Chapter 1 - International Political Economy

Question 1

What does IPE study?

Answer 1

Battle between winners & losers of the global economic exchange. Furthermore, its studies the welfare outcomes of certain policy.

Question 2

How does foreign economic policy emerge?

Answer 2

It emerges from the interactions between societal actor’s interests and political institutions.

Question 3

What are the main schools of thought?

Answer 3

1) Mercantilism: makes the connection between wealth and power, which is acquired via trade.
2) Liberalism: alter government policy, markets should make the allocation, enrich individuals (not state), make products at relative low costs and trade them
3) Marxism; capitalism is the private ownership of capital + wage labour.

Question 4

What are the theoretical foundation of Marxism?

Answer 4

Value of goods consists out of labour, hence wages are too low and results in profit –> extra capital investments –> concentration of capital –> falling ROI –> further reduction of labour
==> imbalance between production (capital investments) and consumption (low wages)

Question 5

What are interests and beliefs in the global economy?

Answer 5

Interests arise from positions in the global economy

Ideas provide a set of beliefs about cause and effect, they focus on the relationship between government policies and economic outcomes

Political institutions transform these interests into policies and establish rules that govern the political process ==> but who is empowered?

Question 6

Explain Mecantillism

Answer 6

State is the most important actor
State intervenes in the economy to allocate resources

Anarchy in international system, competition for industries and resulting trade conflicts

Aims to enhance power of the state

Question 7

Explain Liberalism

Answer 7

Individuals are the most important actors

They enforce property rights and facilitate market exchanges

Harmonious international system, benefits to all countries ==>create political framework that enables countries to benefit

Goal is to enhance the aggregate social welfare

Question 8

Explain Marxism

Answer 8

Classes are the actor

State is an instrument of the capital class to gain power

International system is exploitative, rich countries exploit labour in poor countries

Aim to promote equitable distribution