PS 205 Final Study Guide Terms and Concepts to Know Liberalism: An approach that generally shares the assumption

of anarchy (the lack of world government.) but does not see this condition as precluding extensive cooperation to realize common gains from economic exchanges. It emphasizes absolute over relative gains, and in practice a commitment to free trade, free capital flows, and an open world economy. (p.278) Mercantilism: An economic theory and a political ideology opposed to free trade; it shares with realism the belief that each state must protect its own interests with out seeking mutual gains through international organizations. Comparative advantage: The principle that says staes should specialize in trading goods that they produce with the greatest relative efficiency and at the lowest cost (relative to goods from the same state). (p.282) Tariff: A duty or tax levied on certain types of imports (usually as a percentage of their value) as they enter the country. (p. 288) Nontariff trade barriers: Forms of restricting imports other than tariffs, suc as quotas (ceilings on how many goods of a certain kind can be imported.) (p. 289) Protectionism: The proctection of deomestic industries against international competition, by trade tariffs and other means. (p. 287) NAFTA: Balance of Trade: The value of a states exports relative to its imports. (p. 281) WTO: World trade organization. An organization begun in 1995 that expanded the GATTs traditional focus on manufactured goods and created monitoring and enforcement mechanisms (p.290). Most-favored Nation status: A principle by which one state by granting another state MFN status promises to give it the same treatment given to the fist states most favored trading partner. (p.291) Generalized System of Preferences: A mechanism by which some industrialized states began in the 1970s to give tariff concessions to third world states on certain imports; an exception to the most favored nation. Cartel: An association of producers or consumers (or both) of a certain product, formed for the purpose of manipulating its price on the world market. Intellectual property rights: Free trade: The flow of goods and services across national boundaries unimpeded by tariffs aor other restrictions; in principle (if not always in practice), free trade was a key aspect of Britains policy after 1846 and of U.S. policy after 1945.

Centrally planned economy: An economy in which political authorities set prices and decide on quatos for production and consumption of each commodity according to a long term plan. Mixed economy: Economies such as those in the industrialized West that contain both some government conrol and some private ownership. (p.307) Interdependence: A political and economic situation in which two states are simultaneously dependent on each other for their well-being. The degree of interedependence is sometimes designated in terms of sensitivity or vulnerability (p.309) Exchange rate: The rate at which ones states currency can be exchanged for the currency of another state. Since 1973, the international monetary system has depended mainly on floating rather than fixed exchange rates. (.318) Convertible currency: The guarentee that the holder of a particular currency can exchange it for another currency. Some states currencies are nonconvertible. (319) Hyperinflation: An extremely rapid, uncontrolled rise in prices, such as occurred in Germany in the 1920s and some third world countries more recently (p. 319) Hard currency: Money that can be readily converted to leading world currencies. (319) Reserves: Hard currency stockpiles kept by states. (p. 319)

Fixed exchange rates: The official rates of exchange for currencies set by governments not a dominant mechanism in the international monetary system since 1973. (p. 319) Floating exchange rates: The rates determined by global currency markets in which private investors and governments alike buy and sell currencies. Managed float: A system of occasional multinational governments interventions in currency markets to mange otherwise freefloating currency rates. (p.320) Devaluation: A unilateral move to reduce the offical exchange rate. (p.324) Discount rate: Provisoin of short term relief in the form of food, water, shelter, clothing, and other essentials to people facing natural disasters. (p.495) IMF: International monetary fund. An intergovernmental organization that coordinates international currency exchange, the balance of international payments, and national accounts. Along with the World Bank, it is a pillar of the international finacial system. (p.326) World Bank: Formally the international bank for reconstrucion and development. It is an organization that was established in 1944 as a source for loans to help reconstruct the European ecomonies. Later, the main borrowers were third world countries and in the 1990s Eastern European ones. Remittances: Balance of payments: A summary of all the flows of money in and out of a

country. It includes three types of international transactions: the current account (including the merchandise trade balance) flows of capital and changes in reserves (p. 329) Keynesian economics: The principles articulated by British economist John Maynard Keynes, used successfully in the Great Depression of the 1930s including the view that governments should sometimes use deficit spending to stimulate economic growth. Fiscal policy: A governments decisions about spending and taxation, and one of the two major tools of macroeconomic policy making. (p.331) Monetary policy: A governments decisions about printing and circulating money, and one of the two major tools of macroeconomic policy making (the other being fiscal policy) (p.331) National debt: The amount a government owes in debt as a result of deficit spending. MNCs: Foreign direct investment: The acquisition by residents of one country of control over a new or existing business in another country. Also called direct foreign investment (p. 339) Host country: A state in which a foreign multinational corporation (MNC) operates. (p. 340) Home country: The state where a multinational corp. operates.

