AP Comp Gov Unit 5

Political economic systems

  1. Liberalism (LF, capitalism)

  • Both

  1. Communism

  2. Socialism

a) Command economy (centrally planned, communism)

b) Market economy

Impact of Global Economic and Technological Forces

Globalization: spread of products, tech, info, and jobs across national borders/cultures → interdependence of nations fostered through free trade

  • Caused challenges for regimes wit issues of sovereignty and stability

Economic Liberalization: States allow for less state control of economy, allowing more free trade, privatization, etc. (Process of becoming ore open)

  • Privatizing government owned industries (privatization vs nationalization), opening economy to foreign direct investment (FDI)

    • FDI - investors/capital coming from outside the country into the country

      • Cheaper to invest in another country than their own

      • If you import more than export, rebalance with FDI

  • International organizations (WB, IMF, WTO) have led to economic liberalization

    • Loss of sovereignty for countries to join

    • WB: Big infrastructure loans (long term loans)

    • IMF: Exchange rates, emergency loans (everything is burning, give me money loans), establish stability

      • Has helped in Mexico, Russia, Nigeria, China

    • WTO: Opens trade to benefit everyone (even communist regimes have joined, eg China and Russia)

  • Multinational Corporations (Transnational Corporations, TNCs)

    • Corporations that are increasingly dominant in global markets and sometimes pose challenges to domestic economic policies regarding labour, environment, land rights, taxation, and budget

    • Aid in “sharing the wealth” in underdeveloped countries but can do it on own terms → have monopsony power (one employer controlling the job market)

  • Foundation of neoliberalism

Neoliberalism

  • Believe in removal of barriers/restrictions on what internal/external economic actors

  • Ignores structural inequalities (poverty, racism, etc) - believes that it’s the fault of the individual

  • Pros    

    • Increased consumption

  • Cons

    • Exacerbates wealth inequality

    • Governments under pressure to benefit private corporations over citizens/public industries (no ability to monitor corporations)

    • Environmental pollution

    • Poor infrastructure and lack of government regulation

    • Regional migration/ inequalities (think Mexico North and South, China West and East)

Problems with globalization/neoliberalism can provoke conflicts within states such as

  • Increased demands placed on governments by civil society groups

  • Protests by students/disenfranchised

  • Arrests of protesters/imposition of social media restrictions

  • Empowerment of once-marginal nationalists/populist groups that blame government for changes in culture/economic conditions

Responses to Global Market Forces (in the AP 6)

  • All countries have diff ways to increase/decrease control of TNCs

    • Improve domestic economic conditions

    • Respond to domestic demand

    • Control/influence political debates to maintain/increase power

    • Extend national influence regionally and internationally

UK - allows most privatization, China - least privatization

China

  • Special Economic Zones (SEZs) along coast of China

    • Areas to attract FDI by allowing market-oriented policy (capitalism)

Mexico

  • Privatization/increased competition in Mexico’s oil industry (Pemex - state owned oil company that’s undergoing increased privatization)

Nigeria

  • Working with foreign companies to extract and produce oil

  • Brain drain (skilled workers leaving)

Russia

  • Re-nationalization of oil/natural gas industries and imposition of foreign investment limitations

  • Gazprom - state owned natural gas company, Rosneft - state owned oil

Iran

  • Nationalized oil industry

Challenges from Globalization

Regime Sovereignty

  • Foreign direct investment and TNCs

    • Pose challenge to government’s foundational economic/political ideas and principles

  • Cultural influences (typically been Western)

    • Accompany investment/trade with a given regime can promote domestic backlash

  • Environmental degradation

    • Increased economic development can cause environmental/health issues that alienate citizens

  • Foreign political and economic pressures (sanctions, tariffs)

    • Powerful countries put pressure on less powerful countries whose actions may “offend” them

Policies and Economic Liberalization

International Organizations (careful, NOT consistent with GH20 definitions, CG def: Can’t be joined by regular people, only governments)

