Global Political Economy: Glossary (Part 5) T-Z

Tax Haven: A tax haven generally refers to a country, often an offshore island country, where taxes are very low or near zero. Those wishing to avoid taxes can invest their money in these countries and avoid paying taxes to their home governments.

Taylorism: Techniques of production using discipline and organization in the workplace. Production is based upon the scientific study of human efficiency and how much speed the human body can tolerate in the work place. It also uses incentives to increase the speed of work and exploitation. Used widely in US and Europe. Also used by Lenin and the Bolsheviks to modernizes production in the Soviet Union. See Harry Braverman. Labor and Monopoly Capital.

Technocratic Rule: Technocratic rule or management of the economy is frequently seen under neoliberal regimes when the economy has suffered a recession or is under austerity. For example a technocrat prime minister was appointed as Prime Minister of Greece after the economic crises in 2010. In this way, the country may avoid populist pressures to maintain benefits for the poor, elderly and working classes.

Technological Leapfrogging: Technological leapfrogging can be achieved by developing countries when they adopt technologically advanced methods of production as they industrialize. This means that they avoid going through the stages of older less efficient and polluting technologies and advance to more sophisticated technologies at once. This might provide them an advantage in the global market over countries which are still using less efficient production techniques.

Technological Spillover: Technology spillover happens when new technologies developed by a particular firm or group of firms becomes available for use by other firms or countries. The monopolization of a new technology by a particular firm may be relatively short term as other firms gain access to the technology.

Technology Transfer: Technology transfer happens when knowledge, technologies, skills, manufacturing techniques, and other technologies are learned and adopted by other countries, particularly developing countries. For example the technologies for the production of radio, television and video machines by the United States was quickly transferred to Japan in the l950s and l960s. 

Terms of Trade: The terms of trade indicate the relative price of exports of a country in terms of imports. It is the ratio of export prices to import prices. When the price of exports rise, a country can import more products. If the price of exports fall, the country can import less. The terms of trade generally militate against countries which depend upon the export of primary products such as bananas or coffee, because the price of agricultural products is likely to fluctuate greatly in the global market. For example, if the price of coffee falls, a country will have to export a large amount of coffee to buy a bulldozer.

The Theory of Capitalist Development (1942): A seminal book by the Marxist economist Paul Sweezy which extended the theories of Karl Marx to the twentieth century economy of the United States. Sweezy analyzed the operation of monopoly capitalism as it existed in the United States in the twentieth century.

Time Preference Theory of Interest (Irving Fisher): A concept from Irving Fisher that interest is a reward for not consuming things today, but putting off consumption until a later time.

Tobin Tax:  A tax proposed by the late economist James Tobin on international Financial flows but never established. The tax would provide a fund to help bail out countries in financial crises.

Tokyo Round: Trade talks under GATT which began in September 1973 and lasted for 74 months, involving 102 countries. The talks addressed the issues of tariffs and non-tariff measures. The talks resulted in tariff reductions worth 300 billion dollars in world trade.

Toxic Imperialism: Toxic imperialism happens when nations or firms act in such a way as to pollute other countries and profit from doing so. One form of toxic imperialism is dumping toxic waste in low income countries which lack environmental regulations. This can happen through the trade in toxic waste, often mislabeled. Another form is using countries with lax environmental regulations to produce products.

Trade Barriers: Trade barriers are restrictions on international trade, particularly tariff barriers, for the purpose of protecting the survival and profits and of domestic industries. Other types of trade barriers may include quotas, technical regulations, tax policies, and government subsidies to industries.

Trade Protectionism: Barriers to foreign trade, particularly tariff barriers. The major argument for trade protectionism has traditionally been to protect small industries.

Trade Rounds: Generally refers to the trade rounds carried out under the General Agreement on Tariffs and Trade (GATT) in the late twentieth century. The major trade rounds were the Kennedy Round, the Tokyo Round, and the Uruguay Round. The Doha Round has been carried out under the World Trade Organization. 

Traditional Growth Theory: May refer to the theories developed by Robert Solow and others in the l950s. Traditional growth theory posited that economic growth was a function of labor and capital. Technology and human knowledge were considered as exogenous variables. There were seen to be constant returns to scale.

Transatlantic Trade and Investment Partnership (TTIP) A trade investment agreement between the European Union and the United States which was being secretly negotiated through 2014. Talks began in Washington, DC in July 2013 and continued. Objectives of the trade agreement is to remove barriers which will result in millions of dollars of savings to US and European companies. It is argued by liberal proponents that everyone will benefit. Objectives also include cutting tariffs, standardizing technical regulations on products, opening up markets to services and investment, restricting subsidies to state owned enterprises, ensuring a market for genetically modified foods now restricted in Europe, and coordinating regulations in the financial sector between the EU and the United States.   

Transfer Pricing: Transfer pricing is the setting of prices between different branches or companies of a single corporation which are generally located in different countries. The misuse of transfer pricing involves pricing to lower the profits of a company in high-tax countries and raising the profits of a branch in a low-tax country. Transfer pricing is the major tool for corporate tax avoidance.   

Trans-Pacific Strategic Economic Partnership Agreement (TPSEP): A trade agreement of 2005 among Brunei, Chile, New Zealand and Singapore. The purpose was to liberalize trade in the Asia-Pacific region.

Trans-Pacific Partnership (TPP): A proposed expansion of the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP) which has been negotiated beginning in 2010. The potential members include Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the US. The agreement might also include Taiwan and South Korea. A round of secret negotiations began in August 2013. Information about the large scale deal was leaked to the public and on November 13, 2013, the complete draft of the Intellectual Property Rights chapter of the agreement was published by WikiLeaks. There are many concerns about the potential agreement. Joseph Stiglitz has said that the TPP presents grave risks.

Turkish Financial Crises (2001): The 2001 Turkish Financial Crises broke out in February. Turkey was under an IMF structural adjustment program with the Turkish Lira pegged to the dollar as a crawling peg. In November, 2000, the banks had liquidity problems with a loss of confidence in the system. The central bank injected a large amount of liquidity into the system, violating its own rules. But this had little effect as a large amount of money flowed out of the country. The current account deficit rose sharply due to high imports. Interest rates rose. On February 19, the President of Turkey, Ahmet Necdet Sezer, warned the Prime Minister, Bulent Ecevit, about corruption in his ministry. Following this, the currency peg collapsed on February 21. The currency was floated, leading to a thirty percent devaluation. The currency crashed further in subsequent days with extremely high interest rates. The Turkish Banking system was badly in need of reform and a large amount of hot money had flowed into the country to take advantage of high interest rates on Turkish liras. Turkey received a loan of 11.5 billion US dollars from the IMF. However there were many strings attached. The government had to embark on a privatization of state economic enterprises and change many laws. Kemal Dervis, a World Bank former vice president was brought into the government to carry out an extensive reorganization of the banks and the country’s economy.

Uneven Development and Combined Development: A complex theory developed by Leon Trotsky to understand global development and the potential for development in Russia under the Czar. Trotsky’s analysis led to the theory of the permanent revolution. He noted that in human history, different countries do not modernize in the same way through linear stages of growth. Also countries are affected by each other with a spill-over effect. This means that countries could skip stages, telescope development, or compress development stages in the transition to modernization. He also noted how imperialism affected the way countries under the rule of another country were changed and modernized or impeded from development.   

Uruguay Round: A round of trade talks which resulted in the establishment of the World Trade Organization. The talks began in September 1986 and continued for 87 months, involving 123 countries. Issues addressed include tariffs, non-tariff measures, rules, services, intellectual property rights, dispute settlement, textiles and agriculture. Besides establishing the WTO, the talks resulted in major reductions in tariffs and agricultural subsidies, an agreement to allow full access for textiles and garments from developing countries, and the extension of intellectual property rights.  

Use Value: Use value is a concept which was developed by classical political economists in the eighteenth and nineteenth centuries. Use value is a measure of the utility which a commodity contains as opposed to its exchange value. For example, paper money contains little use value but only exchange value. 

Utilitarianism (Jeremy Bentham): Utilitarianism says that policies are best which produce the greatest good to the greatest number of people. The theory is sometimes seen to be unethical, as it could allow the weak members of society to perish without any help if the resources used could produce greater happiness elsewhere.    

Variable Capital (Karl Marx): A concept used by Karl Marx to describe labor as a factor of production in which the cost of labor was not fixed, but subject to change according to the conditions of production.  

Virginia School of Economics: A school of economics characterized by the Public Choice approach. Major architects of the school include James M. Buchanan, Gordon Tullock, G. Warren Nutter, and Mancur Olson. A major work was The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962) by James M. Buchanan and Gordon Tullock. First located at the University of Virginia, in 1969 the Center for the Study of Public Choice was established at Virginia Tech University. This center was moved to George Mason University in 1983. Theorists share the “free market” approach with the Austrian and Chicago schools. They apply economic analysis to national constitutions. Mancur Olson studied collective action and special interest groups. They have published a body of literature on rent seeking behavior.

Volatility: Volatility may refer to the rapid and unpredictable changes in the market values of major currencies in the global market. This makes it difficult to predict the prices of imports and exports and impedes international trade.

Wage Fund Doctrine: This principle says that employers must have a fund of capital available to pay the workers during the production process.

Washington Consensus: The assertion made by such organizations as the IMF and the World Bank in the l990s that countries around the world agreed with the approach of the United States that there was no alternative to instituting neoliberal economic management in countries in the age of globalization of production and marketing and that the rollback of interventionist governments along with privatization was necessary. In reality, there is little evidence of such a consensus.  

The Wealth of Nations: The famous book by Adam Smith published in 1776. Adam Smith argued that a more free market and liberal policies had an advantage over statist policies such as those advocated by Friedrich List. The book contained the idea that the free market functioned as if there was an invisible hand operating to produce a favorable result for all parties. The book also promoted the idea of free trade between countries, but noted that sometimes the worst enemies of the free market were the capitalists themselves who tended to form a monopoly in order to control the market.

Welfare Maximizing: Welfare maximizing may refer to devising economic policies which are designed to increase the social welfare of members of a society by the optimal allocation of resources to different segments of the population.

Welfare State: Welfare state may refer to the Western governments which began to provide a range of social services and benefits under Keynesian economic management after the early l930s. Social spending served as a government tool to increase effective demand and stimulate capitalist economies.  

World Bank: The World Bank includes The International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The World Bank is an international financial institution which was set up at the Bretton Woods Conference in the United States in 1944. It provides loans to developing countries. The official goal of the World Bank is the reduction of poverty. The first World Bank loan was made to France for 250 million US dollars, half of what was asked for. The US State Department refused to approve the loan until the French Government expelled the Communist Party members from the Government.  

World Trade Organization(WTO): The organization established in l995 under the Uruguay Round of Trade negotiations. It replaced the General Agreement on Tariffs and Trade (GATT). As of 2013, there were 159 member states in the WTO.

Zaibatsu: A zaibatsu is a type of business firm which existed in Japan before World War II. The US occupation sought to destroy the Zaibatsus but they were reorganized as keiretsus. These large firms are interlocking and their presidents cooperate in formulating joint policies. They also share in financial matters, R&D, and marketing. They form the backbone of Japanese monopoly capitalism.



