PS 20 Textbook Condensed Chapter Outlines.docx

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Political Science
Leslie Johns

Chapter 2  It is easier for a smaller group to act effectively, because they can coordinate together and be more efficient  Iteration, Linkage, and strategies of reciprocal punishment are all ways to aid cooperation between actors  The availability of information also aids in cooperation between states  A better deal can be made for an actor in bargaining due to: o Coercion: The threat or imposition of costs on other actors such as military force or economic sanctions o Outside Options: The alternatives to bargaining with a specific actor o Agenda-Setting Power: A “first mover” advantage that helps an actor to secure a more favorable bargain  Institutions can facilitate cooperation in 4 main ways: o Setting standards of behavior: Clear standards of behavior through organizations such as NAFTA, which reduce ambiguity in acceptable actions o Verifying Compliance: Means of verifying and judging compliance can be set such as the UNSC making sure that there were no weapons of mass destruction in Iraq through inspections o Reducing the Costs of Joint Decision Making: Essentially “rules of the road,” rules are put in place that help everyone stay on the same page, such as those created by the United nations o Resolving Disputes: Mechanisms to resolve disputes are important because if an actor violates an agreement, it is helpful to have rules set in stone that can minimize conflict Chapter 3  War can commonly take place due to incomplete information: o The capabilities or resolve of one side may not be fully known to the other side o States may have an incentive to represent their capabilities, and it is not always clear whether the message a state sends is credible o Coercion can be used to sway opponents, as well as bluffs which can cause the opponents to overestimate a state’s resolve or capabilities o Ways of demonstrating credibility include brinksmanship and tying hands  Brinksmanship involves a state taking actions that may start an accidental war, showing that they mean business  Tying hands involves leaders making statements and threats that they cannot back down from, and if they do back down they are subject to audience costs  War can commonly take place due to commitment problems: o Sometimes in bargaining, actors bargain over things that are a future source of power, such as a strategically advantageous territory o Changing power may result in the stronger state instigating war in a preventative manner in order to keep their power o Similarly, if a state thinks that they may be attacked in the near future, they would strike preemptively o First strike advantages are commitment problems because a state may have the opportunity to have a huge advantage if they are the ones to strike first  War can commonly take place due to indivisible goods: o Regime/Religious superiority o A holy land such as Jerusalem o Many times the good may actually be divisible in some way, but leaders have incentive to represent the good as undeniably indivisible  Ways to make war less likely: o Raising the cost of war such as by mutually assured destruction o Increasing transparency can help solve incomplete information, especially when related to military capabilities o Providing outside enforcement of commitments can help, such as state acting in compliance with WTO rules or rules of other organizations. In addition linkage and iteration can serve as a sort of enforcement o Dividing apparently indivisible good, whether physically or symbolically Chapter 4  Nationalist interests as well as individualistic interests can contribute to decision-making, such as national security as well as the economic interests of oil company executives o Small groups, such as United Fruit, are able to impose better organized interests that groups such as American taxpayers, so they are able to influence the government substantially o The military and other interest groups wield a disproportionate amount of power due to coercive advantages  Politicians may have incentive to instigate war for their own benefits o Ideological reasons may cause incentive for politicians to start war with opposing nations o The rally effect: The tendency for people to become more supportive of their country’s government in response to dramatic international events, such as crises or wars o Diversionary incentive: The incentive that states leaders have to start international crises in order to rally public support at home o However, most leaders do not fall prey to the diversionary incentive due to audience costs, as well as the high cost of war  Countries may fight wars to satisfy interest groups: o The military industrial complex: An alliance between military leaders and the industries that benefit from international conflict, such as arms manufacturers o Bureaucratic institutions and agencies may have specific interests in causing war o An example is Japan in the 1930’s, where the military became much more influential, and the Japanese foreign policy became much more aggressive o Economic interests such as big oil or United Fruit may have incentives to start wars, which are mirrored by political leaders o Ethnic lobbies such as the Jews in the United States also have considerable power, such as the involvement in Israel o These relatively small interests wield considerable power because of their size and organization  There is a democratic peace that seems to be evident throughout the modern world o