurred: First Wave-19th century, began in Europe and North America, diminished by WWI Second Wave-Started right after WWII, faded out around 60s. Third Wave-Began mid 70s still continues today, democ. in South America, and Post Comm. Europe

Comparative Advantage

To maximize economic growth countries should specialize in making some subset of goods that can be produced cheaply in their domestic economy and then trade with other countries

Why are we in a trade war with China?

Trump's grand strategy of "America First" -Free-riding issues -claims globalization has weakened US and helped China rise Deeper skepticism of free trade -Trump says free trade has moved manufacturing abroad -Hurts American manufacturing and jobs -Consistent with domestic political strategy of Trump (gets votes from those with manufacturing jobs) -Trump wants firms to move manufacturing to US again Trump's demands specific to trade with China -China should boost imports of US products (particularly agricultural) -Protection of US intellectual property (respect copyright more, limit ability of Chinese firms to force US to make technology transfers as part of joint ventures with companies) -No currency manipulation (commit to stable exchange rate to stop using devaluation of Chinese currency relative to dollar to up exports by making goods cheaper for US consumers) Trade Deficit (US imports more than exports from other countries) -Indicator of unfair trade policies -Have bad deficits a lot of place but particularly bad with China -Trumps wants to decrease imports from China by raising price of goods by raising tariffs, thinks tariffs will pressure China to make concessions because China needs US economy to survive

The US and NATO Benefits

US and NATO: Cold War Origins -Goal: Keep the Russians out and the Americans in and the Germans down (General Lord Ismay) Keep Russians out (NATO and protection of Europe from soviet threat) Keep Americans IN (NATO as bidding mechanism for US military power) -Is an American led alliance system which made US a necessary hegemon for collective security arrangement -As hegemon US provides essential public goods like military security -Alliance also helps to restrain US military power by forcing US to act multilaterally and consider European concerns when forming foreign policy and considering military intervention Keep Germany down (NATO and peace between democratic powers in Europe) -Helps mantain peace between powers by adding outsider (US) to mix -Before Cold War had to world wars erupt between same states (Germany, Great Britain and France mainly), these states became allies under NATO

Monetary union

Union where members states adopt a common currency this eliminates the transaction cost of maintaining exchange rates in calculating the relative price of goods and services across countries

Commodity backed standards

Usually paper currency that can be exchanged for set valued commodity prior to World War I both the US and UK issued currencies backed by gold or silver

International Migration Types

Voluntary Migration -Legal vs illegal (moving without proper documentation and process or overstaying visa) included -Involves moving to another country for personal gain (typically economic) Forced Migration -Refugees (leave home country to escape war, repression or natural disasters) -Human trafficking (includes third party who use violence, threats and misinformation to force individuals to leave their home country to become sex/labor slaves) Difference important, international agreements and norms mandate that states must accept refugees and asylum seekers (forced migration) but states not required to take in those engaged in voluntary migration Under Trump dispute over what considered involuntary (said fear of returning home to drug/gang violence doesn't count, claim violence only includes threats involving state (government) actors)

Fixed exchange rate

We're governments commitment tainting the value of a currency at a certain level affects exchange rate ensure stability in the currency value but it forces the government to actively interviewing via mix the policy tools to maintain the currency value at a certain level

Peg

When a country that has a fairly volatile economy attached their currency to a larger country so it's value changes with the value of that country's currency Scene with Latin American countries in Caribbean countries who attach their value to the dollar

Appreciation

When a currency becomes more valuable because money supply is less

Commodity standards

When currency is based on a standard such as gold or silver the earliest Monterey problems did this by basing currency on tangible commodity. Help set standard for value of different currencies

Global Capital Markets

When foreign capital holders lose confidence in a government's monetary policy, they tend to sell assets denominated in that currency -Sales of these assets (treasury bonds) drive down (depreciate) value of the currency and raise the government's borrowing costs Governments can reassure foreign investors or bring them back when lose confidence by -Raising taxes or cutting government spending -Offering higher return rates (push up interest rate) -Issue is that this can push domestic economy into recession -Major economic actors in global capital markets like pension funds, investment banks, hedge funds, sovereign wealth funds can discipline and change policy of governments through their market-based transactions Ex: Greek Financial Crisis 2011-2012

Trade Deficit (Current Account Deficit)

When imports exceed exports in a year -Offset by a capital account surplus -If US has an overall trade deficit in economy in a given year, it's buying more from foreigners than it's selling to foreigners -US finances trade deficits with loans from foreigners -Capital account surplus shows up as more investment capital coming into US -Trade deficit indicates healthy investment climate in US -Foreigners wouldn't finance US imports if didn't think debts would be repaid -Capital account surplus brings foreign money into US that drives up domestic investment levels and compensate for low savings rates in US -Growth in US enabled by globalizations from foreign investments , growth can be symptom of trade deficits

Inter-dependent

When states are reliant on the flow of goods services capital and people across borders. this typically comes with transactional costs

Merit based admission

Where immigration and being allowed to immigrate is dependent on if you have tool sets that would encourage economic growth and development

Ricardo's Theory of Comparative Advantage

Why do states trade? -Globalizations helps rase national income through specialization and trade -Theoretical logic illustrated by comparative advantage -Policy implication: states should eliminate trade barriers to maximize economic growth -Just generalizing to states what we do as individuals (as individuals, we don't make everything we use ourselves like the milk in our cereal)

