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Summary of International Political Economy
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Summary of International Political Economy
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International Political EconomyDr Giuseppe - Year 2: Block 2
,1. Comment
3 December 2020 at 12:34:37
How politics and economy shape
one another
2. Comment
3 December 2020 at 12:33:54
Economics: study of production,
distribution, and consumption of
scarce resources
3. Comment
3 December 2020 at 12:42:59
Focus on material benefits/
losses, lesser importance of
ideas Part 1 - Economic Approaches
4. Comment
3 December 2020 at 12:45:40 1 2 International political economy: politics of economic flows across borders
Believed that idea emerged only • Political decisions have heterogenous consequences
after Great Recession (08/09) • All states benefit from trade, but unequally
- Just like Marxism emerged • Political battle between winners and losers of trade
during inequality • Political decisions usually serve self-interest of politicians
- Although idea may just have 3 • People usually act rationally
gotten popular due to greater
suffrage (?) 4 5 Keynesian economics: society benefits when government engages to counter cyclical fiscal policy
5. Comment 6 Economic approaches:
3 December 2020 at 12:45:22 • Mercantilism:
E.g. pours money into economy • State-focused
during recession • States manipulate economy to maximize power
• National power is zero-sum, based on economic power
6. Comment • Prescription: economy should be controlled
3 December 2020 at 13:26:06
7 • Positive trade balance (only) → acquire wealth from abroad
Each explains different things,
• Some economic activity is more valuable (e.g. manufactured goods > natural resources)
but not everything 8 • Liberalism:
9 • Individual-focused
7. Comment
• Economic activity aims to enrich individuals
3 December 2020 at 12:55:25
• Focus on welfare consequences
Back in the day, more exports =
• Prescription: economy should not be controlled
more income
• All trade is good (mutual gains from trade, comparative advantage)
10 • Market-based resource allocation
8. Comment
11 • State should: enforce property rights/contracts + resolve market failures
3 December 2020 at 13:25:28
• Marxism:
Key thinker: Adam Smith
• Class-focused (capital vs labor)
• States are agents of capitalist class, corporations as main actors
9. Comment
3 December 2020 at 13:08:53 • Capital tends to concentrate (competition → efficiency → small elite)
Economics ≠ politics • Focus on consequences of inequality
• Investment → productive capital growth → reduced rate of profit → wage reduction)
10. Comment • Ability to produce > ability to purchase
3 December 2020 at 13:07:23 12 • North exploits south
Individuals should be free to • Prescription: capitalism is bad
make decisions
11. Comment
3 December 2020 at 13:03:26
When exchanges fail to allocate
resources to social desirable
activities
12. Comment
3 December 2020 at 13:23:25
E.g. large corporations are based
in wealthy north but operate in
poor south
,13. Comment
3 December 2020 at 13:32:39
Land, capital, skilled labor,
unskilled labor
14. Comment
3 December 2020 at 13:32:58
Import-oriented, export-oriented,
unemployed
IPE course:
• Focus on interaction between:
• Societal interests:
• Material (what increases welfare)
13 14 • Shaped by endowments (skill-level, industry)
• Political interests:
• Politicians (what will keep me in office)
• Domestic institutions:
• Democratic (societal interests)
• Autocratic (elite interests)
• International institutions (enforce compliance with collective decisions)
• Politically constrained ef ciency: understand best policy given constraints
• Transatlantic divide:
• American: empiricist, group/individual (vs state) focused
• British: normative (e.g. ethical dilemmas), specific cases
Dark Leviathan analogy:
• Programmer creates unregulated marketplace on dark web → players start cheating system →
creator resorts to enforcement
• Message: marketplace requires (government) enforcement
• Realpolitik: order depends on threats of violence
Readings:
• International Political Economy (Oatley, 2019), chapter 1
• Farrel, "Dark Leviathan"
fi
, 15. Comment
3 December 2020 at 14:01:01
Benefits domestic producers over
foreign producers
16. Comment
3 December 2020 at 14:06:14
E.g. Us tariff on Canadian lumber
(under Trump)
- Ended up harming other US
industries that use lumber
- Canada retaliates with other
tariffs
17. Comment
3 December 2020 at 14:04:13
Part 2 - Trade
Impacts cost of goods
18. Comment Free trade is a net public good
3 December 2020 at 14:04:49 • Comparative advantage, eliminates waste
Protects regional products • Almost all economists agree
E.g. in EU, pork leg can only be 15 Types of trade protection:
labelled prosciutto if from Parma 16 • Tariff: tax on imported good
• Quota: limit on amount of good
19. Comment • Non-tariff barriers
3 December 2020 at 14:05:36 17 18 • E.g. domestic subsidies/insurance programs, protectionist laws
E.g. EU banned chlorinated 19 • Can be disguised as health/environmental concerns
chicken (virtually all US chicken)
Trade faces a collective action problem:
E.g. EU banned GMOs (little • Prisoner’s dilemma: protectionism as always dominant strategy
evidence of health risk) 20 • Hence states don’t liberalize unilaterally (except England)
• Barriers:
20. Comment • Information problems
3 December 2020 at 14:13:04
• Resolve of states
Since other state can exploit you
• Incentives to misrepresent position
• Commitment abilities
21. Comment
• Outside options
3 December 2020 at 14:24:15
- Can take years of negotiation
Factors that ease cooperation:
- Parties get better deals at
21 • Bargaining
expense of other side (limit on
• Suitable bargain exists
distribution of goods)
22 • Small # participants
23 • Linkage of policies
22. Comment
• International institutions (principle of reciprocity)
3 December 2020 at 15:07:06
Fewer interests to navigate • Set standards of behavior
24 • Monitor/enforce compliance
25 • Reduce transaction costs
23. Comment
3 December 2020 at 14:22:32
Reward/punishment in non-trade World Trade Organization:
area • Established 1994
26 • Predecessor: GATT (created after WWII)
24. Comment • Neither can agree on agricultural goods
3 December 2020 at 14:27:57 • Establishes common principles:
Solves information problem • Market liberalism
(makes defection visible) • Non-discrimination
• Ties state’s individual relations to overall trade network
25. Comment • Flexible (strength)
3 December 2020 at 14:27:17 • Features:
E.g. easier for states to join an • All members have equal vote (but dominated by US and EU interests)
existing agreement • Provide information/monitoring
• Most Favored Nation: best treatment is extended to all trade partners
26. Comment • Exceptions: free trade areas or customs unions
3 December 2020 at 14:29:11
General Agreement on Tariffs and
Trade
- Predecessor to WTO
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