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Veblen, Thorstein. The Theory of Business Enterprise. Mansfield Centre, CT: Martino Publishing, 2013. (First published 1904)



Global Political Economy: Glossary (Part 4) O-S

Offshore Banking: Offshore banking units are concentrated in the Bahamas, the Cayman Islands, Hong Kong, Panama, and Singapore. They can also refer to Swiss Banks and banks in Luxembourg and Andorra. An offshore bank is simply one located outside the country of the depositor. It is usually in a low tax jurisdiction, that is, a tax haven. These banks may provide bank secrecy, low or no taxation, easy access to deposits, and protection from local political or financial instability. It has been estimated that half of the world’s capital may flow through offshore banks. These tax havens have 1.2 percent of the world’s population and 26 percent of the world’s wealth. They have some 31percent of the net profits of US multinational corporations. It has been estimated that some 13 to 20 trillion pounds sterling may be hidden in such tax havens. According to the World Wealth Report of 2010, one third of the wealth of the highest worth individuals, some six trillion dollars, may be held offshore.

Oligopoly: A market situation where a small number of large companies control the market for a commodity. This may allow companies to be price setters and keep profits high.

Oligopsony: Refers to a market in which there are many sellers but few buyers.

Opportunity Costs: The opportunity cost is the benefits that one must give up in order to engage in an alternative activity. For example, the income one would have to give up to take a long holiday.

Pareto Optimality: A pattern of resource distribution in which no one can be made better off without making someone worse off.

Partial Equilibrium Analysis: A type of analysis which examines equilibrium in one of more specific markets, without looking at the entire economy.

Path Dependence: In economics, decisions and patterns are frequently limited or determined by decisions which have been made in the past. For example, a particular technology is established and is put on the market. Once it becomes established, future versions may follow the same technology even though this is not the best possible technology. An example frequently given is the Microsoft operating system which became the dominant technology, even though it is not the best one. 

Pegged Currency: A system in which there is a fixed exchange rate between a  currency and gold or some other currency such as the dollar.

Periphery: Political economies, whether national or global, can be seen to be divided into a core and a periphery. The periphery is the outlying region farthest away from the center.

Physiocrats: A school of political economy in France in the Eighteenth Century. Physiocracy means the government of nature. The Physiocrats believed that the wealth of nations was derived solely from the value of land and agriculture. They saw productive work as the source of national wealth. They said that all life depends upon the productivity of the soil and the ability of the natural environment to renew itself. They praised country living. Their work is seen to be the first well developed theory of economics. The main figure was Francois Quesnay (1694-1774). Another important figure was Anne-Robert-Jacques Turgot (1727-1781).

Pigou Effect (Real Balance Effect from Arthur Cecil Pigou): Says that in a recession, the declining prices will increase the wealth of consumers and therefore increase spending.

Planning Commissions: Government economic institutions which were responsible for planning future economic development in countries such as India that developed plans, such as the Five Year Plans, for development. This approach was modeled after the development plans of the Soviet Union.   

Plaza Conference (1985): A conference in which Japan agreed to appreciate the value of the Yen, under US pressure.  

Pluralism: In the American context, pluralism refers to the concept that power is divided between many groups in the society and that their political activity is primarily a matter of each group trying to maximize their gains from the political system.

Portfolio Investment: Refers to investment in the financial sector in such investment assets as securities, stocks, bonds, Repo and so on, rather than in the manufacturing sector. Foreign portfolio investment is risky for emerging market economies as this type of money is essentially hot money. It can leave the country quickly in the case of economic or political instability.

Post-Fordism: Indicates an economy which has made the transition to a post-industrial economy which is dominated by the service sector. In the case of the United States there is a financialization of the economy.

Precariat: A class of people, such as urban poor, who lack secure jobs and economic security. An increasing proportion of the global population in the early twentieth century.

Predatory Pricing: Happens when businesses sell goods or services below the cost of production in order to ruin their competition. For example, large waste companies in the United States frequently sign up people for waste collection at very low rates until their competition is forced out of business. It is analogous to dumping in the international arena.

Preemption: Happens when a firm succeeds in getting its products into the market ahead of other firms. It is also called First Mover Advantage. This may preempt other firms by preventing them from moving into the market for a considerable time during which the initial firm enjoys high profits. 

Price Setters: A situation in which oligopoly firms control the market for a product and are able to keep the prices from falling. That is, they are able to set the price rather than allow the market to set the price. Having a unique product may also enable a firm to be a price setter.   

Price Takers: Price takers are at the mercy of the market and must sell their products at the price which the market or another firm decides.

Principles of Economics (1890): The famous textbook written by British economist Alfred Marshall (1842-1924 which went through many editions and was the standard textbook for generations economics students. The textbook deals with theories of supply and demand, marginal utility, costs of production and many other topics. The book is seen as consolidating the ideas of neoclassical economics into a coherent theory. The book was also responsible for changing the name of the discipline from political economy to economics.

Prisoner’s Dilemma: A game which has been analyzed in game theory. The game demonstrates why two individuals might not cooperate, even though it appears that they could benefit by doing so. Two prisoners are arrested and charged with a crime. The prisoners are isolated from each other. Because of lack of evidence, they can be convicted only on a charge that carries a one year sentence. So if neither one gives evidence on the other, they each get a one year sentence. If one remains silent and the other tells, the one who tells goes free and the other gets three years jail. If both of them tell on each other, they both get two years. The rational solution is that both of them defect and tell on the other. But the best solution would be for both of them to remain silent. This is seen to apply to real life situations. In the cold war, the rational solution was to build nuclear weapons. But the best solution for two enemy countries was to cooperate and not build nuclear weapons. The game shows how rational behavior may make one a rational fool. 

Product Cycle Theory (Raymond Vernon): From Raymond Vernon’s book Sovereignty at Bay (1971).  According to this theory, every product follows a cycle from innovation to maturity to the time when it is obsolete. After World War II, American firms had a comparative advantage in innovation because the American market was so large and because the US led in R&D. In the first phase, American products are exported from their US base. Sometime later, the product matures and production techniques become standardized. Foreign firms enter the market as there is technological transfer and a demand for the product. At this point, US firms export the means of production and produce abroad in order to preempt foreign firms. So FDI is a device used to preempt foreign firms from gaining a foothold in the market and allowing American firms to keep their monopoly. This theory helped to explain the behavior of US firms in the l960s.

Profit Seeking Activity: Another term for rent seeking by a coalitional distribution or interest group. If the activity is merely to gain greater benefits without enhancing production, such as in cotton agricultural subsidies in the United States, then the activity is unproductive and unjustified. The term is associated with Mancur Olson and the Virginia School of Public Choice Theory. 

Progressive Taxation:  The policy of taxing high incomes at a higher rate than low incomes.

Public Choice Theory: A theory largely devised by James Buchanan and Gordon Tullock in their book The Calculus of Consent (1962). They used economic theories to understand political behavior. These theorists were strongly opposed to government interference in the market.

Quantitative Easing: Another term for printing money. Central banks may have a policy of increasing the money supply with the aim of stimulating economic activity. This was the case following the financial crises in the United States in 2008. Quantitative easing by the United States and Europe tends to flood foreign currencies into emerging markets such as Turkey, where interest rates are higher.

Radical Critique of Political Economy: Radical critique may refer to the work of Karl Marx and others who challenged the approach and assumptions of the mainstream of political economy, such as Adam Smith, David Ricardo, Thomas Malthus and John Stuart Mill in the 18th and 19th centuries. After the marginalist revolution in the nineteenth century and the establishment of neoclassical economics by Alfred Marshall and others, radical critique refers to leftist thinkers in the Marxist tradition, who continued to support working class movements and base their economic analysis upon the labor theory of value, rather than the theory of marginal utility. The modern radical critique can be seen in the writings of Paul Sweezy, Harry Magdoff and others at the Monthly Review journal in New York, as well as other left critics of neoclassical economics.

Rational Choice Theory: Rational Choice Theory emerged from the use of methodological individualism to explain all of human behavior. The approach uses economic theory of utility maximization to analyze political behavior. Examples include the work of Anthony Downs in An Economic Theory of Democracy in the l950s and Gary Becker in The Economic Approach to Human Behavior (1976). The approach is also used in the Public Choice approach of Mancur Olson. It assumes that people make rational calculations to gain the basic desires of life, including food, prestige, awards, health, wealth and happiness. People are seen to approach life with the selfish and egotistical desires assumed by Thomas Hobbes. To act otherwise, presumably, would be a mistake. Probably a justification for capitalist profit-seeking behavior.

Rational Fools: A term from the political economist, Amartya Sen. While economists emphasize rational decision making by individuals, those rational decisions may also mark individuals as rational fools in terms of the likely outcome. One could relate this to rational profit making activity of corporations, which is swiftly destroying the global environment and so turning out to be quite irrational in a larger sense.

Reading School: The Reading School of Political Economy named after the University of Reading in England. The Reading School associated with John Dunning emphasizes technology as an important factor in the development of multinational corporations as well as the organization of production on a global basis. The theory is seen as eclectic as it borrows ideas from different schools of thought.

Real Economy: The Real Economy refers to the production of goods and services rather than investment in the financial sectors of the economy.

Realism: Realism may refer to state-centric realism which assumes that the international system is anarchic and sees the state as the most important actor. The approach also recognizes the role of international organizations, multinational firms and NGOs in the international arena.

Recession: A sharp downturn in economic activity in a country. In the United States, the technical definition of a recession is two consecutive quarters of negative economic growth.

Regime Theory in International Political Economy: A regime is defined by Stephen Krasner as a “set of principles, norms, rules, and decision making procedures” which guide actors, such as the directors of the World Trade Organization. In International political economy, the major approach is the liberal approach which assumes that actors act according to their rational interests and cooperate through international organizations. The realist approach sees states as the main actors in the international political economy and often in conflict with each other.

Regional Monetary Integration: May refer to the process by which the currencies of Western Europe were linked together into an exchange rate mechanism and eventually replaced by a single currency, the Euro. It may also refer to attempts toward monetary integration in North America, South America, East Asia, West Africa and other areas of the world through monetary unions and other forms of monetary cooperation.

Regionalism: A process by which the countries of a region, such as Western Europe cooperate to solve regional problems through such methods as customs unions, free trade areas, single markets, and monetary integration. It may refer to countries in North America, Europe, South America, East Asia, South Asia and elsewhere.

Rent Creation: May refer to activities of a government, such as legislation to create new programs, which results in the establishment of benefits which may then be available for distribution to an interest group. For example, a government may create social welfare benefits which are then distributed throughout the society. This can be contrasted to wealth creation in which new values are created through economic production.

Rent Seeking Behavior: Refers to the activities of coalitional distributions or interest groups which lobby or engage in other types of political activity to secure benefits from the government or public sector. This is seen by public choice theorists to be unproductive as it does not create any wealth but merely consumes resources already created.

Research and Development (R & D): Refers to activities which are aimed at innovation, the creation of new products and the improvement of existing products.

Reserve Army of the Unemployed (Karl Marx): A term Marx used to describe those workers who were unemployed and which capitalists could easily hire at cheap wages to expand production in a short period of time.   

Right to Work Laws (Irving Fisher): Also called open shop laws. This means that workers in a factory cannot be forced to join a labor union established by workers or labor officials in the factory.

The Road to Serfdom (1944): This is a famous book by Frederick Hayek which argued that the social welfare programs of the British Labour party were likely to result in totalitarianism.

Roundabout Production: Production methods which require more machinery and capital and therefore take more time to put into place when a decision has been made to expand production.

