Flashcards Development of the Global Economy

what was the treaty of union?

gave trade access to glasgow to the american colonies which increased their trade and by 1770, 2/3 of tobacco entering the Uk went through scotland

how did glasgow go through industrialization?

tobacco lords invested in land, shipping, and the textile industry and because they had close proximity to raw materials (coal and iron), urban markets, and ports, they were successful in the industrial revolution

which city is the second city of empire?

glasgow, after london, for its industrialization

what was glasgow deindustrialization and reinvention?

after WWI, they were unable to compete with eastern europe and asia. the population dropped from over a million to just around 600,000

reinvention: glasgow rebounded with higher eduction, but that did create inequality

top three largest cities in the us in 1840

new york, baltimore, new orleans

what resulted from the switch from hunter/gatherer to agricultural production?

extra food so people at home, availability of natural resources, and availability to communicate

(was easier for some regions than others)

how did finances improve?

switch from bartering to the use of money as a medium of exchange

what did the plough do to demographics?

made it so that more men were in farming than women and that still exists today

how did the medicis get their money?

started out by financing money for trade and then going into banking and lending (were able to forgive their sins by paying money)

What was the slave trade?

15 million men, women, and children transported across the atlantic between 1500 and 1900. It was about 10% of Africa's population and was focused on supplying labor for cotton, sugar, and tobacco.

What was the industrial revolution?

Started in the UK because they couldn't match the production of chinese cloth industries. The UK used protectionist policies and in 3 decades, productivity increased 370%. Gave UK a comp. advantage in cloth production and also said that they couldn't sell the machines outside of the country for 15 years

more thread -> inc dmd for women -> weaving machines

machines need energy and workforces -> more people moved to cities

What are the types of colonies?

Settler: people leave to live there

Extract: focused on extracting natural resources

When was the first globalization?

1870-1914

What were the three aspects of the first globalization?

Migration moves people (mass emigration from Europe to the Americas and settler colonies);

capital flows move money (European investment abroad in railways, mines, plantations);

trade in goods moves commodities out of the periphery and manufactures into i

What enabled the first globalization?

technological change: the telegraph (rapid communication across long distances) and the steam engine (trains could run and ships could go even faster)

policy change: trade liberalization (repeal of corn laws and negotiation of bilateral agreements) and the gold standard (provided fx rate confidence)

what else did the technological change of the first globalization enable?

colonial rule

how were technology and policy integrated to created the first globalization:

Technology created the possibility of a global economy (telegraph, steam, industrial machinery) , while policy created the rules and access (trade liberalization, gold standard) . Both were necessary: technology without open markets and stable money would not have produced 1870 to 1914 integration.

what are the three main IPE theories?

mercantilism, liberalism, and marxism

when was mercantilism popular?

17th-18th centuries

how did trade result in driving wealth?

tariffs and fees: countries needed legitimacy and administrative capacity and trade made that easy because you could tax imports and put fees on exports

what are the three goals for mercantilism?

enhance national power: economic strength is critical but we need money for wars and productive capacity for manufacturing

exports valued over imports: don't want our gold to be leaving bc then can't spend it on your army

manufacturing is better than primary sectors: finished goods are more valuable than unprocessed, primary goods

What is strategic trade theory and how does it tie in with mercantislism?

Under certain market conditions, government intervention can help a country's firms win in international markets (government should intervene and subsidize -> example airlines)

modern view

What is observational equivalence?

maybe not traditional mercantilism (a country doing strategic trade might look like mercantilism, but it isn't because the stated objective, market failure, is different from classic mercantilism, wealth = power)

when was liberalism ipe theory?

late 18th-18th centuries

what are the three propositions behind liberalism?

enrich the individual (maximize social welfare)

exp and imp are both good

produce whatever you're better at (comp. advantage)

what role should the government play according to liberalism?

a limited, buttt important role: gov't doesn't direct the market, but they still need a state to protect property rights and contracts and provide public goods -> enable trade

What does free trade as a path to peace mean?

