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Discussion #1 June Samuel
ANNOUNCEMENTS
Read Chapter | in Mingst (ESSENTIALS OF INTERNATIONAL RELATIONS) for Tuesday’s lecture
You need the newest edition because it was put out after 9/11 and is drastically different.
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1. What is International relations, who are the major actors?
- states
- non governmental organizations (ex. UN)
- super governmental (ex. EU)
the two latter are getting more important because of
1) globalization — trade, ideas. Going across boundaries. Made better by transportation and
communication. These things are better because of the formation revolution.
2) trade Trade increases because of industrialization and globalization.
II. Upcoming current events: Iraqi Elections
Which influences the elections (or any situation) more?
- Agency - situation you're in
- Structure - people that act
Iraq lacks the following for a successful election:
|. peaceful regime change — every democracy works based on the incumbents understanding that if
they loose the elections they will get another shot in four years — they don’t engage in violence if they
loose. In our country we switch from the democrats to republicans in leadership all the time.
2. media to learn about elections — the majority of Iraqis are not able to use television and radio access
to learn about the candidates and therefore can not make educated decisions.
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3. motivation for democracy: The U.S.A is imposing the elections on Iraq
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New threats
Failed States —(ex. Afghanistan) maybe due to a form of terrorism
Terrorist —
- (World Trade Center - was not based on technology)
- threats based on the global system are new technologies. The capacity of various groups to find
new members with similar views also comes into play here. The internet connects many
terrorists together.
How do we respond to the new threats? What do we do about these threats.
Can't respond preemptively. Is Bush’s doctrine good?
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What Distinguishes Contemporary IR system?
The absence of two competing ideologies is a distinctive aspect of the 20” century. That is not to say there are no ideologies
different from capitalism (ie terrorism). We still have two official communist countries (Cuba and North Korea). [s this
really a different ideology or just a way for ruler to get power.
{n North Korea the government is involved in building counterfeit money, built a wall around their borders to keep people
from seeing what’s going on in their state etc... This is a country that is operating outside the system
In Iran there is a dominant theology. In some states there are terrorist regimes. But these cases are all exceptions.
What is the siructure of power in the system?
If you take certain aspects like the military than the United States is way ahead of other countries (maybe not Great Britain),
We spend more on the military as well. There is also a technological gap between America and other countries. Our
culture is the leading culture and sets the trends for many other places.
If we compare this with the cold War era than the Soviet Union had amazing military capabilities. But it was still on the
lower end of technological advances. It was a super power with a third world economy.
It’s not only the United States. There are many other players in the IR sysiem. They don’t have weapons of mass
destruction but they can influence outcomes in the international sysiem. For example, the UN, WTO, NGO's etc have a
stake in the outcome of governments and wars. They have a huge part in the system even though they have no military or
weapons. The U.S is subject to certain rules and disciplines from these organizations as well.
The x-ray is a part of technological advance that is a symbol of the fact that this age brought about the challenge of dangers
to security that has come from within society. We need to check in airports in our own country to make sure that there are no
terrorists on board.
Our system is a system that is based on economic opportunities. Countries will become more developed if they improve their
economics. As a result you have rapidly growing ties — the U.S is heavily dependant on other countries and their pulling out
of it would result in loss of jobs, increase of poverty etc. This is because firms that work abroad are very important. There is
anew development of work structures. Whereas third world countries used to just produce simple items for their colonizing
countries. Now they produce and create products that are in the middle of the production process. Increasingly they are
moving up the production process.
Transportation is facilitated by policies. This is not natural — it took a lot of thought and work. Even the new economic ties
would not have been possible without policy. The policy offers a structure not possible before. Technology is important but
policy is the most important.
The issue of stability is also important. These are new threats that were not there under the Cold War system. Mainly
because the Soviet Union would control a lot of the countries that are threatening America or each other these threats are
new. We wouldn’t have had the war in the Balkans for example. The two super powers were able to keep a much better
level of control. These threats are magnified because of the very same technology that allows us better open communication.
