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Political Science
Lilach Gilady

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: 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 • 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 more profitable location. Therefore, taxation, labour laws. Environment regulations etc. can induce capital to move elsewhere. This is a socio- economic concept that is argued to occur between countries, states, provinces or territories as an outcome of globalization, free trade,neoliberalism or economic deregulation. When competition becomes fierce between geographic areas over a particular sector of trade and production, governments are given increased incentive to cut business regulations, labor standards, environmental laws and business taxes. Rodrik How far will integration go ? Political trilemma: countries cannot simultaneously maintain all three (economic integration, mass politics and a nation state) Options: • Economic integration+nation state= a Race to the bottom, Choose to liberalize everything to maintain the national government, movement ofmcapitalmis a treat toward government, we lose the option of mass politics (democracy) • Economic integration + mass politics= global federalism, loss of the nation state will lead to a global government • Nation state+mass politics= Bretton woods. We won't have as much economic gain, limited economic integration, control on monetary movement. Eichengreen When currencies collapse We currently rely to much on the dollar and the euro and both are giving doubts about their stability of the future. Look at the examples of 30s and 70s to avoid a collapse however we do not have another currency to fall back on. 1930s: depression. Good played a significant role as countri used it as an international monetary reserve. Interest rates rose, Roth slowed and us stock markets collapsed. Led to English banks removing the gold standard and capital was going out of countries rather than liquidation. Countries relied to heavily on the two currencies without backup 1970s: Bretton wood was created, which was a new international monetary system where currency values were fixed but it was against the dollar. Institutions (GATT,IMF) were successful as they increased stability while increasing growth in trade. There began to be doubts against the dollar, currents floated against the dollar, however global trade actuAlly rose after the collapse because institutions provided stability but us was not dependent on Bretton woods Hegemonic stability theory: a hegemon naturally has an incentive to implement free trade because they enjoy comparative advantage from trade. "Too big to fail"-> stability and security are ensured for trade. The solution is to maintain stability and secure confidence while helping those countries that are struggling to increase the over all economic growth. North and South Modernization Theory: there is a growing gap between developed and less developed states. Industrialization> urbanization > rise of the middle class > democracy> growth. This theory assumes that European model is universal, with minimal government intervention and free trade. The idea that all states develop in the same way. Assumes that the only idea of development is contemporary "modern" societies and that all other nations will take the same party at some point from industrialization to modernity. Walt Whitman Rostow. The J-Curve of economic reform: the economy will get worse before it gets better. Likely to lead to political measures in order to help settle the struggle. Only those institutions strong enough are able to enjoy the benefits of reform. Charlton Can Trade Liberalization Benefit Both Rich and Poor? Trade Liberalization: lowering barriers, greater openness to competitive markets and less artificial restrictions to trade, this increases economic growth and prosperity because t can increase the quality of goods and the amount of cheaper goods available, it generates new jobs and it increases peace since higher levels of international trade is usually associated with lower levels of hostility among trading nations. Disadvantages of Free Trade: growing global instability, the distribution of wealth both within and between states has increasingly grown unequal, and unfettered global competition creased incensed pressure to abandon domestic social policies, environmental regulations and human rights protection. Free trade benefits both developed and developing countries according to Charlton. It has increased American household income by lowering costs of goods and services, it has increased wages and it is making more effective American companies. If done right, free trade will help developing countries get out of poverty and allow them to bargain on equal terms with developed countries. Objective of US commercials: 1. foster economic prosperity, 2. protect US political alliance campaign. Opposition to free trade according to Charlton is a short sighted and does not look at the long term benefits of it. Free trade boosts growth and provides meaningful employment. Economic liberalization will ultimately lead to global development (NATIONALISM?) FAIR TRADE: Stigilz - what is often practiced as free trade is not actually free trade. There are usually additional barriers on products being traded as "free". A lot of the FTA that are established by the US are designed on the basis of US economic interests and effects the development of developing countries. The FTA set out by the Bush administration is not a free-trade agreement at all but is designed to benefit US economic interest and the US keeps it subsidies which they do not allow developing countries to have counter subsidies. Free trade/ trade liberalization has made many people in developed and developing countries worse off because they are over powered by the bigger corporations and nations. There is a growing inequality in both developed and developing countries. Americans loose their jobs to lower waged workers in different countries. The standard economy theory does not say everyone will be better off, it is just the winners, therefore the rich get richer and the poor, poorer. Many countries that have increased their levels of trade growth like China, have grown faster but countries did not liberalize, instead used protectionism because they become vulnerable. Foreign banks only become interested in large corporations than small local/ medium sized businesses. Protectionism is bad but most countries economies developed with some form of protectionism. Sachs Strategic Significance of Global Inequality Priority is given to national interests and their influence on economic growth over state preservation. 1.Poverty Trap: countries are too poor to sustain economic growth due to failure to fulfill basic standards that would encourage new investments 2.State Bankruptcy: States inability to fulfill its current debts. This is typically associated with foreign creditors, similar to a poverty trap. 3.Liquidity Crisis: reverse of capital flow 4.Transition Crisis: when political and economic regimes undergo a significant institutional regime International Regimes and Organizations It had been proven that the more developed a country is, the nicer it is to live there. The j-curve economic reforms are politically challenging especially when political institutions are weak and legitimacy is low (due to a lack of democracy if regimes) Weak institutions are the product of a variety of things: 1.Colonial legacy: no institutional infrastructure... No modern self rule tradition, many places do not hold a nation state in a colonial legacy, traditional authority structures;culture; geography. Instability leads to weak institutions lead to instability (continuous cycle that is difficult to break) 2.Curse of natural resources: decline in manufacturing, high levels of unemployment, and exports, government does not rely on taxation, until there is stability, they are corrupt. 3.Geography and poverty trap: war leads to poverty; poverty leads to war... Natural disasters, modernization theory New international economic order: helps diminish gap between north and south. We need economic intervention in the market forces in order to start imaginary in a more just way (nationalism) Dependency theory: alternative to modernization theory..development and underdevelopment emerged simultaneously. Some nations are deflated and some are underdeveloped, one feeds off the other. Dependency theory argues that all countries are modern, even developing nations. They Re not behind in time they just exist as a result of modernity. Developing nations are the way they are because of the way they have been inserting into the world system. The development of some depends on the exploitation of underdevelopment of others. Institutions help increase cooperation, stability, prosperity, and emergence of governance. Meirsheimer The false promise of international institutions Institutions push states away from war and promote peace. Liberal institutionalism:addresses how to prevent war. Economic and environmental cooperation between states is more realistic than stat
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