Political Science 7 – International Relations - Power Point #13

Dr. Tabakian’s Political Science 7 Modern World Governments – Spring 2013

Supplemental Power Point Material #13

LECTURE HIGHLIGHTS (1)

• Modernization

• Scientific Knowledge – Racism And Sexism

• Human Rights As Foreign Policy

• State Interdependency

• Economic Growth & Development

• Theories Of Trade

• Liberalism & Mercantilism

• Comparative Advantage

• Political Interference In Markets

• Protectionism

LECTURE HIGHLIGHTS (2)

• Trade Regimes

• The World Trade Organization

• Bilateral & Regional Agreements

• Cartels

• Industries & Interest Groups

• Enforcement Of Trade Rules

• Economic Globalization

• The Evolving World Economy

• Resistance To Trade

• Interdependence

MODERNIZATION (1)

Joel S. Migdal argues that cultural contact can inspire the

modernization of a people that in turn encourages the

abandonment of old norms and beliefs so that new ones

can take its place. Three components help to explain this

transformation process. First, it is assumed that the

benefits of new ways are better than the old ones. Second,

individuals are not hampered by institutional restraints.

Third, those who elect to adopt new practices are rational

and optimizers, while those who do not remain committed

to non-rational traditional values. Cultural contact may be a

necessary factor, but it cannot be the only factor.

MODERNIZATION (2)

Daniel Lerner argues that societies may consist of various

mobile personalities, yet share the common trait of

empathy. He stresses that society has to possess large

numbers of individual with “psychic mobility,” meaning that

they are willing to adopt new patterns of thinking. Travel

was the primary method for sharing new techniques.

Today’s media culture no longer requires direct human

contact. Social mobilization does not always have to entail

modernization. S. N. Eisenstadt speaks of the “post-

traditional” society in which old norms and practices are

thrown away, but are not replaced with new modern

practices.

MODERNIZATION (3)

Modernization also led to the de-monopolization of power

lords held in those villages dominated by lordships.

Populations had other sources of resources made

available to them that power lords could not withhold.

Another factor is that lords adapted with the times,

changing their behavior to maintain their hold on power.

MODERNIZATION (4)

Neoclassical framework advocates laissez-faire trade

policies, free labor markets, stable exchange rates,

competitive market structures, wage restraint, and a limited

role for government in the economy. Neoclassical

economists stress comparative advantage, for example

stressing the need for resource rich third world countries to

focus on exporting raw materials and labor-intensive

manufacturing while foregoing advanced industrialization.

Modernization theory stressed that the third world could

rise out of poverty through external linkages with core

nations that could invest and purchase raw materials from

periphery countries.

MODERNIZATION (5)

Dependency theories countered modernization with

highlights of exploitation of the periphery by the core. Later

case studies in the 1970s and 1980s showed that those

periphery countries that are the most advanced might

benefit from external linkages, as they are more willing to

direct incoming investments into capitalist development

projects that are prone to bring long-term benefits.

Developmental theories focus on late term industrialization

by stressing the need for a strong state role. The concept

of a developmental state “focuses on the political will, the

ideological coherence, the bureaucratic instruments, and

the repressive capacity needed to formulate and

implement effective economic policies to promote high-

speed capitalist growth.”

MODERNIZATION (6)

World-systems/dependency theories draw on Marxist

principles. Immanuel Wallerstein is regarded as the father

of world-systems/dependency theories as it pertains to the

hierarchy of states consisting of core, semi-peripheral and

peripheral nations. Mobility is determined according to the

flow of resources between these different nations and that

a key variable determining a nation’s development

outcome is that country’s mode of incorporation into the

capitalist world-economy.

MODERNIZATION (7)

Dependency theorists suggest that groups within weaker

states like residing capitalists and the military would

willingly ally themselves with more powerful states or their

respective militaries and even multinational corporations.

This would assure that elites in poorer states would

continue to prosper, while their country prospers at a rate

that is determined according to its placement in the world

capitalist system. Dependency theorists would argue that

rich states dictate the rate of prosperity of poorer states.

