3. Political Economy.docx

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Political Science

Theories of political economy 11/13/2013 9:53:00 PM Theories of International Political Economy I. Introduction Early during the Cold war (50,60s) focus was on security issues in the field of int’l politics (high politics)  changed in the 70s in shifted by adding more of a focus on political economy issues woven in time when people started talking more about liberalism <3 Approaches to Political Economy> II. Mercantilism- o Oldest approach to political economy, emerged in 17 century: when we saw rise of nation-state and consolidation of state power o Mercantilist policy makers believed wealth and power were closely linked with possession of precious metals –silver and gold o People got and accumulated silver and gold BY exporting more than importing (contrast between liberal trade theory: trade freely as opposed to restrain import) o Esp. Britain: used mercantilist trade policies to rise in relative power; intentional goal was to create trade surplus (economically wealthy also enabled them to build military) o Gain wealth and power through gold & silver BUT it’s fixed supply & economic relation is zero-sum relations are tended to be conflictual, with emphasis on relative and absolute gains o This time period, economic interaction was main forms of competition between states; if this competition is g conflictual, lots of room for conflict (direct contrast from liberal trade theory- room for absolute gains) BUT hard to think liberally if goal is accumulating something that is fixed supply o Mercantilism declines when Britain thinks ―We can gain more from free trade‖ rather than protectionism and returns in the interwar periodAfter WWII free trade is the trend & US, the new hegemon, pushes the idea of free trade to their advantage still the dominant idea but sometimes point to protectionist policy as neo-mercantilist policy (protecting domestic industries from imports) III. Liberalism (dominated in the study of political economy because it has been dominant in the dominant states in the int’l field) *Cooperation: see more possibility for common gain, don’t focus on relative gains as how to gain state wealth in absolute terms a. Adam Smith o ―In a domestic economy, if individuals specialize and are allowed to specialize and pursue individual interest, everyone would be better off‖Achieve collective harmony and national wealth as a product of self-interested behavior o Economist following Smith believed what was good for individuals is good for states in the international field (states should trade at what they’re good at and trade freely)What was good for individuals within state was also good for states with each other ; States should specialize what they’re good at and trade freely –trade according to their comparative advantage Wealth would grow, unlike a zero-sum-game and everybody would benefit o Two important contrasts between Mercantilist and Liberal 1) Mercantilist pursuit of interests lead to conflict not harmony vs. Liberals believe pursuit of self-interest can still lead to harmony 2) Mercantilist: government should be strong and involved, central govt. to maximize interests, direct different industries to export Vs. Liberals- governments should stay out of the way for individual to pursue self- interest b. Comparative Advantage o Two countries can benefit from trade with each other, if each uses their resources optimally, should specialize only goods they can produce efficiently, export what they have a comparative advantage in, import what they don’t have CA in o States differ in factor endowments (factor of productions)- land, labor, capital Ex. French has little land but technology but Russia has lots of landproduce according to what they can efficiently produce a lot of o If all states capitalize on comparative advantage, wealth will grow and everyone will be better off o Comparative advantage domestically may be different from comparative advantage internationally  domestically, there is a hierarchic protection, no danger o To some extent, some patterns of trade match up nicely with comparative advantage BUT technology can overcome some natural endowments (some limit) o Arguably, can be applied to issues of security (trade in military, peacekeeping forces, etc. depending on how much human resources you have, military technology, or in general, as comparative advantage in security) o **Main point: everyone can benefit from free trade driven by comparative advantage, not necessarily equally, but better off than they would be without –why they don’t all benefit equally because differ in what they have a comparative advantage in –Liberals not saying poor states will catch up to richer states, they will be better off than if they restrict trade; therefore, absolute gains are important, not relative IV. Marxism a. Marx (1840-50s) o Look at capitalistic countries which do generate wealth BUT! generate wealth by exploiting most people and the generated wealth is concentrated in the hands of a few; poor don’t benefit but are more suppressed o In a capitalistic society, profits are gained