Key concepts

Question 1

Institutional diversity

Answer 1

Institutional diversity refer to the variety of different institutional arrangements that are found within a particular context. This includes the number and type of institutions, their roles, relationships, and interactions.

Question 2

Clusters

Answer 2

Most EU states share at least some important institutional features with a group of other states depending on the field of cluster.
* Nordic, continental, midtiterranian, post-communist, post-Sovjet

Question 3

The Wall Street crash

Answer 3

The Wall Street Crash of 1929 was the greatest stock market crash in the history of the United States.

It happened in the New York Stock Exchange on Tuesday October 29, 1929, now known as Black Tuesday. Bank failures followed, resulting in businesses closing. This caused worldwide panic, which started the Great Depression.

Question 4

Great Depression

Answer 4

Lasting almost 10 years (from late 1929 until about 1939) and affecting nearly every country in the world, it was marked by steep declines in industrial production and in prices (deflation), mass unemployment, banking panics, and sharp increases in rates of poverty and homelessness.

Question 5

European forms of government (e.g. federal v unitary state)

Answer 5

Federal states: Germany, Austria, Switzerland (the U.S.) - nation combined of autonomous states, regions, etc. that can have their own laws and rules.

Unitary states: most European states - one government, one set of rules

Question 6

Dirigisme (policy making)

Answer 6

Dirigisme => France, the state neglected some industries to protect industries where France could have a competitive advantage (helped develop some industries with subsidies)

Question 7

Incrementalism (policy making)

Answer 7

Germany (Rechtsstaat) => incrementalism which is the theory of public policy making, according to which policies result from a process of interaction and mutual adaptation among a multiplicity of actors advocating different values, representing different interests, and possessing different information.

Question 8

ad hoc/case-by-case/pragmatic policy making

Answer 8

UK => phrases mean “for this purpose only.” Its literal translation from the Latin is “to this.” Common examples are an ad hoc committee or an ad hoc commission created for a specific or one-time purpose to address issues that fall outside the scope of other existing committees or commissions.

Question 9

Consensual policy making

Answer 9

Sweden => Consensus decision-making or consensus process (often abbreviated to consensus) are group decision-making processes in which participants develop and decide on proposals with the aim, or requirement, of acceptance by all.

Question 10

Bretton Woods

Answer 10

Under the Bretton Woods System, gold was the basis for the U.S. dollar and other currencies were pegged to the U.S. dollar’s value. The Bretton Woods System effectively came to an end in the early 1970s when President Richard M. Nixon announced that the U.S. would no longer exchange gold for U.S. currency.

<- in practice: the US needs to make sure that their amount of gold is the same as the amount of dollars being printed (1 ounce of gold = $35 - they counted how much gold they had and how many dollars, and thereby deciding the value). If they print more money than what they have in value of gold, inflation happens - all the extra money means that the dollars value decrease.

• Discussion:
  Knew how much the money was worth
  Stability of prices
  Very closed economies - more state power
  Not very competitive
  Had to sign contracts with governments in order to invest in other countries

Question 11

The IMF

Answer 11

International Monetary Fund

Promoted global monetary cooperation and helped countries to become more stable, by providing short-term loans to help countries finance their temporary balance-of-payments deficits

Question 12

GATT

Answer 12

The General Agreement on Tariffs and Trade (GATT)

• a series of intergovernmental negotiations that were agreed on instead of the intended International Trade Organization (ITO) that the congress would not agree to.
• GATT was a weak organization that wasn’t meant to stand alone, but ended up doing so because the ITO failed to appear.
• The difficulty of reaching agreement, and the prospect of having to enforce a much more complex package of arrangements, led to the creation of the WTO, a far stronger body than GATT.

Question 13

Development of the ‘Keynesian-welfare state’ in post-war Europe

Answer 13

Keynesianism = demand side policies (will try to change demand by fiscal policy)

Post-war: in favour of state intervention for the recovery of the ailing capitalist economies of Europe.

Keynesian economics dominated economic theory and policy after World War II until the 1970s, when many advanced economies suffered both inflation and slow growth, a condition dubbed “stagflation.”
Keynesian theory’s popularity waned then because it had no appropriate policy response for stagflation.

Question 14

Mild Keynesian

Answer 14

Increasing government spending to create employment

Question 15

Ordoliberalism

Answer 15

It emphasizes the importance of a strong legal framework and the enforcement of contracts, as well as the importance of a stable monetary policy. It also advocates for limited government intervention in the economy. This approach has been influential in Germany, and it is often seen as the basis of the German economic system.