Trade between countries makes war between them less likely because 1. they will alr be talking 2. there is an economic cost of going to war 3. acquire things through payment, not conquest

What are some examples of evidence of peace through trade?

Wilson's 14 points (point 3)

Cordell Hull

Change through trade -> german foreign policy

China WTO accession (if in wto, it'll reduce conflict)

What are the challenges to comparative advantage?

- assumes factor mobility

- country just "has" the comp. advantage (in reality it is built)

- now we mainly trade in intermediate goods, not the final product

- specialization is a source of vulnerability

are ipe theories alive today?

These centuries-old theories still structure today's trade debates, but no administration fits one purely: every one mixes mercantilist, liberal, and other arguments, so you must classify the stated justification rather than the policy itself

according to marxism, what is the organizing principle of society?

social class and their relationship to production

according to marxism, what is the relationship between state and the economy?

the state reflects the interests of the economically dominant class, the capitalists who own the means of production

explain under consumption + surplus capital = crisis of capitalism

workers are paid too little and cannot purchase what they produce, profits pile up faster than investment can absorb them = unstable system and they overthrow the government

what is imperialism?

the highest stage of capitalism -> country pushes capital outward seeking markets and investment destinations which postpones the crisis

What are the steps of how imperialism postpones crises?

market for surplus goods, source of cheap resources, destination for surplus capital, use surplus to placate domestic proletariat

What are the steps to analyzing policy?

1. what are individual's preferences wrt the policy?

2. how are those preferences aggregated into political coalitions?

3. how do the political coalitions interact?

4. how do institutions aggregate preferences into policies?

What is rationalism?

assumes policy preferences derive from material interests and whether the policy makes you better or worse off

material interests

causal relationships (policy a will produce outcome b)

logic of consequences (actors weigh choices and choose what serves them best)

shared interests (actors bind into coalitions/groups of people who share the same interests)

what is constructivism?

identity and who you are matters when making decisions about policy

identities and norms

role defined behavior (what you do follows a social role rather than any instrumental calculation)

logic of appropriateness (action follows what is fitting for one's role)

shared identities (people aggregate politically based on shared identities)

what is the logic of collective action?

there is a free-riding problem where people take advantage. the problem is greater when there are more actors and individuals stakes are low

what are the implications of the collective action problem?

concentrated interests better organized than diffused interests

once organized, mobilization is relatively easy

how do you address the collective action problem

selective benefits: rewards only available to those who join -> unions

non-material motivations: solidarity or a sense of duty can make people contribute even when the material incentive to free ride remains

what are majoritarian poltics?

broad distribution of costs and benefits (nearly everyone pays and nearly everyone benefits)

what are entrepreneurial politics?

narrow distribution of costs and broad distribution of benefits (organized losers fight hard and requires a policy entrepreneur to mobilize the unorganized winners)

what are clientelist politics?

broad distribution of costs and narrow distribution of benefits (subsides serve a small constituency at the general taxpayer's expense)

what are interest group politics?

narrow distribution of costs and narrow distribution of benefits (both sides are organized and it's a two-sided lobbying battle)

how are institutions combined with individuals policy preferences

institutions reflect power -> they are designed to deliver particular ends (rational choice institutionalism) and diverge on their own path with their momentum (historical institutionalism)

institutions have implications -> for rationalism, institutions are the rules of the game and for constructivists, institutions go deeper and embody

who makes us trade policy? what is the main tool used?

congress -> article 1 section 8

but in reality, congress delegates to the executive power

tariffs are the main trade policy instrument

what are the ways in which us trade policy is actually made?

reciprocal trade negotiations -> GATT and preferential trade agreements

Unilateral instruments -> US can apply them on it's own

What are the US unilateral instruments can implement on its own?

trade defense instruments -> antidumping tariff act of 1934

safeguard measures -> section 201 of trade act of 1974 (emergency protection for an industry injured by imports)

section 301 of trade act of 1974 (action against unfair foreign trade practices)

section 232 of trade expansion act (restrictions of imports that threaten national security)

international emer econ powers act 1974: econ measures under declared national emergencies

section 122 of the trade act of 1974: temp measures to address balance of payments problems

How do we predict firm interests?

position in international production determines how affected by trade liberalization (material interests)

How are winners and losers from liberalization sorted?

