Political Science 7 – International Relations - Spring 2013 - Power Point Presentation #13 - © 2013 Tabakian, Inc.

1. Dr. Tabakian’s Political Science 7
Modern World Governments – Spring 2013
Supplemental Power Point Material #13

2. 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

3. 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

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.”

9. 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.

10. 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.

11. 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.

12. 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.

13. 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.

14. 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.

15. 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.

16. 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.

17. 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.

18. 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.

19. 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.

20. 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.

21. 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.

22. 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.

23. 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.

24. 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.

25. 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.

26. 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.

27. 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.

28. LIBERALISM & MERCANTILISM (4)
• Free market:
– Bargaining space
– Market price
– Demand curve
– Supply curve
– Equilibrium price

29. 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.

30. 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.

31. 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.

32. 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.

33. 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

34. 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.

35. 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.

36. 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.

37. 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.

38. 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.

39. 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.

40. 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.

41. 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.

42. CARTELS (2)
• Consumers do not usually form cartels,
but the major oil-importing states formed
their own organization – the International
Energy Agency (IEA).

43. 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.

44. INDUSTRIES & INTEREST GROUPS (2)
• Intellectual property rights:
– Contentious area of trade negotiations.
– World Intellectual Property Organization
(WIPO).
• Service sector of the economy.

45. INDUSTRIES & INTEREST GROUPS (3)
• Arms Trade.
• Smuggling:
– Illicit trade.
– Black markets are widespread and
flourish, particularly in economies
heavily regulated by government.

46. 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.”

47. 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.

48. ECONOMIC GLOBALIZATION
• Globalization is transforming not only trade, but
money, business, integration, communication,
environmental management, and the economic
development of poor countries.

49. 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.

50. 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.

51. 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.

52. 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.

53. 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.

54. 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