  • Int. Orgs: Countries choose to join and DO NOT relinquish sovereignty to join

  • IMF

    • Desperation loans (country is unstable and needs help)

    • Structural Adjustment Plans/Programs - requires privatization of state-owned companies, reduced tariffs (encourage FDI), and reduced governmental subsidies of domestic industries to get a loan

      • Can dramatically decrease legitimacy of governments

      • less common now but drew large criticism

  • WB

    • Infrastructure improvement loans (country is stable and wants money for a QoL project)

Developing Countries

  • Import Substitution Industrialization Policies: Reducing foreign dependency by raising tariffs and encouraging local production of industrialized products

    • Response to SAPs from IMF

    • Making domestic goods cheaper than world goods → support domestic industries for less reliance on other countries

    • Highly protectionist

Supranational Organizations: HAVE TO give up some sovereignty to join. Have sovereign powers over the national governments that are member states and can apply pressure on policymakers to reduce tariffs and otherwise liberalize trade. Has social, political, and economic integration

DO NOT write about NATO or UN (by CG standards it’s iffy, it’s also just asking to be wrong)

  • Economic Community of West African States (ECOWAS)

  • EU

    • Requires member states to allow freedom of movement of citizens, free trade, all use the same currency

  • WTO

Social Policies

Govs create new social policies in response to political, cultural, and economic changes (including gender, healthcare, and education pollicies)

  • Iran: Gender equity issue: Women can vote/run for Majles and can be member of cabinet BUT dress, religious leadership, access to education, freedom to attend certain events is limited

    • Eg Morality police

  • Mexico: Gender quotas →

  • Nigeria: Unequal gender access to education in the north/south

    • Kidnappings from girls schools by Boko Haram (much lower access to education in the North as a result)

  • Abortion access, reproductive care, etc as examples of gender inequality

Social welfare policies

  • Governments implement policies to reduce poverty, improve literacy/public health/lives, and maintain political legitimacy

    • Often out of self-interest of the government (it’s expensive to recover from an unhealthy population than prevent the unhealthy population)

Impacts of Industrialization and Economic Development

  • Rapid industrialization and increasing dependence on energy from fossil fuels have created environmental/political problems → gov must address to protect citizens

  • Post materialism: Response to consequences of rapid industrialization (eg looking to protect the environment)

Solutions:

  • Moving factories, implementing green technology with subsidies for compliance, engaging in increase infrastructure development and environmental regulation

  • Passing laws to address air pollution problems in major cities from auto/industrial emissions

  • Developing infrastructure and other mechanisms to respond to health crises related to systemic pollution

Trade Liberalization

  • Affects growth of domestic/foreign business

  • Trade freedom

Austerity

  • Governments concerned with budget deficits resulting from world market fluctuations often must adopt austerity measures → results in funding cuts to state programs

  • Economic policies undertaken to control public sector debt by a government

  • Aims to reduce government spending through policies such as cuts on public spending and tax increases (cutting health care and education spending)

  • Tightens belt rather than grows stomach

  • UK - led to big protests

  • WILDLY unpopular from citizens, hurts the middle class/bottom the most

    • Disproportional in who is impacted

Stimulus (opposite of austerity)

  • Action taken by government to increase economic activity by taking party in fiscal policy as well as specific expansionary monetary policies

  • Attempts to stimulate economic growth through fiscal monetary policies

Causes and Effects of Demographic Change

Demographic changes

  • Growing/shrinking population

    • Stage 1: High mortality/fertility - low population growth

    • Stage 2”eclining mortality high fertility - high growth

    • Stage 3: Declining fertility, change in population age structure - demographic opportunity

    • Stage 4: Aging population, done to longevity (living longer but not producing new children) - increasing “dependency ratio”

      • Solution: immigration which brings social pressures (anti-immigration sentiment)

    • Stage 5: Population declines (death rate > birth rate) (replacement rate ~2.1)

