Globalization and Politics Midterm Review

Harvey

Decline of Neoliberalism (he thinks its dumb and stupid; how we got here)

What is Harvey's definition of neoliberalism and what does he identify as factors of its emergence? What are his four main mechanisms of dispossession?

"A theory of political economic practices proposing that human well-being can best be advanced by maximizing entrepreneurial freedoms within an institutional framework characterized by private property, individual liberty, unencumbered markets, and free trade." → To paraphrase, Harvey defines neoliberalism as a system that hopes to achieve human well-being through a system and institutional framework marked by maximized entrepreneurial freedoms. Harvey attributes neoliberalism's emergence to a restoration of capital class power and the business elite, who maintain their power via the Christian right. Harvey's four main mechanisms of dispossession are: privatization, financialization (removing regulations/"liberating" financial services), management and manipulation of crises, and state redistributions.

Inside Job

2008 financial collapse (winners and losers)

What is an ISI? Identify macroeconomic and microeconomic logic to support it. What are the two stages of ISIs and how are they implicated in policy?

An ISI is a tool of state-driven economic development. It stands for import substitution industrialization. Macroeconomic logic in support of it is that it allows for growth through investment and thus an increase in savings, which is the largest constraint on growth. The microeconomic logic to support it is the promotion of an economic shift from agriculture to manufacturing and altering of relative prices between indigenous agriculture and manufacturing. Consumer non-durables → mature industries, low capital costs, low skill levels, and a large domestic market that can be easily captured. Consumer durables → mature industries, high capital costs, more complicated production processes, hope that a large domestic market can emerge in response to transition to the second ISI

Simmons

BITs (Bilateral investment treaties; global governance)

Based on trade theory, who should trade with whom? Name the factors of production and three types of goods based on the Hecksher-Ohlin factor. Give examples.

Based on trade theory, states should focus on producing goods that require resources they are rich in (which are thus cheaper) and trade for goods that require resources they have less of (which are thus more expensive). The factors of production are labor, resources, and capital. The three types of goods are thus labor-intensive (clothing), land-intensive (raw materials), and capital-intensive (microchips).

What caused the great depression?

Causes of the great depression include: World War I, Stock Market Bubble, housing market collapse, gold standard , interdependence, shitty tariff policy

What caused financialization?

Financial liberalization → financial repression under the Bretton Woods agreement, examples including caps on interest rates, regulation of cross-border capital movements, stronger ties between states and banks, high reserve requirements, and securities transaction taxes were, was sacrificed due to: 1) an ideological shift towards neoliberalism 2) power resource theory → a decline in labor's political power 3) the advent of technology and regulatory arbitrage

Krippner

Financialization

How do firms go global? What are TRIPs and BITs?

Firms go global via contractual relationships (outsourcing their materials to be produced in a privately owned factory) or vertical integration (creating and owning factories at all levels and stages of production. TRIPs are designed to protect intangible assets; BITs are bilateral investment treaties, which are signed between states to protect tangible assets.

Elm and Low

GVCs (Global value chains)

How did societies respond to the great depression?

Generally, societies responded to the great depression with statism. Statism is an ideology that promotes the state exerting control over a much larger share of economic activities; its forms can vary, from fascism, to social democracy, to populism. An example is the social democracy that arose in the US with the alphabet laws.

How are MNCs and FDIs governed? What is Baldwin's hold-up problem?

IMPORTANT: MNCs are a product of Foreign Direct Investment. The three steps to foreign direct investment are securing access to natural resources, securing access to foreign consumer markets, and improving production efficiencies. The Hold-up problem is the temptation on one party's part to alter the distributions of gains after an investment is made.

Identify and explain four faults in social democracy.

Inflationary bias → The death of the phillips curve → governments and policy makers no longer believed in the relationship between unemployment and inflation US exports inflation → Low interests rates in the U.S. leads to money flow from the US to Europe, which leads to expanded money supplies in Europe, which leads to inflation, thus causing global inflation to grow upwards. Rising Labor assertiveness → Laborers want a bigger cut of productivity while inflation slowly erodes their wages Supply shock → When price shocks (see: oil) occur, the whole system becomes unstable

Discuss some key elements of the Bretton Woods System. What are some important things to notice?

Key elements of the Bretton Woods System include a fixed but adjustable exchange rate system and a non-discriminative international trade system (although agriculture was excluded from this).

