GST4001 - Session 2-1 (September 10th, 2007)
Three Perspectives Of Global Political Economy
Session Objectives
Perspectives of GPE
Compare and contrast Liberal, Nationalist, and Marxist perspectives on GPE
Compare and contrast liberal view of competition with the mercantilist view of competition.
Develop tools for Global and National political and economic analysis
Three Perspectives of Global Political Economy
- Liberalism, Nationalism, Marxism
LIBERALISM: Philosophical
Origins and Content
Classical Liberalism
Importance of Free Markets:
- Provides a framework for greater efficiency, greater positive sum outcomes
The “Invisible hand”
- Allows individuals to follow individual interests
Positive-Sum Outcomes from Self-Interested Behavior
Origins and Content
Importance of the Individual
A Limited Role for the State - Liberty and a Fear of State Power
Laissez-faire “let it be”
- Everyone can buy/sell without government constraint/regulation
- "economic equivalent of freedom" and "free markets"
Free market + limited control of the state = liberalism (in economic terms)
- "conservative" only in only in modern, US (developed countries?) perspective, historically and globally "liberalism", "against/freedom from the state"
- for example, revolution as a reaction to taxation (state intervention)
- "classical liberalism" to differenciate perhaps?
Markets and Democracy Diffuse Power (safeguards freedom)
Liberal Perspective on Trade
- lower government regulations (that is trade barriers) within and between countries = liberalize trade - WTO
- removing barriers that are in the way benefits all (comparative advantage)
- leads to PPPPeace and PPPPPProsperity (and happy and cooperative and harmonious...?)
- and vice versa
Adam Smith
Absolute Advantage
- any country has an absolute advantage to trade in a product with another
Two countries, two products - specialization on what you can best do (quality and price)
Each country can produce one product more cheaply than the other country
- and everyone gets what is the best produced... where-ever
- with no barriers, market reveals absolute advantage of producer
- with no barriers, consumer receives best product globally... theoretically I guess?
- positive sum
Specialize and trade!
- free trade: taxes, barriers etc affect natural prices
Increases overall welfare in both countries (positive sum)
- everyone wins
David Ricardo
Comparative Advantage
- There will always be something an relatively poor country can make (i.e. advanced industrial country vs impoverished country)
Two countries, two products
- highly developed country can produce anything, but should specialize in higher end, opening up market space for countries less developed
- lack of higher end product specialization creates comparative diminishing prosperity on highly developed countries
- less developed countries specialize in lower-end goods?
- mutual interdependency on products specialized on all sides - achieve overall welfare
- specializing creates these interdependencies, which is actually a word, amazing
- invest on human capital to create comparative advantages
- once again, positive sum. YAYYYY!
One country can produce naturally endowed, one (?) products more cheaply than the other country
Specialize and trade!
Increases overall welfare in both countries (positive sum)
What about relative gain in positive sum? (countries gain more or less "positives"... or something like that, you know)
- okay in liberal viewpoint
- better than zero sum/negative sum scenarios
- "\('∇'\) is always better than /('д'/)" - (or \('д'/) I guess?)
LIBERALISM: Philosophical Origins and Content
Free markets but increased role for the state
Contemporary Liberalism
Free markets and very limited (I guess) state role
Modern liberalist extensions - what is this slide about, I don't le understand, which is French for "the understand"
Neo-Liberalism
Market - State Symbiosis
Market-based solutions to policy questions
Sovereignty at Bay - Raymond Vernon
Propositions:
1) Increasing economic interdependence & technological advances in communications & transportation make nation-state anachronistic
- national economies are no longer self-sufficient but interdependent
2) Economic & technological developments have undermined the traditional economic rationale of the nation-state
3) The organization of economic activity on transnational scales increases economic efficiency & domestic economic welfare, contributing to an erosion of national control over economic affairs & policy
- multinational corporation is driving (neo)liberal (or liberal extension) economic activity... stuff. yeah?
- replacing national control? - good from liberal perspective because nations and governments get in the way
Virtual State
Imperial State (19th century UK) - transforms into...
Trading State (Post WWII – Japan and Germany) - (national based trading) transforms into...
Virtual State (future, Singapore, Hong Kong, Switzerland) - analogyo to role of multinational corps
Virtual State analogous to virtual corporations locating production facilities around the globe and outsourcing
In VS, land and manufacturing (BODY) no longer primary attributes of power and wealth, instead knowledge-intensivity, technological innovation, and service sector (HEAD) are primary attributes
- state helps advance knowledge and innovation, investing in talent abroad and bringing it back
- government in limited role seeks global resources, etc
- cannot achieve objectives within own boundaries - invest/trade abroad
Body states – Russia, China and India
VS strengthens interdependency and reduces the likelihood of war as motivation to acquire territory is reduced
Virtual State
Functional Aspect of Virtual State:
Privatization of state enterprises (selling them off)
Deregulation of Economic Sectors
Reduction of Military - help remove dependency on military resources
- HK outsourced its military needs? Harharhar
Market fills power vacuum left in the wake of state retreat
Emphasis on human resource development as primary national goal
- attract human capital from abroad and educating domestic human capital
Between liberals - disagreement between "how much government"
- Spectrum of Friedman (as little as possible) to Keynes (plays role as regulator and expediates wherever needed)