MODERNIZATION (8)

The new institutionalist “entails a rejection of rational-actor

models, an interest in institutions as independent variables,

a turn toward cognitive and cultural explanations, and an

interest in properties of supraindividual units of analysis that

cannot be reduced to aggregations or direct consequences

of individuals.” Gary Gereffi and Stephanie Fonda list four

primary transnational economic linkages: foreign aid,

foreign trade, foreign direct investment, and foreign debt.

Developmental states utilize state policy to promote the

efficiency of their country in order to achieve a strong potion

in the international division of labor. One can argue that

those regions where agriculture remains dominant like sub-

Saharan Africa and South Asia, maintain the lowest levels of

economic and social well being.

MODERNIZATION (9)

Latin American and India have high levels of poverty

though they may possess high levels of industrialization.

Thus, industrialization is not a guarantee for high living

standards. Investments in health, education and job

training are important for those peoples who are ultimately

responsible for their own welfare. These are major

requirements for any country to improve its condition

regardless if it desires higher productivity in agriculture

and/or industry.

SCIENTIFIC KNOWLEDGE RACISM & SEXISM

The scientific method helped to instill economic

development in mankind. Prior to this occurrence in

human history, one can see a constant continuity in

history. There permeates within mankind a desire to

command nature. Defining the laws of nature brings forth

universal regularity to what is and is not possible.

Technology brings about further insight to what

possibilities are possible; with the only determining factor

for a society to understand would be its degree of

scientific advancement. One may also make the

argument that increased scientific knowledge has helped

to de-legitimize racism and sexism for increased

knowledge has proven successful in promoting human

equality.

STATE INTERDEPENDENCY (1)

Societal interdependence addresses situations in which

events within one society affect events in another.

Government involvement in instigating these events does

not have to take place for this to occur. Transnational

relations helped to encourage interdependency between

states. Nation-states interdependent on one another

presented each with economic and political trade-offs

whereas gains in one may lead to the weakening of another.

Economic gains that may be derived from external sources

that are able to produce them more efficiently while only

retaining those industries that are efficient may allow a state

to achieve higher overall productivity. This comes at a price

when a state becomes so dependent on foreign sources of

goods that it affects how its foreign policy is conducted.


As a state becomes more interdependent on one another it

also serves to prevent it from acting overly aggressive

against those states that it has become dependent.

Interdependence reversed the low levels of political

optimism beginning in the 1970s that established linkages

between the West, Latin America, and Asia and culminated

with the collapse of the Soviet Union.


Simple interdependency is morphing into a complex

interdependence that was uniting economic and political interests

of states into one cohesive block. War among the advanced

states became unthinkable as interdependence made it ever

more costly. An interdependent world of liberal-democratic states

can at some point in time lead to world peace. Regardless of

these economic forces, security concerns as well as the drive for

national honor can overrule the costs associated with breaking

linkages. Countries that wish to attract foreign investments or

accrue technological innovations have to wear a “golden

straitjacket”. This is a set of policies that include balanced

budgets, economic deregulation, free trade, a stable currency

and most importantly an overall transparency so that people can

predict the overall direction of a country.


Societal and economic interdependence can interlink the

domestic policies of two nation-states. Take the example of

Canada and the United States. The high degree of societal

interdependence assures that Canada will be strongly affected

by American policies. The most powerful nation-state can

more affect the policies of another country interdependent on

its society as the US and Canada example shows.


Underlying most analyses of world politics and international

organization is the state-centric approach. This makes two

assumptions:

(1) Governments remain the most significant actors in world

politics.

(2) Governments are unified actors. Transgovernmental is a

reference to direct interactions between agencies

(government subunits) of different governments where

those agencies act relatively autonomously from central

governmental control.

HUMAN RIGHTS AS FOREIGN POLICY

The rise of international law and the recognition of universal

human rights have in turn affected those processes available

for states to control. To sum up, it can be argued that we are

approaching a time when a world of regions maintain states

that remain sovereign, yet committed to universal principles

that in turn create new political arenas that maintain relations

between actors. Glocalization assists us with understanding

how this is taking place. The theory focuses on the

relationships among units that according to John Mearsheimer

“are transforming the identities, interests, and strategies of

actors through a combination of global and local processes

and are thus adding new political actors and processes to an

increasingly global politics.” Human rights has become a

fundamental principle of American Foreign Policy.