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We have the danger of failed states (either captured or don’t have the capabilities to provide full domestic security and
control its territories) become the breeding ground for terrorism. In order to address these problems we need established
channels to communicate. Some say the state is dead. That is not necessarily the case — it just needs to communicate.
Can the U.S go it alone?
Some states who have no apparent power can get it from being on the security council of the UN or some other job. Military
and economic powers are not the only things that count. The international system is a system of checks and balances and
creates a more even playing field for all countries. This suggests that the U.S doesn’t even have that much power. It can’t
do whatever it wants. We can win wars but it cosis money and recourses.
You have to look at the history and compare with other cases. Overall we can say the U.S usually allies with other countries
to achieve their goals. This demonstrates you can do it alone because of the unique features of the system. Also, the U.S is
not interested in building their power in a colonial way the way Great Britain did. For example, we did not go into Iraq for
the oil because we can buy it on the international market. We went in to Iraq to promote democracy.
In order for the system to work properly you need to make sure there are no rouge states. The United States can’t do that
alone. They can’t check for nuclear weapons in North Korea by themselves.
The Unites States operating in the system shows certain vulnerability:
1) Democracy
2) We rely on many other finances — other countries sending us goods
3) we have a population deficit- can’t be a colonizing system
Theorizing about International Relations
Why do we need a theory’?
- Provides some systematic thinking and guidelines as to how to think about an issue. Organizing tool
- Gives predicative power — doesn’t always work because we can’t exepiment...
IR used to just be a diplomatic history. Over time it started relating to the two big issues of “War and Peace”.
Perspectives are not theories. It is based on fundamental assumptions about reality.
Realist perspective:
Idealist perspective:
Liberal perspective:
Radical perspective (new! ):
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It perceives the world as a zero sum game. [t means that if one state become more powerful than
another state becomes less powerful. This is also a world of anarchy. It is a justification that states have
to be powerful and invest in their power.
There are many strands within realist perspective. What if it is easier to invade than to defend? Ifit’s
easier to defend than you expect international stability. But if it’s easier to invade there will be more
war.
Q: What kind of predictions would the realist perspective identify for the current and future evolution of
the current international system?
They will probably argue that the EU, China, ete will emerge as multi powers. We are moving
to a multi powered world. Once the US is out of Europe militarily => they will emerge as a rival
to the US.
NATO is a threat to some, not needed for others.
Next time we will do liberalist perspective
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Reali
st Perspective continued —
Hegemonic Stability Theory - Government has to give something in order to get respect from
people
It explains why there are UN and IMF international regimes and why they were largely started by the
US.
Its because concentrated power in one actor must provide for everyone else.
Liberal Perspective
T
not concerned solely with the issues of power. There are other considerations which relate to
economic issues and the assumption (of other two perspectives) that the world is not a zero sum
game — it’s a positive sum game. One country’s benefit is not another’s downfall. Cooperation
is possible
Look closer at the state. Look at the way it’s organized, what kind of coalitions there are, For
some countries power is legitimized by the threat of the outside. This causes them to be more
willing to fight, At the other end you have coalitions that are interested in operating with other
cultures. The form of government therefore, plays a very important role.
Spread of Democracy — Idealist theory - Woodrow Wilson. He believed that democracy would
be the only form of government. Believed it could be achieved through central bodies (UN).
here is no real idealism involved in it. But the US, after reluctantly entering World War Two, fell
into isolation. In some places they hold elections for one person — there is no opposing candidate.
Ss
o the idealism is that there was no follow up. He didn’t see what the lack of involvement on the
part of the US brought (electocracy),
Economic Interdependence — Schumpeter. Asks who profits from war? Very small group —ex.
Arms dealers- benefits. They don’t even want war all out. In big wars everyone looses. He
alleges that there is a powerful small group that benefit from peace which is why there was no
big war this past century.
This led to Globalization. In today’s world in dominant technologies in order to have a
viable technology you must have individuals who are not constrained by some political
arrangement. You need a bottom up system. In the USSR they had all decisions made
from the top.
