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Summary Global political economy 1-12
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Global political economy summary 1-12
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Global political economy – LecturesInternational Economics Lecture 1
Introduction to the Course
• Tutorials are 40%
• Mid-term covers 1st half
• 30% of grade (because of e-prospectus)
• Final covers 2nd half (with some linkages)
• 30% of grade
• The halves of the course will be taught separately, but, they are of course related
International Economics
• Lectures 1-6 will expand your knowledge of ‘Principles of Economics’
• Lectures 7-12 will expand on ‘Foundations of Political Economy’
• The topic of the 1st half is International Economics
• IE will help you to understand the mechanical foundations, on which GPE thinkers
and policymakers base their opinions
• You have to know how the mechanics work before you can form critical opinions of
them
• What are the main topics of study in international economics?
International Economics
• 1st: International trade
• That is, trade of goods and services across borders, political element
• Trade that involves dealing with more than one sovereign government
• More than one monetary regime, (one currency to another) set of laws
• Move across borders, This can lead to any number of ‘complications’ as deals are
made
• Trade regulation affects markets
• But Int’l trade can also be extremely lucrative, many opportunities
• And, arguably, it can help people in both countries
Though, of course, it might hinder some people in one or both countries
• 2nd: International Production
• So, producing goods and services across borders, multinational cooperations
• Your smartphone might have been made in 40 different countries
• Many manufactured goods now are produced from highly international networks
• How does this get regulated? Who creates enough stability for this to remain
profitable
, 1 and 2 are relates – movement about goods and services
• 3rd: International Financial Systems
• Foreign exchange
• Every time you move into another currency area, you are subject to additional risk
• Also, credit can be given or withdrawn, leaving a small economy in shambles
• And FDI is covered here as well
• 4th: International Development: how do capital flows impact economic
development, especially in ‘developing’ countries: this is more handled in GPE even
though there are chapters in our book (Reinert)
movement of capital
International Trade
• Does this impact me?
• You might have heard of the notion of… globalization
• When did globalization start?
• 1990s onwards?
• WTO: Global Trade gets teeth
• But globalization arguably started in the 1870s-1914, before the 1 st world war
• First ‘golden age’ of international capital
• Aka heyday of the British empire
• Global economy united under the pound and the gold standard as currency
reduced risks and feritlitated international trade
• Before 1945 however politicians tend to act as though the global economy was a
‘zero sum game’, cause of 2e world war
• This meant, if I didn’t grab land and use it for resources and markets, then someone
else would
• This economic model fueled the political model of colonialism
• This economic model was based on the old theory of mercantilism
• More recources is more power
Mercantilism
• Metropole: centre of production with colonies (who are producing)
• Manufactured goods are as a rule far more profitable to produce – contain more
value added, than raw materials
• So, mercantilists want production to be ‘at home’
• How to get raw materials for production – e.g. cotton for textile mills?
• You could buy them on a competitive international market
• Or, you could take colonies, and extract raw materials a monopsonistic prices
(Monopsony= only one buyer)
, • You then produce goods at home, and sell at home
• But also use the colonies (e.g. India), as a forced market, where you have a monopoly
as a seller
• Meanwhile, other ‘powers’ are jockeying to gain the most colonies, and most raw
materials, and markets, so that they can gain the most value added
• Most wealth = most military power = most economic power = depends on economic
poweretc.
• But during the 1930s, and 1940s, the Anglo-American economists began to push a
new idea
Cause of world wars are the competing aspect and not focusing on trade
Trade: The Non-Zero-Sum Game
• The idea was that, instead of competing amongst each other for colonies and captive
markets
• Why not create a new international order based on Ricardo’s old idea, that trade, via
comparative advantage, would enrich everyone?
• International trade would create more wealth than would autarky, even with
colonies decolonization
• This would create incentives to work together, rather than compete
• It would also create development, prices increase and more wealth into a country
• And it would cement the world into one big capitalist-democratic family
• This was extremely radical: and (I think ironically) many still view it cynically—even
though it was the main cause of the end of colonialism (!), economically unviable
• But, to have the major powers create a whole economic system based on
accountability, democracy, good government, trust, rule of law, and on human rights
and dignity…
• This was the dream; and in many ways it has delivered, and continues to lift people
out of poverty
• Before Covid, by 2030, no extreme poverty
• So people bought into it: it ‘won’ by selling not only a promise, but real prosperity
for the ‘middle classes’ and those who aspired to be like them
Bretton Woods System, number of components – democracy trough the UN – economically
advantages
• Goal: To Foster World Trade and Democracy
• United Nations
• IMF
• World Bank
• GATT/WTO
• OECD
• Global currency union under the USD (until 1971)
, • Increasing cooperation
• Free movement of capital, goods, and people across borders, with minimal
restrictions or tariffs
Globalization: Rise and Decline
• Thus, Globalization has been happening since before WWI (with the UK as hegemon)
• And, since WWII (with the US as hegemon)
• It was believed in 1989 that Russia would join the global order (optimism)
• Fukuyama’s End of History
• And that since 1997, that China would also join this global order
• And we would be one big democratic-capitalist economy
• Since the 1980s, world leaders acted as though globalization was inevitable
Globalization
• What are anti-globalists’ economic concerns?
• Worried about Immigrants
• Depresses wages
• Threat of moving companies overseas
• Worsen working conditions
• Help union busting
• Reduce workers’ bargaining power
• Foreign investment
• Increase housing prices in cities
• Increased debt levels
• In general:
• Reduce standards of living
• Increase instability/quality of life
Globalization and International Trade
• But international economists will say: overall globalization is better
• International trade enriches everyone
• It creates more wealth than autarky
• Look at the lower price of goods
• People now can buy shoes, shirts, appliances, phones, for far less than they could in
the 1960s and 70s
• In those times, many children still went to school without shoes, parents did not all
have refrigerators, etc.
• Quality of life has gone way up
• Global Poverty is rapidly decreasing: it is at an all-time low
• This is despite huge population increases
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