THE INTERNATIONAL POLITICAL ECONOMY

Transcription

1 THE INTERNATIONAL POLITICAL ECONOMY

2 FOUR ACADEMIC AREAS OF IPE The International Trade System a market system The International Monetary System a market system Multinational Corporations generally independent Economic Development usually focused on the less developed states Your textbook emphasizes globalization. Many perceive economic globalization as the globalizing factor.

3 POWER IN THE WORLD ECONOMY MARKET POWER THE POWER OF THE MARKET THE POWER TO STRONGLY INFLUENCE THE MARKET THEREFORE, A STRUCTURAL MARKET FAILURE. POLITICAL POWER STATES MNCs NO LONGER MILITARY POWER? COLONIALISM MILITARY INTERVENTION

4 THE MARKET (I) DEMAND IS A FUNCTION OF ALL THE FACTORS THAT CAUSE SOMEONE TO WANT OR NEED SOMETHING. SUPPLY IS A FUNCTION OF ALL THE FACTORS THAT ARE NECESSARY TO PRIODUCE A GOOD OR A SERVICE. THEORECTICALLY, SUPPLY AND DEMAND ARE THE INDEPENDENT FUNCTIONS THAT CAUSE THE DEPENDENT VARIABLES OF PRICE IN THE MARKET AND THE AMOUNT OF THE SERVICE OR GOOD PRODUCED. IN THE CONTEXT OF ALL MARKETS, THE SYSTEM PROVIDES THE MOST EFFICIENT ALLOCATION OF SCARE RESOURCES.

5 THE MARKET (II) FOR THAT EFFICIENCY TO FULLY EXIST, ALL THE FACTORS OF PRODUCTION (EVERYTHING THAT IS NECESSARY TO PRIODUCE A GOOD OR A SERVICE) MUST BE FREE TO MOVE TO WHERE IT CAN BE THE MOST EFFICIENT. NOT JUST TRADED GOODS AND SERVICES, BUT PEOPLE, MONEY, IDEAS, TECHNOLOGY, NATURAL RESOURCES, ENTREPREUNALSHIP, INDUSTRIES, ETC. THE EFFICIENT MARKET REQUIRES THUS ECONOMIC GLOBALIZATION.

6 FACTORS OF PRODUCTION Land - natural resources above and below the surface Capital - the human created means of production: factories, farms, machinery, infrastructure Human Capital - the work force s capability, dependent on education and training Financial Capital - the funds provided by lenders to businesses and states to develop land, capital, and human capital. Entrepreneurship - the ability to assemble resources including innovations, finance and business acumen in an effort to transform innovations into economic goods. It involves inventiveness, initiative, risk taking. Technology - The way we do things and the ability to improve the way we do things.

7 THE MARKET (III) BUT? AT WHAT COST COMES THIS EFFICIENCY? IS EFFICIENCY, AS SOVEREIGNTY FOR SOME, ALWAYS THE ABSOLUTE GOOD? MOREOVER, WHAT IF THE ASSUMPTIONS NECESSARY FOR THE MARKET TO WORK THEORECTICALLY ARE NOT PRESENT?

8 AREAS WHERE THE MARKET FAILS MICROECONOMIC ISSUES: STRUCTURAL MARKET FAILURE POWER OVER THE MARKET RESOURCE IMMOBILITY PUBLIC GOODS GOODS AND SERVICES CONSUMED COLLECTIVELY EXTERNALITIES MACROECONOMIC ISSUES: MACROECONOMIC INSTABILITY ECONOMIC GROWTH

9 OATLEY S TWO ABSTRACT QUESTIONS POLITICAL, ECONOMIC, AND SOCIETAL DECISIONS AFFECT THE ALLOCATION OF THE SCARCE RESOURCES. THERE WILL BE THOSE WHO BENEFIT MORE THAN OTHERS. RESOURCES ARE FINITE AND THERE WILL BE COMPETING DEMANDS FOR THOSE RESOURCES. ALLOCATION WILL BE BY POLITICAL, ECONOMIC, OR SOCIETAL INSTITUTIONS AND PROCESSES. MOREOVER, THERE ARE CONSEQUENCES: OVERALL SOCIETAL WELLBEING DISTRIBUTION OF THE BENEFITS

10 ADDITIONALLY WE HAVE OTHER VALUES, WHICH MAY NOT ARISE OUT OF THE MARKET S EFFORT TO EFFICIENTLY ALLOCATE SCARE RESOURCES. FOR THESE WE OFTEN NEED TO CAUSE A TRADE-OFF. Fair Income Distribution Full Employment Controlled Inflation Adequate Stability Economic Freedom Security against Economic Risk Social well-being Individual well-being High Living Standards High Human Development Concern for Others Achieved Non-Economic Goals Other social and religious goals

11 THE ECONOMIC INSTRUMENT OF POWER Most governments have a limited ability to use their economic instrument of power, unlike the political/diplomatic and military instruments, which they control. Domestic and International economies are market-based Economic power provides a basis for creating other instruments of power. The primary use of the economic instrument of power by a state is through negotiations. Other uses are -- Tariffs and quotas, Domestic regulations, Economic sanctions, Economic incentives, & Foreign economic aid