Compare and contrast migrants and refugees? Which are afforded more protection under international law? What are trends typically seen in migrant and refugee movement?

Migrants are people who leave their home country to travel to another for non-violent reasons; that is, they were not displaced, but left of their own free will. Refugees were forced out of their homes due to war, persecution, etc. and are thus afforded much more protection under international law. Migrants typically move within their class of state (CSPP model) or one tie inwards. Thus, people leaving a core nation almost exclusively travel to another core nation.

What are Peters 12 dimensions of immigration policy? Describe his theory on the relationship between tariffs and immigration policy.

Nationality, skill, quotas, recruitment, work prohibition, refugee policy, family reunification, asylum policy, citizenship, other rights, deportation, other enforcement. When tariffs rise, import competing industries expand, demand for low-skill labor rises, and businesses lobby the government to relax immigration restrictions. When tariffs fall, import competing firms exit, wages fall, labor decreases, and displaced workers pressure the government to increase restrictions on immigration. In the long run, business innovates and the skill-based labor it produces reduces the amount of low-skill labor, depressing wages, and increasing pressure to restrict immigration.

Peters

Politics of migration (reaction to economic restructuring)

What are the consequences of financialization?

Rising cross-border capital flows, rising instability of the financial system, increasing concentration of financial services activities, rising socio-economic inequality at the top

Who argued the political trilemma? What is the political trilemma? What are some of its strengths and limitations?

Rodrik The political trilemma is Rodrik's way of characterizing global economic and political structure. The three aspects of it are hyperglobalization, national autonomy, and democracy; the dilemma to it is that there can only be two at the same time. For example, during the Bretton Woods period post-World War II, hyperglobalization was sacrificed for the sake of national autonomy and democracy in political and economic decision-making. The political trilemma is a useful way to characterize the constraints and choices we make when defining/designing the relationships between the world economy and domestic societies. Relatedly, it allows us to conceptualize the development of the world economy. Its limitations are in that it has neither a theory of politics nor an explicit consideration of global structure.

Frieden

Social democracy as a response to the great depression

Why was social democracy chosen by the Bretton Woods Conference? What is Power Resource Theory?

Social democracy was chosen because of its functionalism: it was thought that modern societies needed it to survive (this was clearly not the case, as both the soviets and nazis survived without it). Power Resource Theory is the idea that economic policy is shaped by the balance of power between labor and business. Thus, whichever group has more power and leverage will shape policy.

What are some defining features of globalization?

Some defining features of globalization include the stretching of activities across borders, an increasing magnitude of connectedness, an accelerating pace of trade flows, and deepening enmeshment of local and global events.

How do we explain the transition from Bretton Woods to Neoliberal Hyperglobalization?

Stein's Law → If something can't go on forever, it won't; changing ideas; power resource theory

What is the modern organization of global production and capital? Who are the winners and losers from this organization?

Tech flows from core to SP to join with low skill labor, physical capital flows to SP to join with low skill labor, these flow from SP to P to gain resource endowment, finished goods then flow back to core, and low-skilled labor goes from P to SP and then core in the form of intermediate and assembled goods and migrant workers. Abstractly the winners are those with locally abundant resources or those who are mobile enough to find some, and losers are those who are neither of the above. Concretely, winners are human capital in the core, labor in the SP, and those who control natural resources in the P, while low-skill labor in the core, capital in the SP, and indigenous groups with legitimate claim to resources in the P are losers.

What are some components of social democracy compared to classical liberalism? What is Saltsjobadeer and what is its importance? (8 facets of statism)

The 8 facets of statism are: Keynesianism, maintaining full employment, socializing risk, price/income stability, financial repression, market regulation, labor organization, labor-business cooperation. Saltsjobadeer was the Swedish commitment to social democracy, which was groundbreaking because it was the first nation to do so.

Autor

The China Shock (low skill labor in the core; reaction to economic restructuring)

What lessons can be learned from the failure of the Doha round?

The Doha Round was the most recent trade negotiation at the WTO over developing countries, which was blocked due to disagreements between the US, EU, and several developing nations. This failure shows that universalism is inconsistent with deep interdependence, while global value chains rely on deep interdependence. These combined show that the WTO is inadequate.

What is the WTO 1.0 as defined by Baldwin? What is the political economy of old school trade? What is the logic of the WTO 1.0?

