poli sci final
state capitalism
Often portrayed as a blend of economic nationalism and liberalism Authoritarian states (China, Russia) use the liberal global economy to advance their wealth and power, while resisting the free market and political freedom domestically
balance of trade/ trade surplus or trade deficit
does a country export more than it imports (trade surplus) or import more than it exports (trade deficit)
"Washington Consensus"
**economic globalization intensifies* Beginning in the 1980s, the United States promoted the idea that economic growth would best occur through reducing barriers to international trade and investment (an approach sometimes called "the Washington consensus" or neo-liberalism)
How has economic globalization affected the world?
-Tooze article: The 2008 Financial Crisis
1. Pankaj Mishra, "The Rise of China and the Fall of the Free Trade Myth"
-Chinese/Japanese/Asian economics -History of rise of China in economics explored through other asian economics that made groundwork for China's success -Economic theories laid down by American Alexander Hamilton used by Japan and others to grow economy -Asian companies outshined America, making cheaper yet higher quality products -'America first does not mean America alone," President Trump declared last month at the World Economic Forum in Davos, Switzerland. This sudden burst of pragmatism from an avowed nationalist showed what a difference a year can make. Denouncing the "false song of globalism" during his presidential campaign, Trump, on his third full day in office, canceled the Trans-Pacific Partnership, a regional trade deal with Japan and 10 other countries. He then denounced Canada, Germany and South Korea for exporting more to the United States than they import. He promised to renegotiate trade pacts with Europe, Canada and Mexico and get a better deal for American workers. In Davos, however, he reached out with conciliatory words to the very free-trading and globalizing elites he has consistently maligned. -Clearly, Trump's views on trade and globalization have evolved since his insurgent campaign. This may well be because of the rapid gains in the past year of a country he did not mention by name. In fact, Trump chose in Davos to affirm that "America is open for business" because it was in these same Alpine heights, three days before Trump was inaugurated as president, that China seized the opportunity to claim leadership of the global economy. With the United States seemingly in a protectionist crouch, China had become, despite all its problems, indispensable. "In a world marked by great uncertainty and volatility, the international community is looking to China," Klaus Schwab, the founder of the World Economic Forum, said last year while introducing his guest, the Chinese president and general secretary of China's Communist Party, Xi Jinping. -Yet Xi is entitled to some of his rhetorical point-scoring. The financial crisis of 2008 greatly weakened the American economy, but it left China relatively unscathed. More important, China, whose share of world trade in the mid-1970s was less than 0.5 percent, is today the world's leading exporter —the hub of new and increasingly dense transcontinental trading networks that bypass the United States. "When the United States grows, so does the world," Trump claimed in Davos. But America's status as the linchpin of the global economic order is now endangered. The trading system China dominates has reduced the long dependency of Latin American and sub-Saharan African countries on American and European markets. China is now bringing to a close the first phase of globalization, begun by Europe and the United States in the 19th century. In the process, it is making East Asia the new center of the world economy -Once Japan became the leading investor in Asia, regional production chains began to link those countries with one another. This process of regionalizing investment and production, which largely dispenses with Europe and America, has now been accelerated by China's rise as a manufacturing power -The success of China's state-led economy presents, in many ways, the same economic (and ideological) quandary that Japan unexpectedly threw up before the United States when, in the 1980s, it became the world's leading creditor. A regional trading system dominated by China will make Asian countries less likely to enlist in American geopolitical objectives. Locked into boundary disputes with its neighbors, China has accelerated the militarization of the South China Sea, acquiring more than 3,200 acres of land on reefs and outcrops and installing runways, ports and hangars. But it has also