POLSCI 369 Study Guide - Fall 2018, Comprehensive Midterm Notes - International Law, Protectionism, Gold Standard

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POLSCI 369
MIDTERM EXAM
STUDY GUIDE
Fall 2018
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Polsci 369: International Political Economy 9/5/18
International Political Economics: the politics of (mostly economic) things crossing borders
Ex.
Goods and services international trade
Corporations, factories, businesses foreign direct investment
Short term capital portfolio investment flows
Currencies exchange rates
People immigration
International Trade: the exchange of goods and services across international borders
- Production and exchange are the two foundations of the economy, and long-distance
exchange has been going on for a very long time
Ex.
Neolithic obsidian trade throughout the Middle East (c. 12000 BC).
Ancient Egypt traded gold and lapis for Lebanese wood and Arabian oils.
Roman Bronze relied on tin from Cornwall, England. In return: gold, statuary,
wine.
- The transportation revolution beginning in the 19th century expanded the scale of global
trade beyond anything the ancients could have imagined: in 2015, about 1/3 of
everything produced crosses a border
Controlling Trade with Trade Barriers and Export Promotion
- As long as there has been trade, states have sought to control it, through taxes,
quantitative restrictions, and other barriers to trade
A. Taxes: one motive for taxing trade is to raise revenue for the state. Because
international trade is centralized, operating through a small number of ports, it was the
ost effetive ta hadle for ost states util the 20th century
B. Earning Income: states have often sought to grow export revenues, to put those
revenues towards key state goals, like investment or military growth
C. Limiting competition: another motive for controlling trade is to limit competition for
domestic groups that may be relatively uncompetitive
International investment is usually divided in into two categories based on duration and the
extent of control
A. Foreign direction investment (FDI) is a long-term investment in a foreign firm combined
with managerial control
D. Portfolio Investment Flows: short or medium-term investments in foreign stocks and
bonds without managerial control
Controlling International Investment
- Casual observers today might assume that opportunities for international investment of
any type are freely available. That is partially true today, but far from true historically
- Controls on international investment are the rule, not the exception
- Just as states regulate trade flows, they also regulate financial flows with capital
controls:
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o Short-term capital controls: taxes, quantitative restrictions, and other barriers to
short-term capital movements
o Restrictions on FDI:
Exchange rates and government control: the exchange rate between two currencies is the rate
at which one currency is exchanged for the other
- Exchange rates are set on international markets, so there is no scope for government
control, right?
o Exactly wrong:
Ma ehage rates are set fied as a atter of puli poli.
Governments directly manage exchange rates by being (among) the
largest buyers and sellers in currency markets.
Historically, many governments have set controls on foreign exchange for
their country. They control banking, and so they control who gets foreign
currency, when and at what rate
Immigration, emigration, and government control
A. Immigration: the movement of people into a destination country of which they are not
native
B. Emigration: the movement of people out of their native country
Summarizing so far:
Key point 1: International Political Economy (IPE) is the study of the politics of trade, exchange
rates, foreign investment, and immigration
Key point 2: The extent to which goods, services, investment and people cross boarders is a
matter of choice
I. Creating a Global Economy
A. Economic relations require order: consider all of the tasks that the state undertakes to
facilitate the economy at the national level
1. Facilitate exchange with personal integrity, open national markets, contract law
2. Encourage investment with financial regulation, securities regulation, security of
property, patent and copy right
3. Provide a trustworthy currency
4. Train workers and ensure properly functional labor markets
Similarly, successful global economic relations require global order: safety and freedom of
movement, open international markets, international contract law, protections for intellectual
property, security of property across borders, global money, and workers
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