International integration: The process by which supranational institutions come to replace national ones; the gradual shifting upward of some sovereignty from the stae to regionl or glaobal structures (p. 352) Supranational: Larger institutions and groupings such as the European Union to which state authority or national identity is subordinated (p. 351) Monetary union: Security community: A situation in which low expectations of enterstate violence permit a high degree of political cooperation- as for example among NATO members. (p.353) Free-trade area: A zone in which there are no tariffs or other restrictions on the movement of goods and services across borders. (p. 355) (customs union) Maastricht Treaty: A treaty signed in the Dutch city of Maastricht and ratified in 1992; it commits the European Union to monetary union( a single currency and European Central bank). And to a common foreign policy. Digital Divide: The gap acesess to information technologies between rich and poor people, and between the global North and South. (p. 370) Cultural imperialism: tragedy of the commons Global warming UN Environment Program (UNEP) Montreal Protocol Acid rain Less-developed countries Millennium Development Goals

Urbanization Refugees The World system (periphery, semiperiphery, and core) Imperialism Decolonization Postcolonial dependency Neocolonialism Dependency theory Newly industrialized countries (NICs)

Import substitution Export-led growth Microcredit Informal sector Brain drain Terms of trade Debt service Debt renegotiation IMF conditionality Empowerment

Issues to Know 1) Know the difference between liberalism and mercantilism in some detail. This terms reference two different approaches within IPE and their views of trade. Mercantilism: Generally shares with realism the belief that each sate must protect its own interets at the expense of others. Not relying on international organizations to create a framework for mutal gains. Mercantalists emphasis relative power. What matters is not so much a states absolute amount of well-being as its position relative to rival states. Liberalism: Generally shares the assumption of anarchy but does not see this condition as precluding extensive cooperation to realize common gains. It holds that by that building international organizations, instuitutions, and norms, states can mutally benefit from econoic exchanges. It matters little liberals whether one state gains more or less another just whether the states wealth is increasing in absolute terms. Liberalism and mercantalism are theories of economics and also ideologies that shape state policies. Liberalism is the dominant approach in Western economics, though more so in microeconomics than macroeconomics. 2) Understand what the WTO is and what it does. The WTO is the World Trade Organization. WTO is a multilateral IGO that promotes, monitors, and aduudicates international trade. The WTO is central to the overall expectations and practices of states with regard to international trade. It replaced GATT which was created in 1947 to facilitate freer trade on a multilateral basis. It was the same idea but was not able to regulate trade. 3) Know what is meant by protectionism and which policies can be considered protectionism? Proctectionism: Protection of domestic industries from international trade competition. Although this term encompasses a variety of trade policies

arising from various motivations, all are contrary to liberalism in that they seek to distrort free markets to gain an advantage for the state (or for the substate actors with in it), generally by discouraging imports of cometing goods or service. States often attempt to protect an infant industry, as it starts up in the state for the first time, until it can compete on world markets. i. For example when South Korea first developed an automobile industry, it was not yet competitive with imports so the government gave consumers incentives to buy Korean cars.

4) Know how trade agreements are enforced. 5) Understand the pros and cons of international interdependence in trade. 6) Know what Intellectual Property Rights are and how they are protected. 7) Understand why currencies rise and fall. 8) Understand how fluctuations in a countrys currency affect their trade with other countries. 9) Know what central banks are and what they do. 10) Understand how MNCs operate. 11) 12) Understand what the World Bank and IMF do and the differences between them. 13) Have a good knowledge of the Bretton Woods international monetary system. 14) Know how the EU works, its institutional structure, membership, treaties and agreements, and the issues it is dealing with in the 21st century. 15) Understand how information technologies are used. 16) Know the pros and cons of integration. 17) Know what is meant by the tragedy of the commons. 18) Know what the Kyoto Protocol is and how it works. 19) Know how biodiversity is protected. 20) Be able to describe a conflict that has arisen over a natural resource. 21) Be able to describe in some detail the institutions, norms, treaties and movements that exist to solve an environmental problem. 22) Understand the stages of demographic transition and what happens in each stage. 23) Know what is meant by basic human needs and the politics behind world hunger. 24) Know the position and role of women in developing countries, and why economic accumulation is closely tied to the status of women in society. 25) Know the theories of accumulation and the differences between them well. Be able to make an argument in favor of a theory of accumulation.

26) Understand the effects of colonialism. 27) Briefly understand the role of the United States in revolutions and what happens after revolution. 28) Be able to describe the development experience of a NIC. 29) Be able to explain why China and/or India are booming economically and describe their obstacles to further development. 30) Understand the effects of democracy and authoritarianism on economic accumulation and development. 31) Understand the issues with North-South debt. 32) Know the various types of aid. 33) Understand the various models of development assistance.