International Political Economy

1. SIS 401 Summer 2005Wolfram Latsch International Political Economy Presentation 5. Why Globalization Works I.

2. What Liberal Globalization Means • “movement in the direction on greater integration” • Greater “integration of economic activities, via markets” • Lowering of “natural and man-made barriers to international economic exchange” • “Greater reliance on market forces”

3. Markets, Democracy and Peace • Property and freedom(political and economic liberties or rights, political and economic control rights/property rights) • The beneficent state • Regulatory competition (contestability) • Constitutionality, accountability (credibility, constraint) • Moral reform (commercial culture and guardian culture)

4. Markets, Democracy and Peace • International relations • Comparative advantage and absolute advantage • Positive-sum interactions and zero-sum interactions • “Openness”: goods, services, technology, ideas • Collectivism and liberalism

5. The “Magic” of the Market • Rise of the market economy • Property (incl. IPRs) • Corporations • Innovation • Financial intermediation

6. Physician, Heal Thyself • Death of central planning • Who’s the boss? Market or planner? • Production or consumption?

7. The Changing Role of the State • Why has the scope of the state changed? • Public goods • Merit goods • Regulation and competition policies • Redistribution and risk management • Why has the size of the state changed?

8. Physician, Heal Thyself • Market failure • Government failure • Capture, “special interests” • The government as a special interest

9. The Liberal Global Economy • The first and second “golden ages of globalization” • 1870-1914 (UK and offshoots) • Since 1950(Western Europe, Japan, then non-Japan East Asia) • Criterion: convergence of prices and synchronized business cycles

10. The Liberal Global Economy • Trade in Goods and Commodities • Large volume increase in trade • Increase in productivity of goods-producing sectors, fall in relative prices of goods • Increase in importance of services • Rise in intra-industry trade and intra-firm trade (MNCs)

11. The Liberal Global Economy • Capital mobility • UK a major capital exporter in the 19th C. • Offshoots are major recipients of capital in 19th C. • US a major capital importer now • LDCs receive smaller proportion of investments today

12. The Liberal Global Economy • Labor mobility • Migration a major factor in the 19th C. (c. 19-100 million from 1815-1914) • Migration negligible today, mostly intra-LDC refugees • Migration today: skilled labor aggregated in DCs • “Factor price equalization” phenomenon

13. The Liberal Global Economy • The 1914-45 interlude: why? • Citizenship, public goods and nationalism • Business cycles and economic integration • Protectionist politics • Rise of collectivist ideologies • Warfare and inter-war instability

14. The Liberal Global Economy • After 1945 • Keynesianism, fine-tuning, full employment • Fixed exchange rates, limited capital mobility • Int’l economic institutions (IMF, WB, GATT/WTO) • Oil crisis, stagflation, reform

15. The Liberal Global Economy • After 1945 • LDCs: planning and statism vs. outward-orientation • Resurgence of economic liberalism • Liberalization in India and China: convergence?