abandoned its abrasive attitude, making determined efforts to pivot Asia away from Trump's America. And it seems to be succeeding -will make Asian countries less likely to enlist in American geopolitical objectives. Locked into boundary disputes with its neighbors, China has accelerated the militarization of the South China Sea, acquiring more than 3,200 acres of land on reefs and outcrops and installing runways, ports and hangars. But it has also abandoned its abrasive attitude, making determined efforts to pivot Asia away from Trump's America. And it seems to be succeeding.With China offering generous infrastructure deals to the former American territory of the Philippines, President Rodrigo Duterte announced that "it is time to say goodbye" to the United States —previously he threatened to ride a jet ski to a Chinese man-made island in the South China Sea and plant his country's flag there. Other rival claimants to parts of the South China Sea —Malaysia, Vietnam and Brunei —have also moved closer to Beijing since Trump's election. Smaller countries like Cambodia and Laos now resemble Chinese client-states. China is also trying to repair long-strained relations with Japan by inviting investments by Japanese multinationals.These attempts to win over major American allies in Asia complement Xi's ambitious One Belt, One Road initiative, which aims to put China at thecenter of global affairs through a network of trade links and infrastructure projects stretching from Asia to the Middle East to Africa and Europe -will make Asian countries less likely to enlist in American geopolitical objectives. Locked into boundary disputes with its neighbors, China has accelerated the militarization of the South China Sea, acquiring more than 3,200 acres of land on reefs and outcrops and installing runways, ports and hangars. But it has also abandoned its abrasive attitude, making determined efforts to pivot Asia away from Trump's America. And it seems to be succeeding.With China offering generous infrastructure deals to the former American territory of the Philippines, President Rodrigo Duterte announced that "it is time to say goodbye" to the United States —previously he threatened to ride a jet ski to a Chinese man-made island in the South China Sea and plant his country's flag there. Other rival claimants to parts of the South China Sea —Malaysia, Vietnam and Brunei —have also moved closer to Beijing since Trump's election. Smaller countries like Cambodia and Laos now resemble Chinese client-states. China is also trying to repair long-strained relations with Japan by inviting investments by Japanese multinationals. These attempts to win over major American allies in Asia complement Xi's ambitious One Belt, One Road initiative, which aims to put China at thecenter of global affairs through a network of trade links and infrastructure projects stretching from Asia to the Middle East to Africa and Europe. Investing more than $1 trillion in more than 60 countries —ports in Pakistan and Sri Lanka, high-speed railways in East Africa, gas pipelines in Central Asia —the initiative can claim to be the largest overseas investment drive ever undertaken by a single country. The 11 European Union members and five non-E.U. Central and Eastern European countries that havejoined the China-led political and commercial group called 16+1 have all signed major infrastructure deals with China, enhancing Beijing's influence in the E.U. The remaining 11 members of the Trans-Pacific Partnership have gone ahead without the United States; they are expected to sign a final agreement in March.By pulling out of the TPP and threatening trade sanctions, Trump encouraged Japan to seek a deal with Europe that shuts out the United States. Britain, another stalwart American ally, is considering joining the TPP. China, meanwhile, is hectically negotiating more than a dozen trade agreements in Asia while proposing its own alternative to the TPP, a trade agreement called the Regional Comprehensive Economic Partnership. China has also intensifiedefforts to build alternatives to such Western international institutions as the World Bank and the International Monetary Fund. In 2014, China inaugurated, against staunch American opposition, the Asian Infrastructure Investment Bank, whose members now include all Asian states except Japan -There is little doubt that Beijing is presenting itself as a benign alternative to the United States. In a speech just before his second term as the party's general secretary, Xi claimed that there were more takers internationally for Chinese "values." China, he said, offers "a new option for other countries and nations who