- Find an outline an example of one economic policy/practice from any country that fits into the realist perspective of IPE. Don’t all choose the same country
The great example of the economic policy in realist context is Russian gas policy. Currently Russia uses its neighbor Ukraine to deliver gas to Europe, however the emergence of new projects for Russian gas exports to Europe provoked the gas conflict between Russia and Ukraine, which began at the turn of 2005-2006. Then Ukraine created obstacles to the free transit of Russian gas to Europe. Particularly acute gas war was at the turn of 2008-2009. The absence of the Russian-Ukrainian agreements on gas supplies and its conditions of transit interrupted the supply of hydrocarbons from Russia to Europe through Ukraine for two weeks. As a result, Kiev's actions not only worsened the Russian-Ukrainian relations, but also increased the interest of Russia in the construction of bypass routes. Russian national interest in being the main gas supplier of Europe was also harmed by Europe’s project of "Southern Gas Corridor". In response Russia launched its own project "South Stream". Last year Russia completed the last negotiations with the European countries, signing documents with Serbia, Hungary, Slovenia and Bulgaria. This allowed Russia to start construction of the pipeline, which will provide direct access to Russian gas to the European market. This example shows how Russia responded to other countries’ and even Union’s tries to get rid of gas dependence.
- How do the critical perspectives enrich the study of IPE? What are the significant differences between the mainstream theories and the critical perspectives?
There is a variety of IPE theories which pretend to provide a complete explanation of how economic, political, and social issues interact with each other and make a complete model of the world. Liberalism can explain the state building and social interactions between people in terms of market relations, rational choice theory extrapolates individual decision-making to the inter-state interaction, and feminist critique states that current economic inequalities and dominant role of men in political and social life are caused by gender gap between men and women. There are much more theories that became mainstream during certain historical periods. The critical perspective puts the dominant theory under a constant pressure and makes it develop crucial points of theory. As it was told before, each mainstream theory claims to explain all aspects of life. The critical approach puts this very claim under a big question. Although critical approach is more about finding weak points in dominant theory, it improves the theory by making it more complete. One person cannot develop a flawless theory and predict its effects. Therefore critical approach enables the dominant theory to revise itself to become more practical and all-catching. The main difference between these two types of theories is that mainstream theory is constructing our life while critical theories change our life’s direction.
- Should NGOs and/or MNCs be given a role in WTO decision-making? What are some of the potential benefits or problems with doing this? How do nations use trade as a tool to achieve foreign policy objectives? Give specific examples
NGOs and MNCs should not be given a role in WTO decision making, but their interest should be taken into consideration when decisions are being made. Currently state is the main subject in WTO which means that countries’ government are intermediates between WTO and people. Although governments are supposed to lessen their influence on the economic sphere of life, they are responsible for making fair laws which consider not only economic interests of people, but also cultural, social, political, etc. Moreover only the state may define the main objectives of the economic policy of the country to improve the life of all its citizens. Therefore, sheer profit is not the main goal of WTO, but well-being of as many people as possible during inter-state cooperation. MNCs’ main goal is to increase profit of this very corporation, which means that the common good is not among priorities in their functioning. NGOs are created to resolve specific societal problems, such as corruption, health, human rights. Although NGOs closely cooperate with the governments they are unable to cover all spheres of life at once. Both MNCs and NGOs are effective in dealing with specific problems and their experience may benefit the whole world, but it’s only up to the states to define objectives and agendas which will benefit its 159 member-states.
- The widening and deepening of ties as a result of RTAs has increased economic gains, but in some cases intensified political pressures. Discuss the potential political problems associated with RTAs. Use examples.
The number of RTAs tripled from 58 to 188 during 1995-2005. Such growth of regional trade agreements shows that a single organization of WTO cannot resolve peculiar issues innate to certain regions. Moreover RTAs can be the continuation of political cooperation between countries, which may cause additional pressure on its members. Let us take Treaty on a Free Trade Area between members of the Commonwealth of Independent States as an example. The Treaty was signed in 2011 by Armenia, Belarus, Kazakhstan, Kyrgyz Republic, Moldova, Russian Federation, Tajikistan, and Ukraine – the former members of Soviet Union. Although each member has the same rights in this organization, Russian Federation’s dominance is obvious. Russia can use its economic and political power to make its members act according to Kremlin’s will. The main political problem in this case is maintenance of the principle of pluralism, on which international relations should be built. The main threat of such RTAs lies within the balance of political power between its members as imbalance may lead to potential usurpation of decision-making process by the leading country.
- How would an international agreement on governance of FDI benefit MNCs? How would such an agreement benefit states? What prevents such an agreement from being realized? How have reactions to MNCs changed in the past half century? Why? Explain the changes currently underway in the pattern of FDI and in the organization of MNCs? What are some of the implications of these changes for IPE?
