Market Economies and the Role of States: A Comparative Analysis - Prof. Danielle Carter, Study notes of Comparative Law and Politics

Download Market Economies and the Role of States: A Comparative Analysis - Prof. Danielle Carter and more Study notes Comparative Law and Politics in PDF only on Docsity! February 22, 2012 Pls 140 Professor Carter Market Economies  Market economy: an economic system in which individuals and firms exchange goods and services in a largely unfettered manner. o Nearly universal since end of cold war  Capitalism: the combination of a market economy with private property rights Market Essential Roles of States  Providing security  Establishing and enforcing property and contract rights  Creating and controlling common currency o Within or across nations (i.e. euro)  Most essential roles involve providing public goods Beneficial Roles of States  State provision of:  Infrastructure  Education  Health care  Prevention of regulation of monopolies  Intervention to correct market failure  Market Failure: when markets do not perform their expected function (like the U.S. housing market and how it crashed) Politically Generated Roles  Taken on because populace demands them, for example:  Improved working conditions  Policies to redistribute income  Environmental protection Economic Voting  Voters sanction or reward politicians based on assessments of the economy  Measures: GDP, GNP, unemployment and inflation  Socio-tropic vs. egocentric (pocketbook) assessments  Retrospective vs. prospective  Just beginning to test these theories in developing world Key Economic Debates  Keynesianism vs. Monetarism  John Maynard Keynes: Fiscal policy to revive demand during economic down turn  Milton Friedman: Monetary policy during economic crisis  Development economics vs. neoliberalism  Import-substitution Industrialization (ISI): Trade by protectionism to grow industries  Comparative advantage: Gains through trade by focusing on goods that are produced efficiently Keynesianism  John Maynard Keynes: most prominent economist of mid-20th century  State should intervene in economic downturns  Government deficit spending stimulates demand  Managed capitalism could smooth out boom and bust cycles, maybe provide continuous full employment  Keynesian policies adopted in most Western countries Monetarism  By 1970’s, new economic situations: stagflation  More government borrowing not solution  Great Recession (2008-2009) led to largest Keynesian deficit spending in a generation Germany  Social market economy  Combines highly productive market economy a generous welfare state  Globalization and limits on EU member spending has raised questions about viability—caused high unemployment and problems financing social welfare benefits  Close relationships between private and public sectors Japan  Developmental state  Created national strength in particular economic areas through key ministries  Led to “Japanese miracle”- Japan became world’s second largest economy after WWII  Not an extensive welfare state: depended on lifetime employment system  Does not spend a lot of money on social security, health care and etc.  Economic miracle ended in 1990; bubble burst, reforms led to less government control Mini-Case: Chile  Early neoliberal reformer  Neoliberal success story  Military dictatorship of Augusto Pinochet turned economic policy over to civilian technocrats- “Chicago Boys” they were highly educated @ the University of Chicago  Opened Chile up to world market and reduced state intervention  In wake of Mexican debt crisis, implement even more radical free market reforms Case Study: Mexico  Transition from protectionism to neoliberals  Rampant inflation and debt crises led to shift in early 1980’s  Today Mexico is the state with the largest number of free trade agreements in the world  Set to become a powerful economy, but inequalities (income and regional) have increased with free trade  Highly depended upon the U.S  Mexico saddled with debt following the Great Recession Nigeria  Gains most of its revenue from OIL  Oil corruption, and dependence  Poor and agricultural in 1960 when gained independence  Origins of economic problems in colonial rule: little industry, Nigerian elite employed in government  By 1974, oil 80% of government revenue  Government used oil money to buy support  Nigeria become one of the world’s most corrupt societies  Debt crises forced country to negotiate a SAP