Democratic peace: The observation that there are few if any military conflicts between democratic regimes o Democratic leaders are subject to more transparency and accountability  Accountability: The ability to punish or reward leaders for the decisions they make, as when frequent elections enable voters to hold elected officials responsible for their actions by granting or withholding access political office o Democratic states appear to be both more transparent as well more credible o One opposing argument is that the democracies just happen to aligned with each other, as a result from the Cold War polarization Chapter 5  Alliances are a key component to international relations o Alliances for due to common interests between states, and help these states to cooperate with one another o Alliances are commonly made either to create a balance of power, or because of a bandwagon effect o Forming alliances allow for states to signal their interests to the rest of the world o Alliances increase credibility, as states in alliances raise their costs of abandonment o Alliances are usually honored—roughly 75% of the time  History of alliances: o Before World War 1, there were essentially 2 armed camps:  The Triple Allaince, headed by Germany and Austria  The Triple Entente, with Russia, France, and Britain  These alliances were unstable and not set in stone o Between the wars, the alliances were very weak, and many of them broke down due to nations like Britain not being stern enough in their resolve o During the Cold War, the world was mainly broken down into NATO in the west, the Warsaw Pact in the east, and then the divided third world  The alliances during the Cold War were highly institutionalized and ideologically based  Collective Security Organizations try to keep the peace, but are not always successful o League of Nations: A collective security organization founded in 1919 after WW1. The League ended in 1946 and was replaced by the United nations o United Nations (UN): A collective security organization founded in 1945 after the end of WW2. With over 190 members, the UN includes all recognized states o Collective security agencies tend to take part in peacekeeping and peace-enforcing operations around the globe, as well as taking part as neutral observers o Collective Security Organizations have 2 main problems: collective action problems, and joint decision making problems o The United Nations’ main body is the UNSC (security council), which have 5 permanent members (USA, Britain, France, China, USSR) that all have veto power on decisions o In sum, collective security organizations help states to cooperate to further their collective interests in international peace by providing rules and standards to address the challenges of collective action and joint decision making that inevitably occur o A main role of the United Nations is to ensure peace:  Peacekeeping operation: A operation in which troops and observers are deployed to monitor a ceasefire or peace agreement  Peace enforcement operation: A military operation in which force is used to make and/or enforce peace among warring parties that have no agreed to end their fighting o The UN was largely ineffective during the Cold War because the polarizing nature of the time period inhibited the UNSC from unanimously making decisions o After the Cold War ended, the UNSC became more prominent, and was actually able to instigate peacekeeping operations, and important issues such as the Gulf War o There seems to be a “triumph of the lack of the will,” where many crises do not get successfully dealt with by the United Nations, such as the situations in Bosnia, Somalia, Rwanda, and Darfur o In general, it does not appear that the United Nations is overly effective, as it faces 2 main challenges:  None of the veto-wielding members can see a potential operation as threatening to its interests  Member states, especially the powerful ones, but care about a situation enough to devote the necessary resources and take the necessary risks in an operation Chapter 6  Important theories of trade: o Heckscher-Ohlin trade theory: The theory that a country will export goods that make intensive use of the factors of production in which it is well endowed. Thus, a labor-rich country will export goods that make use of its labor o Stopler-Samuelson Theorem: The theory that protection benefits the scarce factor of production. This view flows from the Heckscher-Ohlin approach: if a country imports goods that make intensive use of its scarce factor, then limiting imports will help that factor. So in a labor- scarce country, labor benefits from protection and loses from trade liberalization o Ricardo-Viner (specific factors) model: A model of trade relations that emphasizes the sector in which factors of production are employed, rather than the nature of the factor itself. This differentiates it from the Heckscher-Ohlin approach, for which the nature of the factor— labor, land, capital—is the principal consideration  Types of trade restriction: o Trade barrier: Any government limitation on the international exchange of goods. Examples include tariffs, quantitative restriction, import licenses, requirements that governments can only buy domestically produced goods, and health and safety standards that discriminate against foreign goods o Tariff: A tax imposed on imports; this raises the domestic price of the imported good and may be applied for the purpose of protecting domestic producers from foreign competition o Quantitative restrictions: Quantitative