International Political Economy

German reparations

-Germany's payments for cost of war -was agreed upon in the Treaty of Versailles (1919) -terribly damaged German economy -France + Britain relied on these payments to pay the US back -When the US stock market crashed, Germany suffered even more, as well as other nations; US also facing the effects of the crash demanded its money back with a greater emphasis

credit default swap / AIG

..., Basically insurance - where credit protection seller (insurer) receives premiums, in exchange for agreeing to assume the risk of loss on a specific asset in the event that asset experiences a default. Important in the 2007-8 Subprime Credit Crunch (AIG)

assets

..., The entire property of a person, association, corporation, or estate applicable or subject to the payment of debts.

deregulation

..., The process by which governments remove, reduce, or simplify restrictions on business and individuals with the intent of encouraging the efficient operation of markets.

globalization

..., The process by which regional economies, societies, and cultures have become integrated through a global network of political ideas through communication, transportation, and trade.

capital

..., assets available for use in the production of further assets, previously manufactured goods used to make other goods and services

Margaret Thatcher

..., leader of conservatives in Great Britain who came to power. Pledged to limit social welfare, restrict union power, and end inflation. Formed Thatcherism, in which her economic policy was termed, and improved the British economic situation. She dominated British politics in 1980s, and her government tried to replace local property taxes with a flat-rate tax payable by every adult. -similar to Reagan in valuing privatization and deregulation

stagflation

..., name given the economic condition throughout most of the 1970s in which prices rose rapidly (inflation) but without economic growth (stagnation). Unemployment rose along with inflation. In large part, these conditions were the economic consequences of rising oil prices.

institutional investors

..., organizations, which pool large sums of money and invest those sums in companies. They include banks, insurance companies, retirement or pension funds, hedge funds and mutual funds.

currency crisis

..., when a speculative attack on the exchange value of a currency results in a sharp depreciation of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate

Cold War

1945-1988 The ideological struggle between communism (Soviet Union) and capitalism (United States) for world influence. The Soviet Union and the United States came to the brink of actual war during the Cuban missile crisis but never attacked one another.

tariff/non-tariff barriers

1: taxes placed on imported goods to raise the price of those goods, making them less attractive to consumers. Used to protect domestic industry from foreign competition 2: all barriers other than protective tariffs that nations erect to impede international trade, including import quotas, licensing requirements, unreasonable product-quality standards, unnecessary bureaucratic detail in customs procedures, and so on (an example of neomercantilism taken in the 1970s post OPEC crisis)

stimulus package

A package of economic measures put together by the government to stimulate a floundering economy. The objective of a stimulus package is to reinvigorate the economy and prevent or reverse a recession by boosting employment and spending. The theory behind the usefulness of a stimulus package is rooted in Keynesian economics, which argues that the impact of a recession can be lessened with increased government spending.

Imperialism

A policy in which a strong nation seeks to dominate other countries politically, socially, and economically.

Currency Value (strong/weak, hard/soft)

A weak currency: cheaper exports, more expensive imports, domestic inflationary pressures. Unstable fluctuations. A strong currency: expensive exports, cheap imports. Stable and reliable.

Richard Nixon

Against Keynesiaism and LBJ's Great Society program -- sought to see more economic growth than stability -- unilaterally made the decision to make dollars nonconvertible to gold and to switch to a flexible exchange rate system, which led to increased speculation on currencies and more money in the intl economy --president during a period in the US that competition across the world was growing

Alan Greenspan

American economist who served as chairman fo the federal reserve from 1987-2006. his advice was to "unleash the markets" it was due to him that there was a repeal of the glass-steagall act. He was celebrated by both sides of the political parties as the savior of the economy due to the repeal, however; the market crashed

economic growth/expansion

An increase in the total output of an economy. It occurs when a society acquires new resources or when it learns to produce more using existing resources.

1997 Thai Baht crisis

Baht suddenly collapsed in value resulting in a currency crisis. The Thai govt had GUARANTEED the exchange rate of the baht to be fixed at 25 baht per dollar. Thai banks were found to have bad loans and capital flight commenced. This resulted in an extreme decrease of Thai dollar reserves. Speculation turned this into a self-fulfilling prophecy where everyone pulled their money out, but the Thai govt couldn't give everyone their dollars at once. They were forced to abandon their fixed rate resulting in the collapse of the baht. This caused a plethora of problems for everyone from merchants to businessman.