want to speed up their development while preserving their independence. -It was always wildly optimistic to suppose that China would eventually be integrated into an American-dominated order and persuaded, if not forced, to adopt its nor -policies.Belying predictions of doom, China has again demonstrated the power of what Dower, speaking of Japan, called "national pride —acute, wounded, wedded to a profound sense of vulnerability." The United States never knew this single-minded ambition of the historical loser to avenge his losses; American leaders now reckon with it at home, in the wake of a nationalistic backlash against free trade and globalization. Some confused policies and mixed signals have accordingly defined the American position on China. During the American presidential campaign in 2016, all the main candidates, Bernie Sanders and Hillary Clinton as well as Trump, opposed the TPP, which was intended to contain China in its own region. Then, in Trump's chaotic first year, the United States seemed to be forced back by Hamilton's shrewd East Asian disciples into its historical role as the mother country of protectionism. Trump now says that America firstdoes not mean America alone, and he is open to rejoining the TPP. There may be more such reversals ahead. For Trump is only just beginning to acknowledge, after a year of bluster, the formidable challenge of China and the arduous effort needed for the United States to match its most determined and resourceful rival yet -nationalism plays role in growth -theme growth of internat'l power
Kotkin--realist world
-hegemons change -power politics drive events (Man power and Material wealth determine hierarchy of superpowers) -Next century determined by relationship between US and China cause they are most powerful by these terms; how they manage their resources and relationship will determine world's fate -China's economy will inevitably become more powerful than US -China has proved every political theorist wrong because of its myriad contradictions (not stagnant authoritarianism, corrupted meritocracy) -US faces lots of domestic dysfunctions (elites ignoring economic state of middle class, or the lack thereof) -bailout from 2008 financial crisis? Elite people were saved, but regular citizens were not, and the persons responsible not held accountable (Topsy?), adding to contradictions -Peers now (big lead up to this because each has gotten more powerful because of the weakness of the other, long-fueled rivalry), leading to conflict of who will be next biggest world power -Globalization creates wealth by enticing dynamic urban centers in richer countries to invest abroad rather than in hinterlands at home. This increases economic efficiency and absolute returns, more or less as conventional economic theory suggests. And it has reduced inequality at the global level, by enabling hundreds of millions of people to rise out of grinding poverty, But at the same time, such redirected economic activity increases domestic inequality of opportunity and feelings of political betrayal inside rich countries. (this injury is furthered by feelings of cultural insult; their societies become less familiar and more like countries they invest in) -people ignore nationalism cause they don't realize it works both ways/ignore cultural differences, but this only exacerbates headbutting of culture; you have to respect culture to assimilate -china could never have achieved what it has over the last two generations without the economic openness and global security provided by the United States as a liberal hegemon. -Taiwan will be the new conflict between the two that could decide who becomes next WP -China's Xi is like, this is Chinese territory and the Ppl's Liberation Army is strong enough to seize it, but Taiwan wants to be its own country... - Authoritarianism is all-powerful yet brittle, while democracy is pathetic but resilient -Question is whether China can maintain vise-grip on its psuedo colonies without incurring the wrath of the demo-crazy US - in geopolitics, good outcomes are possible, too—realism is not a counsel of despair...things necessary to prevent war: -----Western policymakers have to find ways to make large majorities of their popu-lations benefit from and embrace an open, integrated world. Chinese policymakers have to continue their country's rise peacefully, through compromise, rather than turning to coercion abroad, as well. The United States needs to hew to an exactly right balance of strong deter-rence and strong reassurance vis-à-vis China and get its house in order domes-tically. And finally, some sort of miracle will have to take care of Taiwan.
