POL208Y1 Study Guide - Final Guide: European Bank For Reconstruction And Development, Bretton Woods System, Stephen D. Krasner

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Published on 16 Dec 2013
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POL208Y1 FINAL EXAM REVIEW
FIND MAIN TERMS & DEFINE WITH EXAMPLES
INTERNATIONAL POLITICAL ECONOMY DISCUSSES THE FACT THAT THE POLITICAL ACTIONS OF STATES CLEARLY
AFFECT INTERNATIONAL TRADE. FURTHERMORE, POLITICAL DECISION MAKING IS ONE MADE WITH ECONOMIC
REPERCUSSIONS IN MIND, OR WHAT IS ECONOMICALLY VIABLE.
ARTICLE:
BRETTON WOODS SYSTEM: ESTBALISHED THE STABLE LIBERAL TRADE SYSTEM AFFTER WW11 AND THE
COLLAPSE OF THE GOLD STANDARD. AFTER WW11 EUROPEAN STATES WERE IN NEED OF FINANCIAL ASSISTANCE
INCLUDING BRITAIN WHO PRIOR TO WW11 WAS SEEN AS THE FOREMOST ECONOMIC HEGEMON. THE GOLD
STANDARD (PRE 1914) PROVIDED AN AUTOMATIC ADJUSTMENT MECHANISM FOR INTERNATIONAL PAYMENTS
WHEREBY COUNTRIES INVOLVED IN TRADE WOULD PEGG THEIR OWN CURRENCY TO THE GOLD STANDARD. THE
GOLD STANDARD HELPED TO STABILIZE INTERNATIONAL AND DOMESTIC ECONOMIES ALTHOUGH AFTER WW1
STATES LOST CONFIDENCE IN THE SYSTEM AND RESULTED TO PROTECTIONIST MEASURE, EVENTUALLY
ABANDONING THE GOLD STANDARD, DURING THIS TIME AND SOON AFTER BRITIAN COULD NOT HELP, AND THE
US REFUSED TO HELP RESULTING IN THE GREAT DEPRESSION. --- LATER CHANGED INTO THE US DOLLAR
STANDARD. THE SIGNIFICANCE OF THE BRETTON WOODS SYSTEM LIES IN THE IDEA THAT INSITUTIONS CAN
CHANGE AND GROW TO ADAPT TO THE SYSTEM BETTER THAN STATES AS ECONOMIC ANCHORS.
OIL EMBARGOES
COLLAPSE OF BRETTON WOODS DURING THE US WAR IN VIETNAM THE US BEGAN TO INCUR MAJOR
TRADE DEFICITS THEREFORE NIXON TOLD THE INTERNATIONAL COMMUNITY THAT THE BRETTON WOODS SYSTEM
AND THE USE OF THE US DOLLAR COULD NOT MAINTAIN A GUARENTEED FIXED RATE FOR TRADE AND STABILITY
PURPOSES. HENCE, THIS DEMONSTRATES THAT AS A HEGEMON, THE US FELT THAT IT WAS NOT IN THEIR FAVOUR
TO MAINTAIN THEIR DOLLAR AS BACKED BY THE GOLD STANDARD; THEREFORE THEY BACKED OUT AT THE COST
OF THE INTERNATIONAL COMMUNITY. IN A CONTEXT OF RELATIVE AND ABSOLUTE GAINS, THE US FELT THAT THEY
WOULD NOT BE IN A UNLIATERALLY ADVANTAGEOUS POSITION. THE BRETTON WOODS SYSTEM WAS SEEN TO PUT
FORTH VARIOUS INSTITUTIONS WHICH REMAIN TODAY, INCLUDING THE IMF AND THE WORLD BANK HENCE EVEN
THOUGH THE SYSTEM ITSELF FELL THROUGH, LEAVING THE MARKETS WITH A FLOATING EXCHANGE RATE TODAY,
ITS INSTITUTIONS HAVE REMAINED A LARGE PART OF THE INTERNATIONAL ECONOMIC SYSTEM.
