International Political Economy – Notes

 Two basic questions in this topic:

1. What makes a nation wealthy?
2. What is the proper role of government in economic activity?

Right Left
Liberalism Nationalism Structuralism

Dependency Marxism

Right Vs. Left: Amount of Government Intervention

Adam Smith (1723 – 1790; Scotland) – Liberalism

 Adam Smith is the ‘father of capitalism’.
 He advocated ‘market forces’ (The Invisible Hand).
 Adam Smith, born in 1723, published his first book at the age of 36. He was a pioneer of political
economics and modern capitalism and his second book, "Wealth of Nations," is still considered
the first modern work of economics.
 Today, he is known as the father of "laissez-faire" economics, which opposes government
interference in business dealings.
 (Laissez-faire): a doctrine opposing governmental interference in economic affairs beyond the
minimum necessary for the maintenance of peace and property rights.

Free Trade
Free Trade occurs when there are no Government Interventions in:
1. Trade Tariffs.
2. Quotas.
3. Non-Tariffs Barriers.

Comparison
Government Intervention Free Market
Expensive Good. Good’s prices go down.
Same quality & Choices. Quality goes up.
Innovation.

Nationalism:
 Premises of Nationalism:
1. States compete economically.
2. Nations with the most advanced economies win economic competition.
 Theorists of Nationalism:
1. Friedrich List, Russia, 1789-1846
2. Alexander Hamilton, USA, 1755-1804
 Hamilton – “Report on the Subject of Manufactures” (1791):
Industrial Power = National Power = Independence

Comparison of Economies:
Strong Economies Weak Economies
Mature Industries Infant Industries
High Quality Low Quality
Low Cost High Cost

Communism:
 Karl Marx (1818 – 1883) & Frederick Engels
 The Communist Manifesto 1848

Dependency & the Division of Labour

Economically Developed Countries Less Developed Countries
 North America, Western Europe, Japan.  Africa, Asia, Middle East, Latin America.
 Large middle class.  Primary products.
 High Tech.  Commodities.
 Industrial products.  Elites – impoverished.
 High skills.  Low skills.
 High wages.  Low wages.
 Cars, chemicals, aerospace, telecomm,  Bananas, coffee, minerals, rubber, timber.
electronics, software.

 Money flows from the EDCs to the LDCs and from the LDCs to the EDCs.