There is a push towards democracy. And you must have economic policies that are agreed on. The
Golden Straight Jacket rule says you must have some basic rules (no inflation, for example)
- International Regimes- based on the principle of cooperation. Means certain aspects that might hurt
both countries will be stopped. This is where Hegemonic Stability Theory comes in. You need
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International regimes to stop the Prisoner’s Dilemma. For example, a country might be better off if
they put tariffs on international trade, BUT if everyone did it there would be trade wars so they’re not
allowed to.
An example of an international regime is the world trade organization.
Power of a state is not dependent only how strong their economy, military etc. it is also important to
look at what kind of international rules are in place.
Comparing the major perspectives
What are the criteria were going to compare?
Based on theoretical/ behavioral assumptions.
REALISM — Power, Zero Sum Game
LIBERALISM — economic political considerations, their impact, positive sum game
RADICAL — comparable to realist — all conflict.
What is the major unit of analysis?
REALIST — State — homogenous entity
LIBERALISM - International Regimes
RADICAL — Classes
What is the source of change in this perspective?
REALSIM - conflict
LIBERALSIM -
RADICAL ~— class conflict
What kind of predictions would be made to the future?
REALISM — competition in relationship to china
LIBERALISM — convergence in political and economic terms as a result of convergence in economic
development
RADICAL - better at describing what happened, not what will happen.
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Pre-Westphalia
Greek States: unique because they are very small yet they had the biggest army in the world and they
were highly centralized. Their principle was whoever is stronger, wins. Then there was a coalition of
states which believed in certain rules (Persia was part of it). Persia attacked but the Greek States won.
The good prevailed and a new, Roman empire emerged.
The empire was consciously organized sticking to certain principles and laws. At the same time they
built a strong infrastructure. Ultimately, they created a civilization,
After the collapse of the Roman empire there were two new groups emerging in the world. Byzantine,
with its capital in Istanbul and the Arabic empire (om century) expanded over the Mediterranean.
So, before we get to Westphalia it is important to understand all the empires that came before it.
Westphalia is the first one that really resonates with the modern understandings though.
Background
Pre- Westphalia there was many wars. Ina period between 1654-1668 negotiations started. They
realized they needed to set rules. The treaty set down then became the cornerstone for our system
Principles of the System
1) Primacy of sovereignty — gives you the exclusive right to conduct various operations in your own
country, The state has the power within the realm of the state. When the Westphalian is said to be
failing today it is because of things like when the UN walked into Serbia to protect the Serbs. The Serbs
should have had complete sovereignty in their own country.
2) Territorial Sovereignty - Once you decide on the territory that’s how it stays. All lands haye to be
assigned Sovereignty — there can’t be “no man’s land”. The implication was that being sovereign was
not a right granted by the empire; it was the result of natural laws, god given capability, etc.
3) National Governments are primary agents in the International System
4) National Governments interact and establish treaties. Therefore you have a whole body of
international law that is in play in the international system. They body of law is a result of |) Natural
Law and 2) treaties signed and rationalized by the primary actors. (This is a result of the first three)
5) War has become a recognized instrument of international relations. It is legitimate to use as part of
foreign policy
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For the first time we had the principle of what causes sovereignty.
Phases:
1648- 1815 = date the treaty was signed until the Concert of Europe. It was based on commonality of
interests, conservative arrangements. From 1815, for about 60 years there was no war in Europe. It was
a very stable system. It operated under the principle that if you have a couple of major players (UK,
Russia, Prussia and France) then the system could operate as long as alliances were fluid, UK was the
balancer.
1882 - Triple alliance (Austro-Hungarian empire, Germany, and Italy)
1883 - Dual alliance (France and Russia)
The UK ceased to be the moderator and started probing the aboye places. This is one of the reasons that
led to the collapse of the peace.
1885 — Conference that was a final stage to divide Africa. Germany felt they were on the loosing side of
this deal.
