1.Theoretical Approaches to IPE
What does realism say about how state power shapes international trade and finance?
State interests do not want an international governing body (anarchy) so they can protect their interests.
How do states benefit from trade (Comparative Advantage)
Economic growth, job creation, and higher living standards, as trade allows for specialization, access to new markets, and lower prices for consumers. Increased exports boost domestic production, support high-wage jobs, and provide farmers and manufacturers with larger customer bases, while imports provide more affordable goods and services for consumers.
Bretton Woods System – What was it, and why did it collapse?
- Conference that developed from the chaos of the Great Depression & WW2
- Set up the World Bank, IMF, and the GATT
- The system lacked flexibility and speculative attacks against the dollar.
What factors attract multinational corporations (FDI)?
access to new markets, availability of resources, and cost-efficiency
How did Latin America use Import Substitution Industrialization (ISI)?
A strategy to develop their own industries and reduce dependence on foreign imports. They implemented protective policies like tariffs and subsidies to encourage domestic production of goods like textiles, machinery, and consumer products.
What does liberalism say about the role of markets and institutions in the global economy?
The market is top, cooperation is possible, institutions help create stability.
What determines a country’s trade specialization in the Heckscher-Ohlin Model?
- Abundant v. scarce factors
A country with abundant labor will export labor-intensive goods (e.g., clothing), while a country with abundant capital will export capital-intensive goods (e.g., steel), resulting in mutually beneficial trade according to the Heckscher-Ohlin theorem.
What is the impossible trinity?
An economic principle stating that a country cannot simultaneously have a fixed exchange rate, free capital movement, and an independent monetary policy
How do short-term capital flows impact economies?
Short-term capital flows can destabilize economies by creating volatility in exchange rates and asset prices, increasing the risk of financial crises and economic downturns.
Why did East Asian economies succeed with Export-Led Growth (ELG)?
Aggressive pursuit of export-oriented manufacturing, significant investment in human capital and education to create a skilled workforce, strategic acquisition of foreign technology, and creating an enabling environment with good infrastructure and access to credit for successful exporters
How does global capitalism create winners and losers through the perspective of Marxism & Dependency Theory?
Capitalism is inherently exploitative.
How do states intervene to boost national industries?
- Tax policy, Tariffs, or subsidies.
Why can’t countries have all three of the Impossible Trinity?
foreign currency reserves of a central bank are limited, once the reserves are depleted, the domestic currency will depreciate. Hence, all three of the policy objectives mentioned above cannot be pursued simultaneously.
What caused past crises (1997 Asian Financial Crisis, 2008 Global Crisis)?
1997: rapid domestic credit growth, excessive foreign borrowing, and overheated economies, leading to currency devaluations and recessions. 2008: collapse of the U.S. housing market due to a bubble in property values, predatory lending for subprime mortgages, and deregulation of the financial sector, which led to the failure of major financial institutions.
What reforms did the IMF & World Bank promote?
strengthening governance, modernizing economic policies, and increasing inclusivity
What are the key readings on these ideologies (Realism, Liberalism & Leninism)?
Krasner (realism), Friedan & Lake (Liberalism), and Marx (Leninism)
Why did the GATT turn into the WTO?
global trade had become more complex, requiring a formal international organization with a more comprehensive and enforceable framework
How do floating and Fixed exchange rates impact trade and investment?
- Floating exchange rates are determined by supply and demand, offering flexibility but creating volatility that can impact trade and investment.
- Fixed rates are set by a government, providing stability that can attract foreign investment and smooth trade, but limit a country's ability to use monetary policy independently
Describe Convergence vs. Divergence, and is globalization equalizing or worsening inequality?
convergence: A situation where economies with lower income levels catch up to those with higher income levels, thus becoming more similar over time
divergence: The gap between two or more things increases.
What are the critiques of neoliberal policies regarding Fair Trade vs. Free Trade?
Increased Inequality, "Race to the Bottom"
The negative social and environmental impacts of pure free trade and the argument that fair trade, while a potential alternative, is often an insufficient remedy operating within the same flawed capitalistic framework.