Savings: Savings may refer to the part of the national income which is not spent or consumed. In this case, it may result from deferred consumption. Savings in an economy may be related to investment and capital formation as the amount of savings may be made available to use as capital, when deposited in a bank or other investment asset.

Seigniorage: Refers to the special privileges the United States enjoyed during the Bretton Woods period as the provider of the world’s reserve currency, the US dollar. 

Service Sector Economy: A service sector economy is an economy in which the dominant enterprises of the economy are in the service sector. The service sector or tertiary sector includes information, transport, distribution of products, sales, pest control, entertainment, repair, food, hotels, hair solons, tourism and more. More than seventy percent of the work force in the United States is in the service sector.

Shareholder Capitalism (Stockholder Capitalism): The national system of political economy in the United States which is based upon the requirement that firms manage their business in such a way as to maximize profits for their stockholders or shareholders, rather than to serve the general needs of society.

 Smithsonian Agreement (December 1971): An agreement which adjusted the fixed currency exchange rates established at the Bretton Woods Conference in l944. The US dollar’s convertibility into gold was abolished. The dollar was over-valued by the l960s. In February 1973, the dollar was devalued by ten percent. The conference was held in Washington, D.C.

Social Dumping: Refers to a situation in which transnational corporations move manufacturing to countries which lack work standards and pay low salaries and few benefits to workers. Relocating in such countries as Bangladesh, for example to produce cheap clothing for higher profits is an example of social dumping.

Social Market Capitalism: Refers to the national systems of political economy in Western European nations such as Germany. These economies have been characterized by higher levels of social welfare and greater benefits to workers as compared to the United States. The members of society are seen as shareholders, as the companies are supposed to serve the interests of the whole society. 

Special Drawing Rights: A reserve currency created by the IMF in 1969 due to the shortfall in US dollars for international liquidity. The SDR is made up of a basket of currencies of the US dollar, British Sterling, the Euro and the Japanese Yen. As of 2013, there were some 275 billion in SDRs which are owned by the member countries of the IMF. They have served as a unit of account for the IMF and before 1981 were mainly seen as a form of credit. Countries are expected to maintain their SDR holdings at a given level. The SDR is sometimes seen as a source of credit for developing countries. They are not seen as very important in providing liquidity, however, as they make up only about four percent of global forex reserve assets.

Specie flow mechanism (David Hume): An analysis of the international flow of money which measures the effect upon an economy, including prices and the value of the currency. Hume observed that exports from a country would cause the value of the currency to rise, raising prices and having a negative effect on exports.

Speculative Mania: A phenomena which happens when investors rush to invest in a particular area of the economy, such as stocks or housing. The market may overheat creating a bubble which is likely to burst when investors start to become skeptical that the market will continue to rise. There is then a stampede of investors to get out of the market as quickly as possible.

Stagflation: A term used by a Conservative member of Parliament in the UK in a speech in l965. Lain Macleod warned that the economy was suffering from both high inflation and high unemployment.  This phenomenon was seen in the US economy beginning in the l960s. Unemployment remained high even when there was considerable inflation in the US economy. Some economists believed that the situation could be corrected by applying the proper monetary policies.

Stagnation: Stagnation in an economy happens when the rate of economic growth slows down and economic recovery is difficult to achieve.

Stakeholder Capitalism: Stakeholder capitalism can refer to the national system of social market capitalism in some European states, such as Germany. Members of society are seen to be stakeholders as they have an interest in the economic outcome in terms of their social welfare and quality of life.   

State-Centric Realism: A view of global political economy in which the state is seen as the primary actor in the international economic arena. International organizations are seen as having a secondary importance.

Steady State Economy: A steady-state economy may refer to the economic growth model of Robert Solow. In this model, the economy reaches a steady state when investment is equal to depreciation and is said to be in equilibrium. Knowledge is seen as an exogenous variable.

Stockholder Capitalism: The name applied to the national system of political economy in the United States which is based upon the requirement that firms manage their business in such a way as to maximize profits for their stockholders, rather than to serve the general needs of society.

Stolper-Samuelson Theorem: Says that international trade will tend to benefit those who own the abundant factor (capital or labor) and hurt those who own the scarce factor. Over time there will be a redistribution of value to either labor or capital. In a developing country, labor will benefit most. In a developed country, capital will benefit most.

Strategic Behavior: Strategic behavior in economics is a broad term which could apply to both firms and governments. In order to be successful, a firm must develop a strategy to manage the firm optimally and meet specific goals, most importantly making acceptable profits for its owners and stockholders. The production of cutting edge profits might be part of this strategy. For governments, strategic behavior can involve economic policies which promote domestic firms in the domestic and international environments.

Strategic Management: Strategic management involves the operation of a firm to meet specific objectives. It primarily involves responding to external issues outside the company, such as understanding the customers’ needs and responding to competitive forces. There is a need to continuously adapt to the changing external environment. Strategic management provides overall directions to an enterprise. There are a number of models of strategic management.

Strategic Trade Theory: Strategic Trade Theory argues that countries can increase international trade, particularly exports, by implementing specific policies. For example, Japan was able to capture a large share of the US market in electronics and automobiles in the l960s and 1970s by such policies as government support to oligopolistic industries, producing quality products at low cost, producing niche products, and supporting domestic firms even when they did not make a profit.   

Structural Adjustment Programs (SAP): Structural Adjustment Programs are economic reform policies administered by the IMF as requirements for obtaining a loan from the IMF. These policies usually involve the implementation of austerity packages. They may require large scale privatization of state owned enterprises, cutbacks in government employment, cutbacks in education, cutbacks in health, cutbacks in social welfare, banking reforms, decreases in government subsidies, and other such policies.

Structural Investment Vehicle (SIV): A financial instruments which earns a profit by producing nothing. The SIV was invented by Citigroup in 1988. The market in SIVs collapsed in 2008 with the financial crises. Money is made by borrowing money on short and medium term notes such as securities, commercial paper, and public bonds, at low interest. This money is then used to buy longer term securities that pay higher interest, such as mortgages, bonds, auto loans, student loans, and credit cards. The net credit spread produces profits for the investors. The amount of SIVs reached 400 billion dollars in 2008, but then the market collapsed.

Subprime Mortgage: A subprime Mortgage is one which is held by a borrower with a lower credit rating than a borrower with a conventional mortgage. Since the risk is greater in such lending, the interest rate is generally higher. Over-lending in the subprime market helped to produce the financial crisis in the United States in 2008. 

Subsistence Economies: A subsistence economy is one in which food, clothing, shelter and other basic needs are supplied through nature, such as through hunting and gathering and agriculture in which that which is produced is consumed by individual families or small groups and does not enter the market. Trade in such an economy would be carried out through barter as money is absent.

Subsistence Theory of Wages:  A principle held by classical political economists which says that wages will fall to the point in which the wage only allows the worker to survive.

Supply Side Economics: A right-wing conservative approach to economic policy. Supply side advocates argue that economic growth can best be increased by such policies as a lower income tax, a lower capital gains tax, and by reducing government regulations on firms. They argue that consumers will benefit from the greater supply of goods which result. It is the opposite of demand side economics. 

Surplus Value (Karl Marx): The source of profits for Karl Marx. When the worker works longer than is necessary to produce his cost of living, the additional part of the day is surplus labor for which the capitalist does not pay. This surplus labor produces surplus value for the capitalist.   

Global Political Economy: Glossary (Part 3 ) J-N

Jamaica Conference (1976): A conference in which the major industrial powers accepted flexible currency exchange rates. Most economists thought that this would benefit the global economy, while others argued that it would create higher inflation and destabilization.

Japan (Bank of): Nippon Ginko, the Central Bank of Japan located in Tokyo. It was founded after the Meiji restoration in 1882. In l871, a new currency, the Yen was established. The bank issued new bank notes in 1885 which were greatly favored by the rats which ate many of them.

Jevon’s Paradox (William Stanley Jevons): Says that an increase in the efficiency of use of a commodity will not result in decreased consumption of the commodity, but rather increased consumption. For example, if light bulbs become more efficient by using less energy, people will just buy more bulbs and use them longer.

Jugler Cycles (Joseph Schumpeter): A business cycle discovered by Clement Jugler associated with changes in investment in new plant and equipment. These cycles last eight to eleven years.

Justifiable Coalition: A distributional coalition, such as a corporation, which is set up to create value or wealth, rather than to engage in rent seeking on its own behalf. According to New Political Economy, in this case, the coalition is justifiable.

Keiretsu: In Japan, a set of companies with interlocking business relationships. They appeared after World War II, after the partial breakup of the big companies called zaibatsu. The six major postwar groups were Mitsubishi, Mitsui, Sumitomo, Fuyo, Dai-Ichi Kangyo, and Sanwa.  

Kennedy Round: Trade round talks under GATT which began in May 1964 and continued for 37 months. The talks involved 62 countries and addressed the issues of tariff reductions and anti-dumping measures. The talks resulted in 40 billion dollars of trade concessions in world trade.

Keynesian Economics: Also known as demand side economics. The theory presented in The General Theory of Employment, Interest and Money (1936) by the British economist John Maynard Keynes. Keynes noted that economic output depends upon aggregate demand, or total spending in the economy. During a recession or depression, the government can come to the aid of the economy by government spending programs to boost aggregate demand and thus economic output.

Kitchen Cycles (Joseph Schumpeter): Short fluctuations in the economy discovered by Joseph Kitchen, which last from three to four years. They are due to the changes in business inventories.

Kondratiev Waves: Long-run economic cycles lasting between 45 and 60 years and discovered by Nikolai Kondratiev. Prices rise during a 20 to 30 year period, and then decline for 20 to 30 years.

Labor Productivity: The amount of goods and services a worker produces in a unit of time. It can be measured in terms of a firm, a particular process, an industry, or for a country. Productivity depends upon such factors as investment, technology, human capital and intensity of work.

Labor Theory of Value: A theory devised by the classical political economists beginning with Adam Smith and David Ricardo. The theory was used by Karl Marx in his critique of political economy in Capital. The theory basically says that economic value is produced by labor. The amount of value produced depends upon the prevailing means of production in an economy.

Laissez faire capitalism: A system of economy which historically has existed only in theory. In is a concept from classical political economists, such as Adam Smith, of an economy in which the government does not interfere in the workings of the market. Prices are seen to be set by natural factors, such as effort in labor.

Late Industrializer: Countries such as Germany, Japan and the former Soviet Union which industrialized after the rise of earlier industrial countries such as England and the United States. The term is associated with Alexander Gershenkron who argued that the pattern of industrialization was different for countries depending upon the time frame of industrialization. While industrial capital was accumulated gradually through emerging corporations in early industrializers, the state was active in the accumulation of capital in late industrializing states. For example, the banks were a source of capital for capitalist businesses in Japan after 1945.   

Law of Diminishing Returns: A fundamental economic principle which says that in a process of production adding one more factor of production, while holding other factors constant, will, at some point, yield lower per unit returns. This is because at some point, additional units of a factor of production may lower the efficiency of the process.

Law of Income Distribution (Vilfredo Pareto): A pattern of income distribution across nations discovered by Pareto. Income increases geometrically from the poorest to the wealthiest members of society in almost every society, according to the law. Pareto believed that the natural distribution was that twenty percent of the population would own eighty percent of the wealth.

