Tabakian Pols 7 Fall/Spring 2014 Power 13

Dr. Tabakian’s Political Science 7 Modern World Governments – Spring/Fall 2014

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.

STATE INTERDEPENDENCY (2) 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.

STATE INTERDEPENDENCY (3) 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.

STATE INTERDEPENDENCY (4) 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.

STATE INTERDEPENDENCY (5) 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.

CHINESE ECONOMIC GROWTH

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

Education

Tabakian Pols 7 Fall/Spring 2014 Power 13