International Relations #4 Flashcards
International relations and the study of IPE
Major focus in IR since the 1970s
Connections between political power and economic forces from the local/national to the global levels
Distributions of goods and benefits between states and within states
Who gets what?
Mercantilism (17th-18th centuries)
Early capitalist system
Based on the idea that trade generates wealth, and so states promote exports and restrict imports
Nationalism and protectionism > free trade
Economic and military power complement each other (e.g, colonialism)
Mercantilism and Neomercantilism
Mercantilism protectionism based on national interest has risen and fallen
Still popular with realists and conservative critics of free trade and globalization
Appears again after 2008, financial crisis and the COVID-19 pandemic; especially among populist political leaders.
Bernard Mandeville (1670-1733)
Early critique of mercantilism The fable of the Bees (1714)
Ethic of virtue and honesty- ruin
Self interest - prosperity
Key influence on later liberal thinkers
The rise of Liberal Political Economy
Heavily influenced by Adam Smith and later, David Ricardo
Both argues that states could enjoy a comparative advantage in the production of certain goods
Based on a Laissez-faire (let it be) approach to the marketplace
Key themes: individual initiative (entrepreneurship) competition, pursuit of self-interest, invisible hand of the marketplace
David Ricardo on Comparative Advantage
TL; DR: economics should be left alone, will benefit all as the market regulates itself internationally; those able to provide goods cheaper do so and balance towards those with a comparative advantage.
The Great Depression
Liberal free market ideas dominate in “roaring” 1920’s
…. Until 1929 crash
20th Century Liberalism (A.k.a “keynesianism”)
John Maynard Keynes (1883-1946)
Individuals do not always make rational choices, so “the market” is not always infallible and the state needs to step in
John Kenneth Galbraith (1908-2006)
“The notion that the market is intrinsically and universally benign is an error of libertarians and unduly orthodox conservatives” (1984
FDR New Deal (1933)
Keynesian principles; the state plays a central role:
Create jobs to put people to work
Provides safety net through social security (unemployment insurance, pensions, health care)
Regulates industry (e.g., banks cannot speculate in financial markets)
The Post War International Economic Order
Bretton Woods, 1944 establishes a system of stabilized exchange rates to avoid another great depression
Based on liberal principles, according to national interests (“embedded liberalism”)
The Bretton woods Institutions
International Monetary Fund (IMF)
International bank for reconstruction and development (IBRB, later the World Bank)
General agreement on Tariffs and Trade (GATT)
Temporary agreement until a more permanent one could be worked out, completed in 1955 with the World Trade Organization (WTO)
Bretton Woods Successes (international)
Under the Marshall Plan, US$ Billions rebuild the economies of Europe as major trade and security partners
IMF controls exchange rates and Balance of payments regime
By the 1960’s, IMF expands role as a credit provider to developing countries
IMF and World Bank dominated by the US to this day
Keynesian Successes (Domestic)
High employment
High productivity
Low inequality
Relative labour peace
The Breakdown of Bretton Woods
Originally, currency values were based on the price of gold (the gold standard) which was set at 35$ USD/ Ounce
By 1971, US trade imbalances and financial burden of the Vietnam War led the US to abandon the gold standard and raise import tariffs
High inflation through “oil shocks” of the mid-1970s exacerbated financial problems
Neoliberalism
Emerges during the middle of the 20th century, in Europe: Vienna, Mont Pélerin society (Switzerland). Ludwig von Mises, Friedrich Hayek
Later in the US. Gary Becker, Milton Friedman, University of Chicago
Marginal during mid-century, central beginning in the 1970s