Laws of returns to scale: Includes the law of increasing returns to scale, the law of constant returns to scale and the law of diminishing returns to scale.

Least Developed Countries (LDCs): Least developed countries are countries which lack socioeconomic development and have a low human development index. The three criteria for least developed countries include poverty, lack of human resources and economic vulnerability. LDCs have a gross national income (GNI) per capita of less that US $992 as of 2012. Human resources are weak in terms of nutrition, health, education, and adult literacy. They also demonstrate economic vulnerability based upon the instability of agricultural production, the instability of exports of goods and services, merchandise export concentration, the handicap of smallness, and a significant proportion of the population affected by natural disasters. These criteria are set by the Committee for Development Policy of the UN Economic and Social Council (ECOSOC). There were 50 LDCs in 2014, including 34 in Africa, 10 in Asia, five in Australia and the Pacific, and one in the Caribbean.

Lender of Last Resort: The International Monetary Fund is frequently referred to as a lender of last resort when a country experiences serious financial problems and needs a large loan. The IMF is then seen as the only solution to the problems which the country faces.

Leontief Paradox: A concept from Wassily Leontief. The paradox was that the United States was seen to enjoy a comparative advantage in the export of labor-intensive agricultural products when traditional H-O theory predicted that the US should export capital intensive goods. Most of these agricultural products, however, were not produced under conditions of corporate production, but on individual small and medium sized farms in the United States. The process utilized much family labor which otherwise might have remained idle. Perhaps other relevant factors are the high productivity of much farm land in the US and efficient farming methods used by farmers in the US.

Less Developed Countries: Countries characterized by a low national per capita income, a high rate of population growth, high unemployment, and a dependence upon commodity exports.

Liquidity: Liquidity is cash, cash equivalents, and other assets, such as stocks and bonds that can easily be converted into cash.

Loanable Funds Theory of Interest: This theory says that interest rates are determined by the supply of savings and the demand for loans.  

Lobbying: In the American political system, all major corporations station representatives in Washington, DC, who petition Congressmen for legislation favorable to their business. Congressmen are in turn rewarded for their service with campaign contributions from these corporations. While it appears to be a form of bribery, it is referred to as lobbying, in the American context. More generally, lobbying also occurs in the European Union and other political contexts. 

Macroeconomic Policy: Includes the policies of a government in shaping the national economy. It includes monetary policies and fiscal policies. Monetary policies include such tools as raising or lowering interest rates to expand or restrict the economy. Also a policy of quantitative easing (printing money) is sometimes used to increase the money supply and stimulate the economy. Fiscal policy includes spending policies of the government, including military spending, spending for social welfare, spending for new infrastructure and so on. It also includes policies on taxation.

Managed Float: An exchange rate system in which the value of a currency is largely determined by the free market and changes from day to day. However, it can be adjusted by actions of the central bank, such as the buying and selling currencies. This is part of the current international financial environment. It is also called a dirty float.

Managerial Capitalism: A form of capitalist production and accumulation in which firms are managed and controlled by highly paid managers who are the central agents of power and direct the enterprises of the firm in order to maximize profits and accumulation. In the case of financial firms, profits and accumulation of capital is the sole underlying objective of the enterprise. 

Marginalist Revolution: The Marginalist Revolution refers to the development of neoclassical economic theory in the Nineteenth Century, beginning in the 1860s with the work of William Stanley Jevons, Carl Menger, and Leon Walras. These theorists developed a marginal theory of value to replace the labor theory of value of the classical political economists. Jevons published The Theory of Political Economy in 1871. Menger published his Principles of Economics in l871 and Walrus published his Elements of Pure Economics in 1874. This work anticipated the work of Alfred Marshall at the end of the century, which began the neoclassical period of economics.

Marginal Return: The marginal return to a factor of production is the change in output brought about by a change in that factor of production. The marginal product of labor is the change in output per unit change in labor.   

Marginal Productivity: The additional output that is produced by hiring one more worker or by using one more unit of input.

Marginal Utility Theory: An economic theory which attempts to measure the increase in satisfaction which consumers gain from consuming an extra unit of a good.

Market: A system, institution, procedure, or infrastructure by which people or parties may participate in the exchange of goods and services. A market generally also establishes the prices of goods and services. A market with a single seller is a monopoly. A market with multiple sellers and a single buyer is a monopsony.

Marshall’s Cross: The graphic depiction of supply and demand in Alfred Marshall’s economic model which depicts price on one axis and quantity on the other. Since the supply and demand curves cross at the point of equilibrium, the graph resembles a cross. It was seen by some to be the worker under capitalist production who was being crucified on this cruel cross.  

Masters of the Universe: The title which the owners and directors of giant global corporations have given themselves depicting their role in the global economy. 

Meiji Restoration (1868-1912): The economic rise of Japan during the imperial rule of Emperor Meiji. Meiji came to power with the end of the Tokugawa Shogunate in 1867. Changes brought about the end of feudal society and the beginning of a market society. Industrialization and the rise of the military promoted Japan as a modern nation with western influence. A Meiji slogan was “Enrich the Country.”   

Methodological Individualism: An approach to understanding economic and political behavior by focusing upon the discreet decisions of individuals which are seen to be rational. Typical of the neoclassical era of economics and particularly of the Austrian school of economics.

Mexican Debt Crisis: In August 1982, Mexico defaulted on its debt to the IMF. The Mexican Peso was devalued by about 50 percent. The private banking system was nationalized and Mexico suspended payments on its debt. The US Government arranged a 3.5 billion dollar loan to Mexico. This was followed by another loan of 3.8 billion dollars three months later during which Mexico was forced to make free market reforms. Wages fell and there was high unemployment. 

Mexican Financial Crises (1994): The Mexican Peso Crises began in December 1994 with the collapse of the Mexican Peso. The new President, Ernesto Zedillo had just been elected. Carlos Salinas de Gortari was the outgoing President. Zedillo took office on December 1, 2004. The Peso was four to a dollar but quickly crashed to seven to a dollar. The United States bought pesos and organized a loan of 50 billion US dollars. The Peso stabilized at around six to a dollar and Mexico emerged from the crises in around three years, which is a typical time. The causes of the crises involved several factors. First, Zedillo reversed the tight monetary controls of Salinas implementing financial liberalization. Secondly, Salinas’s populist policies before the election had strained the country’s finances. His efforts to stimulate the economy were unsustainable. Further the quality of loans made in a period of low interest rates led to high risk. Another factor was the Chiapas rebellion in late 1994. This helped to lead to a drop in foreign investment. Inflation also increased due to high spending in the period 1985-1993. At the same time, oil prices dropped. This made it hard to finance past debts. The current account deficit rose and dollars flowed out of the country.

Microeconomic Policy: Economic policies which are said to be designed to improve economic efficiency such as tax policy, competition policy, deregulation, economic liberalization, reforms of industrial and import licensing, the ending of public monopolies, and bringing an end to central planning.

Ministry of Economics, Trade and Industry (METI): The ministry of the Japanese Government which succeeded MITI in 2001 to coordinate and guide the Japanese economy.

Ministry of International Trade and Industry (MITI): A government ministry in Japan which was created in l949 to coordinate international trade policy with the private and public sectors of the economy and revive the Japanese economy. It provided money for R&D and investment to major companies. It was succeeded by the Ministry of Economics, Trade and Industry (METI) in 2001.

Misery Index: The misery index is a measure of the inflation rate plus the unemployment rate.

Mittelstand: The name given to small and middle sized industries in Germany, Austria, and Switzerland. They are given credit for much of Germany’s economic growth in the 20th century. These firms are seen to be efficient concentrating upon a particular niche in production. They typically enjoy economies of scale, have highly skilled workers, provide high job security, are export oriented, and manufacture innovative and high-value products. In Germany, in 2003, seventy percent of employees in the private sector worked in such industries and contributed fifty percent of GDP. They are often located in small rural communities and produce such items as machinery, auto parts, chemicals and electrical equipment. 

Mixed Economy: An economy typical of Sweden and several developing countries such as India in which some industries are privately owned and some are state-owned. Infrastructure industries, such as dams and electricity producing plants are typically state-owned.

Mob Psychology: Also called crowd psychology. Mob psychology can help to bring about a financial crises as viewed in the financial instability theory of Hyman Minsky. When a new opportunity opens up in the market, firms and individuals rush in to invest resulting in euphoria and creating a bubble in overvalued assets. At some point, some start to believe that the market has reached its peak and start to pull out by selling assets. This trickle picks up and turns into a panic as the mob psychology takes over again and this results in bankruptcies and a financial crisis.

Money Illusion: Happens when people react to the amount of money rather than to the purchasing power of the money. For example, people generally believe that their income has gone up when they get a pay raise, but their real pay may have actually decreased in terms of purchasing power.     

Monetarism: A school of economic thought associated with the American economist Milton Friedman. Adherents of monetarism emphasize the role of government to control the amount of money in circulation. Friedman argued that the excessive expansion of the money supply is inflationary and governments should concentrate upon price stability by regulating the money supply.

Monetary Reserves: Monetary reserves are funds which a government must hold, such as dollars or Euros, to pay its international debts.

Monopoly: A situation in the market when a single enterprise is the only seller of a particular commodity. There is an absence of economic competition and therefore the supplier can raise prices at will.

Monopoly Finance Capital: A description of the US economy after the late twentieth century in which companies engaged in financial enterprises controlled the economy and made the great bulk of their profits from financial enterprises, rather than in manufacturing. The approach is associated with the journal, Monthly Review, in New York, edited by John Bellamy Foster. Financialization is seen as a response to the stagflation in the US economy in the l970s. Financial institutions turned to speculation in the financial markets to generate higher profits. They also invented new financial tools, such as derivatives.   

Monopsony:  Refers to a market situation in which there are many sellers but only one buyer.

Moral Hazard:  Moral hazard is the principle that nations must be held accountable and responsible for their debts. If they are not held responsible when they default on a debt obligation, for example, and are then given a new loan to cover the default, this could be seen as throwing good money after bad, and encouraging the country to be irresponsible. Moral hazard says that actors may be more willing to take risks when most of the risk will be borne by another actor. Therefore, it is important to hold actors responsible.

Multilateral Agreement on Investment (MAI): A draft agreement negotiated between members of the Organization for Economic Cooperation and Development (OECD) between 1995 and l998 on international investment. It was launched in May 1995 and negotiated in secret. In March l997, a draft of the agreement was leaked. NGOs and developing countries launched a campaign of criticism of the draft agreement because it would largely prevent countries from regulating foreign companies. Due to this pressure, the negotiations were suspended in April 1998 and France withdrew from the negotiations in October. The negotiations were then canceled on December 3, 1998. However, similar measures to serve the interests of corporate investors and prevent their regulation are being established under the World Trade Organization.

Mundell Equivalency: Says that trade in capital or labor and trade in goods will have the same effect on the economy and that one can fully substitute for the other. 

Mundell-Fleming Model: A model developed in the l960s by Robert Mundell and John Fleming. It describes an open economy and the relationship between exchange rates, interest rates, and output. The Mundell Flaming Model is used to argue that an economy cannot maintain fixed exchange rates, free capital movement, and an independent monetary policy all at the same time. This is the irreconcilable trinity also known as the Mundell-Fleming Trilemma.  

