International Political Economy
International Political Economy PSC 1003
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This 5 page Class Notes was uploaded by Kerrigan Unter on Monday October 19, 2015. The Class Notes belongs to PSC 1003 at George Washington University taught by Olson, L in Fall 2015. Since its upload, it has received 9 views. For similar materials see Introduction to International Politics in Political Science at George Washington University.
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Date Created: 10/19/15
PSC1003 International Political Economy International Political Economy and the Perspectives because of the ongoing process of globalization states are less independent in the types of economics policies that van pursue rea1ists believe states should take an inward first approach to development resolving domestic economic problems at home first allowing them to exert more power internationally 1ibera1s advocate an outwardfirst approach coordinating domestic economic policies with the goal of integrating into the global economy the identity perspective examines the goals of economic development emphasizing for example the ideological effects of the Washington Consensus the possibility of pursuing sustainable development policies and the discursive con ict this causes between the developed and the developing world and the ideologies that underlie the integrations of the global economy Economic Policies 7 categories of economic policies macroeconomic microeconomic governance policies exchange rate policies trade policies policies towards foreign investment and finance and immigration policies Macroeconomic Policy Fiscal Policy 0 Concerns the state s budget and whether the budget is in balance in deficit or in surplus I A balanced budget has a neutral effect on the economy I A budget deficit means the state is spending more than it is collecting in taxes For Keynesians this will stimulate the economy I A budget surplus means that state is taking more in taxes than it is spending This will generally constrict the economy Monetary Policy 0 Deals with the supple of money in the economy which can be in uences by a central bank buying and selling government securities which will in turn effect the interest rate I Emphasizes in on M1 cash in the economy which can be affects through the interest rates on M2 interest bearing savings I Raising the interest rates encourages savings and deters borrowing tightening M1 I Lowing interest rates discourages savings and encourages borrowing loosening M1 Balance of Payments The third macroeconomic policy that accounts for the in ow and out ow of goods services and investments The Current Account 0 Measures trade ows in addition to government expenditures and net income on foreign investment The Capital Account 0 Measures portfolio investments such as stocks bonds and currency reserves held by a state and foreign direct investment Balance of payments is measured in terms of a surplus and deficit on one account or the other 0 If a country spends more than it earns it has a current account de cit This is balanced by borrowing and creating a capital account surplus I For example if a state runs a budget deficit and accrues debt and is a net importer of goods it will offset this by selling currency or bonds to other states 0 If a country earns more than it spends it runs a current account surplus This is balanced by lending and creating a capital account de cit I If a country is a net exporter of goods it will offset this by buying other countries currency or bonds Realists argue that it is better to run a capital account deficit since it is better to be a lender than a borrower Being a lender state increases a state s power relative to the borrower Liberals argue that so long as the balance of payments is in balance it doesn t matter Surpluses and deficits will come and go What is important are the interdependencies that are created 0 Liberals will also argue that both borrowers and lenders become tied together and share a mutual interest in preventing balance of payments crises Balance of payments crises occur primarily when an indebted state is unable to service its debt 0 Chronic balance of payments crises impede economic development and tie up capital in debt service that could be used for other economic goals 0 In the face of a balance of payments crisis state must often turn to the IMF for a short term loan M icroeconomic Policies Deal with a specific sector of the economy and include policies such as Regulations such as health safety and environmental standards Subsidies which comprise grants or loans by the state with the intention of fostering development in a particular sector through lowering the cost of production Price controls which keep prices down Price supports which set a basic minimum for commodities Competition policies or how the state deals with monopolies Labor law Governance Policies Concerned with how well the government can protect individuals and enforce contracts Includes issues such as Security in the sense of physical security Can the state in fact exercise its executive power effectively Predictable domestic policies which measure the stability of the government and whether the state can attract investment Corruption particularly within the legal system 39 States with high levels of corruption are viewed as unattractive to business because it adds additional costs usually in the form of bribes for the business I While in the past most businesses saw corruption as the price of doing business Western states have recently cracked down domestically on companies that engage in corrupt practices Exchange Rate Policies Examines the value of one state s currency in terms of other state s in a market which generally effects the price of exports From the end of the World War II to 1971 the dollar gold convertibility standard created a fixedexchange rate system With the US abandoning support for this system the global economy shifted to the more marketbased oating exchange rate system In reality what exists is a managed or dirty oat where states coordinate with one another usually in secret to intervene in currency markets in order to affect the value of a state s currency Trade Policies Concerned with how a state deals with in ows and out ows of goods and services usually emphasizing whether barriers to trade exist Most common way to restrict imports is through antidumping duties 0 Dumping is when the exporting state provides a heavy subsidy to an industry such that the good can be sold at lower than the cost of production 0 The importing state responds by imposing a retaliatory antidumping duty in essence a tariff on the good 0 This is the most common issue taken to the World Trade Organization s dispute resolution body Controversially some qualitative restrictions such as health and environmental standards are often seen as barriers to trade 0 The WTO allows qualitative standards to be put in place when they serve a social rather than an economic purpose 0 Many corporations and states however take other states to the WTO accusing them of imposing qualitative restrictions for economic reasons Foreign Direct Investment Many developing states seek invest from foreign multinational corporations as a way to inject capital into the economy In the past a much more tenuous relationship existed with developing states seeking to impose restrictions on FDI 0 Trade Related Investment Measures TRIMs were imposed to demand that MNCs use a certain percentage of locally produced content in their production process These have been banned by the WTO 0 Trade Related Intellectual Property TRIPS were often imposed to force MNCs to transfer technology to the host state These are also banned by the WTO which generally adheres to Western intellectual property and copyright standards Immigration deals With movement of labor the least integrated aspect of globalization and the global economy concemed With legal frameworks governing legal immigration and how to respond to illegal immigration laws encouraging skilled immigrant labor such as HlB Visas in the US would fall under this category