Question 16

Indicative planning

Answer 16

Indicative planning is a form of economic planning implemented by a state in an effort to solve the problem of imperfect information in market economies by coordination of private and public investment through forecasts and output targets.

Question 17

Autarky

Answer 17

A self-reliant state.
* An economic system of self-sufficiency and limited trade. A country is said to be in a complete state of autarky if it has a closed economy

Question 18

Growth models: Export-led growth v domestic consumption-oriented growth

Answer 18

Export-led or consumption-oriented growth models.

“conceptualise the EU as a union of two different growth models:

• those that prioritise export growth (be it manufacturing, high-tech firms, tradable services, or foreign and direct investment),
• and those that prioritise domestic-consumption (be it the public sector, small family firms, construction, real estate and other non-tradable services).”

Question 19

Postwar economic boom

Answer 19

The post–World War II economic expansion, also known as the postwar economic boom or the Golden Age of Capitalism, was a broad period of worldwide economic expansion beginning after World War II and ending with the 1973–1975 recession.
The United States, the Soviet Union and Western European and East Asian countries in particular experienced unusually high and sustained growth, together with full employment.

Question 20

Oil crisis

Answer 20

a sudden rise in the price of oil that is often accompanied by decreased supply. Since oil provides the main source of energy for advanced industrial economies, an oil crisis can endanger economic and political stability throughout the global economy.

Question 21

Stagflation

Answer 21

High inflation and low growth

Question 22

‘Thatcherism’

Answer 22

Thatcherism represents a belief in free markets and a small state. Rather than planning and regulating business and people’s lives, government’s job is to get out of the way.
The political beliefs of Margaret Thatcher.

Question 23

Transformation of dirigisme

Answer 23

The dirigiste tradition is to protect national champions, but this has moved to be more favoring of national suppliers (less direct)

Moving towards a more neoliberal political direction in order to become competitive. This has been discussed sine the 80’s.

Question 24

Speculative capitalism

Answer 24

Speculative capital includes those funds earmarked by an investor for the sole purpose of speculation, which means that those funds are earmarked for high-risk/high-reward investments. This capital is often associated with extreme volatility and a high probability of loss.

Question 25

Asset price inflation

Answer 25

Asset price inflation is the economic phenomenon whereby the price of assets rise and become inflated.

• A common reason for higher asset prices is low interest rates => When interest rates are low, investors and savers cannot make easy returns using low-risk methods such as government bonds or savings accounts.

Question 26

Neo-liberal capitalism

Answer 26

It emphasises:
* efficiency of the market competition,
* role of individuals in determining economic outcome,
* distortions that are associated with government intervention and market regulations.

• Labour and capital (production factors) get paid what they are worth through supply/demand.
• The free market will not waste production factors, as prices will adjust to ensure demand and thereby labour is ensured as well.
• The economy will naturally return to full employment, but fiscal and monetary policy will stabilize fluctuations.

Question 27

Crisis in the Eurozone

Answer 27

Reaction from the financial crisis and new common monetary policy.
The European sovereign debt crisis was a chain reaction set in the tightly knit European financial system. Members adhered to a common monetary policy but separate fiscal policies – allowing them to spend extravagantly and accumulate large amounts of sovereign debt.

Economies like Greece, which relied heavily on debt, struggled to survive. To make matters worse, the value of their existing debt also increased with interest rates.

In order to combat the high budget deficits, countries that requested bailouts were required to abide by certain austerity measures – government policies aimed at reducing public sector debt

Question 28

Europeanization of financial markets

Answer 28

European integration such as the establishment of the SEM, free movement of capital and the single currency

Question 29

Securities-based financial systems

Answer 29

Securities-based (E.g., the UK):
* Greater reliance on issue of shares & corporate bonds – can then be traded on secondary markets

• Stock market rules discouraging cross-shareholding arrangements
• Numerous small investors, but large institutional investors – e.g. mutual funds and pension funds
• High stock market capitalization
• ‘Arms-length’ relations between financial institutions and non-financial companies
• Capital ‘impatient’ – NFCs responsive to short term demands of stockholders
• Relative importance of financial sector in economy

Question 30

Bank-based financial systems

Answer 30

Bank based (e.g., Germany):
* Reliance on banks for corporate funding

• Often specialized or regionalized credit institutions
• Close relations: banks and non-financial companies (NFCs)
• Banks embedded in inter-corporate networks
• Development of strategies by banks towards NFCs
• Patient capital
• Corporate strategies reflect the nature of financing
• Variation in division between retail and investment banking
• Variation in leadership role of banks e.g. Germany v Belgium & Holland v France

Question 31

Financial disintermediation

Answer 31

disintermediation involves the removal of banks, brokers, or other third parties, allowing individuals to transact or invest directly. Cryptocurrencies are disintermediating the financial sector and government from monetary transactions.