British hegemony

Britian was said to be more so of a passive hegemon during the 19th century. Although it provided many of the resources necessary for creating the global economy (mainly capital), it was not hegemonic in the sense that the hegemonic stability theory (the idea that international markets work best when a hegemon accepts the costs associated with keeping them open for the benefit of both itself and its allies by providing them with certain international public goods at its own expense)

competition

By Hayek as something good and necessary to let the markets flow. In the 'Road to Serfdom"... where competition exists it guides individual efforts

bailout

Emergency funds given to corporations in order to prevent their collapse. Funds can come from the government or other institutions, can take many forms, and may or may not require reimbursement

British industrialization

Enclosure movement, developed transportation (railways/canals), good resources (coal, iron, steel), industrial innovations, political stability, developed banking system and culture all led to Britain being the first to industrialize and the hegemonic power of the 19th century.

exchange rates (fixed, pegged and floating)

Floating: currency value is determined by market demand without any govt intervention, according to the laws of supply and demand. Pegged: when the value of a currency if valued through something else, for example Bretton Woods agreement pegged the value of the dollar to gold. Fixed: when the govt sets an official rate of exchange

IMF-International Monetary Fund

Formally charged with providing short-term loans to countries experiencing a current account deficit in their balance of payments (in exchange for the implementation of policies) 1980s worked with World Bank to solve the problem of LDC debt, created by Bretton-Woods.

WTO

Former GATT,in effect since 1995. It deals with trade regulations amongst states and seeks ultimately to liberalize international trade.

Larry Summers

Former Harvard President; said women didn't have the mental capacity for science and engineering like men did. Summers resigned as Harvard's president in the wake of a no-confidence vote by Harvard faculty that resulted in large part from Summers's conflict with Cornel West, financial conflict of interest questions regarding his relationship with Andrei Shleifer, and a 2005 speech in which he suggested that the under-representation of women in science and engineering could be due to a "different availability of aptitude at the high end," and less to patterns of discrimination and socialization. Summers has also been criticized for the economic policies he advocated as Treasury Secretary and in later writings.

government spending

Government expenditures, both chosen and required for a variety of programs and entitlements. Examples: national defense, social welfare, public works, etc.

macroeconomic policy

Government policies intended to manage the overall state of the larger economy, typically employ two basic forms: Fiscal policy: a government taxing (revenue generation), spending, and borrowing. Monetary policy: regulates the supply of money,its value, and the velocity to which it circulates.

Ronald Reagan

He developed Reaganomics, the trickle down effect of government incentives. He cut out many welfare and public works programs. He used the Strategic Defense Initiative to avoid conflict. His meetings with Gorbachev were the first steps to ending the Cold War. He was also responsible for the Iran-contra Affair (retreated back to a bipolar view of power, the soviet union as an "evil empire" - encouraged opening the markets, but used the threat of trade sanctions with many nations that supported ideas such as communism, terrorism and apatheid) "hegemony on the cheap" -- outsourcing and massive deregulation

Friedrich Von Hayek

If you give the govt the chance to intervene a little, the govt will take control over the market. -stifling of market incentives -excessive central control -loss of political freedoms His View --> free market = free people who will make good choices. Let the market float, and fix itself.

TRIPs

The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.

Marshall Plan

Introduced by Secretary of State George G. Marshall in 1947, he proposed massive and systematic American economic aid to Europe to revitalize the European economies after WWII and help prevent the spread of Communism.

balance of payments

It is the record of economic transactions between one country and another. It is determined by recording flows of capital transferred across economies through the exchange of goods, service, investment, revenue/payments, and government activities

Meiji Restoration

Japanese modernization, led to enormous changes in the political, economic, and social structure of Japan. Send Japanese people out to study and come back to contribute to the development of Japan.

modernization vs dependency

Modernization theorists: (liberal perspective) LDCs need to become intimately integrated into the global market economy. Emphasize on their comparative trading advantage. As the LDCs trade more of their primary sources, they will be able to accumulate wealth to buy foreign technology and promote new investments in industrial and manufacturing enterprises. Develop and industrialize while learning from the pitfalls and policy mistakes. Less waste of resources. Foreign aid from IOs and FDI into developing economies is critical—to strengthen the poorer nations ability to trade and build their economic infrastructure. DEPENDENCY Dependence resulted in underdevelopment (structuralist) Underdevelopment was a proves that further undermined LDC economies while contributing to prosperity of industrialized world. Decolonization removed the political dominance of the European powers, but the basic economic system was intact—resulting in neocolonialism. MNCs extracted profits from these nations. Skeptical of foreign aid—dependency on these assistances reinforces a dominant subordinate relationship between developed and less developed nations.

