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12 Cards in this Set
- Front
- Back
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Define IPE and the 4 main issues
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International Trade SYstems, International Monetary System, Multinational Corporation, and Economic Development
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Identify the 2 broad questions IPE asks and the 2 types of studies used to answer them
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How exactly does politics shape the decision that societies make about how to use the resources that are available to them?
What are the consequences of these decisions? |
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How exactly does politics shape the decision that societies make about how to use the resources that are available to them?
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IE is the study of how these competing demands get reconciled into foreign economic policies
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What are the consequences of these decisions?
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Welfare consequences and Distributional consequences.
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Discuss the 3 traditional schools of thought
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The mercantilist school, the liberal school, the marxist school (each offers distinctive answers to the 2 broad questions. We will approach based on interest and institutions.
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Mercantilist School
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3 Propositions of Modern Mercantilism:
Economic strength is a critical component of national power Exporting is better than importing Some economic activity is better than others (manufacturing is better than agriculture) |
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The Liberal School
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-Challenged all 3 propositions of mercantilism
*The purpose of economic activity was to enrich the individual, not enhance the state’s power *Countries gain from trade regardless of a positive or negative trade balance *Countries should produce the goods they have the comparative advantage in, whether manufacturing, agriculture, or whatever |
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The Marxist School
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-Viva la revolucion! The rise of the proletariat against the capitalists
*Capital will concentrate in a few large corporations who make all the investment decisions *Profits fall over time because concentrated capital means lots of investments means falling ROR so wages fall *Lots of investments and falling wages production will rise faster than consumers ability to pay *The state is just an agent of the capitalist class |
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Societal Interest
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-Interests – any group will prefer the policy that raises its income
-Interests form from: *Material interests *The policy you want depends on how it affects your income *And Ideas *The economic theories held by the actors in the political system and economy |
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Political Institution
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-Institutions
*Political institutions establish the rules governing the political process *Establish the rules to reach and enforce decisions -Interests and Institutions *Investigate the source of competing societal demands for income and then explore how political institutions aggregate, reconcile, and ultimately transform these competing demands into foreign economic policies |
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History of Globalization
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Globalization is not new
Trend to deeper international economic integration began in 19th century due to Technology: steam engine and telegraphs Incentivized governments to lower barriers to trade Stabilized monetary system with true gold standard WWI, The Great Depression, WWII were the exception Reparations demanded after WWI Post WWII, decided harmony not conflict was needed |
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History of Globalization pt. 2
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Bretton Woods system formed post WWII
IMF, GATT (later WTO), IBRD (later World Bank), pseudo-gold standard based on US $ Attempt to return to 19th century “golden years,” but Keynesian economics now ruled meaning activist central government and central banks; not the liberal view of 19th century |
