POL208Y1 Lecture Notes - Perpetual Peace, Keynesian Economics, Small Government
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Introduction to IR - Lecture 1
Office Hours: Wednesday 2:00-3:00 by appointment. SS# 3034
•IPE: International political economy
•Islands of cooperation: institutions
•Summary and looking forward
The economy clearly matters – but how? When? What actors does it affect?
How does the economy affect international relations?
•The interaction between economics and politics (polity and market)
What is the role of the economy in IR?
•It depends on whom you ask
oA source of power (we need butter to buy guns)
oA source of welfare (we like butter)
•Prosperity as means vs. prosperity as a goal
•Why do we want/need a strong economy?
•Example: Chinese economic growth
oShould we be worried?
oDo they want a strong economy to ensure the welfare of their population or
in order to take over the world?
oShould we cooperate or consider them a threat?
Guns vs. Butter
•A common metaphor for the national production possibility frontier
•“Guns will make us powerful; butter will only make us fat.” – Herman Goering
•“We can do without butter, but, despite all our love of peace, not without arms. One
cannot shoot with butter, but with guns.” - Joseph Goebbels
•“Bomb them with butter”
Guns vs. Butter PPF
•PPF; production possibility frontier
•The trade off between guns and butter is most noticeable in times of war
•Total war – sustainable over time?
•Effects on morale
•Effects on gender relations
•Positive effects of wartime economy?
•How we can use the economy as an instrument of war; bomb them with butter
•An intense, coercive disturbance of the economy of an adversary aimed at
diminishing its power
•Economic warfare can be waged separately from military warfare (sanctions) or in
conjunction with an ongoing war (strategic bombing, siege, blockade etc.)
•Submarine warfare in WWI and WWII; oil embargo on Japan;
•International law separates between goods that are part of the war effort and those
that are for civilian use. Dual use?
•Mixed record; smart sanctions; specific sanctions to not harm the general
population; success is questionable
•Economic measures can be a carrot as well (encouraging incentives); MFN, WTO
membership, foreign aid etc.
How to Calculate the Cost of War?
•Direct costs; tanks, planes, bombs, personnel, damaged infrastructure
•This is not sufficient, we must look further
•Indirect costs; higher oil prices, borrowing money, healthcare for veterans etc.
•For the US: total economic impact for the war 2002-2008 $1.3 trillion (compared
with $804 billion in direct war costs)
•A $1 in indirect costs for every $1 in directs costs
•Per family of four: $20,900 ($57 a week)
How to Understand the Role of the Economy in IR?
•Our view of the role of the economy depends on how we answer the following
•What is power? What is the main purpose of power? Is the economy then an
instrument for gaining power or is power an instrument for an improved economy?
•Who are the main actors in international relations?
•Is cooperation sustainable? (Relative vs. absolute gains)
•What is therefore the desired balance between guns and butter?
•Liberalism; economic nationalism (realism); Marxism (Gilpin)
•Increased efficiency increased growth maximize welfare
•How do we maximize efficiency?
oFocus on comparative advantage
oSmall government less intervention, more efficient the economy will be
•Trade peace (the liberal peace) (democratic, perpetual peace, Kant)
•Absolute gains (more prosperity in general for ourselves)
•Believe in the guns vs. butter trade off; should minimize guns to maximize butter
•Main actors; individuals; firms
•States want more prosperity
•Mercantilism; realism; protectionism
•Realist approach to international political economy
•Wealth is a source of power; economic competition for primacy; imperialism
•Guns AND butter; not necessarily a contradiction; no trade off as they reinforce
each other and are a necessary component of power
•How do we achieve this?
oThe role of the industry
oSupport trade insofar it promotes national interests; but not with potential
•Trade interdependence vulnerability potential conflict (autarky)
•Strategic trade; only with non threatening partners and only if trade benefits us
more than it benefits our trading partners
•Relative gains (want more compared to others)
•Main actors; states
•Critique of capitalism; way of understanding the world
•The world economy is dominated by capitalists who seek to maximize profit
•This leads to overproduction – more supply than demand instability and crisis
•Capitalism creates a concentration of wealth (and power) in the hands of a smaller
and smaller capitalist elite growing impoverishment of the rest
•Hence, the capitalist system is unsustainable and irrational capitalism sows the
seeds of its own destruction and replacement by a socialist system (dialectics)