and increased by squeezing labor out of people for less and less money; owners of capital get rich by keeping wages low/ exploiting workers end up with a structural differentiation between two classes which means 1) Almost impossible for poor people to break out 2) System itself cannot go on without the differentiation, depends on this differentiation o Marx thought the poor would eventually revolt because they are being exploited too much and overthrow the capitalist system, system of communism follows with much equality o Marxist theory was focused on domestic struggles specifically in advanced industrialized countries; thought advanced industrialized countries is where these revolutions would take place (people would eventually revolt in wealthy countries first; underdeveloped countries would have to get richer first) BUT actually, workers in industrialized countries might not have had it so good but enjoyed rising standards of living and didn’t revolt (vs. oppressed workers in underdeveloped countries did revolt) b. Lenin o Lenin’s Theory of imperialism is an explanation of why the revolt would happen in underdeveloped countries, rather than wealthier countries Missing piece: European capitalists were investing in colonies and in these colonies, they could earn huge profits and used it to buy off workers at home (workers in wealthy countries are being exploited but using just enough of profit from colonies to keep workers from revolting) o Two implications of this 1) Should, therefore, be expecting revolt in less developed countries rather than wealthier countries 2) This imperialistic expansion, which wealthier countries needed in order to continue to reap wealth instead couldn’t go on without conflict between the imperial powers (partly a theory of war) o Most Marxists followed Lenin’s view: the North played a central role in creating and maintaining poverty in the underdeveloped world and focus on colonization; the extreme disparities in wealth seen in post-colonialism didn’t exist centuries ago (used to have relatively independent, autonomous societies) c. Colonialism and decolonization Once Europe is linked to everywhere else in the world, colonies disparities in wealth exists o World systems theorist: follow on Lenin’s thinking and see the world as having evolved over time into a world with a core and periphery; in the less developed world, the periphery’s economic activity was the extraction of raw materials, work that uses lot of labor, little capital, pay low wages // in industrialized core regions, production of manufactured goods, more skilled labor, more capital, pays higher wages biggest struggle is between core and periphery, between rich and poor countries, again among cores is over other colonies o Patterns of trade follows this core/periphery division to a fairly high extent (Ex. West export more than rest of the world, Latin America exports in agriculture and minerals – periphery) o Economic colonialism did have some long-term benefits (cities grew, mines were found, farms built, infrastructure built) BUT there was severe harms (minerals taken away, farmlands implanted but used for export crops rather than substantive crops to feed their own people, railroads that don’t support people) o Decolonization, assumed to be good, BUT training and expertise left with the colonizers; economies were developed to serve the economies of their colonizer not necessarily for their own long term interest –export specialized in cheap, narrow products made them vulnerable; ALSO liberation did not lead to great economic profits & not delink them from their colonizers and rely on former colonizers for security (neocolonialism- continued influence of former colonial power, or just wealthy power in general) d. Dependency Theory o Look at Latin America, after WWII, expected Latin America’s economy to take off but didn’t happen WHY? Essentially argued that the economic growth of the developing world, was inextricably linked to first world countries; existed in structural relationship that developing countries could not catch up; depended on differentiation (much like relationship between owners in Marxist theory)—countries in South were poor and exploited because of their history as subordinate elements in the world capitalist system and would remain as long as they were PART of that system o Remember CA in this logic: argue that comparative advantage is wrong because trade comes with economic ties that disadvantage poor countries; when rich and poor countries, trade traps poor countries in division of labor that allows rich countries to extract labor for own use o *Liberals don’t pay attention to what countries have a comparative advantage in, most poor countries have an advantage in primary commodities (rubber, tin, food) and rich countries (services, manufacture goods) o Liberals forget to look at declining terms of trade, they do not look at what people have a comparative advantage in because some have comparative advantage in expanding demand o Third world countries should engage in import substitution rather than export leg growth V. W
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