3. Robin Varghese, "Marxist World"
--since 1967, median household income has become stagnant, as wealth of the US elites has soared -He predicted that capitalism's internal logic would over time lead to rising inequality, chronic unemploy-ment and underemployment, stagnant wages, the dominance of large, powerful firms, and the creation of an entrenched elite whose power would act as a barrier to social progres -Marx believed that under capitalism, the pressure on entrepreneurs to accumu-late capital under conditions of market competition would lead to outcomes that are palpably familiar today -improvements in labor productivity created by technological innovation would largely be captured by the owners of capital...wages never rise for production power -competition among capitalists to reduce wages would compel them to introduce labor-saving technology -competition would lead to greater concentration in and among industries, as larger, more profitable firms drove smaller ones out of business -capitalism put arbi-trary limits on the productive capacity it unleashed. -Since the 1970s, businesses across the developed world have been cutting their wage bills not only through labor-saving technological innovations but also by pushing for regulatory changes and developing new forms of employment. -competition also makes larger portions of workforce unemployed
2. Adam Tooze, "The Forgotten History of the Financial Crisis"
-2008 should serve as a warning of the scale and speed with which global financial crises can unfold in the twenty-first century -gd worst econ crisis in modern history BUT far less synchronized than 2008 -As capital flows dried up, the crisis soon morphed into a crushing recession in the real economy. The "great trade collapse" of 2008 was the most severe synchronized contraction in international trade ever recorded. Within nine months of their pre-crisis peak, in April 2008, global exports were down by 22 percent -In fact, bankers on both sides of the Atlantic created the system that imploded in 2008. The collapse could easily have devastated both the U.S. and the European economies had it not been for improvisation on the part of U.S. officials at the Federal Reserve, who leveraged trans-atlantic connections they had inherited from the twentieth century to stop the global bank run -Why 2008 is now being told as BS: --many predictions of A* crisis --Macroeconomists around the world had long warned of global im-balances stemming from U.S. trade and budget deficits and China's accumulation of U.S. debt, which they feared could trigger a global dollar sellout --best leaders reacted to the wrong things (ie china did not sell off US Assets) --crisis was general, not just US -What turned 2008 into the worst banking crisis in history was a new business model for bank: "wholesale banking" -t much of these banks' short-term funding involved currency mismatches; leads to shut down in bank funding -solution: bail out banks, crisis diplomacy, federal reserve -iquidity swap lines are contracts between two central banks, in this case, the Fed and a foreign central bank, to temporarily exchange currencies: the Fed provides its counterpart with a fixed amount of dollars and in return receives an equivalent amount of that bank's local currency. (The foreign central bank also pays a margin of interest to the Fed. -he year 2008 can thus be seen as a moment of transition. On the one hand, it marked a twenty-first-century global crisis. On the other hand, the management of that crisis relied on networks of interdepen-dence shaped by the twentieth-century history of the transatlantic relationship—networks that were deep but that leaders on both sides of the divide now seem eager to leave behind -
What arguments are made in favor of globalization?
-Tooze article: The 2008 Financial Crisis was a global crisis because of the astounding amount of interdependence US and European banks had at the time;
What criticisms are made against globalization?
-Tooze: Yet it is also interdependence that saved us from global shutdown of banks, as the US relied on the Federal Reserve to sellout banks through liquidity swap lines
Deudney and Ikenberry
-optimistic compared to other -possible to break out of historical cycle (illiberalism) and bring in peace -emphasis on interdependence and cooperation -liberals interest is not so narrow (economic, security-related, and environmental) as realists -do not believe state interdependence will fail even though they may not get as much relative gains ****focus on absolute gains**** -there are a bunch of problems in the world that we HAVE to work together to solve because they affect ALL of us -interdependence leads to cooperation -China has benefitted from liberal order because they've benefitted (economically) -rise of illiberalism but liberal order is really durable -interdependence is key to maintaining liberal order -l, liberals are heirs to the Enlightenment project of technological innovation, which opens new possibilities both for human progress and for disaster -liberalism=practical -rests on committment to freedom and dignity of individuals -
Rodrik's "globalization paradox"
." For concreteness, think of the old GATT system. It was a very thin and unambitious set of rules, and yet it worked extremely well. I think the secret to its success was that the old regime understood you need to provide countries with much greater policy space. A healthy international economy requires healthy domestic economies and policies.These days, people worry that we will end up on a protectionist slippery slope if you weaken the international rules. But we have systematically underestimated the risk on the other side, which is that when you make the rules unrealistically tight, you also provoke a backlash. That is what we have today. And paradoxically, we are likely to get more protectionism today than we were under the old GATT regime.