Question 32

Patient/impatient capital

Answer 32

Patient = long term

Impatient = short term

Question 33

Bifurcated structure of British capitalism

Answer 33

<- there’s not enough medium skilled workers, so all the mid level jobs are left open because high skilled workers won’t take lower level jobs, and low skilled can’t take higher level jobs

<- LME does not invest as much in education as an CME, companies doesn’t see the incentive to educate their workers (there’s always cheaper labour somewhere)

<- LME is more general skills, university level skills

<- CME is very specific education, e.g., within a firm

Question 34

Objective v subjective poverty

Answer 34

The main difference:
* objective poverty focuses on people’s access to different types of resources
* subjective poverty focuses on indicators of standards of living people actually enjoy.

Question 35

Absolute v relative poverty

Answer 35

Absolute poverty is when household income is below a certain level. This makes it impossible for the person or family to meet basic needs of life including food, shelter, safe drinking water, education, healthcare, etc.

Relative poverty is when households receive 50% less than average household incomes. So they do have some money but still not enough money to afford anything above the basics. This type of poverty is, on the other hand, changeable depending on the economic growth of the country.

Question 36

multi-dimensional deprivation

Answer 36

An index that captures the percentage of households in a country deprived along three dimensions of well-being – monetary poverty, education, and basic infrastructure services – to provide a more complete picture of poverty.

Question 37

Inequality of income v wealth

Answer 37

Income inequality is how unevenly income is distributed throughout a population. The less equal the distribution, the higher income inequality is.

Wealth inequality is how unevenly wealth is distributed. Wealth = assets - liabilities

Question 38

The Gini coefficient

Answer 38

based on the comparison of cumulative proportions of the population against cumulative proportions of income they receive, and it ranges between 0 in the case of perfect equality and 1 in the case of perfect inequality.

Question 39

Anglo-Saxon model of capitalism (or liberal market economy)

Answer 39

capitalism characterized by extensive market coordination by economic actors and relatively neutral patterns of governmental market regulation aimed at maintaining property right institutions without privileging particular social actors.

Question 40

Financial capitalism

Answer 40

a stage of capitalism in which economic and political domination is exercised by financial institutions or financiers rather than by industrial capitalists.

Question 41

Financial liberalization

Answer 41

removal of government intervention on financial markets

Question 42

Debt-driven consumption

Answer 42

In an economy where the price of goods is elevated by commercial debt and consumer incomes are deeply eroded by mortgage debt, there is a persistent and subtle advantage given to low-quality, mass-produced goods, and growth is fostered in this direction.

Question 43

Fiscal austerity

Answer 43

strict economic policies implemented by a government to reduce government spending and public debt.

Question 44

Decentralized collective bargaining.

Answer 44

In a decentralized collective bargaining, wages are set for the workers of a firm or company.

Question 45

Different conceptions of the firm: private v public organization

Answer 45

Majority considering ‘company’ to be a private organization serving the interests of its owners i.e. shareholders;

Others consider ‘company’ to be public bodies/entities, where substantial rights are ascribed to not only shareholders and managers but also employees & suppliers (e.g. France, Germany);

Question 46

Works councils and codetermination

Answer 46

Codetermination is a system of corporate governance under which employees of an organization can vote for representatives on its board of directors (as seen in Germany)

In legal terms, the works council is a body which represents the entire workforce (i.e. all employees) within a particular establishment with a minimum of five employees and exercises the workplace-level consultation and co-determination rights conferred by law on the workforce as a whole

Question 47

Hostile takeover.

Answer 47

A hostile takeover occurs when an acquiring company attempts to take over a target company against the wishes of the target company’s management.

Question 48

Cross-shareholdings

Answer 48

describes a situation where one publicly-traded company holds a significant number of shares of another publicly-traded company.