limits placed on the import of particular goods  Small interests such as agricultural workers are well-organized, and are able to lobby for protection  Protection is easier to ensure than trade liberalization, and example being the artificially high price of sugar in the United States  Democracies tend to have a lot more trade liberalization that dictatorships  Political institutions are closely related to different endowments: o Democrats are associated with labor o Republicans are associated with capital  Extreme trade liberalization benefits the nation’s economy as a whole, but may have negative effects on specific sectors  Trade restrictions may resemble a prisoner’s dilemma, because both nations want to protect their own producers while being able to sell to other nations  Ways of overcoming the problems of strategic interaction in trade: o Small numbers, such as by creating regional trade agreements like NAFTA o Information, as transparency helps both sides clearly see the restrictions and protections of other nations o Repeated interactions, such as through linkage and iteration  International trade institutions: o Reciprocity: In international trade relations, a mutual agreement to lower tariffs and other barriers to trade. Reciprocity involves an implicit or explicit arrangement for one government to exchange trade policy concessions with another o Most Favored Nation Status: A status established by most modern trade agreements guaranteeing that the signatories will extend to each other any favorable trading terms offered in agreement with third parties o World trade Organization: An institution created in 1995 to succeed the GATT and to govern international trade relations. The WTO encourages and polices the multilateral reduction of barriers to trade, and it oversees the resolution of trade disputes  The WTO’s largest contributors are the Untied States, the EU, and Japan  The United States is the biggest defender of the WTO, because it is the nation with the most trading o General Agreement on Tariffs and Trade: An international institution created in 1948 in which member countries committed to reduce barriers to trade and to provide similar trading conditions to all other members. In 1995, the GATT was replaced by the WTO  Almost all developed countries protect agriculture, while having open trade in manufacturing o For example, farmers are well-organized together, while consumers of food consist of a lot more people, and are therefore less organized  Different factor endowments under the Stopler-Samuelson theory may affect which industries are protected and what barriers are in place Chapter 7  Types of investment: o Portfolio investment: Investment in a foreign country via the purchase of stocks, bonds, or other financial instruments. Portfolio investors do not exercise managerial control of the foreign operation o Sovereign Lending: Loans from financial institutions in one country to sovereign governments in other countries o Foreign Direct Investment: Investment in a foreign country via the acquisition of a local facility of the establishment of a new facility. Direct investors maintain managerial control of the foreign operation  Investing oversees is risky, because there is no guarantee that you will ever get your money back, and there may be other restrictions or rules in the home country in which you are investing  Investing abroad may be controversial, because the firms are giving jobs and capital away overseas as opposed to investing domestically  Concessional Finance: Rich countries lending to poor countries  World Bank: An important international institution that provides loans at below-market interest rates o developing countries, typically to enable them to carry out development projects  International lending to nations can be very difficult, because nations can default; both Russia and Argentina have defaulted on huge international debts in the last 15 years  International Monetary Fund: A major international economic institution that was established in 1944 to manage international monetary relations and that has gradually reoriented itself to focus on the international financial system, especially debt and currency crises o The IMF typically deals with austerity and currency adjustment o The IMF verifies compliance o The IMF mediated between private investors and sovereign nations in many cases o Many do not like the IMF because they see it as a tool of international financiers, which is a biased institution  In 1982, the Mexican government defaulted on loans due to the austerity measures taken with the American dollar o By 1983, about 35 developing and socialist countries were formally reorganizing their debt situations o Latin America was hit very hard, and in the late 1990’s, the debt crisis hit East Asian nations such as Thailand o Next, in about 2000, Russia and Argentina were involved as well  The US financial crisis: o In 2001, America had a lot of borrowing from abroad and tax cuts for the public o Low interest rates ensued, which encouraged Americans to borrow heavily o Eventually the housing bubble burst, and banks began to fail, due to the inability of people to pay back their loans o The United States began pouring billions of dollars into the banking system to prevent total collapse, which was a very controversial issue politically  Multinational corporations have large incentives to invest abroad o MNC: An enterprise that operates in a number of countries, with production or service facilities outside its country of origin o Both