National Economic Competitiveness: The ability of a country’s firms and industries to supply and sell goods and services in international markets. Paul Krugman, in a 1994 article in Foreign Affairs, “Competitiveness: A Dangerous Obsession,” argued that countries do not compete with each other the way corporations do. US President Bill Clinton once said, on the other hand, that each nation is like a big corporation competing in the global market place. US economist, Lester Thurow, in his 1993 book: Head to Head: The Coming Economic Battle Among Japan, Europe and America argued that nations do compete with each other. He argued that Europe would win out over the US and Japan due to its superior national system of political economy.

National System of Political Economy: The term describes the parameters of a national economy, such as the Japanese or German Political economy. Relevant criteria are the role of the domestic economy and differences with other nations, types of economic activity, the role of the state in the economy, the structure of the corporate structure, and private business practices. 

Negative Externalities: A phenomenon which happens when all of the costs of production of a product are not included in the price. For example, if the cost of an automobile included the cost of the environmental pollution created the price would be considerably higher. These costs, however, are externalized.

Neoclassical Growth Theory: The theory of growth formulated in the l950s by the economist Robert Solow. This model states that economic growth is a function of the factors of production, labor and capital. Technology and human capital are exogenous variables. It assumes that once new technology is invented, it is available to all producers. It also assumes constant returns to scale. It has been superseded by New Growth Theory, which takes account of such factors as economies of scale and control of R&D.

Neoclassical Political Economy: The term was used originally by Thorstein Veblen in 1900. The neoclassical era of political economy began in the late nineteenth century with the marginalist revolution, and particularly with the work of Alfred Marshall in 1890. The three basic assumptions include (1) people have rational preferences which can be identified (2) individuals try to maximize utility and firms try to maximize profits (3) people and firms act independently, based upon relevant information. Marshall used supply and demand graphs to specify when an economy was in equilibrium. These theorists also developed a theory of value based upon marginal utility. This approach may be viewed as including the Austrian School of political economy.

Neoclassical Synthesis: The neoclassical synthesis is defines as including neoclassical political economy plus Keynesianism.

Neo-institutionalism: An approach to studying society, including economics, sociology, international relations, and political science, that has emerged since the 1980s. It focuses upon the way people behave in institutions. It borrows from the work of Max Weber. In economics, this approach is associated with Douglass North at Washington University in St. Louis. Scholars note that the main goal of institutions is to survive and to do so, they must establish their legitimacy. People may act within institutions rationally to maximize utility; or act out of duty, that is normatively; or they may act cognitively, that is, taking for granted that certain ways are the correct way to do things. Neo-institutionalism emerged as a reaction to behavioralism which focuses upon the individual.

Neoliberalism: The mainstream approach to capitalist accumulation which has emerged since the l980s in Great Britain and the United States and spread widely around the world. Neoliberalism is characterized by the privatization of public sector enterprises, deregulated financial markets, an opening to the global market and foreign direct investment, austerity in government services and social welfare, and state support for capital and failing markets, rather than people. 

New Political Economy: There are several key parameters of the New Political Economy. Following the work of public choice theorists, such as Mancur Olson, it is argued that rent seeking distributional coalitions, such as labor unions, are unproductive and slow economic growth. Economic policy making should be taken out of the hands of populist politicians and put in the hands of technocrats who make decisions based purely upon economic parameters. Justifiable coalitions are positive when they are for the purpose of investing capital for economic growth. Those guiding the economy are seen to be rational and interested in only the needs of the economy.

Niche Products: Products which are produced and intended for a narrow segment of the market.

Nominal Interest Rates: The rate of interest in the current price but ignoring the rate of inflation. For example if the rate of interest is twelve percent, but inflation is ten percent, the real rate of interest is only two percent.

North American Free Trade Agreement (NAFTA): A trade agreement which came into effect in 1993 and links together the economies of Mexico, the United States and Canada. This agreement has shifted many US manufacturing jobs to Mexico. It has also had the effect of lowering average wages of workers in all three countries.  

Global Political Economy: Chapter Fourteen


Chapter Fourteen: Global Trade

Historically, the issue of free trade has been a disputed area in international political economy. This situation remains today. Liberal scholars, following Adam Smith and David Ricardo, argue for free markets as a win-win situation for every country. In practice, however, every country practices neomercantilism to some extent, including the United States. The purpose is to protect certain domestic interests and home markets. Radicals argue that the global trading system, free trade agreements, and the existing terms of trade, militate against developing countries in today’s global economy. They argue that the rules of the World Trade Organization and its dispute-settlement bodies prevent national autonomy, including the possibility of domestic measures to protect the environment. Some environmentalists argue that trade in agricultural products increases the ecological rift. All of this presents a complex picture. Clearly, free trade does not benefit all citizens of a country equally. There will be winners and losers, depending upon one’s location within the domestic and global political economy.

Global Trade: Historical Perspective

The classic era of free trade, from the repeal of the Corn Laws in l846 to the l870s, was quite short. The Corn Laws, tariffs on imported grain in the United Kingdom, protected the high prices of grain for landlords, but was opposed by industrialists, because it tended to keep wages higher and hurt their profits. Trade protectionism increased in the late nineteenth century and continued into the first half of the twentieth century. But after World War II, the US as the most powerful industrial country in the world, pushed for trade liberalization. Several rounds of trade negotiations were carried out under the General Agreement on Tariffs and Trade (GATT) between the l950s and the end of the century when the World Trade Organization (WTO) came into existence.

Liberal economists warn that “free trade” cannot be taken for granted. Under globalized production, transnational corporations can structure their global operations in such a way as to maximize profits. Developing countries are at a disadvantage in dealing with the WTO. Global trade is often seen as unfair. There is resistance from workers, welfare groups, environmentalists, and human rights advocates who fight child labor and sweatshop labor in countries such as Bangladesh.

In 1999, this struggle came to a head at the “Battle of Seattle” meeting of the G-8, the world’s most powerful countries. Opposing the global trading system were workers, environmentalists, human rights activists, and those who opposed capitalism outright. Many issues involving trade are still on the agenda and are far from being resolved.

The Free Trade Debate:

The argument for free trade, as we have seen, was made by Adam Smith and David Ricardo based upon the principle of comparative advantage. Today liberals argue that removing barriers to free trade allows national specialization, facilitates optimal use of scarce resources, and leads to efficient trade patterns based upon comparative advantage. It is argued that the welfare of each trading partner increases. It is also argued that free trade benefits individual consumers and maximizes global wealth. It is also pointed out that free trade maximizes consumer choice, reduces prices, makes efficient use of the world’s resources, encourages the spread of technology, helps poor countries catch up with the rich, and leads to world peace.

All of these claims, however, cannot be accepted at face value without an empirical examination of the claims. First, it is necessary to break the situation down and look at society dialectically. Free trade may not affect workers and consumers in the same way. Cheaper goods may bring environmental destruction, destroy agricultural and ruin local enterprises.

To take one example, the North American Free Trade Agreement (NAFTA), has allowed American and Canadian firms to produce goods more cheaply in Mexico. Consumers in the US and Canada may get better prices, but the arrangement has hurt some workers in all three countries resulting in lower wages. The United States has been forced, by the rules of the WTO, to allow toxic substances from Mexico to be imported into the United States for disposal in toxic waste dumps. The United States was unable to stop the import of asbestos, a cancer causing building material, from Canada. On the other hand, many transnational corporations have been able to increase profits through NAFTA. In 2014, the issue of building the Keystone Pipeline to carry oil produced from tar sands in Canada was being fought out on the ground and in the courts of the United States. Many environmental groups opposed the project due to its potentially great damage to the environment. Farmers in Nebraska went to court to keep the pipeline from crossing their lands. In every case whether free trade is actually beneficial is an empirical question which must be examined. The abstract principles of economists, such as comparative advantage, are theories which may fall apart in the real world.

Liberal economists also claim that protectionism costs consumers much money in higher prices while it does not save many jobs. They claim that such protectionism damages the economy of a country. They also claim that tariffs shift income to protected sectors of the economy and sometimes create monopolies.

The Infant Industry Argument made by Alexander Hamilton says that protectionism is necessary to protect start-up industries in developing countries until they are strong enough to compete in the international market. Friedrich List was also an advocate of protectionism. He argued that free trade was just the policy of the strong countries which could beat the competition. Theoretically, when the “infant industry” becomes competitive, the tariffs will be removed. In practice, while the argument may be sound, in practice it has been the case that such industries often never become competitive under protectionism. They gain the political power to continue protectionism, which increases their profits, at the same time they are producing sub-standard products.

An example was seen in the Indian telephone industry after the country became independent from Britain in l947. In the l980s, Indian companies were still producing telephones based upon l940s technology. In a protected market the companies profited from producing obsolete products. Once the market was liberalized and cell phones entered the market, these older products quickly became useless.

By the end of the l980s, it was still difficult to make a long-distance telephone call from one city in India to another. A land-line telephone connection took up to two years to obtain. In l986, there were only three million telephone connections in the entire country with one million applicants waiting for a telephone connection. Only one-half of one percent of people had telephones and these were those with power and money. In offices it was not unusual to hear people shouting into the mouthpieces of telephones at the top of their lungs to try to get their messages through to someone a few blocks away.

A famous incident happened in 1986, when the former Home Minister of India, P.C. Sethi, was trying to call his relatives in Bombay from Delhi. After trying to make the call for more than two hours, he went to the Central Telephone Exchange in Delhi and pointed an automatic pistol at the head of an operator demanding that his call be put through. The next day, the headlines in the local newspaper read “P.C. Sethi goes berserk.” In this case a good principle had gone to the point of driving a high official in the Indian Government crazy. Once cell phones from private companies became available, people could just forget about land lines and buy a pocket telephone.

Many countries, such as India, protected their domestic industries during the era of import substitution industrialization (ISI) after independence. There were clearly positive and negative aspects of the policy. While the countries became more self-sufficient, the products were generally of poor quality and often old-fashioned. Local jobs were produced, but factories were inefficient with low productivity. Some big domestic firms became monopolists and enjoyed high profits with government protection.

Protectionism, on the other hand, had much greater success in Japan, where the government supported high-tech industries and forced companies to become global players.

The classical argument against protectionism by David Hume (1711-1776) is still valid to some extent. He argued that protectionism would decrease exports over the long run and make products less competitive. This is because exports cause foreign currency to flow into a country. The value of the local currency then rises, making exports more expensive. This tends to slow down exports.

Most liberal economists, following economic models, reject the idea that imports from low-wage countries destroy jobs and lower wages in industrialized countries. However, the evidence seems contradictory in the case of NAFTA in the United States and Canada. Domestic interest groups such as farmers and workers, and sometimes small business, oppose free trade.

Conventional Trade Theory (Comparative Advantage):

Traditional trade theory is based upon the Comparative Advantage Model of David Ricardo. This is the Heckscher-Ohlin Model (H-O Model) from Eli Heckscher and Bertel Ohlin. It was developed in the l930s. According to this model, a country should produce those goods in which it has a cost advantage in factors of production. However, conventional trade theory was not able to explain global trends in trade after the l960s and has generally been replaced with theories of strategic trade.

The Heckscher-Ohlin Model says that a country will specialize in products in which it has a cost advantage over other countries. The model assumes constant returns to scale, the universal availability of production technologies, and that a country has a comparative advantage in some product which it can export.

