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POL208Y1 Study Guide - International Political Economy

Political Science
Course Code
La Haine

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Introduction to International Political Economy
Political Economy
- Interaction economics and politics; combination of the two fields
Opportunity Cost
War Economy
- Times of war, economics plays an important role; market needs to adjust
- Restructuring of the economy
Economic Warfare
- Use of economic instruments as a part of war
- Ex. oil embargo imposed by US and other countries on Japan before they entered WWII;
eventually, they attacked Pearl Harbor
Total War
Economic Sanctions
Opportunity Costs
- When you choose an option, you give up the opportunity of another opportunity that could
have made a lot of money
Peace Dividend
- Economic gain from a reduction in spending on defense
Economic Liberalism
- Increased efficiency will lead to growth, and growth will maximize welfare
- Free markets and limited government intervention

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Economic Nationalism
- Economics are important for national interest and security
- Sudan civil war; Southern Sudan having referendum; mostly Christian; more oil in
Southern part
- Professor Rajan in an integrated economy, what is good for the individual isnt
necessarily good for the system fault lines in global economy because of politics
- Economics in the past was understood as political economy’; need to study politics as well
to really understand economics
- Market can be seen as a means of gaining power market is the butter and security as
the guns; without butter, you cant get any guns
- Source of power we need butter to buy guns, so we should invest in the market and
invest in international security
- Source of welfare we like butter
- We need guns for protection, and butter for welfare
- More money in guns or butter?
- War economy see trade-offs between guns and butter
- Total war everything towards production of guns, and not butter
- Lots of shortages and thus rationing
- But most wars are followed by an economic boom as long as they didnt face too much
infrastructural damage ex. US and Canada after WWIIalthough many European
countries didnt
- Economic warfare coercive disturbance of the opponents economy to diminish their
power and they will not be able to buy a lot of arms
- Economic sanctions putting sanctions on another country to make them change their

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- Economic warfare can be waged separately from military warfare, or even in conjunction
- International law tries to separate goods that are part of a war from civilian goods
- Recently, economic sanctions have been used more instead of war but they often dont
work, and harm civilians as well
- Smart sanctions can target civilians or military capabilities
- Calculating the cost of war
- Direct costs: tanks, planes, personnel, damaged infrastructure, etc.
- Indirect costs: higher oil prices, borrowing money, healthcare for veterans, etc.
- Opportunity costs are indirect example: sitting in class instead of going to work
- Peace dividend peace should lower demand for guns and generate more butter
- What is the role of the economy in international relations? liberalism, economic
nationalism, and Marxism
- Economic liberalism trade will lead to efficiency as well as peace and prosperity
- Absolute gains
- Mercantilism emphasize military sectors; wealth is a source of power; zero-sum
approach; industrialization therefore government intervention and ownership are necessary
- Guns vs. butter for economic liberals, but guns and butter for a mercantilist
- Marxism world economy is dominated by capitalists who seek to maximize profit, which
leads to overproduction
- Rich get richer, poor get poorer
- Marxists believe guns serve the needs of butter
Gilpin The Political Economy of International Relations
- Three ideologies of political economy: liberalism, nationalism, and Marxism
- Liberalism politics and economics exist separately
- Marxism economy drives politics
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