Question 49

State Capitalism

Answer 49

State capitalism refers to an economic system in which the state plays a central role in the economy, often through state-owned enterprises, government subsidies, and other forms of intervention. In relation to France, state capitalism has been a feature of the French economy throughout the country’s history, with the government historically playing a significant role in the economy through nationalization of key industries and creation of state-owned enterprises. This tradition of state intervention has been both supported and criticized, with some arguing that it promotes social welfare and stability, while others arguing it leads to inefficiencies and lack of competition.

Question 50

Planned capitalism

Answer 50

Planned capitalism is a system that combines elements of capitalism and central planning. In relation to France, it has been a feature of the economy throughout history, with the government implementing policies and regulations to guide the economy towards growth and social welfare. This includes public investment, state-owned enterprises and government planning. However, the French economy is a mixed one, and in recent years, the government has sought to reduce the state’s role through privatization and deregulation.

Question 51

Welfare capitalism

Answer 51

Welfare capitalism is a system that combines capitalism with a comprehensive system of social welfare programs. In relation to France, it is often associated with the “French model” of capitalism which is characterized by a large welfare state and comprehensive social welfare programs such as universal healthcare, pension schemes, and unemployment insurance. This system has been implemented to promote social welfare and stability, but it has also led to high levels of taxes and public debt.

Question 52

Mercantilism

Answer 52

Mercantilism is an economic theory that emphasizes the role of government intervention in the economy to promote national wealth and power, by accumulating gold and silver, increasing exports and limiting imports. In relation to France, mercantilism was a dominant economic theory during the 16th and 17th centuries and the French monarchy implemented mercantilist policies to increase national wealth and power. This included creating trade monopolies, imposing tariffs and other trade restrictions, and establishing state-controlled companies to engage in foreign trade. However, mercantilism fell out of favor in the 18th century with the rise of classical economics, which emphasized the benefits of free trade and the limitations of government intervention in the economy.

Question 53

Protectonism

Answer 53

Protectionism is an economic policy that aims to protect domestic industries from foreign competition by using tariffs, quotas, and other trade barriers. In relation to France, protectionism has been a feature of the French economy throughout history, particularly in the 19th and 20th centuries, with the government implementing protectionist policies to promote the growth and development of domestic industries and protect jobs and wages. This included imposing tariffs on imported goods, creating trade barriers, and establishing state-controlled companies to engage in foreign trade. However, in more recent times, France has been more open to free trade and has reduced tariffs and other trade barriers, but some industries such as agriculture and manufacturing continue to be protected through subsidies and other forms of government support.

Question 54

Wage stability

Answer 54

Wage stability refers to the ability of wages to remain relatively stable over time. In relation to France, the government and labor unions have implemented policies and agreements, such as collective bargaining agreements, to maintain wage stability and avoid significant fluctuations in wages. This is often done through national agreements between labor unions and employer organizations, which set minimum wages and other working conditions across entire sectors of the economy.

Question 55

Price controls

Answer 55

Price controls refer to government regulations that set limits on prices.

Question 56

Price ceiling

Answer 56

Price ceiling is a price control that sets a legal maximum price.

Question 57

Infant industry argument

Answer 57

Infant industry argument is the economic theory that a new or developing industry needs protection from foreign competition in order to grow and become competitive. In relation to France, the government has historically implemented protectionist policies to promote the growth and development of new and developing industries, such as tariffs and subsidies. These policies have been implemented to protect new or developing industries from foreign competition and help them grow and become competitive.

Question 58

Market Failure

Answer 58

inefficient distribution of resources that occurs when the individuals in a group end up worse off than if they had not acted in rational self-interest. In the case of a market failure, the overall group incurs too many costs or receives too few benefits.

Question 59

Interventionist state

Answer 59

governmental interference in economic affairs at home or in political affairs of another country.

Question 60

The agglomeration process

Answer 60

where large market and states attracting FDI do not suffer any weakening of their capacity to tax capital (national champions)

Question 61

Semi-presidential system and ‘cohabitation’

Answer 61

Cohabitation is a system of divided government that occurs in semi-presidential systems, such as France, whenever the president is from a different political party than the majority of the members of parliament. It occurs because such a system forces the president to name a premier (prime minister) who will be acceptable to the majority party within parliament.

Question 62

National champions

Answer 62

National champions are corporations which are technically private businesses but due to governmental policy are ceded a dominant position in a national economy. In this system, these large organizations are expected not only to seek profit but also to “advance the interests of the nation”; the government sets policies which favor these organizations.