NAFTA

NAFTA Regional trade agreement b/w US, Canada and Mexico i. Encourages the elimination of trade barriers between these nations MEXICO: i. Mexico's economic crisis in the 1980s leads to deregulation and market opening (Mexico joins GATT in 1985) c. In 1994, NAFTA reduced tariffs over 15 years d. NAFTA has created the world's largest trading bloc e. Unresolved labor issues include immigration and cross-border trucking

hazards of specialization

National security concerns: dependent, losing complete self-sufficiency in the products that are being bought from abroad. Vulnerable domestic producers: imports from a good that is made at home, lowers the price and value of the domestic good. Erosion of national identity and customs

capital account

Part of balance of payments, that measures the investments exchanged, components include outflow of U.S. capital and inflow of foreign capital (simply put, international investment)

current account

Part of the balance of payments, the sub-total of goods and services exchanged

Colonialism

Policy by which a nation administers a foreign territory and develops its resources for the benefit of the colonial power...exploitation

Smoot-Hawley Tariff

Pres. Hoover era, legislation passed in 1930 that established very high tariffs. its objective was to reduce imports and stimulate the domestic economy, but it resulted only in retaliatory tariffs by other nations.

Friedrich List

Protectionism: is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow (according to proponents) "fair competition" between imports and goods and services produced domestically(exiled) German economist, nationalist, and author of the "National System of Political Economy" sought multiple investments in different goods, education and technology within a nation.

open market operations

Purchases and sales of government and certain other securities in the open market through the Domestic Trading Desk at the Federal Reserve Bank of New York, with the purpose of influencing the volume of money and credit in the economy

foreign assets

Represents the total fixed and current assets (loans, money we lend) outside the home country

Corn Laws

Revised in 1815 these laws didn't allow for importing of cheap grain, this gave way to great anger towards the landed aristocracy who imposed them for their own good. Their repeal signified the end of dominance by the landed nobility, and a new beginning on free trade around the world.

neoliberalism

Revival of Adam Smith's classic economic liberalism (primarily thought of in the 1970s), the idea that governments should not regulate private enterprise and that free market forces should rule , deregulation, privatization, open world market(an agenda of economic policies -- compared to liberalism as a perspective)

Adam Smith

Scottish political economist and philosopher. His Wealth of Nations (1776) laid the foundations of classical free-market economic theory, government should not interfere with economics. Advocates Laissez Faire and founder of "invisible hand", Father of economics. Explained how rational self-interest and competition, operating in a social framework which ultimately depends on adherence to moral obligations, can lead to economic well-being and prosperity. Liberalism

Henry Paulson

Secretary of the Treasury during the bailout, free market capitalist, republican, used TARP for $700 billion for banks

GATT

The General Agreement on Tariffs and Trade - a multilateral agreement that sought to promote free trade among countries; predecessor to the WTO, established in 1947. Promotes the ideas of reciprocity and nondiscrimination (supposedly) MFN status included in this, created during Bretton-Woods

World Bank

The World Bank is an international financial institution that provides loans to developing countries for capital programmes. created by the bretton woods agreement (used to be called in the international bank for reconstruction and development -- meant to help European countries redevelop post WWII)

Keynsianism

The economic theory is based on the idea that the state will follow economic policies which regulate the economy in an effort to promote economic growth. The key point to include is that the state can use deficit spending to boost the economy in times of economic downturn--in other words, the state can spend more money than it has to keep the circular flow of goods flowing. When the economy is doing well, the state can cut back and reduce its spending. -combine state and market influences in a way that in the spirit of Adam Smith still relies on the invisible hand but supports a larger but still limited sphere of constructive state action. -state intervention -adopted in modern terms with regard to the current economic crisis (We're all Keynesian now)

Reaganomics

The federal economic polices of the Reagan administration, elected in 1981. These policies combined a monetarist fiscal policy, deregulation of banking, energy, investment, trade markets and supply-side tax cuts, and domestic budget cutting. Their goal was to reduce the size of the federal government and stimulate economic growth. (privatized industries) "trickle down effect"

division of labor

The main focus of Adam Smith's The Wealth of Nations lies in the concept of economic growth. ____________, or specialization is essentially the breaking down of large jobs into many tiny components. Under this regime each worker becomes an expert in one isolated area of production, thus increasing his efficiency. Also also implies assigning each worker to the job that suits him best (different attributes and knowledge)

housing bubble

The most recent speculative bubble over housing prices. Many Americans bought houses they couldn't afford using lax credit and adjustable rate mortgages. The result was a steep drop in prices when mass foreclosures came about. It sent America into the recent "Great Recession."

taxation / tax cuts

The most visible, important and political form of govt revenue. Designed to equitabley distribute wealth, to protect new industries, or to uplift social conditions

monetary policy

deliberate government efforts to increase the supply, velocity of currency, and overall value of money that is circulating in an economy

official reserves

The quantities consisting of foreign currencies that the central banks of nations hold with the IMF, and stocks of gold

Bretton Woods Agreement

This agreement was born out of WWII and it "pegged" the value of currencies to the dollar, and the dollar to the gold $35/1 ounce. "New gold standard" allows for more flexibility in the international system.

