Module 9[1] - International Political Economy Module Nine...

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Module Nine International Political Economy
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What is Political Economy? Political Economy is the study of the interrelationship between politics and economics. Studied at two levels: 1) Domestic Level: Relationship between the state, society, business, and economy Economics has been important to states since their development Economy determines domestic stability of states 2) International Level: Relationship between state’s domestic economy and its behavior in the region or world
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Scholars believe that economic forces and conditions determine the course of world politics. Economy is defined as the system of producing, distributing, and using wealth. Politics is the set of institutions and rules by which social and economic interactions are governed. Political economy has many meanings: The study of the political basis of economic actions, the ways in which government policies affect market operations. The principal preoccupation is the economic basis of political action, the ways in which economic forces mold government policies.
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Politics and Markets are in constant state of mutual interaction. Who are the actors in the market: States Society Business leaders Multinational corporations Individuals international organizations IMF, World Bank, or OPEC (Organization of Petroleum Exporting Countries)
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There are several theories as to how the economy and state should be organized: Mercantilism (Etatism or Statism) It is the oldest approach to the study of political economy. States are created, dedicated to the pursuit of economic power and wealth. Government is organized to increase the wealth of the country. Encourages exports over imports. Encourages industrialization over agriculture. Protecting domestic production against competition from imports. Intervening in trade to promote employment.
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Conceived the world as a dangerous place Security defined in terms of wealth otherwise. Otherwise weakness leaves you vulnerable to subjugation. It has a Realist conception of the world The threat of war and violence always present. Therefore, a state’s assignment is security, power, and wealth. Supported a strong and active state. State should operate on a surplus budget. Modern version of mercantilism: Statist model pursued by East Asian Tigers: South Korea, Taiwan, Singapore, Hong Kong States use their power to harness industrial growth. States are active in the economy. They select industries for special tax advantages; they promote exports over imports; they encourage technological innovations, and they focus on making their economy competitive.
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Liberal Theories (Father Adam Smith) Human beings act in rational ways to maximize their self-interest. When individuals act rationally, markets develop to produce,
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Module 9[1] - International Political Economy Module Nine...

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