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 themodernization of a people that in turn encourages theabandonment of old norms and beliefs so that new onescan take its place. Three components help to explain thistransformation process. First, it is assumed that thebenefits 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 rationaland optimizers, while those who do not remain committedto non-rational traditional values. Cultural contact may be anecessary factor, but it cannot be the only factor.
MODERNIZATION (2)Daniel Lerner argues that societies may consist of variousmobile personalities, yet share the common trait ofempathy. He stresses that society has to possess largenumbers of individual with “psychic mobility,” meaning thatthey are willing to adopt new patterns of thinking. Travelwas the primary method for sharing new techniques.Today’s media culture no longer requires direct humancontact. Social mobilization does not always have to entailmodernization. S. N. Eisenstadt speaks of the “post-traditional” society in which old norms and practices arethrown away, but are not replaced with new modernpractices.
MODERNIZATION (3)Modernization also led to the de-monopolization of powerlords held in those villages dominated by lordships.Populations had other sources of resources madeavailable 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 tradepolicies, free labor markets, stable exchange rates,competitive market structures, wage restraint, and a limitedrole for government in the economy. Neoclassicaleconomists stress comparative advantage, for examplestressing the need for resource rich third world countries tofocus on exporting raw materials and labor-intensivemanufacturing while foregoing advanced industrialization.Modernization theory stressed that the third world couldrise out of poverty through external linkages with corenations that could invest and purchase raw materials fromperiphery countries.
MODERNIZATION (5)Dependency theories countered modernization withhighlights of exploitation of the periphery by the core. Latercase studies in the 1970s and 1980s showed that thoseperiphery countries that are the most advanced mightbenefit from external linkages, as they are more willing todirect incoming investments into capitalist developmentprojects that are prone to bring long-term benefits.Developmental theories focus on late term industrializationby stressing the need for a strong state role. The conceptof a developmental state “focuses on the political will, theideological coherence, the bureaucratic instruments, andthe repressive capacity needed to formulate andimplement effective economic policies to promote high-speed capitalist growth.”
MODERNIZATION (6)World-systems/dependency theories draw on Marxistprinciples. Immanuel Wallerstein is regarded as the fatherof world-systems/dependency theories as it pertains to thehierarchy of states consisting of core, semi-peripheral andperipheral nations. Mobility is determined according to theflow of resources between these different nations and thata key variable determining a nation’s developmentoutcome is that country’s mode of incorporation into thecapitalist world-economy.
MODERNIZATION (7)Dependency theorists suggest that groups within weakerstates like residing capitalists and the military wouldwillingly ally themselves with more powerful states or theirrespective militaries and even multinational corporations.This would assure that elites in poorer states wouldcontinue to prosper, while their country prospers at a ratethat is determined according to its placement in the worldcapitalist system. Dependency theorists would argue thatrich states dictate the rate of prosperity of poorer states.
MODERNIZATION (8)The new institutionalist “entails a rejection of rational-actormodels, an interest in institutions as independent variables,a turn toward cognitive and cultural explanations, and aninterest in properties of supraindividual units of analysis thatcannot be reduced to aggregations or direct consequencesof individuals.” Gary Gereffi and Stephanie Fonda list fourprimary transnational economic linkages: foreign aid,foreign trade, foreign direct investment, and foreign debt.Developmental states utilize state policy to promote theefficiency of their country in order to achieve a strong potionin the international division of labor. One can argue thatthose regions where agriculture remains dominant like sub-Saharan Africa and South Asia, maintain the lowest levels ofeconomic and social well being.
MODERNIZATION (9)Latin American and India have high levels of povertythough they may possess high levels of industrialization.Thus, industrialization is not a guarantee for high livingstandards. Investments in health, education and jobtraining are important for those peoples who are ultimatelyresponsible for their own welfare. These are majorrequirements for any country to improve its conditionregardless if it desires higher productivity in agricultureand/or industry.
SCIENTIFIC KNOWLEDGE RACISM & SEXISMThe scientific method helped to instill economicdevelopment in mankind. Prior to this occurrence inhuman history, one can see a constant continuity inhistory. There permeates within mankind a desire tocommand nature. Defining the laws of nature brings forthuniversal regularity to what is and is not possible.Technology brings about further insight to whatpossibilities are possible; with the only determining factorfor a society to understand would be its degree ofscientific advancement. One may also make theargument that increased scientific knowledge has helpedto de-legitimize racism and sexism for increasedknowledge has proven successful in promoting humanequality.
STATE INTERDEPENDENCY (1)Societal interdependence addresses situations in whichevents within one society affect events in another.Government involvement in instigating these events doesnot have to take place for this to occur. Transnationalrelations helped to encourage interdependency betweenstates. Nation-states interdependent on one anotherpresented each with economic and political trade-offswhereas gains in one may lead to the weakening of another.Economic gains that may be derived from external sourcesthat are able to produce them more efficiently while onlyretaining those industries that are efficient may allow a stateto achieve higher overall productivity. This comes at a pricewhen a state becomes so dependent on foreign sources ofgoods that it affects how its foreign policy is conducted.
