LECTURE 15 - trade and econ Flashcards
1
Q
Assumptions vs Realities
A
Economics is about power
* Two polite fallacies in IR theory and Law
1. all actors are created equal
2. powerful actors are free to act as they choose
2
Q
Authority-Market Nexus (connection)
A
- two basic models we have of an ‘economy/society’
1) private-enterprise, market-based economy
2) State-run, command-based economy - Are all actors created equal?
- Does even a powerful actor have freedom to act?
3
Q
how powerful is the state?
A
“Where states were once
the masters of markets,
now it is the markets
which, on many crucial
issues, are the masters
over the governments of
states.”
4
Q
Capitalism vs Socialism (theoretical)
A
- Capitalism
- It is an economic system in which private individuals own all
the material means of production & all economic activities
are undertaken for purpose of profit.
- Socialism (extreme version, i.e., North Korea)
- The state owns & controls all means of production. Decisions
pertaining to production, distribution are made through
central planning. The state dictates the consumption
pattern. It is based on the principle: “from each according to
his ability to each according to his needs”.
5
Q
feudalism –> liberalism
A
- Scottish enlightenment and industrial revolution about a reset of societal power
– New capital v aristocracy, with labour loser - Should capital be allowed to operate freely?
– Hard Times for bulk of population, but arguably no
change from feudal conditions
– Push back from increasingly
organized labour, social activists - Launch of major debate on laws,
norms, regulations, ethics of
organizing production, economy
– Read Hard Times by Dickens
then read the Communist
Manifesto
6
Q
Capitalism vs Socialism (characteristics)
A
- Capitalism
* Right to private
property.
* Right of inheritance.
* Freedom of
enterprise.
* Freedom of choice
for consumers.
* Competition (Profit
motive).
* Price mechanism on
market forces (Less
role of government). - Socialism
- State ownership of
means of
production. - Central economic
planning. - Social welfare.
- Equality of
opportunity. - classless society.
- Absence of
competition.
7
Q
victory of cap
A
- Very few pure socialist systems
– Most successful have significant capitalist aspects - Very few autarchic economic systems (reducing their dependence on international trade ie. north korea)
- Global system marked by rise in trade
– Has fed massive consumption boom
– Trade now not just about finished products - Factor/input trade
8
Q
comparative advantage
A
- Each country exports the good that it had been
producing at a cheaper relative price in autarky - Specialize in what you produce most efficiently
- Therefore, each country exports the good for which
its opportunity cost is lower - This is the Principle of Comparative Advantage
- Trading like this allows expanded consumption
- Technology key intervening variable
- Changes the efficiency of production
9
Q
value chains = CA in action
A
- Specialization + Technology = Value chains
– Global spread of production systems
– Relatively new phenomenon - Required low-cost logistics (transport) and ICT (comms)
– Very little produced end-to-end in one place now - OECD on value chains:
– https://www.youtube.com/watch?v=ktx2_Dzy3tM
10
Q
effects of value chains
A
- Dramatic surge in international trade
- Dramatic surge in global people movement
- Tremendous recasting of traditional implications, costs of conflict and war
11
Q
complex interdependence
A
- Liberal pushback on
realism - Argues that liberalization
of global trade has
fundamental transformed
nature of IR - Four central principles
1. Societies are
interconnected in many
ways
2. States interact over
many kinds of issues
3. Military force is not
central to inter-state
relations
4. International
organizations are the
center of global politics - Doesn’t mean conflict is
over, but rather than it
best managed through
international
organizations
– For trade, GATT/WTO
12
Q
National Power and the structure of foreign trade
A
- Examination of economic logic behind WWII
– Second World War grounded in a search for new markets
and the resources for domestic industry
– Goal at time was autarkic economic production
– Colonial system essential for maintaining metropole - i.e., new research Britain extracted $45 trillion from
India
– https://www.aljazeera.com/opinions/2018/12/1
9/how-britain-stole-45-trillion-from-india/
– With many markets closed to outside goods, possession
of markets, resources key
13
Q
Foreign Trade and Post WWII Order
A
- Fundamental goal of Bretton Woods
System to remove economic
determinants of war
– Institutional of liberal trading order - In Europe, ‘functionalist’ logic of joint
vesting of interests in Ruhr Valley
– Conjoined interest in European Steel
and Coal Community, the EEC, then
EU - Globally set up liberal free trade system
– Global Agreement on Trade and
Tariffs (GATT), which in 1995
became the World Trade
Organization
14
Q
Governing World Economy
A
- How do we maintain
smooth trade in
anarchy?
– We construct
rules, treaties,
international law - Trade
– Central governing
structure is World Trade
Organization - WTO’s own
‘promo’
explanation video:
https://youtu.be/V
nHtAvMLPLo - Finance
– IMF, World Bank, BIS
15
Q
How do we defuse tensions? =
Institutions – the WTO
A
World Trade Organization – founded 1994
* Membership is restricted to nation states
* Organization run by members who agree decisions
* Day-to-day questions dealt with by representatives in Geneva
* HEAVY bias in favour of global trade liberalization