2) 1914 — 1945 First World War starts to the end of the Second World War.
The reason for the collapse was Germany’s feelings of discontentment and the U.S’s failure to take a
leadership role
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War and Politics
*Read these two guys — very important*
Clausewitz reading says politics is primary and war is secondary. War is just an extension of politics.
Schelling says that armed force, or brute force, is just the last option. The objective is not to go to war
but to achieve outcomes such as approving security.
Categories/types of War
Have to take actors, kind of technology and goal (to scare off or to destroy).
1. Armed Conflict internationally
A. General War — large number of actors committed to destroying each other.
Historically, there are several examples. The thirty year war (which led to treaty of Westphalia) is one
of them. It was a very costly war — more than 2 million people killed on the battlefields. The Spanish
War is another example, which lasted for more than two years and resulted in the deaths of 1.3 million
soldiers. In the UTRECHT, the peace treaty there was specific mention of sovereignty and balance of
powers in Europe to achieve equilibrium. Napoleonic Wars which ended in the concert of Europe. 2.5
million People were killed. For the next decade or so there was no war in Europe. Then the First
World War started. It was not a war where civilians were targeted. The number of soldiers that died
was close to 8 million, It was still a war different in nature than then Second World War. If there was
an armistice for a few days you would see soldiers from either sides exchanging cigarettes and talking.
This is because there were very international sides.
B. Limited wars - fewer actors, less ambitious goals.
Iraq, Gulf war, Vietnam are all examples. The actors are fewer. The objective was not to destroy the
other power but to pacify or contain. The goal was to bring back equilibrium.
2. Conflicts within states, fought for variety of reasons
Civil wars fall into this category. Civil war in America you could say was fought for the end of slavery
or you could say that it was the cotton issues in economics that resulted in civil war. The number has
dramatically increased. The ultimate goal is either to get greater autonomy or to secede.
3. Asymmetric War — primary example is terrorism.
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Grotian — International system is governed by common goals and rules, which act to restrain national
actions (contrast with Realism).
Can only be understood together with form of government
Democracy Defined
Not in the eyes of the beholder.
. elected officials — must ask how they were elected
. free for all elections — but this is not sufficient to democracy — what if the right to vote is limited?
. Included suffrage — not enough because what if not everyone can run for office?
. General right to run for office
. freedom of expression
. alternative sources of information
. freedom to establish associations
Ae wR
io
In sum, civil society and free press. No golden rule as for when country becomes stable democracy.
On what basis can we make assumption that two democracies less prone to conflict then other states?
. Accountability of leaders to society. People don’t want to fight and seek to avoid conflict.
. In democracy must have institutional system of checks and balances.
. Transparency of information. Political class of country A knows all about Country B and vice versa.
. Predictability
. Rule of law — treaties etc.
. Societies are aware of cost of war and capitalists are not interested in all out war.
we we
a
Conclusion — Democracies are zones of stability and peace
Empirical research depends of definition of democracies. Very difficult to analyze with narrow or broad
definitions of democracy.
Also, note that democracies do sometimes fight, they just don’t fight other democracies.
COLD WAR
Explanations:
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e Action/reaction — post WWII, US emerged as super power and Russia became a major imperial
power based on ideology. Collectivism vs. Individualism and Democracy
How did balance of Power emerge?
e® Technology — nuclear weapons Soviet Union developed bomb in reaction to US
Two Major Phases
- US Supremacy — until the 1960’s
US could destroy the Soviet Union and get away with it (despite 1957 launching of Sputnik)
Sputnik spurred US into action and heightened weapon development.
1956 — Hungarian revolution against the Soviet Union. West did not intervene in any meaningful
manner. USSR learned it was safe. US attack not imminent.
1960 — Incentive to negotiate. SALTI and SALTII precluded development of systems that would
give one side superiority over the other.
