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25 Cards in this Set
- Front
- Back
Definition of Political Economy
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Relationship between the economy and the state
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Examples of Political Economy
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Taxes
Building Codes licensing requirements Public Education |
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Liberalism - Central Arguments
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- Economic progress best when people pursue their own interests
- Competition is key - Minimum government interference |
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Goal of Liberalism
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Maximum economic progress
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Mercantilists - Central Arguements
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Protect and enhance the power and prosperity of the nation
1.) Wealth is essential for getting or maintaining power 2.) Protect the wealth with power (military, economic, diplomatic) - Markets tend to concentrate wealth and to establish power relationships between the states, thus it is a zero-sum game where one country’s gain is another country’s loss |
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Structuralists
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- Concerned about exploitation and in justice
- Promotes equality |
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Liberal Economic Policy
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* Keep the state out of the market*
ii. Let buyers, sellers, and investors trade/invest with minimal government intervention regardless of location iii. Allow trade and investment across international borders with minimal government intervention iv. Maximum overall wealth with little emphasis on distribution v. Interdependence not Independence |
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Mercantilist Economic Policy
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- Win in economic competition with other countries
- use subsidies, trade barriers, or any means available ii. Seek self sufficiency iii. Maximum relative wealth for your own country (even if it means less total wealth for the country) iv. Independence not interdependence |
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Structuralist Policy
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State should seek to reduce economic inequality between individuals and country
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Adam Smith & laissez faire
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Advocated laissez faire (to leave alone)
- The government should play as minimal role as possible in the economy - Positive-sum game, not zero-sum game |
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Marxist Critique of Capitalism
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a. A structure based on economic classes
i. Economic classes are defined based on people relationship to the means of production (your job) ii. The bourgeoisie (owners) and the proletariat (workers) b. Capitalism is driven by the bourgeoisie who strive for profit, get wealthier and compete with one another in the competitive market economy c. Proletariat is victimized and relatively powerless d. Exploitation Mass misery Revolution i. In the Revolution, the proletariat overthrows the rule of the bourgeoisie and installs a government that controls the market 1. Command economy: prices and wages are set by the government 2. Economic resources are evenly distributed 3. Social harmony due to equality |
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Normative perspective of Liberalism
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Liberals: Maximum overall wealth w/ little emphasis on distribution
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Normative perspective of Mercantilism
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Mercantilists: Maximum relative wealth for your own country, even if it means less total wealth for the country
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Normative perspective of Structuralism
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Structuralists: Concerned about inequality
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Structure of Dependency Theory
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i. Core – Wealth, More Developed Countries [MDC’s]
ii. A periphery [LDC’s] iii. Core development has occurred on the back of the periphery underdevelopment 1. Northern countries (MDCs) have exploited Southern (LDC) labor and resources from colonialism 2. Multinational corporations and international investment have hurt, not helped the LDCs d. LDC’s locked into a pattern of underdevelopment because the structure of global economics favors the richer countries |
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Trade
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Save $ > Left over $ allows you to consume more > More consumption = higher standard of living
Trade = higher standard of living at a given time than no trade |
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Free Trade
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Freer Trade > More Efficiency > More Economic Growth
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Opportunity Cost
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Opportunity cost: The value of what you give up when you choose one activity over another
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Protectionism
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Restricts trade with the intention of benefiting domestic producers
i. Tariffs: taxes on imports ii. Subsidies: government payments to producers iii. Import quotas: limit quantity of an imported item iv. Non-tariff barriers: health and safety standards, labeling |
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Liberal Critique of Protectionsim
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It keeps inefficient businesses alive
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IMF Tools
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1. Fiscal austerity (government taxes more, spends less)
2. Tariff liberalization 3. Attracting foreign investment 4. Selling off state-owned enterprises |
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Debt Crisis
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High oil prices > petrodollars > banks > loose lending policies > poor countries borrow
= unsustainable debt burden |
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NAFTA Conditions
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Eliminate almost all tariffs between US, Canada, and Mexico
i. For many items produced in those countries ii. Many tariffs reduced immediately iii. Others phased out over 5, 10, 15 year periods Treat foreign and domestic investors the same i. Foreign companies face the same rules as domestic companies e. Protectionist safeguards i.“Snap-back” provisions allow for temporary tariffs to protect industries that are hurt by import surges ii. Some protections for certain industry 1. Example oil in Mexico, shipping in US |
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EU
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a. A very deep level of economic integrations
i. No trade barriers between countries ii. Common tariffs towards outside countries iii. Common agricultural subsidy system (called CAP) b. Import Substitution Industrialization (ISI) c. Produce goods at home that you would normally import from the developed world i. Tariffs and or quotas to protect new industries ii. Attracting foreign investor with incentives iii. Produce low tech goods first then more up the ladder 1. From non- durable consumer goods (Textiles, shoes, soap) to industrial goods (called deepening) iv. Eventually you get relative autonomy |
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Four Little Tigers
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i. Singapore
ii. Hong Kong iii. South Korea iv. Taiwan v. Similar success: Malaysia, Thailand, and Indonesia vi. Success 1. Economic growth tied to exports a. Free market competition b. Much larger market c. More productive industries |