ECONOMIC GROWTH & DEVELOPMENT (1)

There are competing opinions about why high income per

capita helps to promote democracy. One suggestion has

it that sustained growth helps to weaken the base of

authoritarian forces while at the same time empowering

subordinates. Further expansion of civil society grants

citizens the ability to check monopolistic government

while a growing middle class becomes able to further

democratic institutions that in turn strengthens liberal

ideas to take hold. Another argument is that increasing

economic development furthers education among the

populace, which in turn causes individuals to press for

inclusion and accountability.

ECONOMIC GROWTH & DEVELOPMENT (2)

One can argue that mature capitalist economies realize

the necessity for a democratic compromise between the

working class and capitalists. Marxism argues that

capitalism requires expanding markets and increasing

profits through continuous exploitation of low-wage labor

and the continued suppression of subordinated classes.

Globalization results in the homogenization of

preferences and technologies, as well as the blending of

different life styles into a global standard. Globalization in

political terms means the rise of democracy and the

market economy. Even though globalization promotes

homogenization, we should realize the potential benefits.

ECONOMIC GROWTH & DEVELOPMENT – CHINA (3)

The Chinese Government has identified economic growth as

the nation’s highest priority, promoting a “socialist market

economy” and staking the legitimacy of the Chinese

communist system on the ability of the State to deliver on

promises for economic growth. China has experienced a

period of rapid, sustained economic growth comparable to

Japan and South Korea. But economic growth has been

accompanied by a host of new problems as well: increasing

unemployment, rampant corruption, and growing pollution.

What’s more is that the environmental impact of Chinese

economic growth is not confined to China, but increasingly

affects countries around the world.

ECONOMIC GROWTH & DEVELOPMENT – CHINA (4)

With economic growth rates exceeding 10

percent per year from 1980 to 2000, China

today has the fourth largest economy in

the world. And with a population of more

than one billion people, many analysts

speculate that the 21st century will witness

the economic hegemony of the United

States displaced by that of China. Yet, as

China has industrialized its economy, it

has also increased the levels of pollution

in the country. According to the World

Bank, China is home to 20 of the world’s

30 most polluted cities. Linfen, a city in

China’s Shanxi Province and the heart of

China’s coal and power producing region,

has the notorious distinction of being the

world’s most polluted city.

EnvironmentEconomicGrowthChina.wmv

THEORIES OF TRADE

• International trade amounts to a sixth of the total economic activity in the world.

• Scholars of international political economy (IPE) study the politics of international political activities.

– Most focus is on the industrialized regions of the world.

– Global South is receiving growing attention.

– States are the most important actors in IPE, but not as important as in international security.

– Actors in IPE tend to act in their own interests.

– Collective goods problem is important throughout IPE.

LIBERALISM & MERCANTILISM (1)

• Two major approaches within IPE differ on their views of trade.

1. Mercantilism:

– Generally shares with realism the belief that each state must protect its own interests at the expense of others.

– Emphasizes relative power: what matters is not so much a state’s absolute amount of well-being as its position relative to rival states.

– Importance of economic transactions lies in their implications for their military.


2. Liberalism:

– Generally shares the assumption of anarchy but

does not see this condition as precluding

extensive cooperation to realize common gains.

– Holds that by building international

organizations, institutions, and norms, states

can mutually benefit from economic exchanges.

– It matters little to liberals whether one state

gains more or less than another – just whether

the state’s wealth is increasing in absolute

terms.


• Liberalism and mercantilism are theories

of economics and also ideologies that

shape state policies.

• Liberalism is the dominant approach in

Western economics, though more so in

microeconomics than in macroeconomics.


• Free market:

–Bargaining space

–Market price

–Demand curve

–Supply curve

–Equilibrium price


• Mercantilism:

– Economics should serve politics.

– Creation of wealth underlies state power.

