IPE - Theories Flashcards
Introduction to trade
Post WWII – we have entered into the most recent stage of internationalisation. A system which promotes: (seen as the basis of globalisation).
- Free trade
- Free flow of capital
- Stable exchange rates.
Economic Nationalism Perspective Overview Main Actors Conflict Today
Mercantilism - only limited amount of wealth in the world and that each state must secure its interests by blocking the economic interests of other states - known as the Zero-sum game.
- Empires overseas where trade between rival empires was discouraged
- Realists are obsessed with relative gains (being richer than other countries)
MAIN ACTORS
Economic nationalists recognise the importance of market-based actors such as firms but subordinate their importance to the role of the state
Firms are subject to the dictates of the state.
CONFLICT
Imports may pollute the nation through the introduction of foreign values whereas a liberal would argue that the sovereignty of a consumer is most important.
Economic Nationalism today
Countries continue to protect their markets from foreign competition even though committed to free trade.
China has strict economic conditions on foreign investments - they have engagement in economic nationalist policies in pursuit of development.
Hegemonic Stability Theory
Pax Britannica and Pax Americana – in certain times in history, power is concentrated in one state. E.g. Britain and the US used to be a global hegemon.
The theory that a dominant state is needed to support an integrated world economy; the hegemon is willing to bear the costs of maintaining the system
o Argued to create more peaceful conditions and stability enhances countries ability to trade.
o China vs US in trade creates instability.
The Liberal Perspective
Overview
Key Actors
Today
states trade to maximise social well-being.
cooperation rather than conflict where wealth had traditionally always accumulated in the wealthy elite but if we were to liberalise, we could promote self-growth.
o Emphasis on the ability of individuals to choose the most attractive means or to negotiate their differences.
- Rather than Zero-sum game there is MUTUAL BENEFIT.
KEY ACTORS
The economic actor is the individual, not the state.
Firms are a source of economic wealth.
TODAY
WTO are founded on liberalist principles of free trade and IMF and World Bank.
TNC’s urge states to open their markets to the free flow of investment
- Despite its dominance there are challenges for example:
o 2008 crisis whether self-regulation of financial firms can lead to economic efficiency, corruption or crisis
The Theory of Comparative Advantage
The ability of a country to make and export a good relatively more efficiently than other countries; the basis for the liberal economic principle that countries benefit from free trade among nations
- Labour force, climate or natural resources, consumer preferences can determine comparative advantage.
- Power relations can determine - banana farming vs telephone industry
- Telephone would make more, so comparative advantage works better leading to wealth accumulations with certain countries.
- comparative advantage is argued to be inherently unequal
What factors shape trade?
Individual Trade preferences o Economic self-interest. - Interest groups Power dynamic between interest groups. - Domestic institutions o Political parties as interest aggregators.
Trade negotiations are 2 level game
1- Bargaining between trading partners
2- Balancing competing demands of interest groups.
liberal institutionalism
institutions can help states overcome collective action problems and help them realise where their competitive advantage lies and helps to bring trust.
