International Political Economy

1
International Political Economy
SIS 401 Summer 2005
Wolfram Latsch

• Presentation 5.
• Why Globalization Works I.

2
What Liberal Globalization Means

• movement in the direction on greater
  integration
• Greater integration of economic activities, via
  markets
• Lowering of natural and man-made barriers to
  international economic exchange
• Greater reliance on market forces

3
Markets, Democracy and Peace

• Property and freedom
  (political and economic liberties or rights,
  political and economic control rights/property
  rights)
• The beneficent state
• Regulatory competition
  (contestability)
• Constitutionality, accountability
• (credibility, constraint)
• Moral reform
  (commercial culture and guardian culture)

4
Markets, Democracy and Peace

• International relations
• Comparative advantage and absolute advantage
• Positive-sum interactions and zero-sum
  interactions
• Openness goods, services, technology, ideas
• Collectivism and liberalism

5
The Magic of the Market

• Rise of the market economy
• Property (incl. IPRs)
• Corporations
• Innovation
• Financial intermediation

6
Physician, Heal Thyself

• Death of central planning
• Whos the boss? Market or planner?
• Production or consumption?

7
The Changing Role of the State

• Why has the scope of the state changed?
• Public goods
• Merit goods
• Regulation and competition policies
• Redistribution and risk management
• Why has the size of the state changed?

8
Physician, Heal Thyself

• Market failure
• Government failure
• Capture, special interests
• The government as a special interest

9
The Liberal Global Economy

• The first and second golden ages of
  globalization
• 1870-1914 (UK and offshoots)
• Since 1950 (Western Europe, Japan, then non-Japan
  East Asia)
• Criterion convergence of prices and synchronized
  business cycles

10
The Liberal Global Economy

• Trade in Goods and Commodities
• Large volume increase in trade
• Increase in productivity of goods-producing
  sectors, fall in relative prices of goods
• Increase in importance of services
• Rise in intra-industry trade and intra-firm trade
  (MNCs)

11
The Liberal Global Economy

• Capital mobility
• UK a major capital exporter in the 19th C.
• Offshoots are major recipients of capital in 19th
  C.
• US a major capital importer now
• LDCs receive smaller proportion of investments
  today

12
The Liberal Global Economy

• Labor mobility
• Migration a major factor in the 19th C.
  (c. 19-100 million from 1815-1914)
• Migration negligible today, mostly intra-LDC
  refugees
• Migration today skilled labor aggregated in DCs
• Factor price equalization phenomenon

13
The Liberal Global Economy

• The 1914-45 interlude why?
• Citizenship, public goods and nationalism
• Business cycles and economic integration
• Protectionist politics
• Rise of collectivist ideologies
• Warfare and inter-war instability

14
The Liberal Global Economy

• After 1945
• Keynesianism, fine-tuning,
  full employment
• Fixed exchange rates, limited capital mobility
• Intl economic institutions (IMF, WB, GATT/WTO)
• Oil crisis, stagflation, reform

15
The Liberal Global Economy

• After 1945
• LDCs planning and statism
• vs. outward-orientation
• Resurgence of economic liberalism
• Liberalization in India and China convergence?