Topic 1

Question 1

What are substantive issue areas of the international political economy?

Answer 1

1. International trade
2. International monetary & financial system
3. Multinational enterprises (MNEs)
4. Economic development

Question 2

What are the two things IPE theorists condemn?

Answer 2

Economism: over reliance on economics
Politicism: over reliance on politics

Question 3

What two yaps does IPE bridge?

Answer 3

a. The study of politics and economics
b. The national (domestic) and international

Question 4

What does the IPE study?

Answer 4

how politics shapes developments in the global economy and how the global economy shapes politics
the political battle between winners and losers from global exchange
how this political competition shapes the evolution of international trade and monetary systems.
how politics shapes societal decisions about how to allocate available resources

Question 5

What are three traditional schools of IPE and how should politics shape the allocation of society’s resources

Answer 5

Mercantilism: the state guides resource allocation in . line with objectives shaped by the quest for national power
Liberalism: politics ought to play little role in the process, instead the market should guide the allocation of resources - state only to intervene in cases of market failure
Marxism: the most important decisions are made by large capitalist enterprises supported by a political system controlled by the bourgeoises

Question 6

What are some of the main tenets of economic nationalism?

Answer 6

Anarchic world system
National power and wealth are tightly connected.
Wealth was measured in terms of precious metals stock a country had, esp gold.
higher a country’s stock of wealth meant a higher ability to fund war, to meet needs of population and increase standard of living.
Trade provided one way to acquire wealth from abroad.
Governments should discourage imports wherever possible.
Some forms of economic activity are more valuable than others
Trade is zero-sum – one country’s gain in trade is another country’s loss

Question 7

What did mercantilism leave in the Caribbean?

Answer 7

A set of institutional features which profoundly affected the economies of the countries

Question 8

Why is the market not allowed to make decisions about resource allocation?

Answer 8

Because economic activity is too important to allow decisions about resource allocation to be made through an uncoordinated process such as the market because uncoordinated decisions can result in inappropriate economic structure

Question 9

What is the role of mercantilism in development? Use Britten Britain as an example

Answer 9

All the major industrial countries used mercantilist policies during formative stages of development und Britain adopted: free trade painfully slowly
They were the first country in modem history to successfully launch an infant industry promotion strategy

Question 10

What are three central propositions of liberalism?

Answer 10

1. The purpose of economic activity is to enrich individuals and not enhance state power
2. Countries do not enrich themselves by running trade surpluses; countries gain from trade regardless of whether they have positive or negative balances of trade
3. Countries are not necessarily made wealthier by producing manufactured goods rather than primary commodities; countries are made wealthier by making products that they can produce at a relatively low cost at home and trading them for goods they make less efficiently

Question 11

How should resources be allocated according to liberalism?

Answer 11

Resources should be allocated through voluntary market-based transactions between individuals
This exchange is mutually beneficial as long as it is voluntary, both parties to any transaction will benefit
The state should play a limited role in this process by establishing clear rights concerning ownership of property & resources
Judicial system must enforce right & contracts

Governments can and should resolve market failures - instances where voluntary market-based transactions between individuals fail to allocate resources to socially desirable activities.

Question 12

What is the theory of comparative advantage in international trade?

Answer 12

If an economy has an absolute advantage in the production of all commodities, specialization and trade can happen if each trading nation has a comparative advantage in the production of at least one commodity

Question 13

What is comparative advantage?

Answer 13

An economy’s ability to produce a particular good or service at a lower opportunity cost than its tracking trading partners

Question 14

How is comparative advantage calculated?

Answer 14

Calculate the total opportunity cost
Calculate the per unit opportunity cost (cost/gain)
Determine who should specialize in which product depending on which country has the lower opportunity cost in each product

Question 15

What is opportunity cost?

Answer 15

The potential berth missed out on when choosing one alternative over another

Question 16

How is comparative advantage used in the real world?

Answer 16

Used to help policymakers in countries to determine possible diversification opportunities

Question 17

Under what conditions does a country have a revealed comparative advantage?

Answer 17

When its ratio of exports of product to its total exports of cell goods (product) exceeds the same ratio for the world as a whole

Question 18

What are the benefits of free international trade?

Answer 18

• Greater resource utilization promotes a higher level of income - this in-turn facilitates a greater degree of consumption of foreign goods & services
• higher income levels can help promote a greater degree of investment
• offers opportunities to realize the full employment of scarce resources but also promote the optimal allocation of scarce resources

Question 19

What is the center-periphery thesis?

Answer 19

An industrialized core and an agrarian periphery formed the two elements of the world economy

Question 20

Define price elasticity of demand?

Answer 20

How responsive the quantity demanded of a product is to price change ie how sensitive consumers are to price changes of a given product

Question 21

Define terns of trade - and give the formula

Answer 21

An index which represents the ratio between a country’s export prices and its import prices

(TOT = index of average export prices/ index of average import prices x100)

Question 22

What is the unit of analysis of Marxism?

Answer 22

The bourgeoisie & the proletariat

Question 23

What are the three dynamics that drive revolution according to Marxists?

Answer 23

1. Capitalism’s natural tendency toward the concentration of capital
2. Capitalism is associated with a falling rate of profit
3. Capitalism is plagued by an imbalance between the ability to produce goods and the ability to purchase goods

Question 24

What is the Marxist view on resource allocation?

Answer 24

The state operates as an agent of the capitalist class and enacts policies that reinforce capitalism and capitalists’ control of resource allocation

Question 25

In Marxism, who is the key actor in determining how resources are used?

Answer 25

Transnational corporations

Question 26

Does the global economy benefit all countries? Why, why not?

Answer 26

No because systematic exploitation of the poor countries by the rich means the global economy does not benefit all countries; all gains acrrue to capitalist countries at the top of the international hierarchy.

Question 27

What are the two central conditions that characterize capitalism?

Answer 27

1. The private ownership of the means of production for capital)
2. Wage labour - where value is tied to the amount of labour used to produce but capitalists pay workers only a subsistent wage and retained the rest as profit

Question 28

What is Marx’s labor theory of value?

Answer 28

a product value is determined By the amount of labour put into its production rather than market price but workers are paid less than the value of what they produce because capitalists expropriate the surplus value created by labor

Question 29

What are offshoots of the Marxist IPE?

Answer 29

Dependency theory
World systems theory
Push for a NIEO in the 1970s
Robert cox - mistake to hocus only on the state and ignore social forces
Antonio gramsci -Italian economist who was strongly influenced by Marx’s work

Question 30

What is dependency theory?

Answer 30

A theory that explains how the world’s wealth is divided between rich & poor countries

Question 31

What does dependency theory argue?

Answer 31

That advanced economies underdevelop less developed countries or prevent them from achieving independent development

Question 32

What does constructivism focus on?

Answer 32

The role of ideas, norms, beliefs and social constructs in shaping international economic relations as opposed to materialistic and rational factors

Question 33

What does constructivism argue?

Answer 33

That the construction of material reality depends on idea and interpretation

Question 34

Why do ferninsts critique mainstream IPE perspectives?

Answer 34

For their blind spot to gender issues

Question 35

Define patriarchy

Answer 35

A system of society or government in which men hold most of the power

Question 36

Differentiate between liberal and critical feminists

Answer 36

Liberal feminists accept liberal institutions but call for greater inclusion of women and removal of barriers to women’s equal participation
Critical feminists believe inequality and exclusion are inherent in the current liberal system and call for a replacement of liberal institutions with more egalitarian models