HEGEMONIC STABILITY THEORY THIS REALIST THEORY OUTLINES THE EMERGENCE, AND NECESSITY, OF A SINGLE
COUNTRY WHICH CAN ANCHOR STABILITY OF THE INTERNATIONAL MILITARISTIC, POLITICAL AND ECONOMIC
SYSTEM. ITS REALIST NATURE LIES IN THE DISCUSSION OF POWER IN BOTH THE POLITICAL AND ECONOMIC
SYSTEM, WHEREBY THE HEGEMON CAN USE ITS POWER TO OPEN UP TRADE AND THEN PUSH THEIR GOODS INTO
COUNTRIES WHICH THEY INVEST IN. COMPARED TO OTHER STATES WHO MAY REGARD TO TRIBULATIONS OF THE
INTERNATIONAL MARKET AS A NEGATIVE REPRUCUSSION TO OPEN UP THEIR MARKETS TO INTERNATIONAL
TRADE, HEGEMONS WOULD NOT HAVETO WORRY ABOUT THE TRIALS OF THE SYSTEM BECAUSE THEIR ECONOMIC
BENEFIT IS FAR TOO GREAT TO EMPLO PROTECTIONIST MEASURES. WHAT STEPHEN KRASNER NOTES IN HIS
ARTICLE IS THAT, TRULY THERE IS A TREND IN THE INTERNATIONAL MARKET WHICH DEMONSTRATES THE NEED
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FOR A HEGEMONIC STATE IN ORDER TO SECURE STABILITY. FURTHERMORE, IN A MOVE FROM BRITAIN TO THE US,
THE FLUCTUATIONS OF THE MARKET (IN TERMS OF TARIFFS AND THE RELATIVE OPENNESS AND CLOSENESS OF
BORDERS) FREE TRADE HAS BEEN IN ACCORDANCE WITH THE PRIMARY ACTIONS OF HEGEMONIC STATES. FOR
EXAMPLE, WHEN THE US WAS SEEN TO EMPLOY HIGHER TARIFFS, TARIFFS ROSE INTERNATIONALLY AND FREE
TRADE DECREASED (AND VISE VERSA).
ALSO, HEGEMONS ARE SEEN TO BENEFIT FROM DICTATING THE RULES OF THE GAME IN TERMS OF
INTERNATIONAL INSTITUTIONS WHICH MONITOR TRADE SUCH AS THE WTO.
ECONOMIC NATIONALISM THIS ECONOMIC VIEW BELIEVES THAT THE STATE IS THE FOREFRONT AND MOST
IMPORTANT ACTOR IN THE INTERNATIONAL SYSTEM INCLUDING LARGE EXPENDITURES IN MILITARY POWER IN
ORDER TO FURTHER THE NATIONAL INTEREST. IN ACCORDANCE WITH THE REALIST PARADIGM, ECONOMIC
NATIONALISTS BELIVE THAT HUMANS ARE BY NATURE SELFISH AND COMPETITIVE POLITICALLY, THIS IS A
MIRRORED IMAGE OF THE INTERNATIONALECONOMIC SYSTEM. TRULY THIS PROMOTES THE VIEW THAT THERE IS
DIRECT RELATIONSHIP BETWEEN PURSUIT OF POLITICAL POWER AND ECONOMIC WEALTH, ALTHOUGH THE
NATIONAL INTEREST SUPERSEDES ECONOMIC ACTIVITIES. FURTHERMORE, ECONOMIC NATIONALISM PREDICTS
THE ACTIONS OF STATES FOR THE SUPPORT OF INFANT INDUSTRIES AND SUPPORT OF DOMESTIC TRADE---
RELATIVE OVER ABSOLUTE GAIN.
ECONOMIC LIBERALISM - LIBERALISM PROMOTES ABSOLUTE GAIN AND BENEFIT OF TRADE RATHER THAN SIMPLY
RELATIVE GAIN IM FAVOUR OF A SINGLE STATE. LIBERALS, IN PARTICULAR, PROMOTE THE NOTION OF A FREE
TRADE SYSTEM WHEREBYALL COUNTRIES SHOULD BE ABLE TO TRADE WITHOUT BARRIERS AND TARIFFS IN ORDER
TO PROMOTE ECONOMIC GROWTH. ASSUMPTIONS WHICH ACCOMPANY ECONOMIC LIBERALISM ARE THAT THE
POLITICAL AND ECONOMIC REALMS SHOULD REMAIN SEPERATE, AND MARKETS SHOULD BE FREE OF
GOVERNMENTAL/POLITICAL INTERFERENCE. ADAM SMITH POSITIVE GAINS FROM TRADE/INTERDEPENDENCE:
STATES WILL BE LESS LIKELY TO GO TO WAR WITH A STATE THAT THEY ARE HIGHLY ECONOMICALLY INVOLVED
WITH.