- Period of parity — mutually assured destruction
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1. Cold War Continued
The stability of the arrangement, the core was of mutually assured destruction. All actions were
aimed at the avoidance of war because of this. The first thing they did to prevent war was installing the
phone in the white house and the Kremlin. Secondly there was SALTI and SALTI. ABM (alternative
ballistic missiles) was also enacted then. These treaties were developed to assure that one side doesn’t
have such an advantage. That is the nature — details of number of missiles are not important. The
purpose was to assure mutual destruction.
Mechanism to ensure that this arrangement stayed was technology. We now know that the Soviet
Union had continued to create chemical weapons. The security of the arrangement could have been
altered by some of this leaking out. Because once one side looses faith in technology to read what’s
going on the treaty would fall.
2. Post Cold War
Once we made it through Fukuyama claims that this is the end of history. We have exhausted all forms
of “anti-democracy” and there is nothing left to fight against. He was clearly wrong in many ways.
Today it is much less stable of a conflict.
Q- all of the agreements signed by the Soviet Union and the United States —are they still relevant? If
they are (or even if they’re not) should they be thrown away or just ignored?
If they aren’t thrown away, they bar the U.S from making new safer decisions. In addition, maybe we
should produce some kind of arrangement to keep the Arab countries from using missiles on us. More
importantly ABM doesn’t really play a crucial role one way or the other anymore because Russia is not
a world power. It won’t affect international players.
3. Bush Doctrine
A. Beliefs
1. Any constructs on the U.S capacity to act and freedom to act should be removed.
2. The world will be safer is we change the status quo.
One could say this policy worked when looking at examples like Afghanistan. And other countries
don’t need to get involved all the time.
B. Results
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350 units
Customs units agreement - They would collect customs revenue. This integrated economics.
After WWI there were four states speaking German, Dramatic increase in the size of the state.
They now have a shared history, collective cultural identity.
3) Globalization and Nation State — what are the different dimensions
- Economy
- Weapons/military
- Information technology (the internet)
All these three taken together lead to the erosion of sovereignty.
- Inorder for a country to maintain a certain level of prosperity they must be able to make foreign
trade. In the US this went from 3-20 percent. Smaller countries are even more dependent on
foreign trade. This means capital is moving from one country to another. You have an increase
in the growth of some services. (ex. Armenia produces things for Computer Services — the
government has no way to maintain control with computer age.)
- Today you don’t need to organize an army to invade. During the Second World War there were
small bombs that could destroy one house, Today we could wipe out an entire city, This makes
the States much more susceptible to the outside world.
- Information makes people aware of what is happening out of their state borders. Centralized
arrangements are being made into networks.
- There is the emergence of volunteer associations — these organizations compete with nation
states and their control.
Globalization implies free markets where there are no economic borders. We are no longer confined to
our own states. And, Globalization cuts back on Security issues. Therefore, the state doesn’t have to be
big anymore. For example, people say Yugoslavia is too small but there is no such thing anymore.
Q- Why do we need the state then?
You want to have somebody who is in control. They are also our representative in international affairs.
4) Is it Dead?
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The Westphalian state is probably done. Especially because of the human rights issues today. We may
still have a state but it is no longer an authoritarian one. Proof there still is a concept of state is that you
still need a passport to get from one state to another.
You can’t make the assumption that this a zero-sum game. It is becoming a more complex question.
Just because the borders of nation states are getting smaller and changing doesn’t mean they are weaker.
Emergence of NGO’s - Non-state actors.
You still need a state - just one that addresses bigger issues.
Wouldn’t need a state if there were still empires.
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The Bush Doctrine
1. Background
First started in 1992
- It was a reaction to the cold war, It used words like preemption and unilateral action.
- It was leaked to the press and it came off very badly. Therefore, the first Bush Administration
dropped all the above words and put a much more mild doctrine out.
- When George W. Bush reinitiated it, it was used mostly for Afghanistan at first. His
administration brought the words preemption and unilateral action back in. They also added the
concepts of democracy and freedom. He also used it to justify army spending.
Four Realities on which the Bush Doctrine is based:
1. U.S as a superpower. 5% of the world’s population, 20% of the world’s output and a huge
advantage.