International agreement on governance of FDI means that MNCs’ will act under the unified set of rules and will be able to invest in the countries with unstable political situation without being afraid that internal affairs of this country or change of taxation will harm them abruptly. On the other hand, such agreement is beneficial to the states due to potential decrease in money laundering. One of the simplest schemes is money laundering through offshore zones with low tax rates. The MNCs may use this scheme in order to avoid high taxes in particular countries. As a result these countries lose a lot of money. International standards of FDI may secure such countries from budget loses. Although multinational agreement on FDI seems beneficial to both states and MNCs, all attempts to create it failed. The reason is that some states together with some MNCs are satisfied with the current state of matters (i.e. bilateral and regional agreements) and will not want to lose with the adoption of the universal investment policy. The reaction to MNCs varies from country to country on different levels. China’s economic growth, for example, wouldn’t be impossible without MNC’s FDIs. On the contrary, FDIs from tax heavens may cause budget loses in some countries which results in negative attitude to MNCs. There is also no unanimous evaluation of MNCs’ policy among population, as the environmental issue becomes crucial. However modern MNCs try to improve attitude from both states and people towards them by conducting flexible and environmentally friendly policy. For example, Microsoft stated its environmental principles on its official website which contributes to better perception of it among people. Such actions contribute to a new understanding of basic principles of IPE where sheer profit becomes not the most important thing in MNCs’ policy. Solution of social, environmental problems becomes MNCs’ responsibility together as well as states’.
- Is development possible? What factors shape the development process for LDCs; and how do these factors create tensions within and between LDCs, and between LDCs and DCs?
If we take the development of a particular country it can be said that its development depends both on internal and external factors. History shows examples of successful economic growth of poorly developed countries, such as Asian Tigers (Taiwan, South Korea, Singapore, and Hong Kong). Nowadays sub-Saharan Africa is among LDCs with the most serious problems of economic development experienced. The reasons for the deterioration of its socio-economic status after steady growth in the 60-70s were the unfavorable external environment (the oil shocks of the 70s), the failed economic policies and the deterioration of the natural environment. The sharp decline in savings rates, investment, and per capita income was largely due to a combination of falling economic growth with rapid population growth. When the rate of population growth exceeds the rate of economic growth it is extremely difficult for LDCs to overcome them. For example, in Kenya, Senegal and other countries high growth rates in the 80s were accompanied by low or negative growth in GDP per capita. Another important factor is reformation of financial sector. It should be able to provide cheap credits for the economy to grow. DCs provide financial help for LDCs and therefore LDCs are dependent on DCs growth which supplies them with investments. The problem was clearly seen during oil crisis in 1970s when DCs cut down on financial help to LDCs due to their own financial crisis. LDCs’ financial system is instable and without external financing cannot sustain itself. During such reforms LDCs should be led by strong leaders which may partially violate democratic principles of ruling. Asian Tigers overcame industrialization in a hasty manner by cutting on government spending and maintaining high growth rate. This was possible only with a stable political situation. The main dilemma in LDCs’ and DC’s interaction is combining political reforms with economical. Therefore development in some LDCs is impossible due to political instability and political stability is impossible due to low economic growth, which makes DCs responsible for this vicious circle.
- Why do you think some developing countries experience severe food shortages and famine while others do not? What do you think are the most viable solution to ending global hunger?
All developing countries are characterized by a low level of industrialization and development of agricultural sector; therefore most of them experience problems of hunger and food shortage. However some of the developing countries manage to save their population from absolute starvation due to the small sizes of the countries, external help and smart distribution of goods. Let us discuss all three points. Small sizes of countries together with a small population make it possible for developing countries to save people from starvation. Although the economic development is low and agriculture cannot be as effective as in DCs, the number of people dying from hunger will be lesser than in big developing countries. Moreover food can be delivered to different parts of the country without considerable transportation spending. On the contrary, when population grows fast and economy cannot feed it all mass starvation is possible due to inability of the economy to feed the growing number of people. External help may also save some countries from hunger while other countries will not be able to receive humanitarian aid due to the lack of international contacts. In this case developing countries which were colonies of their metropolises have advantage over those who did not have such. Even after decolonization after the World War II there is a strong bound between such countries and developed countries. It is easier to leave from the former colonies for metropolis. For example, over $1 billion comes to Pakistan from people working abroad. This factor contributes to famine prevention in the developing countries. And the last factor is distribution of goods in the country. When goods in the developing countries are distributed unequally, there is a possibility that few people will benefit from such situation while the rest will be starving. Gini index clearly shows that in developing countries the level of inequality is rather high. Ending global hunger is possible only when DCs will provide NDCs means for development (i.e. help with industrialization) and ensure political stability with no social inequality.
- In what ways do you think illicit economic activities prevent or thwart the development of a state?
Illicit economic activities can threaten a state with a market economy. The black market in the countries with command economy can be the only way to buy something that you need (for example, the USSR) and therefore will not be included in our discussion. Illicit economic activities prevent the development of the state in a way that they violate market rules, decrease the amount of taxes paid to the state, and undermine people’s morality. The concept of a market ran by fair competition, equality of all economic subjects, and supply/demand concepts is an ideal every country should strive for. All democratic countries use free markets as a place where people have freedom to choose. Illicit economic activities contradict the rules set by the state and create their own rules which disregard freedom of choice and equality before the law as human values. Moreover they create black market which is not taxed. The state receives less money and cannot invest it in its future development. Finally, illicit economic activities create a new sort of morality, according to which a person does not care about the rest of society, but cares for his/her well-being only. The development of the state is impossible without conscious citizens who really want their state’s development and do their best to make a contribution to it.