POL208Y1 Study Guide - Final Guide: Floating Exchange Rate, Thomas Robert Malthus, Opinio Juris Sive Necessitatis

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Published on 16 Apr 2013
School
UTSG
Department
Political Science
Course
POL208Y1
Professor
Section 1. International political economy
International political economy
Guns vs butter is a metaphor used to describe a trade off between military
spending and spending on civilian welfare. Opportunity costs are the utility of
options used as the result of making a decisions. War economy are the patterns
of production for the purposes of war making. Economic welfare is the inane
disturbance of an adversary's economy to diminish its power.
The concept of guns vs. butter is a common metaphor for the national production
possibility frontier. As societies, we can choose between two types of goods:
guns (defense) and butter (civilian). For any amount of butter produced, we
sacrifice a certain amount of guns, and vice versa. In IR we assume that both are
necessary, so the real choice for societies is what the balance will be between
the two. The metaphor becomes very important in wartime, because that is when
the trade-off becomes most noticeable. For example, in WWII Britain, families’
water and food were rationed so that resources could be directed toward the war.
Guns vs. butter is also useful in differentiating between economic liberalism,
economic nationalism and Marxism. For liberals, there is always a trade-off.
Butter should be chosen over guns because cooperation between countries is
boosted by increased trade and undermined by increased defense. For
nationalists, there is no dilemma between guns and butter. As sources of power,
both trade and defense should be employed strategically to ensure a nation’s
relative advantage. For Marxists, guns serve the needs of butter: the military-
industrial complex (the guns) represents the interests of the capitalists, who have
all the butter.
International political economy in IR
Important because it is our view of the role of the economy. Economic
liberalism is an approach to international political economy premised on the
belief efficiency creates growth and welfare. It is committed to the standard case
for international trade (Adam smith) and concerned with absolute rather than
relative gains. This approach also limits the role of the government (laissez-faire).
Economic nationalism is associated with realism. It is the view that wealth is a
source of power that international politics amounts to a competition for primacy
and that the economy's primary purpose is to contribute to state power. This
approach is more concerned with relative gains. This interdependent approach
will lead to vulnerability. Marxism sees the world economy as dominated by
capitalists who seek the maximum profit. Profit-seeking leads to overproduction ,
ultimately resulting in instability and systematic crisis. Lenin modified the original
Marxist theory to allow for imperialism as a means of delaying the ultimate crisis
of capitalism.
In sum:
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Liberalism- minimal intervention
Nationalism- economy's purpose is to contribute to state power. One
compliments the other
Marxism- complete control
Gilpin:
Liberal perspective:
Organizing and managing a market economy to receive the most economic
growth and individual welfare
An individual will seek to acquire an bike give unit until a market equilibrium is
reached
Governments should not intervene, opportunity costs: to get something one
must give something up
Nationalist perspective:
1. Wealth is an absolute means to power
2. Power is essential as a means to retain wealth
3. Wealth and power Re each proper ultimate ends of national policy's
4. There is long run harmony between these ends
The role of the market is to strengthen the state, and increase power
They are not used together to create pace, infant the economy is the number
one source of conflict
Marxist perspective:
Political conflict arises from class struggle over wealth
Economic growth will eventually lead t the highest state of capitalism, until it
falls
1. Law of disproportionality: denial that supply and demand will always be in
balance, capitalists tend to go toward overproduction, crisis of
overproduction will become more and more severe
2. The law of concentration of capital: increased concentration of wealth in the
hands of few and growing impoverishment of many, this leads to the idea
of a revolution
3. The law of falling rate of profit: uneven development causes countries to go to
war with each other if a country has no incentive to invest in another
country.
Trade and globalization 1
International trade
Adam smith- advantages of free trade, countries can enjoy absolute advantage
Ricardo- comparative advantage of free trade- when costs are lower and more
effective to pay instead of trade due to transaction costs, opportunity costs,
relative prices. Terms of trade are important for Ricardo because it looks at the
ratio of an export commodity to an import commodity and analyses the fairness.
(Raw materials vs. processed goods)
Heckscher-ohlin theorem: a country has comparative advantage in producing
goods that make relatively intend use of countries realistically abundant
factor
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Stolper-Samuelson theorem: owners of a relatively abundant facts of
production benefit from free trade, owners of scare production benefit from
protectionism (tariffs, subsidies, etc. subsidies: measured through free
trade, a sum of money that the government gives a company to keep the
prices low, dumping: a country sells products abroad in princes that are
artificially low; drive other competition companies out f business and then
raise their prices again)
The logic of PROTECTIONISM: becomes an outcome of an international
prisoner's dilemma because you do not know which countries are join got screw
you over so you put up barriers in order to avoid it.
Krasner:
Realist theory: the dimension of power effects the behaviour of things; the
hegemon has a lot of power and effects the behaviour of our actors
States prefer to avoid vulnerability n
Protectionism is costly and small states cannot afford the costs of
protectionism therefore have to open up.
Large states can choose to opt out of protectionism for the benefits of free
trade
Large states have the ability to enjoy free trade without compromising stability
A hegemon enjoys comparative advantage
Use its powers to force other countries away from protectionism and open up
Hegemon will always say that they want free trade because it serves their own
interests
Trade and globalization 2
Hegemons are top big to fail, they enjoy comparative advantage and therefore
benefit from free trade; they have the ability to set trade rules that benefit its
interests. They can use their powers to convince other countries to open up.
Kindleberger spiral: trying to measure e volume of world trade as the economic
crisis evolves. As time goes on, the level of trade goes down. Countries respond
by closing markers and imposing protectionism. This is ineffective because as
trade goes down so does manufacturing and so down implement therefore
depression deepened.
Bretton woods: 44 nations met in 1944 to discuss how to rebuilt the structure of
the economic system after the war. IMF: stabilize the exchange rate between
countries. Solutions: world bank, general agreement on tariffs and trade (GATT)
Globalization: process by which nationality and geographic location became
increasingly irrelevant for economic activities.
Serves state interests
Institutional dimension
Systematic factors: hegemonic interests, technology
Race to the bottom: in a globalized society, capital can exist and move to a
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Document Summary

Guns vs butter is a metaphor used to describe a trade off between military spending and spending on civilian welfare. Opportunity costs are the utility of options used as the result of making a decisions. War economy are the patterns of production for the purposes of war making. Economic welfare is the inane disturbance of an adversary"s economy to diminish its power. The concept of guns vs. butter is a common metaphor for the national production possibility frontier. As societies, we can choose between two types of goods: guns (defense) and butter (civilian). For any amount of butter produced, we sacrifice a certain amount of guns, and vice versa. In ir we assume that both are necessary, so the real choice for societies is what the balance will be between the two. The metaphor becomes very important in wartime, because that is when the trade-off becomes most noticeable.

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