2. No challengers (?) We have a few.
- China — maybe a challenger but the question is when?
- E.U. — might not have it in them. They have geographical challenge among others.
- India — growing rapidly. It will probably be an element of stability in the world, rather than
anything else, This connects to the Chinese challenge.
These are all challenges but our biggest challenges, perhaps, would be rouge states. They are
challengers that are fighting against the international liberal order. If it weren’t for technology we
wouldn’t care about them. Today, however, they have biological weapons
3. Democracy is no longer something that just applies to Western Countries. The environment is
right for spreading democracy,
4. International Liberal Order
II. Salient Characteristics
|. Preemption: Why should it be “preemption” and not “prevention?” Because for some reason the
first can be justified and the latter can not.
2. Unilateral approach — you want to go it alone. The precedent for this is not Afghanistan but the war
in Iraq. The U.S argues that it has the right because it sees the need for preemption
3. Power Beyond Challenge - calls for more military spending.
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2) Emergence of a younger generation that wants to break with the past. This new generation is a
product of globalization.
To what extent is it important to have support for a democracy coming from outside?
Very important to know there is a friendship with outside democracies. Nice to know that these
democracies will punish people that are not following the rules.
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NEOREGIONALISM
|. Regional Trading Arrangements: why bother?
- sheer number
- qualitative features
All countries are members of at least one and some are members of more than one. For example, U.S is
part of NAFTA, This provides with opportunities for free trade and investment protection, Don’t only
pertain to trade but have increasing political aspects.
2. Why do they enter RTA’s?
- political
- toachieve stability
Example: European Community of Coal and Steel: Coal and Steel are the symbols of war materials.
They created a system of cooperation between these places in France and Germany, This was to achieve
stability, not to help the corporations. This is now the EU
Levels of Economic Integration
« Free Trade Agreements — have to cover the majority of trade products
e Customs Union — adopt a CET (common external tariffs) example —- SACU (Southern African
Customs Union)
« Monetary Union— common currency, one central bank.
o EU
= Estonia links to Germany (gave up monetary authority in favor of regional
integration)
= 1986 Single European Act - Four freedoms
® Movement of goods
*¢ Movement of capital — countries remove any controls on capital
movement among states. They transfer the right to impose them to the
regional body.
* Movement of Services — means a dentist can move from Belgium to
France and still practice medicine without taking new tests. This has not
been carried out yet. There is.a lot of pressure from various professional
groups that they don’t want the new competition from other places
* Movement of People
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© Itis in country’s interest for other countries to use its currency (free credit, etc.)
= USS directly convertible to gold, therefore countries chose to use it for
international trade (post WWII)
There are North/North (two highly developed countries), South/South (two developing countries), and
North/South trade agreements. The N/S agreement is a win-win situation for the South. It provides
jobs, stability etc. For the North it is good too because you create opportunities for employment, help
stabilize your neighbors etc,
*East Asian countries did all the economic development — without trade agreements. *
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Grand Strategies
- outward oriented (national strategies)
- Inward oriented
Strategies and regional orders — EU Eastern Enlargement
Implications for the role of state
*Interacting with external world is not in economic interest
*Trade Unions (Argentina)
Industrial Section
Army
Argentina & Brazil: Do not interact with external world and consider everyone a potential threat
Most of Latin America went into debt crisis, had to go through structural adjustment from IMF. In order
to maintain IMF resources countries had to cut funding from military. Countries forced to remove
barriers from high-tariff industries. In order to move forward goods had to be redistributed. Move from
Narrow-outward. Latin America moved towards Democracy.
Regional Orders: Latin America Military was scrapped. Dominant ideology was to create democratic
strategies.
Oil Rich countries have natural resources
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EU Enlargement — extending a zone of peace and stability.
For example, Turkey wants to be a member and so they are using their trade to win their seat in the EU.
