Unit 5: Foundations Of The International Political Economy

In a socialist system

The states owns and controls key means of production

Marxists believe

Capitalist systems are exploitative and empower the rich ("to be rich is to be born rich")

Under colonialism

- Colonies provided cheap labor and resources¸ and served as markets for the colonizer's goods

- A dominant country generally controlled the political and economic lives of foreign peoples

- Significant wealth and resources typically flowed out of the colonies¸ with relatively little capital coming back

Mercantilism includes

States controlling trade, generally protecting home markets (decreasing imports) while seeking to sell products abroad (increasing exports)

Mercantilists (economic nationalists) believe

Governments should regulate trade to advance national interests and power

Colonies

- Were often restructured by the dominant country to extract raw materials

- Provided captive markets for the colonizer's exports

European colonial economic policies can be described as

Mercantilist

"Products" that came out of each region during the Triangular Trade

Africa: Slaves

Europe: Manufactured goods, rum, guns, cloth

Americas: Primary products such as sugar, tobacco, and cotton

How many people were forcibly removed from Africa as slaves during the 300+ years of Triangular Trade?

10-15 millions

A founding thinker for classical liberism is

Adam Smith

Karl Marx

- Witnessed the harsh working conditions and searing poverty of millions of workers during the industrial revolution

- Believed that goverments in capitalist countries could not be trusted because the state would always defend wealthy interests

Friedrich List and Alexander Hamilton pointed out

It was easy for Great Britain to call for open markets and free trade after the country had used mercantilism to build a powerful economy

Which contry scores lowest on all the GEOS macro-dimensions in that radar chart of countries that practices some form of socialism ("state ownership of key means of production")?

Venezuela

Quotes of it's author

Marx: It is true that labor produces wonderful things for the rich—but for the worker it produces privation.

Smith: The sovereign has only three duties to attend to;three duties of great importance¸ indeed¸ but plain and intelligible to common understandings.

Keynes: The ideas of economists and political philosophers¸ both when they are right and when they are wrong¸ are more powerful than is commonly understood¸ Indeed¸ the world is ruled by little else.

Which of the below are key political economic events at the beginning of the 20th century

- World War I, which devastated Europe and parts of the Middle East, Africa, and Asia, leaving some nine million dead

- The bloody Bolshevik Revolution, which saw Vladimir Lenin come to power in the Soviet Union

- The demise of China's Qing dynasty and the onset of the Chinese Civil War between communists and nationalists

-Workers protests for justice, rights, and protections in the Americas

- The Great Depression

What three duties did Adam Smith see for the state?

Defense, rules of law, public works

Liberialism

- Has a classical meaning tied to open markets, free trade, and the pursuit of individual self-interest

- Is a term that has been used in the United States to refer to a preference for a more actie state role in managing volatility in the economy

The more contemporary liberal (Keynesian) world economic order sought by the United States and other Western countries after WWII was based on

Open markets, freer trade, and some limited governmental management

While associated with the liberal tradition, Keynes argued that

During economic downturns and crises, governments should intervene to stimulate employment and overall (aggregate) demand

"Contemporary liberalism" (often associate economically with the ideas of John Maynard Keynes)

Is tied to the idea that classical liberalism is volatile and prone to recessions and depressions, so states should try to manage capitalism and maintain "aggregate demand"

Examples of significant economic downturns where states worked to manage capitalism and maintain "aggregate demand" include

- The Great Depression

- The COVID-19 Pandemic

- The Great Recession

Which IGO was established through the Uruguay Round of the General Agreement on Tariffs and Trade (GATT)

World Trade Organization (WTO)

The World Bank is considered which type of actor?

International governmental organization (IGO)

The World Bank and the IMF were established through which post-World War II agreement?

The Bretton Woods Agreement

The primary role of IMF loans is to

Help stabilize a country's economy when the country has severe short-term budgetary imbalances

In the post-WWII era, the Scandinavian countries

Have generally pursued democratic socialism, with state ownership of some industries and more generous safety nets

Neoliberalism

Criticized post-WWII Keynesian policies, instead promoting less government intervention in the economy

The stimulus spending during the "Great Recession" in the United States was based on the ideas of

John Maynard Keynes

What international organization did John Maynard Keynes help create in the aftermath of the Great Depression?

The IMF

Keynes biographer (Robert Skidelsky) sums up Keynes with three ideas, including

- Markets are inherently volatile

- Large-scale unemployment can develop in volatile markets

- Nothing can stop a downward spiral and growing unemployment in a depressed economy unless the government steps in with public spending to replace a lack of private spending

According to Keynes (as discussed by his biographer Robert Skidelsky), volatile markets can punish

Millions in society, for the mistakes of a few, causing social unrest

The "animal spirits" are

Confidence and optimism in the economy, which sparks economic growth

What is Keynes' approach to stimulating a depressed economy?

More government spending to increase aggregate demand

What is on the horizontal, x-axis, part of the Elephant Chart?

The entire world population, arranged by their incomes in 1988, poorest to the left, richest to the right

What is on the vertical, y-axis, part of the Elephant Chart?

Personal income growth, in percentage terms, over 20 years

How have the world's poorest people fared over the time period?

Poorly, with weak income growth and continued extreme poverty

How have the people on the back of the elephant, in the middle of the global income distribution, fared over the time period?

They have almost doubled their income

Who are offered as an example of those on the back of the elephant in the middle of the global income distribution?

- Indians in Bangalore

- South Koreans

- Chinese who have flocked from the countryside to the cities

- The Brazilian middle class

What is argued as part of the good news of the Elephant Curve?

Income inequality, from a global perspective, has gone down, as the incomes in the developing world have risen

How do the middle classes in the United States and other developed countries fare over the time period?

They have seen very little income growth for decades

Who is at the tip of the trunk, showing sharp income growth over the time period?

"The global one percent"

What political economic dynamic does Branko Milanovic hypothesize might be explained by the Elephant Curve?

Middle-class people in developed countries, generally dissatisfied with their economic position and feeling threatened by migration and job insecurity, turn to anti-globalization populism