Rebuilding the System
No Post WWI Order
- Wilson wins 1919 Nobel Peace prize, but is unable to attend peace talks.
- Treaty of Versailles (which U.S. never ratied) much harsher towards
- Germany than 14 Points. German dissatisfaction remains.
- No decolon
Was a Capitalist Argument a Myth?
The USs Goal
- The US comes out of the Great Depression believing several things:
o Market-based capitalism is still better than a planned communist economy, but
needs to be regulated.
o Nationalism is bad, and leads to w
Trade as Development Strategy
Networks and Agglomeration
- Consider IU: we put a lot of intelligent people together and we can accomplish more than
we could individually:
o We create a university
o We create things to facilitate the university
- Putting u
The World Trade Organization (WTO)
Moving Towards the WTO
- Basic tenants: emphasize a regularized process governing trade that is based on a set of
rules, which rest on basic principles, which are agreed by governments.
- The process is contained in roun
The U.N.s Role
- The Bretton Woods institutions are U.N. observers.
- U.N. also has its own subbranches of economic regulatory agencies:
o International Labor Organization (ILO).
o Trade and Development (UNCTAD).
o Development Program (UNDP).
The Interwar Years
Lessons from Interwar Years
- Peace depends on the stability of the global economy.
o Sec. of State Cordell Hull: Free trade dovetails with peace.
- Several ways to overcome Prisoners Dilemma Nash equilibrium:
o Outside intervention by
The International Politics of Trade
The Core and Periphery
- Path dependence plus agglomeration also implies increasing inequality over time
- Rich get richer
- This leads to interesting international trade politics
- Also interesting domestic politics
The Goodness of Trade
- Accumulation of wealth enhanced a countrys prestige and power
- Currencies are denominated in precious metals
- To accumulate:
o Push exports via subsidies
o Limit imports via tariffs
- The goal is to run a pers
The Economic Case for Trade
- No more Gold Standard; instead, a dollar system with money pegged to gold
- United States hold veto power in IMF
- United States funds reconstruction, first via the Marshall Plan, and later via the World
The Domestic Politics of Trade
From Economics to Politics
- In the economists story, everything is great
- Trade benefits both countries
- But this relies on some assumptions:
- Internally mobile factors of production
- No agglomeration effects
- No money
1. Which of the following strategies is most likely to restrain excessive spending by
the federal government?
a. increases in tax rates
b. reductions in tax rates
c. promises by candidates for federal office that they will balance the budget
d. a Constitu