Key Terms Flashcards
Electoral-economic cycle
- Definition: hypothesis about the relationship between the two. The electoral cycle causes economic fluctuations, including improving inflation. The economy affects election outcomes. Economic fluctuations before an election can tip the balance. The electorate rewards incumbents for prosperity and punishes them for recessions. short run spurts of economic prosperity benefit incumbents.
- Significance: politicians, esp incumbents have the power to aim their economic policies specifically at gaining support.
- E.g. Germany, New Zealand, US → unemployment reaches low around election time. Between 1946 and 1976, the best way to beat inflation was to hold a presidential election
Tufte
Economic Modernization
- Definition: Modernization consists of four factors: income, level of industrialization, education, and urbanization → democracy becomes more likely as these increase
- Significance: An extension of modernization theory, which is coined by Rostow and refers to 1) becoming “well-to-do” and 2) establishing a democracy
- Rostow’s Steps: 1) traditional society 2) pre-conditions for takeoff 3) takeoff (rapid growth) 4) drive to maturity 5) high mass consumption
- Lipset adds democracy as a stage, saying that a country must urbanize, industrialize, improve literacy, grow the media, develop institutions of participation–all at a moderate pace–and then can establish democracy
- Example: East Asian Tigers, e.g. South Korea, Taiwan – successfully democratized only after economic growth reached relatively high levels
Lipset
Stages of Modernization
- Traditional society
- Pre-conditions for take-off
- Take-off
- Drive to maturity
- High mass consumption
Rostow
Rostow’s Stages of Modernization
Traditional society
◦ Based on subsistence farming, fishing, forestry, some mining
Stage 1
Rostow’s Stages of Modernization
Pre-conditions for take-off
◦ Building infrastructure needed for development - transport network, power supplies, communications
Stage 2
Rostow’s Stages of Modernization
Take-off
◦ Industrial revolution - rapid growth of manufacturing industries, infrastructure, financial investment
Stage 3
Rostow’s Stages of Modernization
Drive to maturity
◦ Innovations + technologies replace older industries
◦ Economic growth spreads throughout the country
Stage 4
Rostow’s Stages of Modernization
High mass consumption
◦ Consumer society - people buy goods + services
◦ Welfare systems fully developed
◦ Trade is widespread and expands
Stage 5
Dependency Theory
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Definition: Analytical framework explaining global economic inequality by emphasizing historical exploitation + structural imbalances between developed (core) and underdeveloped (periphery) nations.
◦ Based on this logic, developing countries should detach from the world market - Significance: Developing countries cannot replicate path of developed countries → challenges traditional development theories, highlighting the impact of historical processes
- E.g. Nations in sub-Saharan Africa experience economic underdevelopment due to historical legacies of colonialism + their economies are structurally disadvantaged in global trade relationships
Frank
Mutilevel international system
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Definition:
◦ Core = economically + technologically developed, high standards of living
◦ Semi-periphery = intermediate industrialization/development
◦ Periphery = less developed, provide raw materials + cheap labor
◦ Goods flow from core to semi-periphery + periphery,
◦ Resources flow from semi-periphery + periphery to core - Significance: Reinforces Frank’s dependency theory, shows how core countries exploit periphery countries – structural inequality in the global system
- E.g. Core = USA, Japan; Semi-periphery = China, Brazil; Periphery = DRC
Frank
The Division of Labor
- Definition: Specialization and distribution of tasks in a society or manufacturing process
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Significance: Smith believes the division of labor to be the “greatest improvement in the productive powers of labor” → efficiency gains and increased economic productivity
* E.g. In China, manufacturing processes are often divided among different regions or cities. also manufacturing being split among different countries, such as raw materials being sourced in one place (raw materials for batteries mostly sourced in underdeveloped countries like gabon, drc, but most batteries are actually manufactured in developed countries like US and korea)
Smith
Gains from Exchange
- Definition: Gains from exchange arise when individuals/nations specialize in producing goods and services in which they have a comparative advantage → then trade with others who have a different comparative advantage
- Significance: Individuals/nations benefit by producing what they are relatively more efficient at
- Trading with other countries = efficient resource allocation
- E.g. Ethiopia: comparative advantage in producing coffee due to climate, higher opportunity cost in producing computers; South Korea: comparative advantage in producing computers due to advanced technology and skilled labor, higher opportunity cost in producing coffee → both benefit from trading
Smith
“Invisible hand”
- Definition: The force guiding the free market to the most efficient outcome. Based on the logic that individuals, when seeking to maximize their own well-being, inadvertently contribute to the overall economic and social welfare
- Significance: Shows importance of individuals in economic markets, and underscores that individual decisions drive economic change. and is an argument against market intervention.