The Heckscher-Ohlin Model has four Hypotheses:

First Hypothesis: A country will export those things that it has in abundance. A capital-rich country will export capital intensive goods. A labor-rich country will export labor intensive goods.  This is the principle of comparative advantage.

Second Hypothesis: The Stolper-Samuelson Theorem: Trade will benefit those who own abundant factors and hurt those who own scarce factors.  All sectors of the economy will benefit but there will be redistribution to either labor or capital.

Third Hypothesis: The Mundell Equivalency: Trade in the factors of capital or labor and trade in goods will have the same effect over time, and one can fully substitute for the other.

Fourth Hypothesis: Factor-Price Equalization Theorem: Under certain circumstances, over time, trade in goods will equalize the returns (wages to labor and profits to capital), for each factor of production.

For example, the United States is a capital-rich country. It will export capital intensive goods like airplanes, bulldozers, and supercomputers. A labor-rich country like India will export textiles and carpets which tend to be labor intensive.

According to the second hypothesis, in the United States, oligopoly firms producing aircraft, earth moving equipment and supercomputers will gain more than workers. On the other hand, workers will gain more in India over time, as wages tend to rise.

Thirdly, according to the Mundell Equivalency, a country will benefit equally, whether the goods are produced domestically and exported, or whether the capital is exported to produce the goods in a foreign country. Foreign direct investment can be substituted for trade in useful commodities.

Fourth, according to the Factor-Price Equalization Theorem, in the United States, while the capitalists gain the most in the beginning, over time, the gains of workers will equal the gains of the capitalists. In India, workers will gain the most in the beginning, but returns to capital will increase to equal the returns to labor.

All of this is logical, according to the liberal economic Heckscher-Ohlin Model. However, not surprisingly, in the real world, these theorems do not hold true much of the time. Global corporations learn how to beat the system and keep profits high.

Competitive Advantage and Strategic Trade Theory (STT):

Oligopolistic firms may engage in competitive advantage, rather than comparative advantage. Competitive advantage has weakened the H-O Model, especially when it comes to high-tech sectors. This relates to strategic trade.

The Product Cycle Theory (Raymond Vernon 1966):

Raymond Vernon constructed a theory of foreign direct investment which applied to US investment in Europe after World War II. According to Vernon, every product has a life cycle, from invention to obsolescence, when it can be thrown on the trash heap or recycled.

First, the product cycle begins with the US producing products, such as household appliances, refrigerators, stoves, sewing machines, and so on, for export to Europe after World War II. Europe’s manufacturing capacity had been depleted by the war and there was a pent-up demand for domestic products as people returned to a normal life-style. The models exported were not state of the art, but one generation behind, so profits could be high in their production and sale. Europeans would buy American products and start to prefer them. A market for American goods would then be firmly established.

Second, at some point, after a few years, local producers in Europe begin to produce their own products and come into the market. At this point, the American firms flood the market to keep prices low so that it is hard for local firms to compete. Also by this time, American products have gained a reputation for being “better” than local products.

Third, in order to preempt the competition from European manufacturers, American firms begin to produce their products in Europe. That is, they export the means of production, but produce second generation products using older processes. This tends to keeps profits high.

Fourth, when a new technology is invented, the old technology is abandoned and a new product replaces it. This is the product cycle, from invention until obsolescence.

The process then repeats itself. This process described fairly well what went on in the l960s, until globalized production began to come into use. After this, the products could be produced almost anywhere, the only restriction being the arrangement which produced the highest profits.

Strategic Trade Theory (STT) challenges the neoclassical theory of trade based upon comparative advantage.

Strategic Trade Theory assumes:

  1. There is imperfect competition due to oligopoly firms which can control and set prices.
  2. There are economies of scale and firms engage in R & D.
  3. There are cumulative processes and technology spillover.
  4. Governments may use protectionism, such as is done in both Japan and the United States, and subsidize industries.
  5. The government may use other policies to subsidize firms and help them compete in the international arena. The US subsidizes the R & D of firms through the military defense budget. Japan has many policies to subsidize large firms and help them compete. The European Union also subsidized European firms.
  6. Governments may use protectionism by accusing foreign firms of “dumping” when it is not necessarily true.
  7. Firms may develop niche products to capture certain markets.
  8. A few oligopolistic firms may dominate the market, such as in the airline industry, cell phones, computers, and so on. Production is globally based to cut costs and maximize profits.
  9. Under the principles of strategic trade, firms can often make super-profits.
  10. Strategic trade is relevant to information technology (IT) and biotechnology areas. This is true of both the military and mainstream economy.
  11. Firms may build up access capacity in order to keep out foreign firms.
  12. High tech is more important than the service industry. In strategic trade, it matters whether a country produces potato chips or computer chips.

At Harvard Business School, Michael Porter studied why some industries do better in different countries. For example, electronics do better Japan and aircraft in the United States. Porter studied the international characteristics of the national economy, the national culture, the status of capital and labor, the nature of effective demand, supporting industries, the industrial structure of the economy, the competitive nature of the domestic economy and price competition. These factors can contribute to the success of national industries.

According to Strategic Trade Theory, competition is oligopolistic. This means that a few large firms can control the market and set prices. There are monopoly rents and high profits. Firms can sometimes engage in dumping and can use preemption. This means that they saturate the market with their products to keep out other brands. Oligopolistic industries include computers, semiconductors, and biotechnology. These companies also produce products for the military sector.

Governments can play a large role in helping firms become oligopolies, as in Japan. According to strategic trade theory, manufacturing is more important than the service economy. Governments can assist companies in entering capital-intensive high-tech industries.

Trade Negotiations under GATT:

Several rounds of trade negotiations were carried out beginning in the l960s to liberalize global trade in different sectors of the global economy. Following World War II, the effort to establish the International Trade Organization failed. This failure was largely due to the refusal of the US Congress to ratify the deal. Congressmen coming from rural areas dependent upon agriculture knew that free trade would hurt the interests of farmers. So they would not go along with an international trade organization. By default, the General Agreement on Tariffs and Trade (GATT) became the organization for conducting trade negotiations up to the establishment of the World Trade Organization (WTO) in 1995.

The Kennedy Round (l964-1967): Under the Kennedy Round, tariffs were lowered between the United States and Western Europe. The Common Market in Europe had been established. The round achieved some thirty-three percent reductions in tariffs on manufactured goods and gave preferential treatment to less developed countries.

The Tokyo Round (1973-1979): The Tokyo Round reduced tariffs on most industrial products and liberalized agricultural trade. It also established codes of conduct to deal with unfair trade practices. It prohibited export subsidies.

The Uruguay Round and the World Trade Organization (1986-1993: This round of talks was launched at Punta del Este in Uruguay in l986. It brought the World Trade Organization into being in l995, which was largely an American creation. The talks continued for 87 months, involving 123 countries. Issues addressed included tariffs, non-tariff measures, rules, services, intellectual property rights, dispute settlement, textiles and agriculture. Besides establishing the WTO, the talks resulted in major reductions in tariffs and agricultural subsidies, an agreement to allow full access for textiles and garments from developing countries, and the extension of intellectual property rights. The round was said to have the potential of increasing world welfare by 270 billion US dollars. However, this does not specify who the welfare actually goes to.

The Doha Round (2001- ) The first round of trade talks under the World Trade Organization is sometimes referred to as “the Millennium Round.”  The talks, which involved 159 countries, were not yet concluded in 2014. Issues involved tariffs, non-tariff measures, agricultural subsidies, labor standards, environment, competition, investment, transparency, patents, and a number of other issues.

The World Trade Organization: The World Trade Organization has more extensive and binding rules than GATT. The organization established in l995 under the Uruguay Round of Trade negotiations replaced the General Agreement on Tariffs and Trade (GATT). As of 2014, there were 159 member states in the WTO.

The WTO is based on multilateral rules that apply to all 159 members. It is clear that it serves the interests of the American service-oriented economy and high-tech economies. The WTO has a very strong dispute-settlement mechanism which is meant to prevent the blocking of international corporations from their global operations. Fines will be levied on countries that are ruled to be at fault. Clearly, the most powerful countries are in control of the organization. Agriculture, labor standards, environmental regulations, and human rights continue to be giant issues. There are generally strong disagreements between the rich West and the less developed countries on these issues.

The World Trade Organization has a provision called the Investor-State Dispute Settlement procedure. This allows a panel of corporate lawyers to overrule the will of national parliaments and destroy legal protections for citizens. Big business can sue governments which pass laws to protect citizens in terms of environmental protection and other legislation.

Under the Investor-State Dispute Settlement mechanism, hearings are held in secret. The judges are corporate lawyers. Citizens and communities have no legal standing and no right of appeal. Since the companies can overrule courts and parliaments, this makes democracy problematical. Many environmental regulations have been challenged under NAFTA. In this way, the World Trade Organization can strip countries of sovereignty, deprive people of democracy, and become a business parliament which has the real power. Some argue that this is democracy for capital and not for the people.

Recently, some companies have sued governments claiming huge damages. In Australia, Philip Morris Tobacco Company sued the government over a law which said that cigarettes must be sold in a plain package. Philip Morris argued that the law violated “intellectual property rights.”

In Argentina, the government put a freeze on energy and water bills. When the Argentine Government was sued, it had to pay billions of dollars in compensation.

In El Salvador, a gold mine threatened water supplies. The mining company was refused permission to operate. The company sued the government for 315 million dollars in lost profits. In a Canadian case, two Eli Lilly patents on medicines were revoked when the Canadian Government said that the company could not show beneficial results. Eli Lilly sued for 500 million dollars.

Due to the above, many groups still believe that trade restrictions are in the interests of poor and developing countries. A main area of dispute is in agriculture. Under the World Trade Organization free trade, most of the world’s agriculture and food production is likely to be carried out by giant global agricultural corporations. What happens to the millions of peasants who are pushed off the land and lose their livelihood? They will likely end up in cities without jobs and become part of the world’s precariat. These are people who live on the edge of existence with no secure livelihood. This is a real danger of the WTO global agenda in agriculture. Therefore many groups in India fight to preserve the right of farmers to government subsidies, which the WTO fights to eliminate under the auspices of free trade. Several thousand Indian peasants have committed suicide in recent years, unable to make a living under increased free trade in agriculture.

Multilateral Free trade Areas:

Free trade agreements are being formed on a regional basis for the most part. They include the following in 2014 and others are likely to be formed over the next decade.

The European Union (EU): Composed of twenty-eight states, the EU comprises a large free trade area. The aim of the policies of the European Union is the “free movement of people, goods, services, and capital.” Eighteen members of the European Union used the Euro as of 2014.

The ASEAN Free Trade Area (AFTA): Includes ten countries in Asia.

The Central European Free Trade Agreement (CEFTA): This is a free trade agreement between the European Union and countries in southeast Europe.

The Commonwealth of Independent States Free Trade Agreement (CISFTA): As of 2014, it included five states.

The Common Market for Eastern and Southern Africa (COMESA): This trade agreement includes nineteen states.

The Greater Arab Free Trade Area (GAFTA): This agreement includes fourteen countries of the Council of Arab Economic Unity.

The Cooperation Council for the Arab States of the Gulf also called the Gulf Cooperation Council (GCC): This is a pact between Arab states in the Persian Gulf.

The North American Free Trade Agreement (NAFTA): A free trade pact between the United States, Mexico and Canada.

The South Asian Free Trade Area (SAFTA): Includes Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka.