Chua--"Tribal World"
Constructivism: -identity -norms valued -popular public opinion vs elites (Chua) -norms/values are implicit in her discussion -belonging to a group is part of human nature/need to associate w others -primal instincts/urges to make enemy=villain (especially easy when very different culture), demonization of other nations = internat'l blunders -failure of us to account for ethnic/religious diversity in iraq -failure us to recognize nationalism=failure in vietnam -internal flaws of us: identity politics and polarization lead to failures of leadership -these internat'l conflicts -reports generated by intelligence agencies were sidelined by leaders of us security on the ground because they didn't want to believe it was so freaking complicated.....! -**not just because they didn't know about it, but taking account of the intricacies of the issue would make the plans much more detailed/complex -idea was to "not lose a country to communism" -didn't take account for POWER of identity -hard to compromise once the conflict rises to a "deal with the devil" kind of animosity toward one another...psychologically and politically very hard to fix (this is where extermination/expulsion of opposite side comes in -solutions? try to learn more about each other? how? -national service programs (have kids see and volunteer and live in other countries for a bit requirement) -some parties play up exclusive nationalistic views, which plays into problem too -once public opinion has moved into identity politics hardened thing, how do new set of elites pull that back/dampen down hatred between identity groups? yikes rural vs urban issues, industrialization leaving rural areas behind
comparative advantage
Economic theory stipulates that free trade makes everything cheaper and improves the quality of products,directly benefiting everyone. This stems from the fact that different countries have different production strengths. These could be a cheap workforce, technological expertise, geography or a rare resource.The argument goes that if each country focused andspecialised on what they do best or cheapest, they would produce better quality or cheaper products. These could then be traded between countries, making every consumer happier. It's a similar principle to everyone specialising in one career and then trading things we need, rather than trying to produce everything ourselves.Free trade has liftedwhole countries out of poverty. It can bring a lot of income from abroad and can push businesses towards continuous investment, hard effort and innovation to expand their international market-share. This also applies to businesses that do not export, but now need to keep their prices low and their quality high to beat the incoming competition.In addition, free trade strengthens the links between countries, boosts economic co-operation and, the argument goes, makes wars less likely -after all, it's not wise to invade your customers and suppliers. This was afundamental reasonfor the creation of the European Economic Community, the precursor to the EU, shortly after World War II.
economic liberalism
Individuals and businesses are the most important actors States should minimize their political interference in the economy Free trade based on comparative advantage is the most efficient way to maximize global wealth (shared absolute gains)
How has the Trump administration tried to manage US trade policy? What are the arguments for and against Trump's policies?**
President Trump is focused on reducing US trade deficits as the core of his foreign economic policy The general concern: the loss of jobs, especially manufacturing jobs Specific issues: Overall US trade deficit Manufacturing's decline Case: trade and the auto industry Tariffs as a tool to address the deficit The debate: Will Trump's policies produce the results that he seeks? Cancelled or renegotiated trade agreements: Withdrew from the Trans Pacific Partnership (TPP) Renegotiated the North America Free Trade Agreement (NAFTA) and the South Korea-US Free Trade Agreement (KORUS) Administration officials have been critical of the WTO for not producing better results for the US Use of tariffs or other trade barriers to reduce/eliminate US trade deficits, in violation of WTO rules Tariffs on imported steel (25%) and aluminum (10%) Trump has placed a 10% tariff on $250 billion in Chinese exports to the US will raise those tariffs to 25% on January 1; has threatened tariffs on another $267 billion in Chinese exports Trump has threatened a 25% tariff on imported autos and auto parts (which will hit Europe hardest) These states have imposed or have threatened retaliation against US exports What factors influence trade deficits? Macroeconomic factors such as economic growth rates and levels of savings (countries that consume more than they produce will run trade deficits) Currency values (countries with stronger - more highly valued - currencies are more likely to run trade deficits) Protectionist measures Current US policies (large budget deficits, strong US dollar) are likely to make the first two worse, overwhelming any impact of tariffs US trade deficit has continued to rise Steel manufacturers have profited, general manufacturing employment continues to rise Costs to US companies have grown (ex: Ford and GM each estimate that their costs have increased by about $1 billion) Some companies may move production out of the US to remain competitive globally US agriculture is suffering as a resulted of foreign retaliation against US tariffs Pork producers may lose $2 billion in sales Dairy farmers may lose $1.5 billion Soybean sales to China have declined 94%
Smoot-Hawley Tariff law of 1930
Smoot-Hawley Tariff Act, formally United States Tariff Act of 1930, also called Hawley-Smoot Tariff Act, U.S. legislation (June 17, 1930) that raised import duties to protect American businesses and farmers, adding considerable strain to the international economic climate of the Great Depression.