GATT: GENERAL AGREEMENT ON TRADES AND TARRIFFS. GATT IS SEEN TO PROMOTE NON-DISCRIMINATION IN
TRADE PRATICES PROVIDING AN INSTITUTION FROM WHICH TO NEGOTIATE CONTRACT AND TRADE RULES. SINCE
ITS ENACTMENT GATT HAS BEEN ABLE TO SUBSTAINTIALLY WIDEN THE INTERNATIONAL TRADE SECTOR THROUGH
THE REMOVAL OF TRADE TARIFFS, ALLOWING FOR TRADE LIBERALIZATION IN ORDER TO STIMULATE
INTERNATIONAL ECONOMIC EXCHANGES. PROPONENT OF MOST FAVOURED NATION P
WTO: WORLD TRADE ORGANIZATION. THE AIM OF THE WTO IS TO UPHOLD TRADE AGREEMENTS AND SETTLE
TRADE DISPUTES BETWEEN STATES. THE WTO IS SEEN TO ENJOY A LEGAL PERSONALITY THROUGH ITS
INSTITUTIONAL FRAMEWORK
IMF: INTERNATIONAL MONETARY FUND. THE IMF PROVIDED SHORT TERM LOANS IN ORDER TO BALANCE
PAYMENT DEFICITS. THE CAPACITY TO LEND TO STATES DEPENDS ON THE QUOTA OF MEMBER STATES WHO
CONTRIBUTE TO THE ORGANIZATION. THE IMF ALLOWS CONFIDENCE IN THE SYSTEM SUCH THAT IF ONE IS NOT
ABLE TO MAKE A TRADE PAYMENT, THE IMF CAN LEND MONEY TO THE MEMBER STATE IN ORDER TO PREVENT
INSTABILITY. THE IMF FURTHER WORKS AS A SURVEILLANCE ORGANIZATION, MONITORING THE ECONOMIES OF
MEMBER STATES AND PROVIDINGE ECONOMIC ADVICE TO AVOID INSTABILITY. PROVIDES 2 TYPES OF LENDING 1)
CONCESSIONAL, LENDING WHICH IS GIVEN FOR A LONG PERIOD OF TIME WITH A LOW INTEREST RATE, TYPICALLY
GIVEN TO DEVELOPING COUNTRIES 2) NON- CONCESSIONAL- SHORT TERM, HIGH INTEREST LENDING.
FURTHERMORE IMF IS SEEN TO PROVIDE ASSISTANCE FOR DEVELOPING COUNTRIES SUCH AS DEBT RELIEF FOR
HIGH INDEBTED POOR COUNTRIES, AND THE MILLENIUM DEVELOPMENT GOALS.
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MILLENIUM DEVELOPMENT GOALS: DISSCUSSED AT THE MILLENIUM SUMMIT IN 2000---INTERNATIONAL
GOALS FOR DEVELOPMENT TO REACH BY 2015. THE AIM IS TO ASSIST IMPOVERISHED STATES AND ENHANCE
THEIR DEVELOPMENT BY IMPROVING THEIR SOCIAL AND ECONOMIC CONDITIONS. AREAS INCLUDED 1) THE GOAL
TO END HUNGER AND POVERTY, AND TO CUT IN HALF THE AMOUNT OF PEOPLE WHO GAINED ONE DOLLAR A DAY
BY ACHIEVING DECENT WORK FOR ALL---WOULD LEAD TO CUT IN HUNGER. CHALLENGES INCLUDE THE ABILITY
KEEP TRACK OF PEOPLE OF ARE DISPLACED DUE TO WAR AND VIOLENCE. 2) ACHIEVE UNIVERSAL PRIMARY
EDUCATION FOR CHILDREN 3) ACHIEVE GENDER EQUALITY 4) REDUCE UNDER 5 MORTALITY RATE 5) IMPROVE
MATERNAL HEALTH 6) COMBAT HIV/AIDS AND OTHER DISEASES. 7) ENSURE ENVIORNMENTAL SUSTAINABILITY 8)
DEVELOP A GLOBAL PARTNERSHIP FOR DEVELOPMENT
**** CONDITIONAL LOANS
WORLD BANK: WORLD BANK DEALS WITH THE PRIVATE SECTOR TO PROVIDE LOANS FOR STATES IN NEED. MOST
IMPORTANTLY THE WORLD BANK FACILITATED EUROPEAN COUNTRIES IN ACHIEVING THEIR PRE-WAR ECONOMIC
STANDARDS IN ORDER TO RE-DEVELOP THEIR ECONOMIES. --- PRIMARILY AS THE EUROPEAN BANK OF
RECONSTRUCTION AND DEVELOPMENT THEN AFTER THEY BECAME THE INTERNATIONAL BANK FOR THE SAME
CAUSE.