Question 63

‘Les Trente Glorieuses’

Answer 63

Les Trente Glorieuses (‘The Glorious Thirty’) was a thirty-year period of economic growth in France between 1945 and 1975, following the end of the Second World War.

Question 64

Dual labor market

Answer 64

dual labor market refers to the theory that the American economy, or labor market, is separated into two categories: the Primary Sector and the Secondary Sector.

• Primary Sector have jobs with good pay, good job roles, company status, and job security, as well as clean and safe working conditions and the potential to be promoted.
• Secondary Sector, has workers with low-status jobs who make a low-to-minimum wage, operate in poor working conditions, and have poor job security and little opportunity for promotion.

Question 65

retrenchment

Answer 65

a situation in which a government, etc. spends less or reduces costs

Question 66

Residualism

Answer 66

Residualism is an outlook on social welfare which maintains. that assistance should be provided only when traditional means. of meeting daily needs (e.g. family or the labor market) fail to. satisfy the minimal requirements of life

Question 67

Collective bargaining

Answer 67

the process in which working people, through their unions, negotiate contracts with their employers to determine their terms of employment

Question 68

Opening clauses

Answer 68

Opening clauses in sectoral collective agreements have become increasingly common to allow for some flexibility at the local and firm level. They delegate greater decision-making to the enterprise level and allow firms to undercut collectively agreed standards.

Question 69

Bicameral legislature

Answer 69

Bicameralism is a type of legislature, one divided into two separate assemblies, chambers, or houses, known as a bicameral legislature.

E.g., house of representetives and senate

Question 70

Industrial relations systems

Answer 70

consists of the whole gamut of relationships between employees and employees and employers which are managed by the means of conflict and cooperation.

Question 71

‘Concession bargaining’

Answer 71

a kind of collective bargaining in which the trade unions surrender or give back previously gained improvements in pay and conditions in exchange for some form of job security.

Question 72

‘Orange revolution’

Answer 72

2004-‘Orange Revolution’ –Mass protests were led by an opposition leader Viktor Yushchenko (who became president in 2005) over rigged elections that gave victory to pro-Russian candidate Viktor Yanukovych. Supreme Court later annuls poll result;

Question 73

‘Maidan revolution’

Answer 73

2013-2014- ‘Maidan Revolution’November - Tens of thousands of protesters take to the streets to protest at the government’s sudden decision to abandon plans to sign an association agreement with the EU, blaming Russian pressure. Security forces kill at least 77 protesters in Kyiv. President Yanukovych flees to Russia, opposition takes over in February

Question 74

‘Territorial sovereignty’

Answer 74

a state’s ability to assume that other states (as well as other global subjects of law) refrain from performing activities about state sovereignty.

Question 75

Annexation

Answer 75

a formal act whereby a state proclaims its sovereignty over territory hitherto outside its domain. Unlike cession, whereby territory is given or sold through treaty, annexation is a unilateral act made effective by actual possession and legitimized by general recognition.

Question 76

‘Shock Therapy’

Answer 76

a group of policies intended to be implemented simultaneously in order to liberalize the economy
E.g., going from fully controlled to liberalized within weeks. The result in the short term is complete chaos and high inflation

Question 77

Rule of law

Answer 77

Rule of law is a principle under which all persons, institutions, and entities are accountable to laws that are: Publicly promulgated. Equally enforced. Independently adjudicated. And consistent with international human rights principles.

Question 78

Entrenched corruption

Answer 78

“Systemic corruption” exists where corruption is
pervasive or entrenched in a society. In other words, it
exists where it is routine in dealings between the
government and private individuals or businesses.

Question 79

Rent-seeking capitalist class i.e. oligarchs; minigarchs

Answer 79

when an entity seeks to gain added wealth without any reciprocal contribution of productivity.

An oligarch is one of the select few people who rule or influence leaders in an oligarchy—a government in which power is held by a select few individuals or a small class of powerful people.
oligarch is especially associated with and applied to Russian figures known for their wealth and political influence.

Question 80

EU Association Agreement

Answer 80

An association agreement is a bilateral agreement between the EU and a third country.

Question 81

Dutch disease

Answer 81

The Dutch Disease is an economic phenomenon in which a country experiences an increase in its currency value due to a sudden influx of foreign capital, resulting in a decline in the competitiveness of other industries.