The WTO 1.0 is marked by old school trade. This means goods produced almost entirely within one state flowing across borders, much more intra-industry trade than H-O would lead us to expect, and limited market disruptions. The political economy of old school trade says that domestically, export-oriented industries succeed while import-competing industries fail, while internationally, market access agreements are negotiated to offer benefits to exporters. The logic of the WTO 1.0 stems from negotiating obligations, creating general exceptions and opt outs, imposing restrictions on those exceptions, and providing an effective dispute settlement mechanism

What is the WTO 2.0? What is the political economy of new school trade?What is the logic of WTO 2.0?

The WTO 2.0 is defined by new school trade, which revolves around global value chains and global supply chains. This means a vast increase in movement of intermediate goods, and much more regionally focused production economies. The political economy of new school trade promotes domestically accruing human capital and technology in the core and shifting labor outwards, shifting losses to the labor in the core and capital in the SP and P, and generating class-based conflict over outsourcing, while internationally negotiating rules to protect assets (both tangible and intangible).

Briefly describe the core-semi-periphery-periphery model. Identify factors that define each group

The core-semi-periphery-periphery model separates nations into three categories in order to neatly describe how nations fit into the global economy. Core nations have high rates of education, high paying, specialized jobs, and are at the center of the economy. These nations are capital abundant. Semi-periphery nations are labor abundant; they have relatively average levels of education with a variety of factory jobs that require no specialization and pay a median amount. Periphery nations are land/resource-abundant, and are far removed from the center of the global economy.

Fukuyama

The end of history (humans achieving ideological evolution; how we got here)

What is the "end of history?" Who defined it? What are the four paths to the "end of history?" What do they argue are the two remaining contradictions?

The end of history, as defined by Fukuyama, is the triumph of liberalism. That is, liberalism is the last viable and widespread ideology left in the world, and human society will not develop beyond it. The four paths to the end of history are: deregulation, privatization, and monetarism in the core, relatively autonomous gradualism in China, IMF and WB supervised structural adjustment in the SP and P, and IMF, WB, and EU supervised shock therapy in ECE and the FSU. The two remaining contradictions are nationalism/populism, which has no goal outside of independence, and religion, which can be seen in Middle Eastern Muslim theocracies.

What impact did the great depression and responses to it have on the global economy?

The global economy was marked by isolationism. Popular policies included high tariffs and discriminatory trade, inconvertible currencies, no cross-border lending or borrowing, and ascension of the empire as the typical model to organize international exchange.

Discuss the politics of globalization; what are some of its facets?

The politics of globalization revolve around economics. Nations want to maximize their national well-being through advantageous trade policies and agreements. They also represent a weakening of states in favor of organizations, as well as a shift from a domestic focus to an international focus.

Identify and describe three hypotheses explaining economic development.

The regime type hypothesis → extractive versus inclusive institutions; the resource/oil curse → presence or absence of natural resources; global imbalances → who's producing and who's consuming (leading to the US as the world's consumer of last resort.

What is financialization?

The rising importance of financial services; there are three different paths one can take to define it: 1) the growing importance of financial markets and financial institutions in the domestic and international economies 2) A process by in which the corporate sector derives a larger share of its total profits from financial assets 3) A process in which household turn to financial markets to manage consumption and savings

How do we redefine and disaggregate the traditional globalization network?

The traditional globalization network can be redefined to show MNCs and other firms as nodes, and flows of intermediate and final goods between and within firms along with ownership and contractual obligations as ties.

Baldwin

Trade 2.0 (WTO 1.0 versus 2.0; global governance)

What is trade pessimism and how does it affect economic development?

Trade pessimism is the belief of developing nations that participation in the global economy would prevent them from moving up in the CSPP model (P to SP and SP to C). It affects economic development in that it promotes insulation from the global economy in favor of domestic, state-driven attempts at development.

Why is free trade not a free lunch?

Trade requires reallocation of workers and jobs; therefore, it permanently alters demand for and wages among specialized workers. For this reason, the economic costs fall heavily on the lower classes, as well as initially exposed sectors.

What is the formula for national trade? What causes a trade imbalance?

Y (national income) = G (government spending) + C (Private Consumption spending) + I (investment expenditures) + [ X (exports) - M (imports) → S (savings-investment gap = Y-(G+C)) - I = X - M. A trade imbalance occurs when imports exceed exports, which occurs at the same time that investment exceed savings.

Hendrix

periphery systems

Rodrik

political trilemma (three corners and theory)

Acemoglu and Robinson

semi-periphery political systems