Political Science 100
Thursday, August 6th, 2015
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Ultimately, a focus on the interaction of the state
and the market, while also focusing international
norms and relationships
Political Economy: “The study of the relationship
between the state, as the leading authoritative
actor in affluent societies, and the economy, the
site in these economies where wealth is produced
and exchanged.” – Rand Dyck
Local and international focuses on international
economic systems
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Free markets
Individual freedoms
Creation of wealth
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International cooperation
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◦ Elimination of tariffs
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Primary goal to limit the role of states in the
market, allowing for market forces to
determine distribution of wealth, competition
and price
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‘an emphasis on class and class conflict, and
identifies interests of the dominant class…as the
main influence on social institutions, including
the state’
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Capitalist system a tool of
oppression, locally and globally
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Tends to analyze inequality of
outcomes
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Identify exploitation in the system
and find ways to fix it
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Not entirely unlike realism
A fight for advantage, both of limited resources
and for dominance
Economic development is, in effect, a
competition
Strong state control of the economy locally leads
to a more effective interaction globally
◦ Mercantilism
◦ National Socialism
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Looking at bigger questions – different ways
governments interact in the market.
Typically a comparative study. Looks at
outcomes, similarities and differences in policy.
(Why are states prosperous? What are the
implications of an active government?)
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Comparisons usually done at macro-level (state
to state)
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Government involvement often mirrors social
values
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When one state’s actions drastically impact
the economy or politics of another state
The United States and Canada are one major
example of interdependence
The EU, more and more, also appears to be
built on this (no matter what the framer’s
may have initially thought)
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Often under-conceptualized component of
trade is the cultural exchange
While the positives of trade are often
emphasized, not always seen as such
◦ Protectionism
 Tariffs and Non-Tariff Barriers
◦ Cultural exchanges
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While international trade is as old as history,
it didn’t really increase exponentially until
mid 1800s
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Wealth of Nations (1776)
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Mercantilism
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British trade, the Corn Laws and imports
◦ Railroads and the Royal Navy
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GATT initially meant as temporary, but failure
to create international trade organization (in
1947), led to it remaining in place
◦ Multilateralism
◦ Reciprocity
◦ Non-discriminatory trade (this has become a key
component of free trade
◦ Free Trade
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LDCs chose not to participate, as it would
dictate trade practices based on deals that
other states made
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Uruguay Round (negotiations) in 1986, led to the
formation of WTO (in 1995)
◦ GATT was folded into the WTO, was basically rules of
international trade
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WTO sets rules for virtually all trade you can
think of between member states
◦ Also provides dispute resolution
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2001 Doha round led to the beginning of a longterm deadlock
◦ Europe and US don’t want agricultural liberalization
◦ China, India, Brazil, Mexico and South Africa working to
ensure no agreements that hurt their interests
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Regional trade blocs (might) be arising as a
serious threat to broader international trade
◦ Canada-EU trade deal my signal a change in this
(also, regional trade is still international)
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Moderately challenging relationship between
US and Europe
◦ An issue of political culture
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Growing economic power of China, India,
Mexico and Brazil mean that trade deals are
more dependent on their wills than before
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Ensures the movement of liquid capital
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Relative value of currencies
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Financial Systems (dominated by IMF and World Bank)
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Bretton-Woods was, originally, a set of rules to
regulate financial systems
◦ Fixed and floating exchange rates
◦ Redistribution of ‘excess’ wealth
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1971 saw the introduction of floating exchanges
Allowed for more private institutions
Speed of communication and trade
Deregulation
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Defining event in the relationship between North,
Central and South America
Banks loaned significant sums to Latin American
states, at high interest rates.
◦ Upwards of $200 billion was loaned
◦ Ineffective projects and corruption ensure that the
investments could not be
repaid when coupled with
economic slow-down
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Banks, in turn, stopped
lending, so states defaulted
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A series of significant monetary and financial crises
ricocheted around the world throughout the latter half of
the 1990s
◦ Deregulation
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1994 Mexico
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1997 Asian Flu
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1998 Economic crises arise in Russia, Brazil and Argentina
◦ Devalue currency, caused rush of int’l money to be pulled from
the economy, leading to further devaluation (and economic crisis)
◦ Thailand’s economic problems impact Indonesia, South Korea and
Japan
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Most recent serious economic downturn due
to deregulation
◦ Subprime lending in the US and Britain
◦ First extended contraction of the economy since
1940s
◦ Wide range of impacts
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Though impact briefly delayed in Europe,
impact has, in fact, been much longer lasting
and due in part to EU wide spread
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Rise of regional trade blocs
◦ NAFTA, EU
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The Transpacific Partnership and Canada
◦ Agricultural production and protectionism
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Is this an example of the Marxist
interpretation of Political Economy?
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Rise and power of OPEC
◦ Iran, Iraq, Kuwait, Saudi Arabia, Venezuela
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The impact of high oil prices on developed
economies
◦ China’s impact
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Energy independence
◦ Shale gas and low oil prices
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High prices and the environment
◦ Why shale may be fools gold
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Large companies are, well, large
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US producers, in the aftermath of WW2, had little
competition to grow
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Relative, particularly to LDCs, corporations have significant
power
◦ Exxon earns $500,000,000/year
◦ This is more than Denmark or Argentina (41 million people!)
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Realist world – where power matters
Race to the bottom
Political interference
Espionage
Global production
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Staples theory (or trap): Economic
development unique in the world. Resources
so abundant, it didn’t develop economically,
or politically, like anyone else. Still, a huge
exporter of raw resources.
Regionalism and
strong provinces
Higher levels of government involvement
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Stronger welfare state than other Anglo-Saxon
countries
Brokerage Party System:
parties try to broker coalitions
between regions, each with
their own interests –
strict ideology is too
constraining
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Aggregates so many interests,
cuts to welfare cannot be as strong here
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Internal political economies…