Chapter 2.4: Contemporary mercantilism Flashcards

1
Q

What is the argument of strategic trade theory?

A

governments and industries can use trade protection and subsidies in a strategic way to expand their global market share and pre-empt entry into the market by competitor firms

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2
Q

Economists have sought to explain the persistence of state intervention in?

A

high-technology sectors such as computer and automobile production

  • through strategic trade theory
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3
Q

When can state intervention be useful? In which kind of market?

A

Oligopolistic markets with few large companies and high entry costs

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4
Q

What other variant of mercantilist thinking gained widespread attention?

A

theory of hegemonic stability

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5
Q

How did theory of hegemonic stability come about?

A

proposed by Charles Kindleberger to explain the collapsed of international order in the troubled interwar years, when US was unwilling and the UK no longer able to provide hegemonic leadership

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6
Q

How does a Hegemon help in stability?

A

a hegemon: dominant power with preponderant power resources

  • competitive and conflictual nature of international system
  • set norms and rules
  • ensure compliance by other states
  • inducing cooperative behaviour through giving financial aid or economic concessions to other states
  • if needed, economic and military strength to coerce other nations into compliance
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7
Q

Example of a hegemony helping through financial aid?

A

US economic aid through the Marshall Plan instrumental in helping with economic recovery process in Europe

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8
Q

What did the critics of hegemonic theory point out?

A

hegemonic theory fails to explain the continued existence of international order and stability during the 1960s and 1970s when US hegemony was in decline

  • hegemons play an important role in creating rather than maintaining international order
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9
Q

How does mercantilist thought in the 20th century depart from traditional mercantilist themes?

A

considers a system of free trade as integral to hegemonic order

traditional
- manage trade to achieve favourable trade balance

hegemonic stability
- free trade can only be secured if backed up by a hegemonic state with preponderant power

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