PSC 1001; Political Economy of Advanced States
PSC 1001; Political Economy of Advanced States PSC 1001
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This 3 page Class Notes was uploaded by Eleanor Parry on Wednesday February 24, 2016. The Class Notes belongs to PSC 1001 at George Washington University taught by Dr. Christopher Mitchell in Spring 2016. Since its upload, it has received 16 views. For similar materials see Intro to Comparative Politics in Political Science at George Washington University.
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Date Created: 02/24/16
Defining Advanced Economies • Industrialized and Post industrialized states ◦ Economy not based in commodity extraction or low wage production • Relatively wealthy with a large middle class ◦ Industrial policy about maintaining growth and distributing profits What Role for the State? • Macroeconomic stability ◦ Keynesian vs Neoliberals • Distribution of Wealth and Income ◦ Social Safety Net v Low Taxes • How much regulation ◦ Libertarians v Regulatorys • Noneconomic Economic Priorities ◦ Post Material Values • Politics of Fiscal Policy and Monetary Policy Government and Stability • Keynesians: govt should intervene in markets to maintain stability ◦ John Maynard Keynes ◦ Most important thing is protecting economy from shocks ‣ Inflation deficits may be good things ‣ Government spending can drive growth • Neoliberals: govt intervention does more harm than good ◦ FA Hayek, Milton Friedman ◦ Government intervention creates inefficiencies ◦ Crisis clear inefficient firms ◦ Get the prices right ‣ Control inflation ‣ Provide stability ◦ Favor small state The Business Cycle • Keynesians: ◦ During downturn - deficit spending ◦ In upturn - Taxes go to stimulus spending Keynesians v Neoliberals • 1850-1929 Liberals Dominate ◦ Alternating booms and crashes until Great Depression • 1930-1970 Keynesians dominate ◦ Liberalism discredited by great depression • 1980-2012 Neoliberalism Ascendant ◦ Keynesians can't fix global 1970s recession ◦ Thatcher Raegan Kohl • 2010 - future Neo Keynesian revival ◦ Support for govt stimulus in Europe grows Politics of Disruption • Government policy can have great effect on equality • Social Democrats v Low tax conservatives • Inequality & Gini Coefficient State Economic Expenditures • Human development and Education • Social Welfare ◦ Healthcare, Employment • Industrial Policy/Corporate Welfare ◦ Can promote growth, protect sectors • Must be paid for somehow ◦ US lowest social spending, lowest takes Social Democrats & the Social Welfare Safety Net • Reduces human suffering • Political and Economic Benefits as well ◦ Increase social peace and stability ‣ Better investment environment ◦ Increase legitimacy of market economy ‣ Discourages embrace of anti market ideologies ◦ Protects democracy by limiting inequality ◦ Counter cyclical keynesian benefit to economy ‣ Consumption stays high even as economy declines Low Tax Conservatives • Redistribution diminishes efficiency ◦ Govt can't pick winners and losers better than the market can ◦ May discourage necessary adaptation • High Taxes hurt growth ◦ Ant thus hurt poor and rich alike ◦ Through pro-business conservatives may favor takes to fund industrial subsidies and bailouts • Equality may only be possible by sacrificing growth ◦ Though social democrats disagree How Much Regulation • The pro regulation argument ◦ Market under regulates to chase show term profits ‣ At expense of the shared environment ‣ At expense of consumer safety ‣ Workers lack power to protest unsafe conditions ◦ Under regulated market produces crises ‣ Profit motive pushes firms to risky behavior ◦ State must step in because markets can't regulate themselves • The Anti Regulation Argument ◦ Overregulation creates ineffiencies ‣ Firm pushed into unprofitable activities ◦ Overregulation can create crises ‣ Firm pushed into socially desirable but risky activities ◦ Firms capable of self regulation ‣ Consumers can boycott unsafe or environmentally unsound goods ‣ Workers can refuse unsafe labor conditions Post Material Values • Salient issues change as scarcity and subsistence become less important ◦ Less concern over economic growth and distribution of wealth • New emphasis on quality of life issues ◦ Individual expression ◦ Diversity and Multiculturalism ◦ Feminism / LGBTQ issues ◦ Environmentalism • A source of tension with developing economies A New Kinds of Politics • Old spectrum about distributional issues • Decline of the traditional left ◦ Mirrors decline of important of labor ◦ Rise of Green Parties • Tensions in developing world ◦ Dcs still focused on material politics ◦ Dos see labor and environmental standards as hidden protectionism Two Kinds of Economic Policies • Fiscal Policy ◦ Taxes and Spending ◦ Generally set by legislature • Monetary Policy ◦ Maintaining the currency ‣ Setting interest rates and exchange rates ◦ Generally set by central bank Dynamics of Fiscal Policy • Most Policies have winners and losers ◦ Organizational advantages of small groups ‣ A few people significantly affected ‣ vs many people marginally affected ◦ Ratchet effects ‣ Policies can create their own constituencies • Lowering taxes equivalent to raising spending macro economically ◦ Raising spending and cutting taxes are both economic stimuli ◦ But both must be paid for somehow Dynamics of Monetary Policy • Monetary Policty stimulus can improve the economy in the short run ◦ Low interest rates ◦ Inflation makes boring cheaper ◦ Inflation encourages spending not saving • Too much stimulus can destroy economy in the long run ◦ Inflation discourages investment ◦ Can make people not want your money • Independent Central Bankers better able to balance the short run and long term good ◦ Politicians care about the next election more than the next decade
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