natural resources and cheap labor may be more readily available in other nations that the home country o Many companies search for the lowest possible labor costs and the weakest environmental safeguards—a race to the bottom o Countries let in foreign investors because MNCs bring in managerial, technological, and marketing skills that would not normally be available, as well as bringing in capital and jobs  For example, IBM in Costa Rica accounts for a huge proportion of the nation’s GDP o Usually, the poorer the nation, the more enthusiastic they are about MNCs o Some countries restrict the activities of MNCs because they can grow to have too much political power in the host nation o Bilateral investment treaties: An agreement between 2 countries about the conditions for private investment across borders. Most BITs include provisions to protect an investment from government discrimination or expropriation without compensation, as well as establishing mechanisms to resolve disputes  Immigration effects the economy of nations o In the past, there was much more migration than there is today o Nations with abundant unskilled labor will probably export unskilled labor, such as in the Heckscher-Ohlin model o Companies benefit from immigrations, because they are able to use labor for far less pay o Opponents to immigration believe that immigrants take our jobs, and can free ride if they are able to evade taxes Chapter 8  Types of currency action: o Appreciate: In terms of a currency, to increase in value in terms of other currencies o Depreciate: In terms of a currency, the decrease in value in terms of other currencies o Devalue: To reduce the value of one currency in terms of other currencies  Interest rates are closely related to exchange rates, with higher interest rates being associated with a stronger currency  Monetary policy: An important took of national governments to influence broad macroeconomic conditions such as unemployment, inflation, and economic growth. Typically, governments alter their monetary policies by changing national interest rates or exchange rates  Different types of exchange rates: o Fixed exchange rate: An exchange rate policy under which a government commits itself to keep its currency at or around a specific value in terms of another currency or a commodity, such as gold o Gold standard: The monetary system that prevailed between about 1870 ad 1914, in which countries tied their currencies to gold at a legally fixed price o Floating exchange rate: An exchange rate policy under which a government permits its currency to be traded n the open market without direct government control or intervention o Bretton Woods Monetary System: The monetary order negotiated among the WW2 allies in 1944, which lasted until the 1970’s and which was based on a U.S. dollar tied to gold. Other currencies were fixed to the dollar but were permitted to adjust their exchange rates o Adjustable Peg: A monetary system of fixed but adjustable rates. Governments are expected to keep their currencies fixed for extensive periods, but are permitted to adjust the exchange rate from time to time as a economic conditions change. Used under the Bretton Woods system  Governments have incentive to care about the type of exchange rate: o Fixed exchange rates allow for stability in the economy, allowing for stable prices and facilitates international trade o Floating exchange rates allow for a level of autonomy, and governments are able to change the rates if the nation is in a state of recession or other crises  Consumers and Businesses also have specific interests related to the exchange rates: o Consumers want a strong/appreciated currency, because it allows them to more easily purchase foreign goods for cheaper prices o Businesses who export want a weak/depreciated currency, because it allows for more people abroad to be able to buy their products o Governments must adjust the currency to be tailored to the needs of its people—whether consumers or producers  International monetary order is implemented to try to create stability and predictability in the world markets  International monetary regime: A formal or informal arrangement among governments to govern relations among their currencies, and which is shared by most countries in the world economy  Different types of currency: o Commodity standard: Uses a good with value of its own as the basic monetary unit, such as gold or silver o Commodity-backed paper standard: Similar to the Bretton Woods System, where paper currency is issued, with a fixed value in terms of gold o National paper currency standard: Currencies are only backed by the commitments of the government issue the money, without a commodity backing the money supply  Everyone wants to have an efficient monetary order, but it is difficult because there is a large incentive to free ride on the work of others  A history of international monetary systems: o The gold standard: The gold standard was led by powerful Eurpoean nations such as France, Britain, and Germany, and was able to provide considerable stability and predictability. However, there was no autonomy or flexibility in the system, which was detrimental to some nation’s economies o The Bretton Woods System: The international monetary order was based upon the US dollar, which was tied to gold at 35$ an ounce. While still somewhat stable, nations were still allowed to adjust their rates if desperately needed. By 1970, however, the United States could no longer keep their currency tied to gold, and there were disputes