Free market

This is the core of Adam Smith's thesis: giving everyone freedom to produce and exchange goods as they pleased (free trade) and opening all markets to competition (international as well as domestic). This became known as the invisible hand

Big 9

This refers to the 9 biggest banks that Henry Paulson sat down with prior to requesting his $700 billion dollar bailout (basically told them that they were going to take the money)

1994 peso crisis

This was caused by the sudden devaluation of the peso. The govt allowed the rate to be fixed at 4 pesos per dollar. The govt could not keep this so decided to let it float, and the peso crashed. The US rapidly intervened with a $50billion loan

liabilities

US banks borrow from depositors (you) who are paid interest and FDIC insured, Organization's debts and other financial obligations.

John Maynard Keynes

Wrote: The Cost of Peace, fear of being so hard on germany, after WWI. Main inspiration behind the Bretton-Woods agreement, saw selective govt intervention in the economy as necessary to correct natural market cycles. Fiscal and monetary policy are necessary to shape aggregate demand, achieve maximum productivity, and employment. Govt to intervene to stimulate and save the economy.

development

a concept that lacks a universally accepted definition, but it is most used in a holistic and multi-disciplinary context of human development — the development of greater quality of life for humans. It therefore encompasses foreign aid, governance, healthcare, education, poverty reduction, gender equality, disaster preparedness, infrastructure, economics, human rights, environment and issues associated with these.

central bank

a government monetary authority that issues currency and regulates the supply of credit and holds the reserves of other banks and sells new issues of securities for the government. A bank whose chief function is the control of the nation's money supply; by manipulating interest rates, buying or selling bonds, and having reserve requirements. The main goal of the Federal Reserve is to maintain and control the money supply; they do this through Monetary Policies such as regulating domestic financial institutions and influence domestic and foreign exchange rates

Gold Standard

a monetary standard under which the basic unit of currency is defined by a stated quantity of gold (strong until the end of WWI when it died - temporarily resurrected in the early 1930s - IMF, tied DOLLAR to gold in a fixed exchange rate, variation of this - specifically $35 an ounce)

proletariat

a social class comprising those who do manual labor or work for wages

Karl Marx

a socialist, says after modern industry, society split between middle class (bourgeoisie) and modern working class(proletariat), that next working class would take over, should make a socialist society of revolutionary workers. Followed theory of Hegel (actually hired to write about communism -- not his ideas). Radicalism, communist manisfesto, the capital.

fiscal policy

all economic activity by the government, a government policy for dealing with the budget (especially with taxation and borrowing). It determines how much a govt spends, invests, and intervenes in the market.

US hegemony

an indirect form of imperial dominance in which the hegemon (leader state) rules sub-ordinate states by the implied means of power rather than direct military force. In this case, the US is the hegemon. Starting after WWII.

OPEC (Organization of Petroleum Exporting Countries)

an international organization concerned with the crude-oil policies of its member states. This organization was founded in 1960, and has 11 members, including Kuwait, Algeria, Iran, Iraq, Indonesia, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela. Due to their control of most of the world's oil supply, they have a strong influence on many industrialized nations. (1973 spike in oil prices)

Positive sum game

any interaction between actors that makes all participants simultaneously better off -- this is the liberalist argument of the benefits of a free marker

comparative advantage

producer can do both areas efficiently but specializes anyways b/c not enough resources and can make more money (**Ricardo built this idea off of Smith's idea of absolute advantage) included in this is the idea of an inherent opportunity cost

TARP

bank side response to US economic crisis, initially turned down by congress then rewritten in-acting equity injectors in which the treasury takes preferred stock in banks and uses leverage to buy up bad debts (every dollar in equity offsets 8-10 dollars in bad debts) A Keynesian style of stimulus initiatives.

opportunity cost

cost of any activity measured in terms of the value of the best alternative that is not chosen (that is foregone). It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices

radicalism

critiques the failures of the state and markets (anti-system), Belief that rapid, dramatic changes need to be made in the existing society, often including the political system. feel that the current system can't be saved, and starting new is the only option (MARX 1910-20th century)

foreign debt (govt or private)

debt we owe to other countries; 2/3 of debt comes from other countries, people, companies and the rest comes from government owing itself

