Global Political Economy compilation
document
Contents
Lecture 1 – 2-2 – Introduction to World Trade: Absolute and Comparative Advantage........................ 2
Lecture 2 – 9-2 – Trade Policy and Regulation...................................................................................... 23
Lecture 3 – 16-2 – International Production: MNEs, FDI, and Regulation ............................................ 46
Lecture 4 – 23-2 – Introduction to International Finance..................................................................... 68
Lecture 5 – 2-3 – Exchange Rates, and the IMF .................................................................................... 88
Lecture 6 – 9-3 – Monetary Unions and Monetary Crises .................................................................. 106
Lecture 7 – 30-3 – Hegemonic Cycles and Historical Capitalism ........................................................ 127
Lecture 8 – 7-4 – Going for Growth: From National Development to Neoliberalism......................... 146
Lecture 9 – 13-4 – Transnational production and finance: Challenges to state effectiveness ........... 159
Lecture 10 – 20-4 – Welfare and Inequality, Social Reproduction and Social Policy .......................... 173
Lecture 11 – 4-5 – Democracy and the 21st century world market: Debating inclusive growth ....... 194
Lecture 12 – 11-5 – The future of the world economy: debating a secure and sustainable future ... 211
1
,Lecture 1 – 2-2 – Introduction to World Trade: Absolute and
Comparative Advantage
International economics will help you to understand the mechanical foundations, on which Global
Political Economy thinkers and policymakers base their opinions
You have to know how the mechanics work before you can form critical opinions of them
International economics
➔ rubrics
- International trade
- International production
- International financial systems
- International development
International trade
- Related to international production
- That is, trade of goods and services across borders
o Always a political element
▪ Politics
▪ Policies
▪ Borders
▪ Law
- Trade that involves dealing with more than one sovereign government
- More than one monetary regime
o Different currencies
- More than one set of laws
o Different laws
- This can lead to any number of ‘complications’ as deals are made
o Legal matters
o Trade regulation affects markets
▪ For example: taxes
o But international trade can also be extremely lucrative
▪ Opportunities
▪ Benefits
o And, arguably, it can help people in both countries
▪ Assume a two-country model
o Though, of course, it might hinder some people in one or both countries
▪ Reality is more complicated
▪ There are winners and losers
International Production
- So, producing goods and services across borders
o Multinational corporations
o Global supply chains
- Your smartphone might have been made in 40 different countries
- Many manufactured goods now are produced from highly international networks
- How does this get regulated?
2
, - Who creates enough stability for this to remain profitable?
- Why is this more advantageous to happen?
International Financial Systems
- Foreign exchange
o Incredible amounts of value
o Huge amounts of capital are moved every moment
▪ Way more than products and services
- Every time you move into another currency area, you are subject to additional risk
- Also, credit can be given or withdrawn, leaving a small economy in shambles
o Related to international development
- And FDI is covered here as well
International Development
- How do capital flows impact economic development, especially in ‘developing’ countries?
o This is more handled in Global Political Economy even though there are chapters in
our book on it
▪ Reinert
International trade
- Does this impact me?
o Yes
o Almost all products you buy have, have been traded internationally
- You might have heard of the notion of globalization
o Start through international trade
- When did globalization start?
o 1990s onwards?
o WTO
▪ Global Trade gets teeth
- But globalization arguably started in the 1870s – 1914
o First ‘golden age’ of international capital
▪ Heyday of the British empire
▪ Pax Britannica
o Global economy united under the pound and the gold standard
- Before 1945 however politicians tend to act as though the global economy was a ‘zero sum
game’
o Our economy needs to gain at the expense of others
▪ Main cause of WWII
o The more resources and markets we control the better
o This meant, if I didn’t grab land and use it for resources and markets, then someone
else would
o This economic model fuelled the political model of colonialism
o This economic model was based on the old theory of mercantilism
▪ Zero sum
▪ We win, you lose
Mercantilism
3
, - Metropole
o Centre of production
o Colonies are places we extract resources from
o Profits are injected back into the metropole
- Manufactured goods are as a rule far more profitable to produce
o Contain more value added than raw materials
- So, mercantilists want production to be ‘at home’
- How to get raw materials for production?
o For example cotton for textile mills?
o You could buy them on a competitive international market
o Or, you could take colonies and extract raw materials at monopsonistic prices
▪ Monopsony = only one buyer
▪ Force colonies to sell for cheaper than they otherwise would have done
- You then produce goods at home, and sell at home
o Use colonies
▪ Even if they are relatively impoverished
▪ Monopsonistic market
- But also use the colonies, as a forced market, where you have a monopoly as a seller
o For example: India
- Meanwhile, other ‘powers’ are jockeying to gain the most colonies, and most raw materials,
and markets, so that they can gain the most value added
o Most wealth = most military power = most economic power = etc.
▪ Still seeing this with today’s china
- But during the 1930s, and 1940s, the Anglo-American economists began to push a new idea
o The cause of WWII was countries competing with each other
▪ Ricardo
▪ Comparative advantage
o Let us create economic unity
▪ Not just a league of nations or a UN
▪ Economic system in which it is in each country’s own economic interest to
work together
o The league of nations was an attempt at creating political unity but did not address
the economic dividedness between countries
▪ Such as trade imbalances
Trade
➔ the non-zero-sum game
- The idea was that, instead of competing amongst each other for colonies and captive
markets
- Why not create a new international order based on Ricardo’s old idea, that trade, via
comparative advantage, would enrich everyone?
