Topic 1 Flashcards
(36 cards)
What are substantive issue areas of the international political economy?
- International trade
- International monetary & financial system
- Multinational enterprises (MNEs)
- Economic development
What are the two things IPE theorists condemn?
Economism: over reliance on economics
Politicism: over reliance on politics
What two yaps does IPE bridge?
a. The study of politics and economics
b. The national (domestic) and international
What does the IPE study?
how politics shapes developments in the global economy and how the global economy shapes politics
the political battle between winners and losers from global exchange
how this political competition shapes the evolution of international trade and monetary systems.
how politics shapes societal decisions about how to allocate available resources
What are three traditional schools of IPE and how should politics shape the allocation of society’s resources
Mercantilism: the state guides resource allocation in . line with objectives shaped by the quest for national power
Liberalism: politics ought to play little role in the process, instead the market should guide the allocation of resources - state only to intervene in cases of market failure
Marxism: the most important decisions are made by large capitalist enterprises supported by a political system controlled by the bourgeoises
What are some of the main tenets of economic nationalism?
Anarchic world system
National power and wealth are tightly connected.
Wealth was measured in terms of precious metals stock a country had, esp gold.
higher a country’s stock of wealth meant a higher ability to fund war, to meet needs of population and increase standard of living.
Trade provided one way to acquire wealth from abroad.
Governments should discourage imports wherever possible.
Some forms of economic activity are more valuable than others
Trade is zero-sum – one country’s gain in trade is another country’s loss
What did mercantilism leave in the Caribbean?
A set of institutional features which profoundly affected the economies of the countries
Why is the market not allowed to make decisions about resource allocation?
Because economic activity is too important to allow decisions about resource allocation to be made through an uncoordinated process such as the market because uncoordinated decisions can result in inappropriate economic structure
What is the role of mercantilism in development? Use Britten Britain as an example
All the major industrial countries used mercantilist policies during formative stages of development und Britain adopted: free trade painfully slowly
They were the first country in modem history to successfully launch an infant industry promotion strategy
What are three central propositions of liberalism?
- The purpose of economic activity is to enrich individuals and not enhance state power
- Countries do not enrich themselves by running trade surpluses; countries gain from trade regardless of whether they have positive or negative balances of trade
- Countries are not necessarily made wealthier by producing manufactured goods rather than primary commodities; countries are made wealthier by making products that they can produce at a relatively low cost at home and trading them for goods they make less efficiently
How should resources be allocated according to liberalism?
Resources should be allocated through voluntary market-based transactions between individuals
This exchange is mutually beneficial as long as it is voluntary, both parties to any transaction will benefit
The state should play a limited role in this process by establishing clear rights concerning ownership of property & resources
Judicial system must enforce right & contracts
Governments can and should resolve market failures - instances where voluntary market-based transactions between individuals fail to allocate resources to socially desirable activities.
What is the theory of comparative advantage in international trade?
If an economy has an absolute advantage in the production of all commodities, specialization and trade can happen if each trading nation has a comparative advantage in the production of at least one commodity
What is comparative advantage?
An economy’s ability to produce a particular good or service at a lower opportunity cost than its tracking trading partners
How is comparative advantage calculated?
Calculate the total opportunity cost
Calculate the per unit opportunity cost (cost/gain)
Determine who should specialize in which product depending on which country has the lower opportunity cost in each product
What is opportunity cost?
The potential berth missed out on when choosing one alternative over another
How is comparative advantage used in the real world?
Used to help policymakers in countries to determine possible diversification opportunities
Under what conditions does a country have a revealed comparative advantage?
When its ratio of exports of product to its total exports of cell goods (product) exceeds the same ratio for the world as a whole
What are the benefits of free international trade?
- Greater resource utilization promotes a higher level of income - this in-turn facilitates a greater degree of consumption of foreign goods & services
- higher income levels can help promote a greater degree of investment
- offers opportunities to realize the full employment of scarce resources but also promote the optimal allocation of scarce resources
What is the center-periphery thesis?
An industrialized core and an agrarian periphery formed the two elements of the world economy
Define price elasticity of demand?
How responsive the quantity demanded of a product is to price change ie how sensitive consumers are to price changes of a given product
Define terns of trade - and give the formula
An index which represents the ratio between a country’s export prices and its import prices
(TOT = index of average export prices/ index of average import prices x100)
What is the unit of analysis of Marxism?
The bourgeoisie & the proletariat
What are the three dynamics that drive revolution according to Marxists?
- Capitalism’s natural tendency toward the concentration of capital
- Capitalism is associated with a falling rate of profit
- Capitalism is plagued by an imbalance between the ability to produce goods and the ability to purchase goods
What is the Marxist view on resource allocation?
The state operates as an agent of the capitalist class and enacts policies that reinforce capitalism and capitalists’ control of resource allocation
