PS 0500 World Politics 11.7 11.19.docx

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Department
Political Science
Course Code
PS 0500
Professor
Daniela Donno

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November 7 Trade, Currency, and Debt  Collective good - A good that can’t be consumed exclusively by those who pay for it, or denied to those who do not. o Non-rivalry (jointness) of supply: consumption of the good by one does not reduce the amount to be consumed by the other o Non-excludability: no one can be excluded from enjoying the good once it is provided  Examples: lighthouses, clean air, national defense, public radio o In International Relations: Free trade, monetary stability International Collective Goods  Collective goods are under-provided  Free-rider problem: o You will benefit from the good even if you don’t contribute o If no one else contributes, why should you?  Solutions: o Hegemon provides good  Soul super power; powerful country  Euro/Eurozone- Germany is the hegemon economically  Takes burden upon themselves  Examples: group projects o International institutions  Regulate activities so they are contributing to positive collective outcomes Free Trade  A collective good o Lowers price for everyone o Comparative advantage (economics)  Makes sure that each state is producing to their relative advantage  Efficient allocation of resources and prices go down o Example: China- the price we pay in U.S. is cheap bc china produces and we import  BUT states have political incentives to put up trade barriers o Tarriffs- taxes on imports  Retaliation in response to unfair trade practices? o Non-tariff barriers- e.g., quotas on imports o Subsidies to domestic industries  Subsidise the steel industry- that industry will be more competitive and sell cheaper. o Currency manipulation Trade Barriers  EU import barriers major point of contention with developing countries  Contributed to collapse of WTO trade talks o Poor countries fight to lower trade barriers so they can sell their agricultural products in the global market. Examples: Bananas- only small % sales going to workers, more goes to covering shipping costs, pockets of supermarkets, price of EU barriers of trade Trade Disputes  Examples: contention between U.S. and China o U.S. wants China to revalue its currency to reduce the U.S.’ trade deficit  Wants to keep the trade low to keep exports cheap  Low relative to the U.S. dollar- it becomes cheaper for US to purchase Chinese goods  By devaluing it, you’re increasing your exports and becoming more competitive o U.S. companies want China to respect intellectual property right  Concerns over food and product safety  Dumping o Country subsidies its own domestic o Dumping goods into another country at another low price o Flooding their markets with your goods at a low price so they stop producing that good that you’re exporting  Excessive “anti-dumping” duties o In Mexico 2005= duty on Chinese textiles is 500% o Chinese trying to put Mexican textile industry to stop producing o Mexicans put a high tax on the imports of Chinese textiles International Trade Regime  Regimes help provide collective goods  General agreement on Trade and Tariffs (GATT)- 1947 o Permanent trade talks to be held in different “rounds” o Goal was to eliminate barriers to trade  World Trade Organization (WTO) – 1995 o All WTO members enjoy most-favored nation (MFN) status  No WTO member can be treated worse than any other  All trade barriers must be equal?  Some exceptions for developing countries  Rich can treat poorer countries with special status/access to markets…treat them better o A binding dispute resolution mechanism Currency  1972- end of the gold standard o Used to be that:  Currencies had to be tied to the value of gold.  Value of currencies were fixed and unchanging relative to eachother  After 1972: now there is a floating currency system o Value of currency changes all the time  Stability in the global currency system is a collective good  Debt crisis can lead to currency collapse o Greek doesn’t go completely bankrupt o Investors lose confidence- sell- and value of euro can collapse in international markets.  International Monetary Fund (IMF) o Lender of last resort (“bailouts”)  For countries experiencing debt crisis o Maintains stability in global currency and financial markets The Euro Crisis  Greece debt crisis  Banking crises in Spain and Ireland  Germany’s yield in July 2012 just 1.2 percent!  Debt: GDP ratio as of Oct. 2011 o Depends on level of economic growth o Austerity kills growth  Austerity program: cutting government spending and raising taxes  Can kill economic growth in the short term  Growing economy can reduce national debt better than an economy that aren’t o Because the government is taking more tax revenues, they can pay down national debt, stop issuing so many bonds.  Defaults by Greece, others could lead to total banking system collapse in Eurozone o They hold Greek Debt  Germany resisting more bailouts, euro bonds o Unwilling to tolerate higher inflation o Want austerity programs  European Central Bank buying government debt  Will the euro be saved?? November 12 Development and Global Inequality Development  Regions: o OECD (first world countries) o Former communist bloc (second world countries) o The “Global South” (third world countries)  Middle income “NIEs”  East and southeast Asia  Parts of Latin America  Low income  Human development o Income/wealth o Health o Education o Security o Gender equality  Sustainable development o Environmental sustainability Millennium Development Goals 1. Eradicate extreme poverty and hunger 2. Achieve universal primary education 3. Promote gender equality and empower women 4. Reduce child mortality 5. Improve maternal health 6. Combat HIV/AIDS, malaria, and other diseases 7. Ensure environmental sustainability 8. Develop a global partnership for development Causes of the Development Gap  Geography o Coastline? Natural resources? Good land for farming?  Colonialism  Corruption  Debt  Civil wars  Population growth  Gender inequality  AIDS epidemic, other diseases  Which of these factors can be changed? Dependency Theory  Periphery states supply raw materials to the Core o No industrialization in the periphery o Many LDCs still rely on commodities for exports o Problem:  Commodity prices fluctuate  Capital accumulation needed for growth Development Strategies  Import Substitution Industrialization (ISI) o Put up barriers to trade, isolate economy  1970s-80s  Trade protection and subsidies to create a domestic industrial base o Problems:  No domestic market for the goods produced  Industries were inefficient  Led to debt crises, weak economic growth  Example: Mexico  Lesson: Economic isolation does not work o Zimbabwe o Daily inflation rate in 2008: 100% o Unemployment more than 80% o Agricultural production declines 2005-2008  Solutions: o Export-led growth (brings in revenue) o Pursued by East/Southeast Asia o Develop globally-competitive export industries o Role for government:  Works with banks to direct investment  Protects “infant industries” International Tools of Influence  Foreign aid o Focus on basic needs:  Fertilizer, farming tools  Roads  Health services  Education  Micro-credit  Loan conditionality o Require recipient governments to reduce corruption, liberalize economy Heavily Indebted Poor Countries (HIPC) Initiative  Requirements to qualify o Debt-to-export ratio at least 150% o Debt-to-government revenue ratio at least 250% o Must qualify for IMF poverty reduction program o Establish track record of economic reform  HIPC countries get debt relief and low-interest loans  August 2012: 39 countries eligible November 14 Civil Wars Civil Wars  Armed conflict within a sovereign state between two or more militarily organized groups, one of which is the government  Conflict least to At least 1000 combat-related deaths in order to be coded as a civil war  Types of civil wars: o Ethnic  Combatants identify themselves based on their ethnicity  Examples: Iraq, Rwanda, Uganda, Burundi o Secessionist  Re
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