INR3003 FINAL EXAM Political Economy Defined International Political Economy IPE considers the flows of such production distribution and consumption across national borders Political economy considers the role that the state plays in such production distribution and consumption Economics is the study of the production distribution and the consumption of scarce resources Dimensions of IPE Some think of IPE as the study of multidimensional bargains between powerful actors and states Level of analysis individual state and international Global structures institutions enforcing rules governing international trade and international finance International Economic History Postwar Period A Creation of new international institutions IMF World Back and GATT B Cold War leading to two separate blocs East and West and the rest Third World C Unprecedented economic growth D Globalization E F Financial crisis Theoretical Approaches Key Concepts in Liberal Economics States differ in land labor resources Worldwide wealth is maximized by international trade Trade organized by comparative advantage each state produces and exports that which it can produce relatively more efficiently trade and international wealth is maximized Key role for multinational corporations promote internationalization or production International Trade Why trade Specialization Focus on what you do best and trade with other what you don t produce International Economic Institutions Bretton Woods System established three institutions to facilitate economic coordination between state and development World Bank International Monetary Fund and World Trade Organization World Bank From reconstruction to development Different approaches to development Economic infrastructure 1950s Basic needs 1960s and 1970s Private sector participation 1980s Sustainable development current International Monetary Fun IMF Stabilization rather than development Short term loans to countries facing temporary crisis Structural adjustment policies Washington Consensus Trade liberalization Government reform Privatization WTO GATT Support of trade liberalization Nondiscrimination in trade most favored nation treatment Preferential access in developed markets for products from the South Settlement of disputes mechanism The European Union a Common Market Liberal foundation larger market and free movement of goods services capital and people Permits benefits of specialization and better investment opportunities Stimulates growth competition and innovation Enhances investment opportunities But also involves uniform tariffs imposed on goods from outside and acceptance of state subsidies North American Free Trade Association NAFTA Phase elimination of tariff and non tariff barriers Idea driven by MNCs seeking larger markets shares than Japanese or European competitors Comprises one dominant and two non dominant economies combined economic strength of Mexico and Canada is one tenth of US goal Last agricultural barriers lifted in 2008 ASEAN Association of Southeast Asian Nations Goals 1 Attract foreign investment to the region taking advantage of economies of scale 2 Increase members competitive edge in the global market by eliminating tariff and non tariff barriers within ASEAN Members signed agreements to form an integrated ASEAN Economic Community by 2015 minus common currency Global Economic Crisis 2008 2009 Problems and Causes Lack ensuring transparency for developed countries especially the US Explosion of unregulated highly leveraged financial instrument Excess credit against insufficient equity in many sectors Importation of cheap Chinese goods left unsustainable trade imbalance Development of Global Economic Crisis Financial institutions unable to meet obligations credit very limited private investment diminished business cut expenditures and workforces consumer demand plummeted Markets in China South Korea and Japan which are dependent on exports to the US shrank earnings fell production curbed further Oil prices dropped 69 percent in July December 2008 Severely impacting oil exporters World shipping plummeted 2009 Eurozone Crisis Problems and Causes Easy credit in early millennium ushered in a decade of risky borrowing and profligate spending Global crisis results in instability in the housing market unemployment and declining in wages Debtor states were turned away from borrowing in the international market increasing debt Imbalances of trade between member states were made even greater increasing instability LIBERALS AND CONSTRUCTIVISTS BELIEVE THAT INDIVIDUALS CAN MAKE A DIFFERENCE Impact of individual elites When political institutions are unstable young in crisis or collapsed When institutional constraints are limited When the issue or situation is peripheral unusual or ambiguous Personality characteristics affect dictators more than any other person in power Cognitive consistency desire to be consistent ignoring other information Evoked set look for details in present similar to past situations Mirror image see opponent as having opposite characteristics Groupthink tendency to form consensus resist criticism Satisficing Search for good enough not optimal solution Three ways to mitigate misperceptions 1 Making assumptions and beliefs as explicit as possible 2 Remaining cognizant of pitfalls of interpreting data only as consistent with one own theory 3 Being willing to work with information from different angles Liberals individuals matter and can make choices that affect outcomes Realists individuals are constrained by an anarchic international system and state seeking to project power for national interests Radicals individuals are constrained by the international capitalist system Constructivists individuals are important as key policy entrepreneurs and form collective identity There has been 14 500 armed struggles in history There has been 3 5 billion deaths Since 1816 there has been between 224 and 559 international and interstate wars Types of wars 1 Interstates war 2 Intrastate civil war 3 Total war 4 Limited war Explaining the decline of total war Memories of WWII Nuclear war is too costly Development of security communities Realists rise of US hegemony Liberals democratic peace economic interdependence international organizations Constructivists people socialized into attitudes values and beliefs in peace Definitions of interstate war sustained combat involving organized armed force a minimum of 1 000 battle related combatant fatalities
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