1. factors/class: capital versus labor everyone who owns capital is on the same side of whoever employs them

2. sector export oriented versus import-competing industries: inter-industry trade -> firms in the same industry share a position regardless of who owns them

3. firms export oriented versus import-competing firms: intra-industry trade -> firms sorted at the firm level

How does collective action play with determining firms interests?

it affects the groups' capacity to mobilize

which sectors were FOR brexit, which against?

manufactering against

finance against

fashion against

fishing for

ALL REFLECT MATERIAL INTERESTS

What are the different personas for citizen's preferences?

worker

consumer

citizen (mutz)

what is the worker persona?

Advanced developing countries:

- abundance of highly skilled labor and they generally align with their employers in supporting liberalization

- scarcity of unskilled labor and when trade opens up, they face direct competition so they resist it

export oriented (love liberalization bc more markets) vs import competing industries/firms (hate liberalization bc have to fight off cheaper foreign imports)

What hurts support for trade?

off-shoring

"china shock" -> 560k jobs lost to trade and 2million jobs lost in the whole economy

extreme concentrated pain

north carolina -> lost 45k jobs and drug overdose deaths increased and impacted voting

How does the consumer citizen preferences look like?

assumed to favor liberalization and are not considered politically important

What does the citizen in citizen preferences look like?

voters filter arguments for policy based on their respective social classes and their views on national identity

What is the politicians as puppets theory?

the assumption that politicians in power always focus on keeping office and consider how each choice affects the chances of reelection (engaged vs non engaged intersts, contending engageed intersts, and median voter

Does partisanship matter in leaders policy choices?

yes, right parties are more pro-free trade than left parties

How do majoritarian (First-Past-the-Post) and proportional representation electoral systems differ, and how can these differences affect economic policy outcomes in IPE?

Majoritarian systems award seats to the candidate with the most votes in each district, often encouraging politicians to focus on local interests and concentrated industries. Proportional representation systems allocate seats based on a party's share of the vote, encouraging broader coalitions and policies that reflect national interests and general welfare.

Why does constituency size matter in IPE, and how do small and large constituencies influence political representation differently?

Smaller constituencies are more likely to be dominated by a few industries or economic interests, giving those groups significant political influence. Larger constituencies contain more diverse populations and economic interests, encouraging representatives to focus on broader concerns and overall welfare rather than the needs of a single industry.

How can unequal representation and constituency shape influence which economic interests are represented in government?

Unequal representation can give certain groups more political power than their population size would suggest, while constituency shape can alter political influence through the way district boundaries are drawn. Together, these factors affect which economic interests gain representation and can therefore shape policy outcomes such as trade, subsidies, taxation, and regulation.

What is a veto player, and what role do they play in policymaking?

A veto player is an individual or institution whose agreement is necessary to change existing policy and who can therefore block policy change.

How does the number of veto players affect policy change?

The more veto players there are, the more difficult it is to change the status quo because more actors must agree to the proposed change.

Why do more veto players make economic liberalization less likely?

Liberalization requires changing existing policies, but having more veto players creates more opportunities for actors who oppose change to block it, making the status quo more likely to remain.

What are the main explanations for where a president's trade preferences come from?

A president's trade preferences can come from self-interest, voter demand, neo-Royalism, what they believe is best for the country, and their worldview.

How can self-interest and voter demand shape a president's trade preferences?