- E.g. Singapore government has strategically allowed market forces to guide economic development; emphasize free-market policies + minimal government intervention → immense economic growth
Smith
Stolper-Samuelson theorem
- Definition: Economies should be defined by their dominant factor of production → factor abundance shapes the political incentives of actors
-
Significance:
◦Labor-abundant economies = labor favors freer trade
◦ Capital-abundant economies = labor favors
limiting trade - Political conflict is across classes
- E.g. US (capital-abundant), engages in trade with China (labor-abundant country); Chinese labor would support free trade to increase exports, more wages, job creation; US labor would support limiting trade to protect domestic jobs, wages
◦ Best for long-run
Ricardo-Viner model
- Definition: Different economic sectors have different interests - labor and capital don’t always act as blocs
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Significance: Individual interests are driven by sector of the economy on which their income depends (not factor)
◦ Exporting = support free trade because they want open foreign markets (E.g. South Korea)
◦ Import-competing = oppose free trade because they want protection from competing goods (E.g. Brazil - argiculture, textile sectors)
◦ Import-employing = support free trade because they want cheaper inputs (E.g. Germany)
Non-tradeable will support free trade because it would reduce prices on other goods
◦ Political conflict is sectoral, not across classes
◦ Best for short-run
Nehru-Gandhi Model
- Definition: Associated with “India 1.0” period after 1947 independence. Central planning and inward focus.
- Significance: Meredith: “socialism with low expectations”: bureaucracy and state employment. “Hindu rate of growth” being slower than the rest of the world.
- E.g. License raj + Import substitution industrialization policies
Meredith
Rao/Singh Model
- Definition: Associated with “India 2.0” period. Capitalize on outsourcing, focus on exporting services, two tiered economic model in which entrepreneurs can prosper
- Significance: Economy takes off in about 1980, rapid reduction in poverty
- E.g.: Exporting IT/software services
Meredith
License Raj
- Definition: System of strict government control + regulation of Indian economy from 1950s-1990s
- Significance: System intended to protect Indian industry, promote self-reliance and ensure regional equality
- E.g. Businesses required to obtain licences from government in order to operate - often difficult to obtain
Meredith
Institutions Hypothesis
- Definition: Some societies have good institutions that encourage investment in technology → thereby achieve economic prosperity
- Significance: Highlights the importance of institutions towards achieving maximum welfare.
- E.g. South Korea = inclusive institutions → fostering economic development, industrialization, and democratization; North Korea = extractive institutions → concentrating power in a centralized regime, economic stagnation and isolation
Acemoglu
Geography Hypothesis
- Definition: Geography, climate, and ecology of a society shape the technology + incentives of inhabitants
- Significance: Emphasizes forces of nature as a primary factor of poverty, which can then allow policies to be formed to combat geological differences.
- E.g. Caribbean colonized by Global North → industries exploited due to rich soil + suitable agricultural conditions; DRC= resource curse
Acemoglu
Offshoring
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Definition: Movement of jobs (not workers) from rich (high-wage) to poor countries (low-wage) – result of gains from trade principle
◦ Solutions = transforming educational systems to fit future jobs, not building protectionist barriers against offshoring - Significance: Capitalizes on global labor cost differentials, reducing operational expenses
- E.g. Textile manufacturing moving from UK to China; call centers moving from US to India
Blinder
Privatization
- Definition: Transfer of government-owned enterprises to private hands → thereby giving greater scope to the invisible hand
- Significance: Friedman believes that total + rapid reduction of government role in economy will best spur economic performance
- E.g. USPS had monopoly on first-class mail in the US, but recently UPS has taken over
Friedman
Corporatism (corporatist state)
- Definition: Political model comparable to a body → core made up of government, limbs made up of political interest groups; assumes that it is possible to segment pop. into political interest groups, for ex working class, bureaucrats, business class, peasant class, etc.
- Significance: Promotes cooperation between the state and organized interest groups for decision-making, aiming for consensus and stability
- Example: Mussolini’s fascist regime Italy
Yashar
Liberal welfare state
- Definition: A welfare-state variation in which means-tested assistance (e.g. welfare eligibility based on family income), modest universal transfers, or modest social-insurance plans predominate.
- Significance: Goal of this system = alleviate poverty + establish free market; There is a strong emphasis on the market as primary mechanism for providing welfare (supports privatization of healthcare, education, pension)
- E.g. US, Canada, Australia
Esping-Andersen
Corporatist welfare state
- Definition: Welfare-state predominated by the preservation of status differentials, so rights are attached to class and status. Emphasizes employment-related benefits
- Significance: Involves close collaboration between governments, employers, trade unions → seeks to maintain social cohesion + conservative values
- E.g. Germany = social, health insurance + pension tied to employment status (reflections occuppational emphasis of corporatist model); Austria; benefits may exclude non-working wives and encourage motherhood
Esping-Andersen
Social-democratic welfare state
- Definition: Welfare-state in which there is one shared pool of benefits and every citizen has universal rights, promoting equality of the highest standard. Goal = income maintenance and equality among citizens
- Significance: understanding this variation provides insights into successfully balancing economic growth with social welfare, fostering inclusive societies, and promoting political stability.
- E.g. Sweden = market economy + robust social welfare policies, progressive taxation, and a strong emphasis on human development → resulting in relatively low income inequality, high-quality public services, and a high standard of living
Esping Andersen