Globalization

Question 1

Political economy

Answer 1

• The study of the interaction between states and markets
• Economic issues are also political; e.g., distribution– “Who gets what?”– is a fundamentally political decision
• Can’t understand economics without politics

Question 2

Different Views

Answer 2

• Markets are “spontaneous” and “self-regulated”
• Markets are created

Question 3

Markets:

Answer 3

nteractions between the forces of supply and demand that allocate resources
Composed of sellers and buyers

Question 4

Property:

Answer 4

• goods or services that are owned by an individual or group
  
  • Can be owned privately or publicly
  • Can be tangible or intangible

Question 5

Adam Smith

Answer 5

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”

Question 6

Public goods

Answer 6

• Indivisible: impossible to exclude others
• Consumption does not reduce availability
• Markets are bad at providing public goods
• States provide public goods:indivisible and available for everyone

Question 7

Private goods

Answer 7

• Possible to exclude others from consuming
• Consumption reduces availability
• Markets are efficient at providing private goods
• States don’t provide private goods

Question 8

Social expenditures:

Answer 8

• the state’s provision of public benefits, such as education, health care, and transportation
• Commonly called welfare or the welfare state
• Prioritizes equality value
• Advantages
  
  • Provide “economic building blocks”
  • Insurance against economic downturns
• Disadvantages
  
  • Can be costly

Question 9

Regulations

Answer 9

• Rules or orders that set the boundaries of a given procedure
• Some regulations limit commerce
• Other regulations govern the organization and operation of firms

Question 10

Trade

Answer 10

• The mechanisms states use to regulate trade:
• Tariff: tax on an imported good (not applied to an otherwise similar domestic good)
• Quota: a limit on the number of certain foreign goods that canenter the country
• Nontariff regulatory barriers: health, packaging, or other restrictions that make it more difficult for foreign goods to sell in local markets

Question 11

Comparative Advantage

Answer 11

• Comparative advantage: the ability to produce a particular good or service relatively more efficiently than other countries
• Comparative advantage shaped by:
  
  • Relative resource endowments
  • Climate
  • Production technologies
  • Human capital and innovation
  • Labor costs
  • Government policies

Question 12

Economic liberalization:

Answer 12

policy changes to limit the power of the state and increase the power of the market and private property in

Question 13

The Rise of Liberalism

Answer 13

• Both a political and economic system. Economic and political freedoms require each other
• Globalization is an extension of liberalism. Distribution through markets > states. Has risen and fallen at least twice in recent centuries
• Economic liberalization: policy changes to limit the power of the state and increase the power of the market and private property in
• Liberalism rises in the 19 th C. and again (“neoliberalism”) in 1980s–1990s
  
  • Accelerates after the collapse of communism
  • Countries increasingly adopt liberal policies, including:
    
    • Cutting taxes, reducing regulation
    • Privatizing state-owned businesses and public goods
    • Expanding property rights and free trade

Question 14

Bretton Woods (1944) – “Keynesianism”1940s – 70s

Answer 14

• Integration through strong state regulation
• Core institutions:
  
  • International Monetary Fund
  • World Bank
  • General Agreement on Tariffs and Trade (GATT),later the World Trade Organization
• High employment, high productivity, low inequality, relative labor peace
• But high inflation of the mid-1970s exacerbated financial problems

Question 15

Neoliberalism (e.g., F. Hayek)–1970s-today?

Answer 15

• Market is a “spontaneous order”;unplanned, evolved naturally
• Free markets, free trade, globalization
• First tried out in Chile (Pinochet)
• Later in UK (Margaret Thatcher) and US(Ronald Reagan)
• Has produced high growth but also exacerbated inequalities

Question 16

Impact of globalization

Answer 16

• Who wins (and loses) in a globalized economy?
  
  • Winners: emerging economies and global elite
  • Losers: middle class in high-income countries
• Globalization is producing inequalities (e.g., Bourguignon)
• Politics is fragmenting around inequalities

Question 17

Political Consequences

Answer 17

• polarization
• fragmentation
• populism

Question 18

Democratic dysfunction

Answer 18

• Are democratic institutions robust enough to contend with these challenges?
• Young people losing faith in democracy
• More people willing to putfaith in “strong leader” whodoesn’t have to bother withelections to get things done

Question 19

Niall Ferguson

Answer 19

• Populist backlash is bad butit’s not “fascism”
• Progressivism emerged after populism in 19th C, might do so again today

Question 20

Dani Rodrik

Answer 20

• Arguments for global government are popular, but unrealistic
• Some argue for more democratic, deliberative and participatory governance (e.g., “directly deliberative polyarchy”). Maybe possible in the European Union, but unrealistic elsewhere
• We’re stuck with what we have, best to limit hyper-globalization

Question 21

How Neoliberal Globalization Challenges Democracy

Answer 21

• Erosion of Democratic Sovereignty
  
  • Neoliberal policies prioritize market efficiency and free trade over
    national control.
  • Dani Rodrik’s “Trilemma” (2000) argues that you can’t have deep
    globalization, national sovereignty, and full democracy at once.
  • Supranational institutions (IMF, WTO, World Bank) limit domestic
    policy flexibility—voters can’t easily change these global rules through elections.

