Lecture 6

Meeting 6-World War I to the Beginnings of The Cold War: 

Meeting 6-World War I to the Beginnings of The Cold War

Sample Exam Question – : 

Sample Exam Question – “Interest Groups explain the content of US trade policy.” Explain with reference to relevant readings.

FT Article Friday, World Economy Section: 

FT Article Friday, World Economy Section Despite Bright Spots, worrying trends in the world economy World economy is growing quickly But Growing stocks of US Dollars abroad, particularly in Asia. The US economy is growing but worrying trends High consumption on borrowed money Huge budget deficit Situation of World’s poor is not being addressed quickly enough International institutions like G7, OECD and G20 are not designed to deal with this. Any crisis could raise pressure for protectionism in affected countries.

Recapping: 

Recapping Last time – growing change in US trade policy in 1930s Punctuated, like many radical shifts in US History, by war in particular

World War I brought many momentous changes: 

World War I brought many momentous changes Shift in vision of US role in the World US as competitor for hegemony with Great Britain Building up to the sweeping shift after WWII

Before we deal with the emerging order after WWII: 

Before we deal with the emerging order after WWII We need a way to understand these changing features of the US role in the World Economy What did this mean for the US? This is where our discussion of theory is helpful Start with the most obvious shift – the rising power of the US relative to all other nations US is a rising power (militarily, economically) Great Britain is in decline (militarily, economically)

How does Theory help us?: 

How does Theory help us? What do we do with this? We have spoken about Marxist, Realist and Liberal theory briefly. And about internal, external approaches. How do they help to understand what US hegemony will do to the world economy?

Realist Theory: 

Realist Theory Unit of analysis is the state States interact in the international system They are power maximizers Domestic politics doesn’t matter

BUT: 

BUT States are not all the same In particular, when we talk about the US, we are concerned with Hegemons Hegemons Have a Disproportionate Amount of Power Well, so what?

Why Hegemons are interesting:: 

Why Hegemons are interesting: They have the power to set up the systems we are interested in Trade, Money, etc. The question that interests scholars is: Why would a powerful nation set up an international monetary or trade system? What Theory is Going to Help us Explain That?

Why would hegemons set up international institutions? : 

Why would hegemons set up international institutions? It’s not obvious- Hegemons want to be powerful. International instutitions seem to benefit all. In other words, such international systems, like trade and monetary systems, are seen as a form of public good.

What is a public good? : 

What is a public good? A public good has two qualities: Non-rivalrous Non-excludable Different from private goods because you cannot regulate or detect use. Examples of public goods: Lighthouse (someone pays for it but they can’t keep you from looking at it) Public television (can’t keep you from watching it)

Hegemonic Stability Theory: 

Hegemonic Stability Theory First question is: when do we get a liberal order? Realists have advanced a theory called Hegemonic Stability Theory (HST) According to HST, a hegemon, or one nation that is more powerful than all others and has a preponderance of resources and military power, is necessary for a liberal order to arise.

Hegemonic Stability Theory: 

Hegemonic Stability Theory Second question is: why would hegemon provide a liberal order?

Why is this important at this point in the course?: 

Why is this important at this point in the course? We will see that a lot of thinking about the US’s role in these various global systems is filtered through HST. Many of the explanations of the interwar instability point to the lack of a hegemon, or the unwillingness of the US to accept the hegemon’s role,

Why is this important at this point in the course?: 

Why is this important at this point in the course? Just as many of the explanations of the post-war system point very clearly to the US hegemonic role and its importance for global economic stability. Several features of the interwar period shape thinking at the end of WWII, so we have to back up a bit.

Monetary Systems: 

Monetary Systems We have talked about trade as if it took place without money Actually, when we buy foreign products, we need to acquire foreign money And vice-versa Trade requires for its completion the exchange and acquisition of one money for another (Dollars for British Pounds) How do we decide how many $=1 UK Pound?

Exchange Rate Systems: 

Exchange Rate Systems Fixed Flexible

Gold Exchange Standard: 

Gold Exchange Standard The Gold Exchange Standard was devised at the end of World War I. Following World War I there was a strong desire in many countries to return to the pre-war gold standard at pre-War parities.

So, Why did the GES break down? : 

So, Why did the GES break down? Intl Explanation: Britain tried to be co-hegemon but was not strong enough Domestic Explanation: Domestic interests were also becoming more important As in Smoot-Hawley, govts couldn’t commit to this sort of standard

What are we to make of this for the role of the hegemon?: 

What are we to make of this for the role of the hegemon?

What else was going on in US foreign policy?: 

What else was going on in US foreign policy? Struggling to define its role in the hemisphere Roosevelet Corollary to the Monroe Doctrine Occupation of Cuba (1906-1909), Nicaragua, Haiti and D.R. US Multinational Influence on the US government Panama Canal