Lecture notes
Global Political Economy - lecture 1-6 notes
- Module
- Institution
- Book
The document contains a summary of the lecture notes for the course Global Political Economy (lecture 1 to 6) from the Bachelor International Studies.
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
Samenvatting "International Economics", 3de bachelor Handelswetenschappen
-
Woordenlijst "International Economics", 3de bachelor handelswetenschappen
-
summary of all readings for this course
Seller
Follow
Sasch
Reviews received
Content preview
Global political economy BA2 S2 – lecturesLecture 1: Introduction to World Trade: Absolute and Comparative Advantage
International trade
The trade of goods and services across borders. (There is always a political aspect to this)
• Trade that involves dealing with more than one sovereign government.
• Often more than one monetary regime and set of laws.
- Moving from one currency to another.
• This can lead to any number of ‘complications’ as deals are made.
- Trade regulation affects markets.
- But International trade can also be extremely profitable.
- And, arguably, it can help people in both countries.
- Though, of course, it might hinder some people in one or both countries.
International production
Producing goods and services across borders.
• 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.
International financial systems
Foreign exchange (Forex)
• 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• Also, credit can be given or withdrawn, leaving a small economy in shambles.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 (Foreign Direct Investment) is covered here as well.
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)
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
- First ‘golden age’ of international capital
- Aka heyday of the British empire
- Global economy united under the pound and the gold standard
• Before 1945 however politicians tend to act as though the global economy was a ‘zero
sum game’ (one wins, another loses).
• This meant, if I didn’t grab land and use it for resources and markets, then someone else
would.
• This economic model fuelled the political model of colonialism.
• This economic model was based on the old theory of mercantilism.
Mercantilism
• Metropole= centre of production
• 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’ for the most profits.
• 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 = etc.
• But during the 1930s, and 1940s, the Anglo-American economists began to push a new
idea.
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.
• This would create incentives to work together, rather than compete.
• It would also create development.
• And it would cement the world into one big capitalist-democratic family.
,Trade as Non-Zero-Sum Game
• 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 (!)
• 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
• Goal: To Foster World Trade and Democracy
• United Nations
• IMF
• World Bank
• GATT/WTO
• OECD
• Global currency union under the USD (until 1971)=> reduces risk and increases
opportunity for investment.
• 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.
- 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?
• 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: anti-glovalist are wrong, and that in the long-term
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.
• And it corresponds with the ‘golden age’ of globalization and Bretton Woods.
So who is right?
• Reality is complex.
• International trade indubitably creates more wealth than autarky.
• It raises living standards.
• But, raised living standards also depend upon a social safety net.
• Governments have to intervene in markets, to reduce exploitation of the poor, or else
capitalism will look like c19th.
• In other words, capitalism only works well if it has some government intervention, i.e.,
‘socialist’ elements (even in the US, the New Deal created a vast safety net compared
with pre-New Deal).
International Trade
• In your book, Reinert attempts to make the case in favour of international trade for the
most part.
• Most economists believe that in the aggregate, international trade is better than not.
• We will in the first half of GPE, focus on the case for trade, looking at it critically, but
assuming that this is better than autarky.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Sasch. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £5.19. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
84866 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now