Varying Popularity of Democracy Promotion in US Foreign Policy Over Time

Woodrow Wilson after WW1 -WW1 expanded number of democracies in the world -Helped facilitate democratic transition in Germany after WW1 -Supported self-determination as way to empower local groups demanding democratic-rule and independence from colonial powers During Cold War -Democratic promotion took backseat to focus on containing communism -US continued to talk in terms of superiority of democracy in idealogical contest with soviet union and communism -At time US regularly aligned self with friendly authoritarian regimes when would help keep communist forces from seizing power -Would even undermined democratically inclined, left-leaning governments out of fear they'd succumb to soviet influence Ex: Anti-communism prioritized over democracy in places like Iran (shah) and Chile (Augusto Pinochet) during cold war where right wing anti-communist dictatorships existed Democratization and end of Cold War -Boom for democracy promotion -Collapse of communism undermined idea that US had to choose between pursing idealogical goal of democracy promotion and security goal of containing communism -With way collapse happened democracy and greater security went hand-in-hand -Communism collapsed due to internal pressure from citizens for more freedom and democracy which removed biggest threat to US security Democracy promotion after Cold War -Had highs and lows -Right after Clinton justified intervention in Yugoslavia on humanitarian grounds (stop genocide) and w/ goal to spread democracy, articulate parts of democratic peace theory when justifying efforts to expand NATO to Eastern Europe -1990s height of optimism regarding emergence of democracy in post communist Russia but since then democracy has faded -Democracy promotion major part of neo-conservative arguments supporting Bush administration's foreign policy (decision to invade Saddam Hussein's regime in Iraq) -Spreading democracy in middle east big part of Bush's plan to counter terrorist threat after 9/11 -Post-bush negative effects of Iraq war and domestic unpopularity increased skepticism surrounding democracy promotion, particularly through use of military force -Obama emphasized commitment to liberal values (democracy), did commit to withdrawing troops from Iraq and keeping US out of similar long-term military arrangements like in Syria -Under Trump emphasis on "America First" and reducing economic burdens of American hegemony has diminished early use of democracy promotion as centerpiece of foreign policy

Baker, Schultz and Halstead Reading

Written by former senior officials from the Reagan and George H. W. Bush administrations, this article presents a conservative arguments for US leadership in combatting climate change While acknowledging the environmental threat, these authors make the case for pursuing environmental protections on strategic grounds based economic, political and national security benefits to the US They acknowledge the two common (usually conservative) objections to pursuing ambitious steps to combat climate change - economic costs and the free rider problem They turn both of these objections on their head -Environmental protection and economic growth are complementary and not mutually exclusive -The US already has a comparative advantage in low-emission manufacturing and so stronger environmental protections would actually promote a more equal playing field for American companies Strategic benefits for the US from ambitious environmental protection Environmental can foster economic growth: -Cleaner energy such as natural gas and renewable energy like wind and solar power is becoming much more cost effective, so the US has substantially cut emissions while maintaining a strong economy -Like the internet revolution, climate-saving technologies could bring revolutionary economic efficiencies -Climate change is already causing significant economic costs through worse natural disasters, combatting it will help the country's bottom line Environmental protection can enhance national security -Climate change poses serious national security threats such as flooding of major cities and international conflicts over water scarcity and thus reducing climate change will lessen these threats -Winner of the clean energy race will determine the international balance of power and set the rules of the new clean energy international economy economy, which ties tot he hegemonic stability theory Policy proposal: Carbon pricing as the most efficient means to reduce emissions Four pillars of the Baker-Schultz carbon pricing approach -Economy-wide, revenue-neutral carbon fee. This will cost less than subsidies and regulations -Revenue from carbon fee returned to US citizens as dividend. A family of four would receive approximately $2000 a year -Carbon pricing would replace many environmental regulations -Carbon tariff would be applied to energy-intensive imports to level playing field

Electorallist fallacy

Wrongly equating the holding of competitive elections with democracy

Preferential trade agreements

a form of economic integration created by reducing trade barriers

Autarky

a situation in which a country does not trade with other countries

Chain Migration

pattern of migration that develops when migrants move along and through kinship links (whole family migrated)

Fiscal

pertaining to finances

Monetary policy autonomy

removing the obligation to maintain exchange rate parity restores monetary control to a government

Sanctions

restrictions intended to enforce international law Include holding trade with an adversary such as in the case of Iran nuclear program and agreement

Competitive devaluations

since devaluations reduce the export price of goods and services to purchases in foreign currencies, some countries may devalue their currencies merely to gain an unfair competitive advantage, a tactic often matched by devaluations in other countries

trade deficit

situation in which a country imports more than it exports

Anti-dumping tariffs

tariffs imposed by an importing country on goods by another country to raise the price to pre-dumping levels Permitted by WTO as retaliation

Capital mobility

the ability of an investor to move his or her money across borders and invest where profits are highest and costs are lowest

Comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

Absolute advantage

the ability to produce a good using fewer inputs than another producer

Recidivism

the act of repeating an offense By certain countries in IMF a

Balance of payments

the difference between the flow of money into and out of a country Means that when a country runs a current account deficit it must come and take by running a capital account surplus

Capital flight

the movement (flight) of capital from one nation to another, via jobs and resources. Loss of capital credit opportunities lead people to have to turn to IMF

Assimilation

the social process of absorbing one cultural group into harmony with another

trade surplus

when a country exports more than it imports

Flexibility Mechanisms

● Mechanisms defined under the Kyoto Protocol intended to lower the overall costs of achieving its emissions targets - involves mechanisms such as emissions trading and joint implementation ● Cost of limiting emissions varies considerably from region to region, but overall impact is the same