Lecture 12.docx

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International Affairs
INTA 1110
Tarun Chaudhary

10/9/12 Introduction of International Political Economy Politics and Wealth Bretton Woods - Developed after WWII - People met to iron out a way to avoid the economic instability that had led to WWI & WWII o Greatly influenced by the Great Depression - Three Institutions o International Monetary Fund (IMF) o International Bank for Recovery and Development (World Bank) o GATT (originally international trade organization) IMF - Role o Stabilizes exchange rates o Linked rates to the US dollar and pegged US dollar to gold o Provides assistance to countries faced with liquidity crisis o The head of the IMF is traditionally not from the US World Bank - Established to rebuild Europe - Provided development assistance for other economies - Mandate has shifted to center on development - Traditionally helmed by an individual from the US - However, following WWII, Russia emerged as a threat o The US instituted the Marshall Plan – USSR chose not to participate in it o US foreign policy shifted to counter USSR power o World Bank became part of this institution GATT - Originally intended as an “international trade organization” - Meant to combat protectionism through a free trade agreement - Market would efficiently allocate everything - US Senate o Objections blocked any such arrangements - GATT was formed in 1947 1970’s - Increasing protectionism due to shifting American priorities - Stagflation in the US o Wage and price inflation o High unemployment o Decrease for demand of US products - Post WWII US economic dominancy undermined - The Nixon Shocks o Floated the dollar; got rid of the Gold Standard The End of Bretton Woods - Nixon floated the dollar, ended gold-standard Theory and Ideology - Mercantilism - Liberalism - Marxism Mercantilism - The economy is another arena of power politics – economics is a tool of politics - Benign vs malevolent - Benign o Economic interests are a matter of security; policies do not have to have a negative impact on other states - Malevolent o States will attempt to increase economic power through military power/exploitive policies i.e. British colonialism of India o Positive feed-back-loop: increased economic power leads to a more powerful military which in turn leads to an easier expansion of economic influence - Pursuing a strong economy relative to other = power = security - The economic goal is to increase power - Main Actors: States - Nature of Relations: Conflictual, zero-sum game - Economic Goals: State power - Utilize your relationship with other countries as a way to extract wealth - Proponents o Alexander Hamilton (protectionism) o Friedrich List (productive power)  The ability to produce is more important than the resul
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