Countries want to become part of it, not because they want to be ruled by France and Germany but
because it gives them some security,
Present State of the Union
1. 12 countries of the European Union are half of Europe. They have the strongest currency in the
world. It has passed the dollar. There is a mutually agreed rule that the national debt will not exceed
3% of the GDP. However, the countries with the upper hand are not following the rule. This is a
considerable threat to the future of the Union.
2. Functioning of a single market. Based on freedom of movement of people, goods, capital, and
services. Freedom of services means that a nurse from Sweden could work in Germany — this is not yet
fully in action. France has come out against it saying it is dumping people in countries they are not
wanted in and it is “Neo-liberalism at its worst”. It most likely will be implemented sometime in the
next few years,
States Building
Four characteristics: (Defined territory, Stable population, Governance, and Diplomatic recognition.)
Places where the international community was involved in state building:
1) Kosovo — it has the first three characteristics BUT it is not recognized as a state. It is a relatively
homogeneous population.
2) Bosnia — they have none of the characteristics BUT the US wants them to be a state and recognized
them as such.
Have to create a viable economy.
State in International Relations Perspective
Both realists and liberalists define the state in the same way (four principles). So where do they differ?
Only when you are discussing it in the context of international relations.
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In a realist perspective - maximizes power and is a unitary actor
In a liberal perspective — state as operating on several different levels and engaging in several different
types of activities.
Power and State relations
What is power? The ability to force someone to do something they would otherwise not do
What gives you power?
- Capabilities
- economy
- size (of population, state, geographical area etc.)
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|. Political Economy
Politics/ State > economy (Markets)
2. IPE > International Dimension
Implications
- Empire > international liberal economic order
3. Perspectives on IPE
> radical, > liberal, > realist
Q-—Is the price of sugar in this country about the same as the world price
A — it is 2.5 times more expensive here which is cookie companies are moving to Canada and congress
is debating whether or not we should enter Caribbean free trade agreement (CAFTA)
50 years ago, dictatorships — which have since collapsed
Today Caribbean countries pose no threat to the U.S
Then why do we care??
Sugar production lobby, financial clout, interplay between Money and Politics. Very small numbers —
wise but very powerful.
China is also on the list of countries congress doesn’t like. Recently, congress passed a 27.5 increase in
duty taxes on Chinese imports. > extra tax of $55 billion on American people
e Are imports bad, or are they good?
e Are exports always a blessing and imports always a curse?
Exports realized to generalize revenue to purchase imports.
Advantages of Importing
1. R&D done abroad — and we benefit therefore
2. we get cheaper products and producers receive imports that enable international competition
3. importers induce competition, prices go down
4. Domestic increase of percentage of imports has in U.S GDP — from %8 to %16, U.S now much
more dependant on foreign countries. But the economy has gotten much better in that time. In
order to develop, country must be OPEN.
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Political Economy
Market > maximization of financial gain, hierarchies of power
Politics > maximization of power, horizontal dist. of power
Empires have always been good to political stability of economy.
The difference of the British Empires was that it also provided rules that other players chose to
follow.
* International liberal economic order
e The power was an international economy
e Britain not interested in invading county if it could be a normal trading partner and not source of
instability
® State provides structure for economic interaction and as long as that interaction takes place, no
direct central needed
e Very unique, revolutionary. (now represented by the U.S)
Examples:
Oil today- tough talk with South Arabic causes prices to rise.
Perspectives same as in international relations. though packaged differently. Emphasis — economy
Radical
|. Rejects existing economic order — capitalism will always lead to inequality. The only option is to
overhaul the situation
A. Dependencia theory
Poor countries remain poor because all decisions made in “rich” London, NY and elsewhere. Rich have
no interest in rising standard of living in these counties.
This was derived from UN Studies. Studies found that terms of trade biased against poor counties.
Terms of Trade > what I have to give up to get something, and the ratio of exports to imports.
UN found that prices of Latin American exports were going down as imports went up. Policy
recommendations of UN- produce same products as “rich countries” but Dependencia holds that that
would be impossible.
B. World System Theory
Core, semi-periphery, periphery movement from one to the other is rare.