STATE INTERDEPENDENCY (2)As a state becomes more interdependent on one another italso serves to prevent it from acting overly aggressiveagainst those states that it has become dependent.Interdependence reversed the low levels of politicaloptimism beginning in the 1970s that established linkagesbetween the West, Latin America, and Asia and culminatedwith the collapse of the Soviet Union.
STATE INTERDEPENDENCY (3)Simple interdependency is morphing into a complexinterdependence that was uniting economic and political interestsof states into one cohesive block. War among the advancedstates became unthinkable as interdependence made it evermore costly. An interdependent world of liberal-democratic statescan at some point in time lead to world peace. Regardless ofthese economic forces, security concerns as well as the drive fornational honor can overrule the costs associated with breakinglinkages. Countries that wish to attract foreign investments oraccrue technological innovations have to wear a “goldenstraitjacket”. This is a set of policies that include balancedbudgets, economic deregulation, free trade, a stable currencyand most importantly an overall transparency so that people canpredict the overall direction of a country.
STATE INTERDEPENDENCY (4)Societal and economic interdependence can interlink thedomestic policies of two nation-states. Take the example ofCanada and the United States. The high degree of societalinterdependence assures that Canada will be strongly affectedby American policies. The most powerful nation-state canmore affect the policies of another country interdependent onits society as the US and Canada example shows.
STATE INTERDEPENDENCY (5)Underlying most analyses of world politics and internationalorganization is the state-centric approach. This makes twoassumptions:(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 POLICYThe rise of international law and the recognition of universalhuman rights have in turn affected those processes availablefor states to control. To sum up, it can be argued that we areapproaching a time when a world of regions maintain statesthat remain sovereign, yet committed to universal principlesthat in turn create new political arenas that maintain relationsbetween actors. Glocalization assists us with understandinghow this is taking place. The theory focuses on therelationships among units that according to John Mearsheimer“are transforming the identities, interests, and strategies ofactors through a combination of global and local processesand are thus adding new political actors and processes to anincreasingly global politics.” Human rights has become afundamental principle of American Foreign Policy.
ECONOMIC GROWTH & DEVELOPMENT (1)There are competing opinions about why high income percapita helps to promote democracy. One suggestion hasit that sustained growth helps to weaken the base ofauthoritarian forces while at the same time empoweringsubordinates. Further expansion of civil society grantscitizens the ability to check monopolistic governmentwhile a growing middle class becomes able to furtherdemocratic institutions that in turn strengthens liberalideas to take hold. Another argument is that increasingeconomic development furthers education among thepopulace, which in turn causes individuals to press forinclusion and accountability.
ECONOMIC GROWTH & DEVELOPMENT (2)One can argue that mature capitalist economies realizethe necessity for a democratic compromise between theworking class and capitalists. Marxism argues thatcapitalism requires expanding markets and increasingprofits through continuous exploitation of low-wage laborand the continued suppression of subordinated classes.Globalization results in the homogenization ofpreferences and technologies, as well as the blending ofdifferent life styles into a global standard. Globalization inpolitical terms means the rise of democracy and themarket economy. Even though globalization promoteshomogenization, we should realize the potential benefits.
ECONOMIC GROWTH & DEVELOPMENT – CHINA (3)The Chinese Government has identified economic growth asthe nation’s highest priority, promoting a “socialist marketeconomy” and staking the legitimacy of the Chinesecommunist system on the ability of the State to deliver onpromises for economic growth. China has experienced aperiod of rapid, sustained economic growth comparable toJapan and South Korea. But economic growth has beenaccompanied by a host of new problems as well: increasingunemployment, rampant corruption, and growing pollution.What’s more is that the environmental impact of Chineseeconomic growth is not confined to China, but increasinglyaffects countries around the world.
ECONOMIC GROWTH & DEVELOPMENT – CHINA (4)With economic growth rates exceeding 10percent per year from 1980 to 2000, Chinatoday has the fourth largest economy inthe world. And with a population of morethan one billion people, many analystsspeculate that the 21st century will witnessthe economic hegemony of the UnitedStates displaced by that of China. Yet, asChina has industrialized its economy, ithas also increased the levels of pollutionin the country. According to the WorldBank, China is home to 20 of the world’s30 most polluted cities. Linfen, a city inChina’s Shanxi Province and the heart ofChina’s coal and power producing region,has the notorious distinction of being theworld’s most polluted city.
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.
LIBERALISM & MERCANTILISM (2)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 & MERCANTILISM (3)• 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.
LIBERALISM & MERCANTILISM (5)• 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.
POLITICAL INTERFERENCE IN MARKETS (2)• 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
POLITICAL INTERFERENCE IN MARKETS (3)• 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.
INDUSTRIES & INTEREST GROUPS (2)• Intellectual property rights: – Contentious area of trade negotiations. – World Intellectual Property Organization (WIPO).• Service sector of the economy.
INDUSTRIES & INTEREST GROUPS (3)• 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