economic nationalism (mercantilism)
States are the most important actors The international economic arena is one of conflict and competition States should manipulate the international economic system (especially trade and the value of their currency) to increase their wealth and power compared to other states (relative gains are very important)
Hyper-globalization (Rodrik article)
The 1990s were, I think, a watershed period where we moved into a different kind of globalization, very different from the previous version in the immediate postwar period. I have called this "the push into hyperglobalization." In finance, this phenomenon was marked by financial globalization —or the normalization of free capital mobility. In trade, it was the creation of the WTO. Essentially, globalization went from being a means for national economic prosperity to becoming the end —with national domestic priorities having to adjust to globalization's needs instead of vice versa
United States Canada Mexico Agreement (USMCA)
The Agreement between the United States of America, the United Mexican States, and Canada[1] is a signed but not ratified free trade agreement between Canada, Mexico, and the United States. It is the result of the 2017-2018 renegotiation of NAFTA by its member states, which informally agreed to the terms on September 30, 2018, and formally on October 1.[11] The USMCA was signed by United States President Donald Trump, Mexican President Enrique Peña Nieto, and Canadian Prime Minister Justin Trudeau on November 30, 2018, as a side event of the 2018 G20 Summit in Buenos Aires. Each country's legislature still must ratify the agreement. Compared to NAFTA, the agreement gives the United States more access to Canada's $19 billion dairy market, incentivizes more domestic production of cars and trucks, increases environmental and labor regulations, and introduces updated intellectual property protections.
The dollar as a "reserve currency" (the "Dollar and the Trade Deficit" reading)
a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves. The reserve currency is commonly used in international transactions, international investments and all aspects of the global economy. It is often considered a hard currency or safe-haven currency. People who live in a country that issues a reserve currency can purchase imports and borrow across borders more cheaply than people in other nations because they do not need to exchange their currency to do so. By the end of the 20th century, the United States dollar was considered the world's most dominant reserve currency.[1] The world's need for dollars has allowed the United States government as well as Americans to borrow at lower costs, granting them an advantage in excess of $100 billion per year
"infant industries" (Mishra article, pp.3-4)
a new industry, which in its early stages experiences relative difficulty or is absolutely incapable in competing with established competitors abroad In his "Report on the Subject of Manufactures," submitted to Congress i91, Hamilton used the potent term "infant" industries to argue for economic protectionism: preventing colonies from competing while selling their own goods around the world. In his view, infant nations needed room to maneuver before they could compete with established industrial powers. The United States embraced many of Hamilton's recommendations; the beneficiaries were, first, the textile and iron industries and then steel. world. In his view, infant nations needed room to maneuver before they could compete with established industrial powers. The United States embraced many of Hamilton's recommendations; the beneficiaries were, first, the textile and iron industries and then steel.It was Hamilton's formula, rather than free trade, that made the United States the world's fastest-growing economy in the 19th century and into the 1920s. And that formula was embraced by other nations coming late to international economic competition
"tariff engineering" (Columbia Sportswear article)
adjusting its products to lessen import taxes on materials from outside the United States like rubber soles, zippers and waterproof nylon
Trans-Pacific Partnership (TPP)
