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Intro to IR L3.doc

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Political Science
Lilach Gilady

Introduction to International Relations Tuesday, January 24, 2012 The Historical Record: The Repeal of the Corn Laws • 1846: The repeal of the Corn Laws – the first significant shift towards freer trade; the anti Corn Law league; the potato famine; ideology • Unilateral act – the UK opens itself up for potential exploitation • Why would the UK do this? Trade • If there is no body to regulate trade there is trouble • Increase in the amount of free trade when we have a hegemon; protectionism occurs when there is no hegemon In the Absence of a Hegemon; The Kindleberger Spiral • The Great Depression? • The Kindleberger Spiral shows the volume of trade from 1929 – 1933 • Throughout the GD there is less and less trade consistently • Thus it spirals out of control; the situation worsens • This decline in trade during the GD may be attributed to an increase in protectionist policies; don’t want to fall victim to what is occurring in Germany • If enough countries adopt protectionist policies others do not wish to be exploited and as such they defect • If there had been a hegemon during this time this would not have occurred; would have allowed government to resist instinctive moves towards protectionism Hegemonic Stability (Krasner) • A hegemon enjoys a comparative advantage; would benefit from free trade; willing to pay the cost of policing • Hegemony suggests stability and security; beneficial for trade • A hegemon would set trade rules that benefit its interests • A hegemon could also use its power to force other countries to open up • A hegemon solves the prisoner’s dilemma by institutionalizing freer trade; may punish those who choose to defect • Example: Pax Britannica: Pax Americana Does It Work? • The main evidence is correlation • The theory suggests causation Hegemonic Stability; The Evidence • 1840-1870 Pax Britannica • 1870-1900 there is a decline in trade • 1900-1914 there is an increase in trade o Unclear • 1914-1945 World Wars and the Great Depression o If we look closer at this period we find that in economic terms the US was already the hegemon; it had all the capacities that would have allowed it to play such a role; not interested in playing this role; isolationism crucial • 1945-? Pax Americana • It is an elegant and parsimonious theory; the evidence, however, is inconclusive; static; how does it work in practice; the role of institutions Lessons From WWII • The Great Depression: o Deflation and laissez-faire economics; didn’t work; lead to more unemployment and social and political turmoil • Government response o Protectionism only made things worse • Rise of extremist political movements; ultimately ends in war • If an economy collapses there is a need for institutions to prevent major Institutional Solution; Bretton Woods system of monetary management • 1944; 44 nations met • Harry White (US) and John Maynard Keynes (UK) • This results in the creation of three new institutions; o International Monetary Fund (IMF)  Two original goals • To regulate exchange rates • This did not work because if you want to change your exchange rate (currency) investors are going to react (sell holdings and crash the economy or vice versa); this is why you cannot say what is going to happen in advance • To be a lender of last resort • Each country of the IMF will give some money to this fund and the money will be available to countries that are in need of it – during states of emergency o International Bank for Reconstruction and Development (IBRD; becomes what we know as the World Bank)  There was a need to rebuild and reconstruct Europe after the war so that a world economy can be present  Start from Europe and expand to the rest of the world o General Agreement on Tariffs and Trade (GATT  World Trade Organization (WTO) in 1995)  If you wa
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