among many of the world’s powerful economies, so the system collapsed o The current international monetary system: Today national governments try to work together, but the world’s largest economies are all based on floating interest rates, such as in the United States, Britain, Germany, and Japan. Unlike the previous 2 systems, there is no official leader in the economic sector (Britain, then the United States). Currency fluctuation is very common, which doesn’t make a huge difference in large economies like the United States, but makes a considerable difference on smaller economies  The European Union is an unprecedented example of economic interdependence: o At first the European Union’s currency was tied to the German currency o In 2002, the Euro began circulation, with the European Central Bank being located in Germany o The Euro allows for incredible stability in times of turbulence, and allows for mutual assistance  Many other nations peg their currencies to other nations’, such as many south and central American currencies being tied to the US dollar  Currency Collapses: o It is difficult for governments in many cases to remain on a fixed exchange rate, such as if the economy is doing very poorly o Governments have incentive to depreciate their currency and lower interest rates, but if they do, foreign investors will pull their money out in fear o Governments are torn, but lowering the interest rates commonly occur, so that the economy can get back on its feet o Currency collapses tend to affect other economies, just not the originating nation o Europe, Mexico, and East Asia have all had semi-recent currency collapses o Governments all have incentive to prevent currency collapses of other nations o However, many nations want to free ride, and have other economies be responsible for helping out nations that are in need of assistance o Currency crisis intervention is a way of stabilizing and protecting the international monetary order Chapter 9  Many factors affect the success of economic development: o Geographic location: temperate locations are more advantageous, tropical regions tend to have more diseases such as malaria, which inhibit production o Domestic factors: Government, protection of property, infrastructure, education, level of integration of the public in decision-making, and more o Domestic institutions: At the onset of government, north America had more equal inhabitants, who worked in manufacturing. On the other hand, South America had very unequal inhabitants, and was more resource based. The beginning of nations, under colonialism, is imperative to the development of the country later on o Having too many raw materials is bad for a nation’s economy, because then all of their effort if only put into one resource  While both developed and developing nations want the world economy to succeed, many times their interests clash  It is thought that colonialism could have ruined many nations’ chances, as the mother country was considered to be vastly superior to the colony, and the people and resources were exploited o In tropical regions such as in Africa and South America, the mother countries completely exploited the people, and only cared about the resources, not the fact that the indigenous people were dying of diseases such as Malaria  However, colonialism is not considered to be a huge factor, because many rich nations were once colonies (USA, Canada, etc.), and many poor countries were never colonies (China, Ethiopia).  Some analysts believe that the current international economy is not conducive to helping the less developed nations develop o The richest nations, such as the United States, get the most voting power in international economic institutions such as the IMF o Rich nations such as the United States can afford to provide subsides for sectors of the economy, such as cotton farming o Developing countries’ interests are not heavily taken into account, even when they coincide with the liberalizing goals of institutions such as the WTO  Development policies: o Import substituting industrialization: A set of policies, pursued by most developing countries from the 1930’s to the 1980’s, to reduce imports and encourage domestic manufacturing, often through trade barriers, subsides to manufacturing, and state ownership of basic industries  Targeted self-sufficiency  Trade barriers to protect domestic manufacturers from foreign competition and encourage national industrial development  Government incentives to industry, including tax credits, cheap loans, and other subsides to draw investors into the modern industrial sector  Government provision of basic industrial services by public enterprises—electric power, telecommunications, transport, finance—to supplement or replace private provision that was seen as too expensive or too limited  This was not effective, as industries that were not specialized had problems selling their goods abroad, and these countries were very vulnerable to currency crises o Export oriented industrialization: A set of policies, originally pursued starting in the late 1960’s by several East Asian countries, to spur manufacturing for export, often through subsides and inventive for export production  This meant not being self sufficient, and being reliable on the volatile world markets  However, this plan resulted in a lot of success, and nations such as South Korea experiences incredible economic development o Eventually, the nations that failed under the Import Substituti
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