The Central American Integration System or Sistema de la Integracion Centroamericana (SICA):

The Trans-Pacific Partnership (TPP): Includes Australia, Brunei, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Potential members include Taiwan and South Korea.

The New Trade Agenda:

Today many countries and the World Trade Organization must struggle with issues which powerful global oligopoly corporations would like to sweep aside. Among these are labor standards, human rights, environment, ecological destruction, and national sovereignty.

Some liberals, conservative economists, businesses, governments and large corporations see environmentalists, trade unionists, human rights advocates, nationalists, peasants, tribal groups, and the people in general, as a threat to global trade or free trade. These groups have a very small voice in the global economy and must fight to be heard. In many cases protection for the environment and the people from global corporations is seen as “trade protectionism.” It is certainly viewed that way much or the time in the WTO. It is well known and well-documented that multinational corporations, such as mining companies, sometimes devastate the ecology of a region, take their profits, and leave environmental destruction behind. Governments may side with the companies which are destroying the environment and people’s health through environmentally destructive practices.

Free trade agreements have become opposed by large numbers of people around the world. This has led countries to resort to “fast-track” legislation to get trade pacts established quickly before political opposition arises. This process was used, for example, in l992 to get the North American Free Trade Agreement (NAFTA) through the US Congress.

When the fast track procedure is taking place, parliaments are prohibited from debating the issues. They just vote on the deal. The IMF can put this condition on other countries. It is extremely difficult to address environmental issues in free trade agreements. For example, GATT ruled against an American ban on tuna which was caught in nets that kill dolphins in 1991. Mexico did not like the law because the Mexican Government said that it discriminated against Mexican fishermen. In l998, there was a ruling against an American law to protect sea turtles.

Many environmentalists believe that free trade, in general, is a threat to the environment. Important environmental concerns may not be addressed in trade talks. More stringent laws could force companies to follow cleaner industrial processes.

When there is global competition for capital and the corporate agenda must be to make profits, this can create a race to the bottom in environmental regulation. If China has regulations and this costs companies more money, then why not produce the products in Vietnam or India? Corporations are forced to compete with others in the international arena. They have to produce products at the lowest possible cost.

Robert Gilpin argued that nuclear and hazardous wastes, water contamination, air pollution, toxic dumps, and carbon dioxide emissions have little or nothing to do with international trade. If one studies the issue of toxic waste and its movement to poor countries, however, one sees that this statement is misleading. Lawrence Summers wrote that it was economically rational to dump hazardous waste in the poorest countries. The reason is that killing a person in a poor country is far cheaper than in a rich country. This simply follows economic logic.

Child labor is another global trade issue. This involves social dumping. Both global companies and countries bear responsibility for dumping on the rights of children. When poor countries claim that child labor is their comparative advantage in the global market place, they are making an unethical argument. It is surely not right to exploit children and deprive them of a childhood and education to enrich countries, people or companies. Surely, countries should protect the human rights of children.

New Trade Deals:

At the beginning of 2014 two new trade pacts were being negotiated. One was the Transatlantic Trade and Investment Partnership. The stated purpose of this deal is to remove regulatory differences between the United States and European nations. Another was the Trans-Pacific Partnership (TPP). This has been under negotiation for several years between the United States and twelve Pacific-rim nations. Note the friendly name “partnership.” All parties are seen as just “partners,” except that some of the partners are much bigger and have much more power than others. The negotiations are held secretly and involve internet services, civil liberties, publishing rights and medicine accessibility. US Trade Representative Michael Froman typically asked for fast-track authority to get the deal established. WikiLeaks published the draft of the TPP which critics say limit internet freedom. The complex rules for intellectual property rights for the internet have not been clearly established.

The economist Dean Baker argues that there is merit to the argument on free trade, but most “free trade pacts” are about structuring trade. They serve the purpose of redistributing income upwards. For countries that sign on to free trade pacts, they provide a process for evading democratic processes. They provide tools which allow corporations to block health, safety and environmental regulations that are needed.

NAFTA was designed to push down the wages of manufacturing workers and make it easy for companies to set up overseas. Many argue that it lowered wages in the United States in the steel and auto industries. In Canada, NAFTA reduced the number of manufacturing jobs.

One area where free trade could benefit the United States is in the area of medicine. Drug companies in the United States have monopolies which result in drugs costing about twice as much as in other wealthy countries which generally have controls on the prices of medicines.


The debate on free trade goes back to the classical era of political economy. Liberals like Adam Smith and David Ricardo argued in favor of free trade. Others such as Friedrich List and Alexander Hamilton pointed out that it was to a country’s benefit to restrict trade for certain purposes. Even Adam Smith did not advocate complete free trade when it came to the defense of the country.

Some scholars have claimed that global trade was free under British hegemony at the end of the nineteenth century. This is somewhat of an exaggeration, as the British regulated trade to serve the British Empire. Trade restrictions increased as European countries rushed to colonize the world and gain access to global resources. Some theorists have argued that trade restrictions led to the Great Depression in the l930s.

After World War II, the United States as the world’s top manufacturing country had a vested interest in free trade. Attempts to establish an international trade organization failed, but a series of trade negotiations were carried out under the General Agreement on Tariffs and Trade (GATT). It is interesting that it was the domestic interests, particularly farmers in the United States that blocked international trade.

The World Trade Organization (WTO) finally emerged in l995. Farming in the United States was increasingly being taken over by the corporate sector. Liberals argue that free trade pacts benefit everyone. In the real world, things are more complex. Some sections of society will benefit while others suffer.  Neoclassical trade models argue that free trade would allow developing nations to “catch up” with rich nations. Again, the real world is more complex. Some nations seem to be catching up, but there are many more that are falling further behind. Under strategic trade, firms and governments can structure global trade to serve their own interests. Today the World Trade Organization allows powerful nations to structure trade in their own interests.

Economists are generally reluctant to bring in crucial issues related to trade such as environmental pollution, child labor, health issues, sweat shops, dumping of toxic wastes and global warming. When it comes to global trade, there is a lot more to think about than just the bottom line of profits. It often determines whether people live or die.

Key Terms:

Corn Laws


Infant Industries

Alexander Hamilton

Friedrich List

David Hume

Heckscher-Ohlin Model (H-O Model)

Stolper-Samuelson Theorem

Mundell Equivalency

Factor-Price Equalization Theorem

Leontief Paradox

Raymond Vernon

Product Cycle Theory

Strategic Trade Theory

Trade Rounds

Intellectual Property Rights

Battle of Seattle

Multilateral Agreement on Investment (MAI)

Fast-Track Legislation

Social Dumping

Investor-State Dispute Settlement

Transpacific Partnership (TPP)

Transatlantic Trade and Investment Partnership

Trade Barriers


Traditional Trade Theory

Eli Heckscher

Bertil Ohlin

Niche Products

Information Technology (IT)

Service Industry


Global Political Economy: Table of Contents and Preface

Global Political Economy

Eddie J. Girdner



To Stinky


This book is dedicated to Stinky, my cat, who was my constant companion and loved to sleep next my computer as I typed. She gave me love, inspiration and support.


Table of Contents:

Part I: Theories and Approaches to Political Economy

Chapter One: Introduction

Historical Overview

Three Perspectives on Political Economy

The Liberal Perspective

The Realist Perspective

The Radical Perspective


Key Terms

Chapter Two: Classical Approaches to Political Economy

The Physiocrats

Francois Quesnay

Jean-Baptiste Say

Classical Liberalism

John Locke

Adam Smith

David Ricardo

John Stuart Mill

Robert Thomas Malthus

Herbert Spencer


Key Terms

Chapter Three: Alternatives to Capitalism: The Utopian Socialists

Saint Simon

Charles Fourier

Robert Owen

The Political Economy of Anarchism

Pierre Joseph Proudhon

William Godwin


Key Terms

Chapter Four: The Radical Critique

Early Socialists

Louis Blanc

Louis Auguste Blanqui

The Radical Critique: Karl Marx and Friedrich Engels

The Labor Theory of Value

Key terms

Chapter Five: The Marginalist Revolution and the Austrian School of Economics

The Marginalist Revolution

William Stanley Jevons

Leon Walras

Carl Menger

The Austrian School of Economics


Key Terms

Chapter Six: Neoclassical Economics and the Neoclassical Synthesis

The Era of Neoclassical Economics

Alfred Marshall

The Neoclassical Synthesis

John Maynard Keynes


Key Terms

Chapter Seven: Toward Revolution: Modern Scientific Socialism

The Social Democrats and Theories of Imperialism

John Hobson

Rosa Luxemburg

Karl Kautsky

Revisionism: Eduard Bernstein

Rudolf Hilferding

Vladimir Lenin: Imperialism

Later Left Political Economists

Michal Kalecki

Oscar Lange

Piero Sraffa


Key Terms

Chapter Eight: Creative Destruction and Pareto Optimality

Schumpeter’s Economics: Joseph Schumpeter

Vilfredo Pareto


Key Terms

Chapter Nine: Critique of Modern Capitalist Society: Veblen, Polanyi and Marcuse

Thorstein Veblen

Karl Polanyi

Herbert Marcuse


Key Terms

Chapter Ten: Dependency and World Systems Theory

Modernization Theory

Dependency Theory

Hans Singer and Raul Prebisch

The Structuralist Approach and the Marxist Approach

Criticism of Dependency Theory

World Systems Theory

Fernand Braudel

Immanuel Wallerstein and the Modern World System


Key Terms

Chapter Eleven: Chicago School of Economics and the Virginia School of Public Choice Theory

The Chicago School of Economics

Milton Friedman

Gary Becker

Robert E. Lucas


Supply Side Economics

Arthur B. Laffer

Rational Choice Theory and Political Science: William H. Riker

The Arrow Impossibility Theorem: Kenneth Arrow

The Virginia School of Political Economy

Anthony Downs

James M. Buchanan

Gordon Tullock

Mancur Olson


Key Terms

Part II: The Global Economy

Chapter Twelve: The Post-War World and the United States

The Post-War World

The Bretton Woods Monetary System: 1944-1971

Political and Economic Arrangements

The Asian Side of Post-War Development

Economic Recovery in Europe

The Structure of the Post-War World

Making the World Safe for Democracy

The End of Bretton Woods and the Deindustrialization of America

The Study of Political Economy

Hegemonic Stability Theory

Regime Theory


Key Terms

Chapter Thirteen: The Dynamics of Economic Growth

The Neoclassical Economic Growth Model (Robert Solow)

Convergence Theory

Problems of Convergence Theory

The Endogenous Growth Model (Paul Romer and Robert Lucas, 1986-1988):

The Theory of Economic Geography

National Systems of Political Economy

The American System of Stockholder Capitalism

The System of Developmentalist Capitalism in Japan

Social Market Capitalism in Germany


Key Terms

Chapter Fourteen: Global Trade

Global Trade in Historical Perspective

The Free Trade Debate

Conventional Trade Theory (Comparative Advantage)

The Heckscher-Ohlin Model

Competitive Advantage and Strategic Trade Theory (STT)

The Product Cycle (Raymond Vernon)

Trade Negotiations Under GATT

The World Trade Organization (WTO

Multilateral Free Trade Areas

The New Trade Agenda

New Trade Deals


Key Terms

Chapter Fifteen: The International Monetary System

The Bretton Woods System

Operating the Global Monetary System

The Irreconcilable Trinity (The Trilemma)