Self-interest means the president supports trade policies that benefit their own political or economic interests. Voter demand means the president responds to the preferences of the voters whose support they need.

What is "neo-Royalism," and how does it differ from the idea that the president does what is best for the country?

Neo-Royalism suggests that presidents may pursue their own preferences because they have greater freedom from immediate electoral pressures. The "what is best for the country" explanation suggests that presidents may instead make trade decisions based on what they believe will benefit the national interest, while their worldview shapes how they understand what that national interest is.

Why are leaders' individual preferences becoming more important in determining trade policy?

Economic and geopolitical conditions have changed, making countries more concerned about dependencies created by decades of liberalization. Leaders may therefore place greater emphasis on economic security, resilience, and reducing vulnerabilities from international economic linkages.

What is the main idea shared by the U.S. and European statements on economic security?

Both argue that economic interdependence can create security vulnerabilities, so leaders increasingly consider resilience and national security when making economic and trade policy decisions.

what are the sources of growth of gdp

growth of labor supply or productivity gains (labor comp, capital deepening, tfp)

What were the four Industrial Revolutions, and what technological changes defined each one?

First: machinery, new energy sources (water and steam), and the shift to factory production. Second: mass production/assembly lines and electricity. Third: computers and automation. Fourth: artificial intelligence (AI).

How can industrial revolutions affect employment?

New technologies can either substitute for labor, replacing workers by performing their tasks, or complement labor, making workers more productive and creating demand for new skills and jobs.

How can industrial revolutions affect inequality?

The effects depend on the pattern of technological diffusion—who gains access to and benefits from new technology. If benefits are concentrated among certain workers, firms, or owners of capital, inequality can increase; if technology spreads broadly, its benefits may be more widely shared.

Supply chains what have they done for transnational production?

they increased it, somewhat from offshoring

what enabled the increase in trade from supply chains?

trade liberalization

liberalization of FDI rules

improved communications

lower transport costs

policy implications of supply chains?

Tariffs raise production costs: Tariffs on imported inputs make production more expensive, which can make a country's exports less competitive in international markets.

Tariff accumulation: When tariffs are applied at multiple stages of a supply chain, the costs can build up as goods and inputs cross borders multiple times.

Rules of origin are important: Rules of origin determine which country a product is considered to come from, which affects whether it qualifies for preferential trade treatment or faces tariffs.

Trade facilitation is important: Making it easier, faster, and cheaper for goods to cross borders helps international supply chains operate more efficiently.

Regulatory cooperation: Countries coordinating regulations, standards, and customs procedures can reduce barriers and make international trade easier for businesses.

Services are becoming more important: Modern supply chains increasingly depend on services such as transportation, logistics, finance, telecommunications, and digital services.

Security implications of dependence: Relying on adversarial countries for critical inputs can create vulnerabilities because those countries could disrupt supplies or use economic dependence as leverage.

Political implications from supply chains?

GVC-participating companies dislike tariffs: Companies that rely on imported inputs for production are hurt by tariffs because tariffs make those inputs more expensive.

Support for trade liberalization goes beyond traditional firms: It is not just export-oriented firms that favor open trade. Companies that compete with imports or participate in global value chains can also have reasons to oppose trade barriers.

GVCs create new pro-trade constituencies: Because more companies depend on international supply chains, more businesses have an economic interest in lower trade barriers and trade liberalization.

what are production and process method regulations?

Regulations can focus not just on the final product, but on how the product is made. For example, countries may require certain environmental, labor, or production standards.

what is the process as quality regulation on services?

For services, the process used to provide the service can be part of its quality. This means regulations may focus on how a service is delivered, rather than just evaluating a final physical product.

types of market failures

Problems of the commons

Negative externalities

Information asymmetries

Public goods/positive externalities

what are problem of the commons?

Occur when a shared resource is overused because individuals have an incentive to use as much of it as possible, even though everyone is harmed if the resource is depleted. Example: overfishing in international waters.

what are negative externalities?