ECONOMIC MARXISM: MARXISTS BELIEVE THAT THE POSITION OF A STATE IN THE INTERNATIONAL MARKET IS
ONE CHARACTERIZED BY THE FAMILIAR CLASS STRUGGLE, SUCH THAT THERE ARE ECONOMICALLY DOMINANT
AND SUBORDINATE STATES. THOSE STATES THAT ARE ECONOMICALLY DOMINANT, ARE RECOGINZED AS ABIDING
BY CAPITALIST IDEALS, WHICH MARX SUGGESTED WOULD LEAD TO THE EVENTUAL DEMISE OF THESE STATES,
ONLY TO BE PROVEN WRONG. HE SUGGESTED THAT THE RATE OF GROWTH WOULD SUPERSEDE THE ABILITY FOR
AGRICULTURAL PRODUCTION ON A WORLD SCALE; FOLLOWING WITH A COLLAPSE OF THE WORLD MARKET---
LENIN - THOUGH THIS HAS YET TO HAPPEN. THE BIGGEST MARXIST CONCERN LIES IN THE VALUE OF LABOUR VS.
THE REVENUE OF LABOUR, WHICH SUPPORTED THE NOTION THAT THE RICH GET RICHER AND THE POOR GET
POORER.
TARIFFS- TARIFFS ARE TAXATIONS PUT IN PLACE BY THE GOVERNMENT OF A STATE THAT IS IMPORTING GOODS.
TARIFFS ARE MOST GENERALLY EXPRESSED AS REVENUE, ALTHOUGH IN ORDER TO PROMOTE THEIR DOMESTIC
MARKET SOME STATES IMPLOY TARIFFS FOR PROTECTIONIST MEASURES. IN THIS SENSE, TARIFFS ARE SEEN TO
PLACE A LIMIT ON THE FACILITY OF TRADE, HENCE THE REASON WHY LIBERALS PROMOTE FREE TRADE AND NON-
TARIFFS BETWEEN STATES, FURTHERMORE AND OVERALL, INEVITABLY NATIONAL POLICIES WILL ALWAYS BE AT
ODD S WITH INTERNATIONAL TRADE.
OPPORTUNITY COSTS COST OF THE BEST ALTERNATIVE TO YOUR CHOICE.
TRANSACTION COSTS THE COSTS INVOLVED WITH DISTRUBUTING YOUR GOODS INCLUDING TRANSPORTATION.
ABSOLUTE ADVANTAGE ADAM SMITH- ABSOLUTE ADVANTAGE SUGGESTS THAT A SINGLE COUNTRY IS BETTER
THAN ITS TRADE PARTNER IN ALL AREAS
COMPARATIVE ADVANTAGE EVEN THOUGH A SINGLE COUNTRY MAY NOT BE GOOD IN PRODUCING ANYTHING,
THEY SHOULD STILL TRY AND PRODUCE SOMETHING.
PRINCIPLE OF RECIPROCITY IF A STATE IS SEEN TO REDUCE TARIFFS IN A BI-LATERAL AGREEMENT, THE COUNTRY
WHO IS ALSO INVOLVED IN THE BI-LATERAL AGREEMENT IS ENCOURAGED TO DO THE SAME AND RECIPROCATE
THE LOWERING OF TARIFFS
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Document Summary

International political economy discusses the fact that the political actions of states clearly. Furthermore, political decision making is one made with economic. Repercussions in mind, or what is economically viable. Bretton woods system: estbalished the stable liberal trade system affter ww11 and the. After ww11 european states were in need of financial assistance. Including britain who prior to ww11 was seen as the foremost economic hegemon. Standard (pre 1914) provided an automatic adjustment mechanism for international payments. Whereby countries involved in trade would pegg their own currency to the gold standard. Gold standard helped to stabilize international and domestic economies although after ww1. States lost confidence in the system and resulted to protectionist measure, eventually. Abandoning the gold standard, during this time and soon after britian could not help, and the. Us refused to help resulting in the great depression. The significance of the bretton woods system lies in the idea that insitutions can.

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