4 realism.pptx Relative vs Absolute Gains U.S. Growth Chinese Growth #1 5% 10% #2 3% 5% 1 Realism Zero-Sum Game Economics → Military Military → Economics System protection, neocolonialism State level – Rational, unitary, self-interested Competition GDP over individuals Redistribution of wealth (among states) over creation IOs and Hegemon Outcome/arena for power relationships State not weakening 2 List/Hamilton Not against Trade, per se List was against agricultural protection Free Trade is beneficial if one has economic supremacy Corn Laws to make U.S. an agricultural component of Britain Historically U.S. was protectionist Goal of Hegemon Coercive Hegemon Interested in Relative Gains National Interest more important than public good How will China react to U.S. hegemony? 3 Is the US in decline? Rise of BRICs = Relative Decline LDC mercantilist policies Government involvement Collective Action (e.g. G-77) Alter System – New International Economic Order Developmental State State interaction in the market to promote development Globalization/liberalism are not beyond control of the state 4 2 post-wwii systems.pptx Post-WWII U.S. and Briton devise system at Bretton Woods Keynes and White—Lessons Learned: Governmental role necessary Moderation of Cycles Regulation State-Centric Relatively egalitarian Fear of Communism Economic problems = Political Problems 1 Embedded Liberalism Embed the Market back into Society State Intervention Focus on Unemployment and Poverty Regulation, not Laissez-Faire Relatively Demand Driven Free Trade and the Market Moderated Capitalism State-Based Trade, little Internationalization of Production Reduced Finance 2 Bretton Woods '45-'71 Fixed Exchange rate U.S. Fixed to Gold Europe Fixed to Dollar Negotiated Exchange Rates Strong Stability Done by Central Banks; Requires: Dollars Marshall Plan Capital Controls 3 IMF International Monetary Fund Financial and Monetary Originally designed to facilitate Bretton Woods System (Fixing/Pegging to Dollar) Supply of Dollars Today: Maintain Exchange Rate Avoid Financial Crises Washington Consensus* Headed By European 4 World Bank International Bank for Reconstruction and Development Provide Loans to Rebuild Europe Provide Loans to LDCs Washington Consensus Headed by an American 5 GATT 1947 General Agreement on Tariffs and Trade Failed attempt at International Trade Organization Temporary agreements on Trade No enforceable body State-Centric Trade Focus on reducing Tariffs U.S. Reluctantly allowed Sterling Area 23 States attended (159 Today) 6 Problems in the Golden Age (~'70s) Relative Decline of US Growth of German and Japanese Competition Eurodollar Market Decolonization NIEs (Newly Industrialized Economies) Group of 77 Stagflation Stagnation and Inflation Failure of keynesi ...