PSC 1001 Midterm Political Economy

Public goods

• Definition: goods and services provided collectively that benefit society as a whole and are difficult to exclude people from using, such as education, public health, law enforcement

• Significance: public goods create equal opportunities, support economic growth, reduce inequality

• Example:  the GI bill expanded access to education and social mobility for millions of Americans after WW1 

• Branko Milanovic

Economic liberalism

• Definition: emphasizes private property, free markets, competition, limited government intervention in the economy

• Significance: underpins what Milanovic calls liberal meritocratic capitalism, most production privately owned and market competition drives economic activity 

• Example: Margaret Thatcher in UK selling off state-owned nationalized industries

• Branko Milanovic

Communism (state socialism)

• Definition: a political-economic system in which all wealth and property are shared so as to eliminate exploitation, oppression, and ultimately the need for political institution 

• Significance: Milanovic argues that communism was capitalism’s enemy during the 20th century. But communist systems collapsed in nations like China, and capitalism emerged triumphant 

• Example: China under Mao Zedong operated as a communist state before market reforms transformed the economy into a capitalist one with state involvement 

• Branko Milanovic

Social democracy

• Definition: combined market economies with strong welfare programs, labor protections, social services, basically a bunch of government efforts to reduce inequality 

• Significance: Milanovic describes this as the dominant model in Western Europe and North America a little post WW2 through early 1980s 

• Example: Postwar welfare states of Western Europe i.e. France and Germany combined economic growth with expanding welfare programs, boosting wellbeing 

• Branko Milanovic

State-led development 

• Definition: a development strategy in which the government plays an active role in directing economic growth

• Significance: central to what Milanovic calls political capitalism. Government uses state power to guide growth, develop infrastructure rather than relying solely on market forces 

• Example: China’s rapid economic growth achieved under an extremely powerful state that transformed it from an agrarian society into a major industrial and economic power

• Branko Milanovic

State capitalism

• Definition: economic system in which markets and private enterprise exists but the state maintains significant influence over the economy to guide economic outcomes

• Significance: Milanovic refers to this as political capitalism where economic growth is overseen by a strong state bureaucracy that retains autonomy from society while allowing private ownership

• Example: contemporary china, where most production is carried out through capitalist markets and private ownership but state exerts substantial influence

• Branko Milanovic

Neo-liberalism

• Definition: a set of policies championed by Thatcher’s conservative government in the 1980s, aimed at diminishing the role of the state in the economy 

• Significance: emphasized privatization, lower taxes, globalization. Milanovic links the neoliberal era to rising inequality, weakening unions, and increasing concentration of wealth in liberal capitalist societies

• Example: the government of Margaret Thatcher in the UK and Tonal Reagan in the US pursued policies reducing regulation and expanding competition 

• Branko Milanovic

Welfare state

• Definition: governments provide social services and protections in this system

• Significance: emerged under social democratic capitalism to reduce inequality and ensure that the benefits of economic growth were shared widely. Milanovic says that these protections remain important in contemporary liberal capitalist societies as well 

• Example: welfare systems developed in Western Europe after WW2, expanding access to benefits and reducing inequality 

• Branko Milanovic

Inequality 

• Definition: unequal distribution of income, wealth, opportunities or power in society 

• Significance: Milanovic identifies growing inequality as the greatest challenge to liberal meritocratic capitalism. He argues that increasing concentration of wealth and educational advantages among elites threatens social mobility and democratic legitimacy 

• Example: In the US the Gini coefficient rose while top 10% of wealth holders came to owning more than 90% of financial assets 

• Branko Milanovic

Colonialism

• Definition: an imperialist system in which a foreign territory is physically occupied, using military force, businesses, or settlers 

• Significance: colonialism often established extractive institutions designed to transfer wealth and resources from colonized societies to colonial powers instead of promoting local development Acemoglu and Robinson argue that these institutions frequently persisted even after independence, shaping long-term patterns of poverty and inequality 

• Example: Belgian colonial rule in the Congo created institutions that extracted wealth from the population while concentrating power in the hands of colonial authorities and local elites. These patterns continued even after independence - Acemoglu and Robinson

Dependent development

• Definition: a pattern of development in which economic growth occurs but remains dependent on external actors, foreign capital, powerful states, etc. limiting autonomous economic development 

• Significance: dependency theorists argue integration into the global economy can produce growth while ALSO reinforcing unequal relationships. Development usually benefits external powers and elite in the domestic population more than broad population

• Example: Roge Karma mentioned South Korea’s industrialization heavily relied on support from the US

Resource curse

• Definition: theory of development in which the existence of natural resources in a given state is a barrier to modernization and democracy 

• Significance: Resource wealth can reduce incentives to diversify the economy, promote accountable governance, or build effective state institutions. Political leaders may instead focus on controlling resource revenues 

• Example: DR Congo possesses extensive mineral resources but has experienced persistent poverty and weak development because extractive institutions prevented benefits from reaching broader population - Acemoglu and Robinson

Import substitution industrialization

• Definition: a strategy for growth in which a country restricts imports to spur demand for local alternatives and grow infant industries  

• Significance: ISI is based on the idea that developing countries need protection from foreign competition for their domestic infant industries. Used throughout Global South in 20th century 

• Example: South Korea used subsidies, protection for select industries to help firms - Roge Karma

Inclusive institutions

• Definition: economic and political institutions that broadly distribute opportunities and power, and allow citizens to participate in economic and political life 

• Significance: Acemoglu and Robinson argue that inclusive institutions are the foundation of long-run economic growth because they encourage investment, education, etc while keeping power out of only the elites’ hands 

• Example: South Korea’s postwar development supported by institutions that promoted education, investment, and participation in economic activity contributed to raising living standards Acemoglu and Robinson

Political globalization

• Definition: the increasing integration of political decision-making, institutions, and governance across national borders through international cooperation (could be in the form of agreements, organizations, etc)

• Significance: helps states coordinate on trade, finance, and international rules. Frieden argues that the post-1945 international economic order relied on multilateral institutions and cooperation led by the US

• Example: Institutions such as the WTO and Bretton Woods represent political globalization because countries cooperated through common rules

• Frieden

Economic globalization

• Definition: growing integration of national economies through trade, investment, finance, and production across borders 

• Significance: economic globalization has generated lots of global growth and helped lift people out of poverty in developing nations. BUT it also created winners and losers  

• Example: China’s integration into the world economy led to dramatic increase in their income. Freeland et al. shows this happening as China became more connected to global markets 

Societal Globalization

• Definition: increasing movement of people, ideas and cultural across national borders 

• Significance: more interconnected world. Freeland et al. says this causes the emergence of a global middle class and greeted interdependence

• Example: Freeland et al describes how the rise of Asian middle class contributed to rise of a broader global middle class, reflecting increasing social connections among people across borders

• Freeland et. al

Deglobalization

• Definition: A process by which countries become less economically and politically integrated, through protectionism, trade barriers, nationalism

• Significance: weakens international cooperation for economy, etc. Frieden argues that backlash against globalization threatens the postwar international economic order

• Example: Brexit and Donald Trump’s America First policies. Mentioned by Frieden

• Frieden et al.