Question 22

How Neoliberal Globalization Challenges Democracy

Answer 22

• Rise of Technocratic Governance
• Decision-making shifts from parliaments to unelected technocrats (central banks, international organizations).
• This weakens democratic accountability—citizens can vote for change, but markets and bond ratings often veto it (“bond market democracy”).

Question 23

How Neoliberal Globalization Challenges Democracy

Answer 23

• Winners: global elite and capital owners.
• Losers: working and middle classes, especially in developed economies.
• Growing inequality fuels populism and polarization (Mounk & Foa 2017; Andriset al. 2015).
• Citizens lose trust in liberal institutions and turn toward illiberal democracy or strongman leadership.

Question 24

How Neoliberal Globalization Challenges Democracy

Answer 24

• Information and Digital Capitalism
• Digital platforms amplify inequality and polarization.
• The “global public sphere” is fragmented by algorithmic echo chambers, undermining the democratic deliberation that globalization was supposed to enhance.

Question 25

How China’s Rise Challenges Neoliberalism

Answer 25

- State Capitalism vs. Market Fundamentalism - China’s model mixes state control with market instruments—contradicting neoliberal doctrine. - Through industrial policy, SOEs, and the Belt and Road Initiative,China demonstrates growth without full liberalization, undermining the neoliberal “there is no alternative” (TINA)narrative.

Question 26

How China’s Rise Challenges Neoliberalism

Answer 26

- Global Institutions Rebalanced - The creation of AIIB, BRICS Bank (NDB), and alternative trade networks challenges the Western-dominated global order. - This signals a shift from neoliberal global governance toward multipolar economic governance. - Technology and Digital Sovereignty - China’s digital authoritarianism offers an alternative model of governance—capitalism without political liberalism. - Its control over data and AI infrastructure globally (Huawei, TikTok,Belt and Road Digital Silk Road) challenges Western conceptions of free markets and open information flows. - Neoliberal Crisis of Legitimacy - The 2008 financial crisis and COVID-19 exposed neoliberalism’s weaknesses (fragile supply chains, inequality, weak welfare states). - China’s model appeared more resilient—boosting the appeal of state-led capitalism in the Global South. - Western-led model imposes extensive conditions. China’s is less burdensome.

Question 27

From Bretton Woods to BRICS: Competing Global Frameworks

Answer 27

- Bretton Woods (1944–1970s) - Core Idea: Liberal international economic order built on U.S. hegemony and free trade - Institutions: IMF, World Bank, GATT → WTOCurrency Order: U.S. dollar as reserve currency - Governance: Weighted voting → U.S./Europe dominance - Economic Model: Keynesian compromise (state intervention + open trade) - Objectives: Post-war reconstruction, stability, liberalization - Critiques: Western-centric, conditionality, inequality, debt dependency

Question 28

From Bretton Woods to BRICS: Competing Global Frameworks

Answer 28

- Neoliberal Globalization (1980s-2008) - Core Idea: Liberal Global market integration through deregulation and free trade - Institutions: WTO expansion, NAFTA, IMF structural adjustment programs - Currency Order: UUSD dominance sustained via financial globalization - Governance: Transnational capital and corporations shape policy - Economic Model: Neoliberal free trade, privatization, financial liberalization - Objectives: Global efficiency, capital mobility, free markets - Critiques: Rising inequality, democratic erosion, loss of sovereignty

Question 29

From Bretton Woods to BRICS: Competing Global Frameworks

Answer 29

- BRICS/AIIB Frameworks (2008–Present) - Core Idea: Multipolar globalization and South-South development - Institutions: New Development Bank (NDB), Asian Infrastructure InvestmentBank (AIIB) - Currency Vision: Move toward de-dollarization (local currency settlements) - Governance: Equal or rotational voting → more inclusive representation - Economic Model: State-led development, infrastructure, industrial policy - Objectives: Counterbalance Western dominance, promote autonomy, infrastructure financing - Critiques: Risk of fragmentation, debt diplomacy, weak environmental oversight