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Exception: East Asia markets. These countries proved that proper institutions can make a country
competitive.
Realist
A. Economics should be subordinate to politics. Source of power that must serve states interests.
Ex. Mercantilism, which treats exports as “virtue” and imports as “sin”
Trade Surplus > gold > power
Ex. Alexander Hamilton — economic nationalism (neo-mercantilism) must protect domestic
industries and state must promote those industries. Weapons manufactured within a country.
A 27.5 percent increase is seen as good by realists. Liberalists would reject it as being contrary to
desire for international cooperation as well as violation of international trade norms. (We will cover this
approach on Thursday)
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Grand Design for Post World War Two Order
- UN SYSTEM: in 1944 Dumbarton Oaks, located in DC set the stage politically for the UN
System. At the same time, Bretton Woods, the conference held in New Hampshire, was the
economic foundation for the UN. The IMF and other similar economic agencies came out of
Bretton Woods. It was also agreed the there should be an International Trade Organization set
up.
- In 1945 in San Francisco there was a meeting to officially set up the UN. They wrote a charter
which named six major agencies as the core of the system (for example Security Council.)
- This design comes from a lesson that was drawn from World War Two.
o 1) Ithas to involve all major super powers (One of the major players never went to the
League of Nations). This was to stop a third world war.
o 2) They recognized the need for a super power to block some bad ideas. This is where
the concept of a veto came from. Between 1945 and 1976 the Soviet Union used their
veto 176 times. Between 1976 and the late 1980’s the U.S used their veto 90 times. This
shows that the veto could be misused
- The balance of power came directly out of the Second World War. There were five key players
o 1) the US 2) Great Britain 3) France 4) China and 5) Soviet Union (now Russia)
- There has been a lot of talk lately that the security council should be changed. But in the charter
you need a 2/3 vote. which is unlikely.
- UNEVOLUTION
o Expanding number of members from developing counties.
© Growing number of issues going beyond issues of security covered on the agenda and in
the work of the UN. Environmental issues, economic issues,
- A big issue in the UN that affects its growth is budget. Even the US gives a significantly larger
amount than other countries we still have the same vote in the UN. This brought about the
conflict of weighted votes within the system.
- Bretton Woods systems (IMF, IBRD, ITO) are part of the UN systems and report to the
economic council.
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- Competitive Devaluations- decision of a government to lower the price of its own currency.
This is not depreciating the American dollar (the dollar is less than the euro.) It is a conscious
decision of the government as oppose to spontaneous action of the market. The result of this
action is that your exports are getting cheaper. Which means essentially you are trying to export
your problems. The IMF was created to address the issue of a country attempting to devalue its
currency.
- Most fayored nation clause
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Duty = tariff = tax — instrument of trade
In face of declining unemployment, governments raised tariff barriers and developed their currencies,
which led to trade war.
Therefore, International Organizations formed.
e More trade = more prosperity = less hostility
® [TO aimed at determining “rules of the game” so that no one country takes actions that
negatively affect other countries.
Votes based on size of country by economic weight.
How does it work?
- Restrictions only imposed when country exceeds limit
- It resources exhausted, must submit to talks with IMF in order to accrue credit
US Dollar used to linked to gold. After WWII, %80 of world’s gold reserves were held at Fort Knox —
not fair to other countries. So instead — new international currencies are linked to money, not gold. This
was welcomed by the world, partially out of fear of the alternative (USSR). World needed more money
due to economic growth and increased trade.
IMF wants to be keeper of the rules according to Bretton Woods. This is based on intervention prior to
crises. This changes when the U.S stopped linking money to gold. Exchange rates now are determined
by markets.
Mexican Finance Minister called chair of Federal Board in 1981 and said “we’re out of cash”.
- Treasury engaged in actions to transfer cash to Mexico
- IMF was asked to compose aid package.
1. convinced government to change policies
2. convinced private bankers not to withdraw
IMF plays negotiating role between government policy and private banking. Role developed primarily
in the third world.
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