Final Exam Study Guide Lectures: 1 - 12The International Political Economy (IPE)Lecture 1: Introduction to International Political Economy/ Trade and Protectionism I. Introduction to International Political EconomyA. 3 Main Schools of Thought- Both academic theories and political ideologies\- General enough to address any possible IPE topicII. The Liberal School of Thought A. Related to political liberalism/institutionalisma. Free markets, private initiative, etcb. Also institutions to promote cooperationB. Key Actorsa. Consumers, households, firms;b. State can provide public goods (roads, schools)C. Main goals (of liberal leaders and scholars)a. Maximize overall welfare (more goods, lower prices)D. IR/IPE more cooperation than conflictuala. Not zero sum (where one’s gain is another loss)b. Everyone can benefit together.1. Emphasize efficiency, comparative advantage, etc.2. Comparative Advantagea. If both ignore, produce both goods: less goods producedb. If specialize and trade = more efficient but dependent on import/export3. Emphasis on absolute benefits of trade, interdependencea. Don’t worry if partner gains more; you’re still better off than without it.4. Institutions can help coordinate, manage conflict, minimize harmIII. The Mercantilist School of ThoughtA. Related to political realisma. Mercantilism: a government plays an active role in pursuing state interests (“beggar thy neighbor”)B. Key Actorsa. Nation statesC. Main Goalsa. Maximize the national interest (esp. security)D. Key Beliefs/Emphasis:a. IPE more conflictual than cooperativeb. Mostly zero-sum: state A’s gain is B’s lossc. Focus on relative gains (due to anarchy)IV. The Radical School of Thought (Marxist or Dependency)A. Related to political Marxism/radicalisma. Struggle of the working class to overthrow their capitalist oppressorsB. Key ActorsPSCI 3810 1st Editiona. Social/economic classes (elites/rich, masses/poor)C. Main Goalsa. Maximize class interests (power, wealth. Etc)D. Key Beliefs/ Emphasisa. Emphasize flaws & inequalities in capitalismb. IPE is more conflictive than cooperative: mostly zero-sum; calss A’s gain is B’s lossc. Core/center vs. periphery: within states (elites/masses), across North/Southd. Economics should drive political decisionsE. Main Obstacle to Economic Success?a. Capitalist structure of international economyV. International TradeA. Is International Trade Desirable?1. The Liberal Perspective?a. Yes, would be better off (more/cheaper goods) when all produce at “comparative advantage” and trade.2. The Mercantilist Perspectivea. Maybe—as long as it helps your state’s security.B. Some Patternsa. It’s a fact life (autarky, unrealistic)b. Trade increasing every year: over 18 trillion tradec. Trade barriers (such as tariffs) generally decreasingVI. ProtectionismA. Free Trade or Protectionism?Basic IdeaProtectionism= trade barriersLecture 2: Globalization & Interdependence Lecture 3: Economic Development (April 20-24 th )I. Differences between North & SouthA. Socioeconomic (World Bank Data):B. Main Economic Sectors (% total GDP)1. Observations-Heavier reliance on agricultural at lower income levels-More industry at middle (including manufacturing, mining, energy)-More services (post-industrial) at higher levels (food, entertainment, government, but transport, banking, IT)C. Commodity Concentration1. Structure of merchandise exports2. More concentration = more vulnerability:Kuwait: Petroleum (90-95%)Guinea: Bauxite (90-95%)Niger: Uranium (70-80%)Burundi: Coffee (60-70%)D. Trade Partner Concentration- Typically former colonizer, nearly major powers- Vulnerable to changes in partner’s economyII. Strategies for DevelopmentA. The Liberal Approach1. Some obstacles- Poor policies (protectionism, internal focus)- Poor institutions, infrastructure, unskilled workers;- Corruption2. Some solutions?- Remove barriers (protectionism, corruption, etc)- Improve education/infrastructure, attract investment- Pursue trade (export-led growth)/ free markets- Foreign aid (if used constructively; build needed infrastructure, diversity &modernize economy)B. The Mercantilist Approach1. Some obstacles:International anarchy So liberal economies works against you; the stronger benefit the most (at weaker’s expense)2. Some solutionsHeavy govt. involvementEmphasize your own state interestsC. The Radical Approach1. Some obstacles- Colonial legacies and dependency: - Colonizers exploited colonies for their resources- North states, MNCs set up continued economic dependence even after decolonization (“neocolonialism”)- Unequal “interdependence” (MNC profits to North while the South stays poor)- Liberal International Economic Order (LIEO) works against South- liberal policies only benefitthe strong:- Very unequal terms of trade (primary vs. finished)- Reducing trade barriers keeps South from catching up;-Foreign debt (revenue wasted on debt service)2. Some solutions: change the system- Replace “Liberal International Economic Order (LIEO) with New (NIEO); some typical demands:- Raise commodity prices (to match finished products);- More foreign aid, technology transfer;- Relieve Southern debt burden;- More influence in IMF/World Bank voting system3. Some solutions- within the system:- More South-South cooperation; rely less on North- Nationalize foreign operations (acquire tech/industry)- Import Substitution Industrialization (ISI): try to industrialize to reduce dependency:- Heavy protection vs. outside goods so domestic industry can develop in your own market* Cartels: use natural resources to your advantage*OPEC (Org. of Petroleum Exporting Countries): 12 countries (6 in Middle East)- About 70% of world’s oil reserves, 40% of production- Set quotas for production, to keep prices high;- Influences, but doesn’t determine, world price4. This week’s Asian-African Summit (Indonesia)General: must replace “obsolete” Bretton Woods w/ “new global economic order”- More open to interests of emerging economies- More decision making power for the South (eliminate domination of North)- More development aid from North with no strings attached:- Do more to address inequality- Replace “colonialist role” of South (export primary goods, import finished goods)More South-South cooperation:- New/expanded regional trade deals- More regional institutions (like Asian Infrastructure Investment Bank/AIIB)III. Evaluating the StrategiesA. The Radical ApproachLittle success