– Achieved prominence several hundred years ago – Britain.

– Declined in the 19th century.

• Favorable balance of trade: positive balance of trade versus negative balance of trade.

COMPARATIVE ADVANTAGE (1)

• The overall success of liberal economics is due

to the substantial gains that can be realized

through trade.

– These gains result from the comparative

advantage that different states enjoy in

producing different goods.

– Transaction costs.

• Two commodities of great importance in the

world are oil and cars.

– Example: Saudi Arabia and Japan.

COMPARATIVE ADVANTAGE (2)

• International trade generally expands the Pareto-optimal frontier by increasing the overall efficiency of production.

• Trade is not without drawbacks:

–Long-term benefits may incur short-term costs.

–Benefits and costs of trade tend not to be evenly distributed within a state.

–Protectionism.

POLITICAL INTERFERENCE IN MARKETS (1)

• A free and efficient market requires a fairly large number of buyers looking for the same item and a large number of sellers supplying it.

–Also requires that participants have fairly complete information about the other participants and transactions in the market.


• World markets:

– Monopoly:

• Diamond market – De Beers.

• foreign governments have little power to break them up.

– Oligopoly:

• OPEC.

– Corruption.

– Movement from centrally planned economies to market economies.

– Politics provides a legal framework for markets.

– Taxation is another political influence on markets


• Sanctions:

–Governments can apply sanctions

against economic interactions of certain

kinds or between certain actors.

• Autarky:

–Self-reliance – avoid trading and instead

try to produce everything the state

needs itself.

PROTECTIONISM (1)

• When states try to manipulate international trade to

strengthen one or more domestic industries and

shelter them from world markets.

– Protection of domestic industries from

international competition.

– Infant industry protection considered a relatively

legitimate reason for (temporary) protectionism.

– Protection of industry vital to national security.

– Defense effort to ward off predatory practices by

foreign companies or states.

PROTECTIONISM (2)

• Means to discourage imports:

– Tariff or duties:

• Tax imposed on certain types of imported goods as they enter a country.

– Nontariff barriers:

• Quota.

– Subsidies to a domestic industry, which allow it to lower its prices without losing money:

• Tax breaks.

– Restrictions and regulations.

– Economic nationalism.

• Protectionism can have both positive and negative effects on an economy.

TRADE REGIMES

• Two contradictory trends are at work in global trading patterns today:

–One trend is toward integration of the industrial regions with each other in a truly global market.

–The second trend is the emerging potential division of the industrialized West into three competing trade blocs, each internally integrated but not very open to the other two blocs.

THE WORLD TRADE ORGANIZATION (1)

• WTO is a global, multilateral IGO that promotes,

monitors, and adjudicates international trade.

– Central to the overall expectations and practices of

states with regard to international trade.

– Successor organization to GATT (1947).

– In 2007, WTO had 150 countries (all of the major

countries, with the exception of Russia) in

membership.

• Most countries likely to become members.

• Condition of membership – liberalization of the

trading practices of would-be members.

THE WORLD TRADE ORGANIZATION (2)

• Reciprocity:

– Most favored nation (MFN) concept: trade restrictions

imposed by a WTO member on its MFN trading

partner must be applied EQUALLY to all WTO

members.

– Exception: Generalized System of Preferences

(GSP).

• Trade concessions to third world states to help

economic development.

• Benefits to belonging to WTO outweigh the costs.

BILATERAL & REGIONAL AGREEMENTS

• Most international trade is governed by more specific international political agreements.

• There are generally two types:

– Bilateral trade agreements:

• Reciprocal arrangements to lower barriers to trade between two states.

– Regional free-trade areas:

• Groups of neighboring states agree to remove the entire structure of trade barriers and adopt a common tariff toward states that are not members of the agreement (customs union).

• If they coordinate other policies such as monetary exchange, the customs union becomes a common market.

• NAFTA.

CARTELS (1)

• An association of producers or consumers, or both, of a

certain product – formed to manipulate its price on the

world market.

– Can use a variety of means to affect prices:

• Most effective is to coordinate limits on production

by each member so as to lower the supply, relative

to demand, of the good.