    • More developed countries tend to have aging populations (eg transition from illnesses causing deaths to brain issues causing death bc we have the tech to make the body live longer but not the brain)

  • Changing land use and values

    • Focus on oil extraction vs agriculture economy

  • Economic opportunities to motivate internal/external population movements

    • Migrate towards job opportunities, away from environmental problems

Government response to demographic changes

  • Draw workers to different geographic regions or influence positive/negative migration rates

    • Leads to deepening of class/regional differences and taxing government resources

  • Ways to encourage/discourage birth

    • Subsidize children (make it appealing to have children)

    • Gov-policy (eg China and One-Child policy)

  • Push-Pull Factors

    • Highly skilled/educated workers leaving to escape government policies/practices that are thought to be limiting, corrupt, or repressive

    • Pull - makes things enticing to enter (immigrate)

    • Push - makes things alluring to leave (emigrate)

    • Brain drain: When the most educated parts of the population are leaving to pursue higher education or work

      • (eg leaving to be a doctor in another country after being educated in one country or having a smart person leave a country to learn somewhere else)

        • Nigeria has a big issue with it

      • If you want the best and brightest, can’t have corruption/bureaucracy being a limiting factor

  • China

    • Shifting emphasis from agriculture to industry

      • Creation of SEZs, encouragement of FDI, fewer government restrictions/regulations of the economy

    • Leads to migration from rural to urban (West to East), creating a growing population whose rising incomes allow them to pursue work/education opportunities abroad

    • Hukou system: Rural/Urban registration system (basically a point system to move cities)

    • One-child policy

      • Drastically decreased young population

  • Mexico

    • Responses to NAFTA

    • NAFTA, economic liberalization policies, Maquiladora zones, FDI promoted migration from rural to urban (South to North) → exacerbates regional economic disparities

      • Led to rise of Zapatistas

    • Young population (mostly 25 or younger) but slow economic development

      • Exportation of labour to the US

  • UK

    • Positive net migration of immigrants → caused social and political tensions

      • Mass immigration from France into UK from Dover (illegally) have been big source of anti-immigration sentiment

      • Aging population in the UK → further burdens universal healthcare system

    • Anti-immigration protests drove Brexit movement

  • Nigeria

    • Big sufferer of brain drain, especially with doctors

    • Government

  • Iran

    • War/revolution led to many leaving the country

Impact of Natural Resources

  • Rentier States - proportion of government income that comes from natural resources

    • These states obtain significant percentage of total government revenue from export of oil/gas/other resources leased to foreign countries have been able to raise standards of living/fund governmental programs based on their huge reserves

    • Bring in money, cause development but have problems with consistent development

      • often has issues with corruption, lack of investment/entrepreneurial spirit (no human resource, industrial production, knowledge-based industry investment), authoritarianism

        • Growth of White Elephant projects: Something that looks good but isn’t actually useful or won’t be applicable

      • Ethics of having an economy based on a natural resources (external pricing) to determine internal prices

    • Suffer from resource curse/Dutch Disease

      • Have inherent wealth but can’t take advantage of it    

        • Contributes to high levels of absolute poverty, war/crime/internal violence, poor economic growth

      • Won’t specialize economy because of focus on natural resource

    • Nigeria (partly free)

      • Niger Delta has abundance of natural resources (primarily oil) → large investment in oil but lacking in everything else → volatility in oil pricing led to periods of poverty/wealth

  • Nationalized resources

    • Provide government revenue, consolidate government control, reduce political influence of foreign governments/TNCs

    • Russia: Re-nationalization of resources (oil/natural gas)

      • Gazprom = Natural gas company

      • Rosneft = Oil company

  • Privatization of resources

    • Private ownership of natural resources → decrease government control, increase wealth inequality, results in potential loss of sovereignty

    • Mexico: Pemex (oil industry) - state owned enterprise (SOE) but becoming more privatized for profit