International Political Economy Midterm
Terms
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- Tensions between State and Market
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State
- society
-collective good
-power
-public choice and state dec.
Market
-individual
-self interest
-money and stuff
-invisible hand - Normative Theory
- describes or makes argument about how things should be
- Positive Theory
- theories about how things really are
- Three Theoretical Approaches
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Liberalism
Marxism
Mercantilism - Liberal Approach
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free-trade
minimum state involvement
individual self interest
invisible hand to greater good - Mercantilist
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State interests
Power protects people
Wealth is link to power
Realist- conflicts from states - Marxism
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1. Classes are unit of analysis
2. State reflects the ruling class
3. Economics determines poltiics - Classical Liberalism
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-limited state
-form money, protect interests
-private charities
-social problems b/c of gov. - Adam Smith
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(1723-1790)
-humans are rational
-positive sum game
-invisible hand guarantees gain
-small state - Problems with Liberalism
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Collective Action Problem
Free-Rider Problem - Why does protectionism still exist?
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1. Domestic Political Pressure
2. National Security
3. Collective Action Problem
4. Misperceptions About Free Trade - International View of Mercantilism
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1. State is unitary actor
2. International system is in a state of anarchy
3. Relations between states are driven by power
4. Peace is maintained by balance of power - Dialectic process
- interactions of independent variables create a thesis then an antithesis then sythesis to thesis
- Forms of History According to Marx
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1. Primative Communism
2. Slavery
3. Feudalism
4. Capitalism
5. Socialism
6. Communism - Falling Rate of Profit
- invest in technology to save labor which will lead to unemployment and cause there to be less money to spend, thus there will be a lower profit
- Law of Disproportionality
- anarchic competition created a boom and bust. There will be overproduction and underconsumption which leads to social instability
- Law of Concentration
- Capitalism produces inequality and competition leads to low wages and monopolies
- Tariffs
- protect their own country's interests and are easiest to raise or lower
- Import Quota
- only import certain amount of product. Domestic more appealing
- Export Quota
- only export a certain amount
- Subsidies
- US and European agriculture is supported even though there is no comparative advantage
- Currency Devaluations
- really cheap to produce goods and export them. Importts are too expensive. Trade issue with China because they are keeping their money down
- Nontariff barriers
- Difficult for imported goods to be marketed
- Dumping
- Lower cost of export while keeping it cheap in country. You are keeping a monopoly inside the country and then after monopoly is established, you raise prices
- GATT
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Genearl Agreement of Tariffs and Treaties
-to stop nations from using protectionist and stop chances of war
-IMF and World Bank were formed to help GATT - IMF
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-formed by GATT
-lends money to countries in the form of SHORT TERM LOANS - World Bank
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Int'l Bank for Reconstruction and Development
-LONG TERM LOANS used to redevelop
-put money in to get money out
-establish comparative advantages - Major Principles of GATT
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1. Reliance on Tariffs
2. Reciprocity
3. Most Favored Nation Status - WTO
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-successor to GATT
-created in 1995
-administers trade agreements
-forum for negotiation and resolution
-research on national trade policies
-assist developming countries - David Ricardo
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1.Comparative Advantage
-everybody benefits from finding their skills
2.Promotes Efficiency
-more total world output with less world effort
3.Promotes International Peace
-less incentive to engage in conflict