International Political Economy: Key Theories, Trade Policies, and Globalization Trends

How does state power shape international trade and finance?

States are primary actors pursuing national interest and security. Economic policy serves political goals, and trade is a zero-sum game.

What role do markets and institutions play in the global economy?

Markets promote efficiency through comparative advantage, and institutions reduce transaction costs and facilitate cooperation.

How does global capitalism create winners and losers?

Core countries exploit peripheral countries, reproducing structural inequality and creating dependency.

How do states benefit from trade?

Ricardo advocates for specialization based on comparative advantage, while Hamilton argues for protection of infant industries.

What determines a country's trade specialization?

Countries export goods that use their abundant factors intensively, predicting trade patterns based on factor endowments.

How do states intervene to boost national industries?

Governments use subsidies, protection, and export promotion to support industries with potential scale economies.

How have trade institutions evolved?

GATT focused on tariff reduction, while WTO includes binding dispute settlement and covers services and intellectual property.

What major agreements shaped global trade?

The Uruguay Round created the WTO, while the Doha Round has stalled over agriculture subsidies.

What was Bretton Woods, and why did it collapse?

Bretton Woods established fixed exchange rates and created the IMF and World Bank; it collapsed due to US inflation and gold reserve depletion.

How do floating vs fixed exchange rates impact trade & investment?

Fixed rates provide stability but limit monetary policy, while floating rates allow autonomy but introduce volatility.

Why can't countries have all three goals of the Impossible Trinity?

Countries can only achieve two of fixed exchange rate, free capital flows, and independent monetary policy simultaneously.

How do exchange rate misalignments cause instability?

Overvaluation leads to current account deficits, and speculation can trigger crises through capital flight and reserve depletion.

What factors attract multinational corporations?

Large market size, political stability, skilled workforce, tax incentives, and access to regional markets attract FDI.

How do short-term capital flows impact economies?

Short-term capital can create volatility and risks, especially for developing countries, but also provides liquidity.

What caused past financial crises?

Common factors include asset bubbles, excessive leverage, and currency mismatches, as seen in the 1997 Asian Crisis and 2008 Global Crisis.

Is globalization equalizing or worsening inequality?

Globalization has led to some convergence between countries but increased inequality within countries.

How did Latin America use ISI?

Import Substitution Industrialization aimed to protect domestic industries but resulted in inefficiency and debt crises.

Why did East Asian economies succeed with ELG?

Export-Led Growth was successful due to state guidance, investment in human capital, and competitive exchange rates.

What reforms did IMF & World Bank promote?

The Washington Consensus promoted fiscal discipline, trade liberalization, privatization, and deregulation.

What are the critiques of neoliberal policies?

Critiques include the one-size-fits-all approach, neglect of social costs, and increased inequality.

What was the impact of U.S.-China tariffs under Trump?

Tariffs were imposed on Chinese goods, leading to a shift from multilateralism to economic nationalism.

How did COVID-19 disrupt trade & production?

The pandemic exposed supply chain vulnerabilities and led to a shift toward reshoring and increased state intervention.

How are countries pulling away from globalization?

Populist leaders and national security concerns are leading to a resurgence of industrial policy and protectionism.

Will the world become more regionalized?

Evidence suggests selective decoupling in strategic sectors while continued integration occurs in others.