Specialization

essentially the breaking down of large jobs into many tiny components. Under this regime each worker becomes an expert in one isolated area of production, thus increasing his efficiency. This saves time and enhances overall gains from exchange and trade. Ultimately, this resulted from uneven distribution and attributes but led to greater abundance of the necessities and conveniences of life (similar to division of labor)

currency speculation

exists whenever someone buys a foreign currency, not because she needs to pay for an import or is investing in a foreign business, but because she hopes to sell the currency at a higher rate in the future (in technical language the currency "appreciates"). This is nothing more than the old rule of buying low and selling high—only with foreign money. - concerned Keynes a great deal

zero-sum game

gains by one party equal the losses for the others. Plays a major role in the realist-mercantilist perspective (not liberal thought)

exports vs imports

goods sent to other countries to sell vs goods sold in our country from other countries

inflation

increased prices for goods and services combined with the reduced value of money

hedge fund

investment instrument that attempts to make a profit from the fact that an asset such as a stock or bond might be trading at different prices in different places. a private investment pool, open to wealthy or institutional investors, that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds, known for its risky but lucrative returns.

capital flight

investors transfer their bank accounts out of the country to safe harbor nations. In turn, this creates extreme shortage of funds in the debtor nations and then sends interest rates shooting up in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic strength. This leads to a disappearance of wealth and is usually accompanied by a sharp drop in the exchange rate of the affected country (depreciation in a variable exchange rate regime, or a forced devaluation in a fixed exchange rate regime)., Also: When residents and nonresidents rush to convert their holdings of domestic currency into a foreign currency, usually taking place when domestic currency is depreciating rapidly or a counry is facing dim economic prospects

Foreign Direct Investment (FDI)

the purchase by the investors or corporations of one country of non-financial assets in another country. This involves a flow of capital from one country to another to build a factory, purchase a business or buy real estate."

Import Substitution Industralization (ISI)

inward looking strategy. guided by structuralist interpretation of development, and views capitalist market forces as a threat to LDCs,. this is bc LDCs are viewed as being exploited by developed nations while they are being repressed and not allowed to grow. opposed dependency on foreign capital, comparative advantage road, and resulted in restrictive trade policies and stringent regulation and control of foreign investment. no more importing from foreign nations would result in economic growth for country since products that were locally manufactured would be sold. expanding the manufacture of labor intensive consumer goods along with diversifying into capital intensive goods.

Liberalism

market oriented economic model (cooperative), an economic theory advocating free competition and a self-regulating market and the gold standard (Britain as the hegemonic power, SMITH 1770-1910)

bonds / securities

notes of debt - also commonly called "paper" - paid out at an established rate of return or interest over a specified period of time (are effectively tradable loans to governments and private firms)

US Federal Reserve

private system of private banks (not part of govt but President appoints chairman) Jobs: -open market operations: buying and selling securities can "prime the pump" or restrict capital -interest rates: setting the discount rate charged to banks, shapes prime rate for other borrowers -reserve requirements for the level of capital held by banks affect supply

Mercantilism

state-focused economic model -- a term generally applied to state intervention in an attempt to manipulate market outcomes, typically out of some national interest (colonial times, 1550-1770)

stocks / equities

stocks are ownership shares in companies called equities / equities may be reserved for private ownership (family business) or may be sold to the public and traded

factor endowments

the amount of land, labor, capital, and entrepreneurship that a country possesses and can exploit for manufacturing -- commonly referenced as part of the Heckscher-Ohlin model

trade

the commercial exchange (buying and selling on domestic or international markets) of goods and services

statistical discrepancies

the idea that in measuring balance of payment, measures are inexact so we must keep track of the margin of error for undocumented flows of capital, like the drug industry

bourgeoisie

the middle class, including merchants, industrialists, and professional people

Peace of Westphalia

the nation-state was born out of this 1648 ________________diplomatic summit -- emphasized the ideas of sovereignty and self-determination as basic principles of the state and thus the global system

interest rates

the percentage of a sum of money charged for its use. Usually lenders will add this onto the amout of money borrowed from them. Discount: The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility--the discount window. SubPrime: characterized by higher interest rates and less favorable terms in order to compensate for higher credit risk. Prime: a term applied in many countries to a reference interest rate used by banks

absolute advantage

this is the idea that ability of a party (an individual, or firm, or country) to produce more of a good or service than competitors, using the same amount of resources (Adam Smith "The tailor does not make his own shoes, but buys them from the shoemaker")

balanced budgets

when revenues equal expenditure (no deficit or surplus)