o Mutual gains from trade
o Comparative advantage
- International trade would create more wealth than autarky would
o Even autarky with colonies
o This would create incentives to work together, rather than to compete
▪ The economic interest of cooperating rather than competing has of course
also political implications
4
document
Contents
Lecture 1 – 2-2 – Introduction to World Trade: Absolute and Comparative Advantage........................ 2
Lecture 2 – 9-2 – Trade Policy and Regulation...................................................................................... 23
Lecture 3 – 16-2 – International Production: MNEs, FDI, and Regulation ............................................ 46
Lecture 4 – 23-2 – Introduction to International Finance..................................................................... 68
Lecture 5 – 2-3 – Exchange Rates, and the IMF .................................................................................... 88
Lecture 6 – 9-3 – Monetary Unions and Monetary Crises .................................................................. 106
Lecture 7 – 30-3 – Hegemonic Cycles and Historical Capitalism ........................................................ 127
Lecture 8 – 7-4 – Going for Growth: From National Development to Neoliberalism......................... 146
Lecture 9 – 13-4 – Transnational production and finance: Challenges to state effectiveness ........... 159
Lecture 10 – 20-4 – Welfare and Inequality, Social Reproduction and Social Policy .......................... 173
Lecture 11 – 4-5 – Democracy and the 21st century world market: Debating inclusive growth ....... 194
Lecture 12 – 11-5 – The future of the world economy: debating a secure and sustainable future ... 211
1
,Lecture 1 – 2-2 – Introduction to World Trade: Absolute and
Comparative Advantage
International economics will help you to understand the mechanical foundations, on which Global
Political Economy thinkers and policymakers base their opinions
You have to know how the mechanics work before you can form critical opinions of them
International economics
➔ rubrics
- International trade
- International production
- International financial systems
- International development
International trade
- Related to international production
- That is, trade of goods and services across borders
o Always a political element
▪ Politics
▪ Policies
▪ Borders
▪ Law
- Trade that involves dealing with more than one sovereign government
- More than one monetary regime
o Different currencies
- More than one set of laws
o Different laws
- This can lead to any number of ‘complications’ as deals are made
o Legal matters
o Trade regulation affects markets
▪ For example: taxes
o But international trade can also be extremely lucrative
▪ Opportunities
▪ Benefits
o And, arguably, it can help people in both countries
▪ Assume a two-country model
o Though, of course, it might hinder some people in one or both countries
▪ Reality is more complicated
▪ There are winners and losers
International Production
- So, producing goods and services across borders
o Multinational corporations
o Global supply chains
- Your smartphone might have been made in 40 different countries
- Many manufactured goods now are produced from highly international networks
- How does this get regulated?
2
, - Who creates enough stability for this to remain profitable?
- Why is this more advantageous to happen?
International Financial Systems
- Foreign exchange
o Incredible amounts of value
o Huge amounts of capital are moved every moment
▪ Way more than products and services
- Every time you move into another currency area, you are subject to additional risk
- Also, credit can be given or withdrawn, leaving a small economy in shambles
o Related to international development
- And FDI is covered here as well
International Development
- How do capital flows impact economic development, especially in ‘developing’ countries?
o This is more handled in Global Political Economy even though there are chapters in
our book on it
▪ Reinert
International trade
- Does this impact me?
o Yes
o Almost all products you buy have, have been traded internationally
- You might have heard of the notion of globalization
o Start through international trade
- When did globalization start?
o 1990s onwards?
o WTO
▪ Global Trade gets teeth
- But globalization arguably started in the 1870s – 1914
o First ‘golden age’ of international capital
▪ Heyday of the British empire
▪ Pax Britannica
o Global economy united under the pound and the gold standard
- Before 1945 however politicians tend to act as though the global economy was a ‘zero sum
game’
o Our economy needs to gain at the expense of others
▪ Main cause of WWII
o The more resources and markets we control the better
o This meant, if I didn’t grab land and use it for resources and markets, then someone
else would
o This economic model fuelled the political model of colonialism
o This economic model was based on the old theory of mercantilism
▪ Zero sum
▪ We win, you lose
Mercantilism
3
, - Metropole
o Centre of production
o Colonies are places we extract resources from
o Profits are injected back into the metropole
- Manufactured goods are as a rule far more profitable to produce
o Contain more value added than raw materials
- So, mercantilists want production to be ‘at home’
- How to get raw materials for production?
o For example cotton for textile mills?
o You could buy them on a competitive international market
o Or, you could take colonies and extract raw materials at monopsonistic prices
▪ Monopsony = only one buyer
▪ Force colonies to sell for cheaper than they otherwise would have done
- You then produce goods at home, and sell at home
o Use colonies
▪ Even if they are relatively impoverished
▪ Monopsonistic market
- But also use the colonies, as a forced market, where you have a monopoly as a seller
o For example: India
- Meanwhile, other ‘powers’ are jockeying to gain the most colonies, and most raw materials,
and markets, so that they can gain the most value added
o Most wealth = most military power = most economic power = etc.
▪ Still seeing this with today’s china
- But during the 1930s, and 1940s, the Anglo-American economists began to push a new idea
o The cause of WWII was countries competing with each other
▪ Ricardo
▪ Comparative advantage
o Let us create economic unity
▪ Not just a league of nations or a UN
▪ Economic system in which it is in each country’s own economic interest to
work together
o The league of nations was an attempt at creating political unity but did not address
the economic dividedness between countries
▪ Such as trade imbalances
Trade
➔ the non-zero-sum game
- The idea was that, instead of competing amongst each other for colonies and captive
markets
- Why not create a new international order based on Ricardo’s old idea, that trade, via
comparative advantage, would enrich everyone?
o Mutual gains from trade
o Comparative advantage
- International trade would create more wealth than autarky would
o Even autarky with colonies
o This would create incentives to work together, rather than to compete
▪ The economic interest of cooperating rather than competing has of course
also political implications
4