also called the Trans-Pacific Partnership Agreement, is a defunct proposed trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and United States signed on 4 February 2016, which was not ratified as required and did not take effect. After the United States withdrew its signature,[6] the agreement could not enter into force. The remaining nations negotiated a new trade agreement called Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which incorporates most of the provisions of the TPP and which enters into force on 30 December 2018. The original TPP contained measures to lower both non-tariff and tariff barriers to trade,[11] and establish an investor-state dispute settlement (ISDS) mechanism.[12][13] The U.S. International Trade Commission,[14] the Peterson Institute for International Economics, the World Bank and the Office of the Chief Economist at Global Affairs Canada found the final agreement would, if ratified, lead to net positive economic outcomes for all signatories, while an analysis using an alternative methodology by two Tufts University economists found the agreement would adversely affect the signatories.[Note 1] Many observers have argued the trade deal would have served a geopolitical purpose, namely to reduce the signatories' dependence on Chinese trade and bring the signatories closer to the United States
What are some of the benefits and costs of free trade, according to liberal theory (chart in Power Point slides, several readings)?**
ppt: Economy-wide Benefits= -efficiency gains as result of greater competition -consumption gains for consumers throughout the economy by having access to a wider variety of goods and services at varying levels of quality and price -gains in real income for consumers and producers by having access to lower priced goods and services -long-term positive dynamic effects arising through increased productivity and technological development -potential economic gains achieved through trade agreements that affect trade and commercial relations over the long run Concentrated adjustment costs -potential job losses in some sectors -potential lower wages for some workers -Concentrated adjustment costs. some workers and firms may experience a disproportionate share of the adjustment costs. recent research is shedding new light on the extent to which these adjustment costs are concentrated in some communities. -the benefits and costs to the economy do not accrue at the same speed: the costs to the economy in the form of job losses are experienced in the initial stages, while the benefits to the economy accrue over time. See "What is Protectionism?" reading, under subheading "The theory"
protectionism
protectionist policy is any policy that provides an unfair advantage to a home industry versus the international competition. The practice has a long history in economics. Mercantilism -where countries augmented their power through regulation that favoured their own economies -was prevalent until the 18th century. But, with trade as one of the engines of economic growth in the 19th and 20th centuries, free trade for all became the benchmark and the goal. And the US was at theforefrontof establishing bodies to promote and regulate international trade such as the GATT and its successor, the World Trade Organisation
"developmental state" (Mishra article, p. 7))
s Indians longed for what Chalmers Johnson, in a book about Japan's unique growth, called the "capitalist developmental state." In such states, skilled bureaucracies led by authoritarian leaders promoted a project of national development (while either paying lip service to, or ignoring, democratic norms). Private entrepreneurs made socially beneficial investments; government policies helped build their comparative advantage while also facilitating social stability with land reforms, education and other efforts to address income equality The "developmental state" assumed that market failures were to be expected and that the state played a necessary role indesigning industrial and financial policy. These included not only trade protection and government subsidies but also, as the political economists Robert and Jean M. Gilpin wrote in "Global Political Economy" in 2003, "selective credit allocation and deliberate distortion of interest rates in order to channel cheap credit to favored economic sectors." Governments were, in fact, very much part of the solution, as even the World Bank, beholden to the Washington Consensus, grudgingly acknowledged in its well-known 1993 report, "East Asian Miracle." The high-performing Asian economies, it noted, "have achieved unusually low and declining levels of inequality, contrary to historical experience and contemporary evidence in other region
globalization
the integration of states and people through increasing contact, communication, and trade interaction among societies and cultures is not new; what is different is the depth, speed and intensity of the interaction and integration Globalization creates wealth by enticing dynamic urban centers in richer countries to invest abroad rather than in hinterlands at home. This increases economic efficiency and absolute returns, more or less as conventional economic theory suggests. And it has reduced inequality at the global level, by enabling hundreds of millions of people to rise out of grinding poverty
exchange rates
the value of one currency in terms of another