Occur when an economic activity creates costs for other people that are not reflected in the price of the good or service. Example: pollution from a factory harms the surrounding environment.

information asymmetries

Occur when one party in a transaction has more or better information than the other, which can lead to inefficient decisions. Example: a seller knowing that a product is defective when the buyer does not.

what are public goods/positive externalities?

Public goods benefit many people and are difficult to exclude others from using, while positive externalities occur when an activity creates benefits for others who are not directly involved in the transaction. These can lead to underproduction because individuals or firms may not capture the full benefits.

False positives can lead to regulatory burden.

False positive: A regulation identifies something as a problem or risk when it actually isn't.

Regulatory burden: This can cause unnecessary rules, inspections, paperwork, or compliance costs for businesses that aren't actually creating the problem.

False negs increase salience of risk

False negatives: A risk exists, but regulation fails to identify or address it. This can allow harmful activities or problems to continue.

Regulatory failures increase salience of risks: When a regulation fails and a harmful event occurs, the risk can become more visible or politically important. This can increase public and political pressure for stronger regulation.

ex: snowmaggedon

Regulation as trade barriers

Process regulations and competitiveness

No race to the bottom but stuck at the bottom?

Production and process method (PPM) regulations convert to trade barrier

What are process regulations and competitveness?

egulations on how goods are produced, such as labor or environmental standards, can increase firms' production costs. Countries with stricter standards may worry that their firms will become less competitive compared with countries with lower standards.

What is race to bottom but stuck on bottom?

The race-to-the-bottom argument says countries may lower labor or environmental standards to attract investment and remain competitive. The alternative idea is that countries may become "stuck at the bottom," where low standards persist because raising them would make domestic firms less competitive.

What are PPM regulations and how they can become trade barriers?

Production and Process Method (PPM) regulations can effectively restrict trade when foreign products are required to meet particular production standards. Even if the final products are similar, differences in how they are produced can create additional requirements or prevent products from entering a market.

What is the brussels effect?

A jurisdiction, especially the EU, can influence regulations beyond its borders because companies and governments choose to follow its rules

What is the de facto brussels effect?

Firms are more likely to apply one jurisdiction's rules globally when that market is valuable, the jurisdiction can effectively enforce regulations, its rules are stringent, and products/services cannot easily be adapted to different regulations. It is harder when jurisdictions have incompatible requirements, such as EU privacy rules vs. U.S. data- sharing requirements

De jure Brussels Effect

("trading up"): Governments may adopt stricter foreign regulations when domestic companies already comply with those rules abroad and want to avoid the cost of maintaining two different standards. Those companies may lobby for domestic rules to match, sometimes alongside civil society groups that support stricter regulation. This is less likely when there are many veto players.

Brexit example of Brussels Effect

One argument for Brexit was that the UK could create its own independent regulations. However, UK companies that trade with the EU still have an incentive to maintain alignment because regulatory divergence means having to comply with both UK and EU rules. As a result, much EU-derived UK regulation has remained similar, and the UK has recently sought greater alignment with EU rules to reduce compliance costs for businesses.

Why has regulatory cooperation become important for international trade?

Differences in regulations between countries can create significant barriers to trade, so countries have developed forms of regulatory cooperation to reduce these differences and facilitate trade.

What is the main challenge of regulatory cooperation?

The challenge is to make trade easier by reducing unnecessary regulatory differences without undermining legitimate public policy objectives, such as health, safety, environmental, or consumer protections.

What is the basic goal of regulatory cooperation?

The goal is to find ways for countries to coordinate or recognize each other's regulations so that trade can be facilitated while still maintaining the legitimate purposes for which the regulations were created.

what are examples of regulatory cooperation?

harmonization

adoption of specific int'l stantards

approximation to int'l standards

equivalence

mutual recognition

harmonization of data requirements

inc transparency