• Organization of Petroleum Exporting Countries

(OPEC).

– 40% of the world total.

–Saudi Arabia largest oil exporter.

–Headquarters in Vienna, Austria.

CARTELS (2)

• Consumers do not usually form cartels,

but the major oil-importing states formed

their own organization – the International

Energy Agency (IEA).

INDUSTRIES & INTEREST GROUPS (1)

• Industries and other domestic political actors seek to influence a state’s foreign economic policies.

– Lobbying, forming interest groups, paying bribes, and even encouraging coups.

– Actors include industry-sponsored groups, companies, labor unions, and individuals.

– Ex: U.S. tobacco exports.

• Industrial policy.

• Role of industries in trade negotiations:

– Agriculture.


• Intellectual property rights:

–Contentious area of trade negotiations.

–World Intellectual Property Organization

(WIPO).

• Service sector of the economy.


• Arms Trade.

• Smuggling:

– Illicit trade.

–Black markets are widespread and

flourish, particularly in economies

heavily regulated by government.

ENFORCEMENT OF TRADE RULES (1)

• Economic agreements between states

depend strongly on the reciprocity

principle for enforcement.

• Enforcement of equal terms of trade is

complicated by differing interpretations of

what is “fair.”

ENFORCEMENT OF TRADE RULES (2)

• Retaliation:

– Dumping: Here retaliation is aimed at

offsetting the advantage enjoyed from goods

imported at prices below the world market.

– Retaliatory tariffs raise the prices back to

market levels.

• U.S. steel industry.

• International Trade Commission (U.S. agency).

• Trade cooperation easier to achieve under

hegemony.

ECONOMIC GLOBALIZATION

• Globalization is transforming not only trade, but

money, business, integration, communication,

environmental management, and the economic

development of poor countries.

THE EVOLVING WORLD ECONOMY (1)

• 1750, Britain had the world’s most advanced economy:

– Industrialization.

–Free trade.

• Today, the largest and most advanced economy belongs to the United States.

– Industrialization.

–Territorial expansion.

– Immigrant labor.

THE EVOLVING WORLD ECONOMY (2)

– Technological innovation.

– Great Depression and resultant protectionist policy.

– Keynesian economics.

– WWII.

– Soviet bloc - centrally planned economy:

• State-owned industries.

• Shock therapy - Poland.

• Transitional economies.

• Today there is a single integrated world economy that almost no country can resist joining.

– Mixed economies.

RESISTANCE TO TRADE (1)

• Globalization of the world economy has created a backlash in many parts of the world, including the U.S.

– Growing nationalism.

– Competition from low-wage countries in the global South.

• Impact on wages in other countries.

• Standards of labor regulation/worker safety:

– Labor unions have been among the strongest political opponents of unfettered trade expansion.

– Human rights:

• Minimum wage issues, child labor, and worker safety issues.

– Environmental issues.

RESISTANCE TO TRADE (2)

• Benefits of free trade more diffuse than the

costs.

–Lower prices on goods important from

low-wage countries.

–Consumers may spend more money on

other products and services, eventually

employing more U.S. workers.

–Cheap imports help keep inflation low,

which benefits citizens and politicians.

INTERDEPENDENCE (1)

• When two or more states are simultaneously dependent on each other, they are interdependent.

– This is a political and economic phenomenon.

– Mutually dependent on each other’s political cooperation in order to realize economic gains through trade.

– In IPE, interdependence refers less often to a bilateral mutual dependence than to a multilateral dependence in which each state depends on the political cooperation of most or all the others to keep world markets operating efficiently.

INTERDEPENDENCE (2)

• Short-term dependence versus long-term dependence

– May differ for a state

• Over time, as the world economy develops and technology advances, states are becoming increasingly interdependent.

– Impact on individual firms

– Integration through flow of information and communications

– Arises from comparative advantage

– Inherently promotes peace

• Drawbacks of interdependence

– Asymmetrical interdependence

Political Science 7 – International Relations - Power Point #13

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Transcript of Political Science 7 – International Relations - Power Point #13