Nau6e_Ch08_PPT.pptx Perspectives on International Relations

PowerPoint of Chapter 8

1. Chapter 8 Realist and Liberal Perspectives on Globalization Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 2

2. Topics to Cover Snapshot of Globalization Domestic Economic Policies Trade Investment Finance Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 3

3. Snapshot of Globalization Trade and investment as “real economy” Realist perspective Relative gains Security relations determine whether free trade or mercantilist policies prevail Liberal perspective Absolute gains, joint benefits Economic interdependence lessens security competition Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 4

4. Snapshot of Globalization Domestic economic policies Security policies Trade policies Investment and savings policies Financial and exchange rate policies Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 5

5. Security and Economics Realist perspective global markets don’t emerge unless countries feel safe Liberal perspective Emphasize absolute or collective gains; more players make open markets more efficient Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 6

6. Macroeconomic Policies Fiscal policy Government can increase or decrease total demand in the economy by running a budget deficit or surplus Monetary policy Government increases money supply ( lowering interest rates) or decreases supply (raising interest rates) Combinations of policies to influence domestic economic outcomes Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 7

7. Macroeconomic Policies Realist perspective Countries pursue different policies, rely on market forces and exchange rates to coordinate, narrow differences Liberal perspective Urge direct coordination of policies among countries through international summits Tokyo Summit Washington Consensus Beijing Consensus Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 8

8. Microeconomic Policies Applies to specific sectors of the economy Includes regulations, subsidies, price controls, competition or antitrust policies, and labor union laws Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 9

9. Trade Policies affect prices of goods and services as they cross borders Tariffs: Taxes on goods and services Nontariff barriers: Any other policy that limits or regulates imports and exports Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 10

10. Specialization and the Division of Labor Adam Smith, The Wealth of Nations (1776) Foundation of free (laissez-faire) trade Specialization (or the division of labor) leads to increased production and wealth The “invisible hand” regulates production and commerce in competitive markets Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 11

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12. Exceptions to Unrestricted Trade National security export controls Regulate trade in military and dual-use technology Protection of infant industries Rationale for import substitution policies Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 13

13. Strategic Trade Theory Economies of scale are so large in some markets that only one firm or country can make a profit Realist perspective Strategic trade focuses on relative gains, views markets as zero-sum Liberal perspective Strategic trade limits common gains Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 14

14. Trade and Jobs Does trade destroy jobs or create them? Destroys relatively less skilled or low-wage jobs Creates relatively more skilled or high-wage jobs Trade with low-wage countries Increases efficiency and productivity in advanced and developing countries Shifts jobs from lower productivity and wage levels to higher ones Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 15

15. Trade Negotiations Most-favored-nation principle Multilateral trade rounds States negotiate reciprocal tariff reductions GATT/WTO Uruguay Round Doha Round Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 16

16. Investment Realist perspective Investment can help states gain access to resources and markets Defense industries must be protected from foreign takeover Liberal perspective Diversify investments Strengthen international rules to protect national interests Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 17

17. Resource-Based Foreign Investments Most FDI went into resource-based industries until 1960 Resource curse Role of resource-based MNCs in countries Impact of China and India’s development on resource markets in the Middle East, Africa, and Latin America Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 18

18. Manufacturing Foreign Investments FDI shifting to manufacturing in mid-1950s Technology gap Does investment increase efficiency? Why is investment flowing to developing countries? Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 19

19. Service-Sector Foreign Investments Includes finance, retail, telecommunications, and entertainment Latest expansion includes data processing, back-office accounting services, software development, and call centers Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 20

20. Multinational Corporations One fourth of all MNCs are headquartered in developing countries Pay higher wages than local firms but not as high as in their home countries Workers do better where MNCs are present Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 21

21. Immigration Policies Wages drive migration Realist perspective Reluctant to liberalize immigration flows unless doing so offers relative national advantage Liberal perspective Emphasize opportunities to match labor skills and economic needs across boundaries, thereby increasing common benefits Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 22

22. Exchange Rates Needs to be coordinated when creating a stable world economy Fixed exchange rate system: How do governments know what the correct price should be? Managed float or dirty float: Government intervention, often secret, to manipulate exchange rates Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 23

23. Currency Markets Exchange market intervention When central banks buy or sell their own countries’ currency in large quantities to affect price Realist perspective Tolerate greater exchange rate competition Liberal perspective Favor coordinate to maintain exchange rates within narrow ranges Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 24

24. Debt Markets Savings mobilized for investment opportunities worldwide Derivatives market Exchange of financial claims against future earnings Serves to hedge against future earnings, prices, or interest rates Role in the global financial crisis Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 25

25. Global Financial Crisis What happened? Late 1990s: Collateralized debt obligations (CDOs) Insurance on CDOs via credit default swaps United States: Subprime loans for houses Housing prices decline, triggering defaults on loans Outcomes Troubled Asset Relief Program Regulation of derivatives market? Basel Accords Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 26

26. Eurozone Crisis What happened? European Central Bank controls countries’ monetary policies Greece, Portugal, Spain, and Ireland cannot correct for balance-of-payment and debt problems independently Outcomes Surplus countries bankroll rescue and direct policy Germany Austerity Nau, Perspectives on International Relations 6e. © SAGE Publishing, 2018. 27