Monetary Unions

Hegemony and Money


Key Terms

Chapter Sixteen: The International Financial System

Global Financial Flows

Financial Crises

Hyman Minsky and the Minsky Model of Financial Crises

Minsky’s Theory of Financial Crisis

Recent Economic Crises

The Mexican Peso Crisis (1994)

The Asian Financial Crisis (1997-1998)

Causes of the Asian Financial Crisis

The Turkish Financial Crisis (2001)

The US Financial Crisis (2007-2008)

Recent Trends in International Financial Flows

Financial Outflows from Developing Countries

Global Foreign Direct Investment

Regulating the International Financial System

Financial Crises and Austerity


Key Terms

Chapter Seventeen: The Multinational Corporation and the Global Economy

Profile of MNCs Today

The Study of Multinational Corporations

The Product Cycle Theory

John Dunning and the Eclectic Theory of the Reading School

Michael Porter’s Strategic Theory

Marxist or Radical Theories

MNCs: Benefits and Downsides

Intrafirm Trade

Transfer Pricing Between Divisions of MNCs

An International Regime for MNCs and FDI

Case Study: ExxonMobil

Chapter Eighteen: The Neoliberal Revolution and the New Political Economy

The Basis of Capitalism

New Political Economy

Rent Seeking Behavior

Justifiable Coalitions

Enter the Technocrats

The Neoliberal Era

Critique of New Political Economy


Chapter Nineteen: The Global Economy

The Top 20 Global Leaders (2012)

The Global Leaders (2020)

The G-8

The G-20


The Developing Countries

The Least Developed Countries

The Shanghai Cooperation Organization (SCO)

A Picture from Life’s Other Side

The Global Underground Economy


Chapter Twenty: Conclusion: Global Political Economy

Biographical Sketches

Glossary of Terms




The purpose of this book is to first provide an easily accessible guide to the major ideas, perspectives, and thinkers in global political economy. The second part will cover the concepts and theories as a basis for understanding the contemporary global political economy. A profile of the major players in global political economy will also be briefly outlined. The field of political economy is vast and it is a challenge for both instructors and students to access the relevant information, including the historical background of the major ideas in a short course. In this book I have tried to bring together a broad body of information which will provide a foundation and reference for both teachers and students. It is hoped that the book will enable students to easily access and understand the basic ideas in global political economy in an enjoyable and intellectually stimulating way.

The first part of the book traces the major theories and approaches to understanding political economy in historical perspective. With these chapters as a reference, the student should be able to develop ideas through which they can understand the dynamics of the global political economy covered in the second part.

Economics, since the emergence of the neoclassical era at the end of the nineteenth century, has often been seen as a science free of ideological biases. This book takes the position that such a view is misleading. Ideological biases are clearly built into all approaches to political economy and the student should be aware of this. The book presents the different sides of the arguments as well as much empirical evidence about the complex contemporary global economy in which we live and from which we cannot escape.

It is hoped that this book will serve to spark the interest of students to pursue their areas of interest in discovering the global political economy on their own. We are all political economists now.

The book includes an extensive glossary of terms and biographical sketches of the major figures which should be of use to teachers and students in using the book.

The ideas presented here have been a joy to explore. Writing the book has been a rewarding learning experience for me. I would be pleased if the book is as useful for the reader.

October 22, 2014


Stars (Chapter Eight of American Sahib) by Eddie James Girdner

Chapter Eight: Stars

James Weldon peered out into the vast universe millions of miles away. He had never seen such a spectacle in his life. True enough, the universe and the millions of stars had always been there. But he had never really seen them, not the way he saw them now lying flat of his back on a string charpie on the flat roof of the BDO’s house. He felt that he was  looking down into a vast chasm, rather than up, and was about to fall, hurtling toward this vast star-filled space. The millions of stars that filled the heavens were incredibly bright and sparkling in the night air. He could see the big dipper clearly over to his right.

He realized how much he had missed, always sleeping inside a house in America, and not on an open roof where he could look into the heavens millions of miles away. Was this what gave the Indians such a philosophical bent, always speculating about the nature of God? How could one see such a spectacle and not consider how it came about? It would turn one into a philosopher.

Or perhaps not. Mr. Verma was sleeping a short distance from him. Now he began to snore. It seemed that the stars held no wonder for him. The whole scene was so serene except for that rip roaring sound. It was very mysterious, indeed. How did he get here and where was he going? Clearly, he was on a mission, to be sure. To avoid having to kill any communists as well as to save his own young ass. Those were truly worthy ideals. No doubt about that. And then a fart, quite loud, came from Mr. Verma’s mungie, brought him back to earth.

James could hear the sounds below in the town. He heard the bicycles on the road in the late evening sounding their ringing bell to avoid other riders in the dark. He heard a dog barking. Shop keepers were closing up their shops, banging down their shutters for the night. At a late night dhaba, the sound of chapattis being flapped from one hand to the other and slapped onto a hot tava. A Hindi film song was blaring from some establishment. Some drunks came past laughing and talking loud out of their heads. He heard temple bells tinkling as someone brought incense to light for the Gods. A motorcycle was passing. What would his parents think if they could see where he was here in this strange land? He felt perfectly secure. It was where he wanted to be at the moment. Another phase of his embarkation upon a great adventure.

James drifted off to a sound sleep in the refreshing night air. He had pulled the light cover over him to ward off the mosquitoes which now flourished with the monsoon rains. They were hankering for some appetizing foreign blood. Sometime after midnight some large monsoon clouds moved across the sky from the west. When Mr. Verma felt the large cool rain drops hitting his face, he woke up. He called to James to wake him up.

“Sahib, Mr. James, we will go downstairs,” he said.

The BDO stood up, picked up his string cot and started to carry it down the concrete steps to the second floor. James saw that the rain had come and so he did the same. Moving down the rather treacherous steps without a hand railing, they placed their beds just inside the sheltered veranda. James resumed his position on his charpie and soon drifted off into dreamland again. The weather was not bad for sleeping if the mosquitoes could be deterred.

James dreamed that he was somewhere on the old farm in Missouri and was trying to run, but his legs would not move fast enough. A black storm cloud was coming up, possibly a tornado. It was bearing down on him, but he could not get back to the old house in time. He was just bogged down there somewhere.

James awoke with the gentle voice of Mr. Verma. Daylight had arrived but the sun had not yet appeared. The pre-dawn air was mysterious. He heard a crow kaw-kawing. A flock of small birds soared across the small veranda. He could see the ugly jagged tops of some buildings in the dim morning light. Small towns of Punjab. Beautiful, they were not. It could surely not be past five o’clock in the morning.

“Let us go for nature call,” the BDO said.

“Fuck!” James thought.

Right at the moment, James would have liked nothing more than to doze for another couple of hours. The daily heat was brutal. The morning air during the monsoon was relatively pleasant. A good opportunity to sleep. Why give that up? A lost opportunity. His warped American mind was completely out of sync with reality. But when in Rome do as the Romans do, James remembered. Somehow he thought that the Romans were probably not so stupid as to head for the fields at this ungodly hour. Not to take a shit, at least. James could generate absolutely no enthusiasm for such an enterprise at five o’clock in the morning. Even as a novel experience, it did not command much interest.

Not only was the idea of going to the fields to take a shit and piss not appealing to him, he was positively sure that there was not a chance in hell that his bowels were going to move at this time. He could take a piss, sure. He needed that, absent a latrine in the house but a shit was something else. Nevertheless, he could not tell that to his new boss. Mr. Verna, whose bowels had been moving at five o’clock in the morning for several decades, would likely not understand. James, on the other hand, had been programmed completely differently. Perhaps half past seven o’clock, eight, or so. That would be reasonable. But not at five in the morning. Forget that shit.

Mr. Verma filled a small brass pot with water from the pump and gave it to James and did the same for himself. He then led the way out of the courtyard, through the large gate, and into the road. As they crossed the metaled road, whose only traffic was human at this time, they entered a well-worn path that led down to the fields. Here, they joined the constant flowing stream of white-clad bodies flooding out and spreading across the fields like a flock of white birds looking for food. Indeed, the fallow field was now dotted with squatting bodies making their early morning nature call. It was somewhat of a windfall for the lucky farmer, getting all that free fertilizer dropped upon his field like Manna from heaven, James reflected. Seeds in there ought to pop up out of the earth like the seeds in that story of Jack in the Beanstalk with all that super fertility. Eating the tasty cucumbers, one would never imagine that they were just recycled shit from the contributing local population.

James felt like a fucking fool. Even if it had been possible for him to shit, he did not feel like pulling down his jeans and shorts, exposing his ruby cheeks, and shitting here in the open air with all those other strangers around. Moreover, it was going to be a grand attraction for the others to watch a gora, an American, no less, taking a shit in their humble field out here in the boondocks. All eyes were going to be focused firmly upon his buttocks, curious to see just how Americans, in fact, took a shit. There just as well have been a command given, as in the military, “Eyes Right!” to focus right on his ass. This was really for the birds.

James noticed too that they were all male. But the women had to shit and piss too. Where were they? He would learn later that certain fields were designated for women and others for men and one just had to know where to go. What a system! India was one gigantic toilet from the Indian Ocean to the Bay of Bengal. From Srinagar to Cape Comorin.

James imitated the Indians, squatting down and taking a piss. Normally, he would take it standing up. That seemed more natural to him. But he also knew that the odds that God was going to will that he take a shit at five o’clock in the morning was pretty close to zero. The old man up above would just not help him out to that extent.

After shitting, the Indians used the water in their small brass pots to wash their ass. For this they always used their left hand because the right hand was used for eating. If the field was being irrigated, there would be a canal that might have water where they could wash.

James started to feel highly embarrassed and inadequate in fulfilling the requirements of this basic protocol of Indian life. At this rate, he was going to turn out to be an abject failure in this enterprise of going native in the subcontinent. And why had the Peace Corps not trained him for this? Development and Resources Corporation of New York had surely let him down in not training him in one of the most basic of all skills that he was going to need every day. They were surely not fulfilling the parameters of their contract.

And sure as hell, when nine o’clock rolled around, he was going to be dying to take a shit and then it would be too late. There would be no place at all to do it. This being an American sahib was sure tricky business. Except for a few fields of corn fodder and patches of sugar cane, not yet grown tall, there were few places to hide in the fields and take a shit at this time of year.

James followed the BDO back to the house all broken hearted. He was going to need that shit. He remembered all that rice and dal he had tucked away at lunch the day before and that bendi tori and chapattis in the evening. Shit. That sure as hell should make him shit.

Meanwhile “back at the ranch” tea was being prepared by Mrs. BDO in the bureaucrat’s comfortable koti. Arriving and feeling quite down, James was offered some of the official sweet, gooey, Punjabi tea. The small mud stove in the kitchen corner of the courtyard had now been fired up and was emitting a fragrant odor of burning cow shit. This smell wafted into the air from other houses as well. It created a pleasant homely atmosphere and James settled back to enjoy it. The smell of smoldering cow shit was so truly homely and relaxing. The smell of burning oak and hickory in West Virginia had nothing over that. He was still feeling guilty over his faux pas at heeding the call of nature. One had to drink the tea quickly. Otherwise, a scum would form on top of it from all the creamy milk as it cooled. He had noticed that.

“James, Sahib, you will take bath,” the BDO told him.

Not a bad idea, James thought. It would be refreshing. And it seemed to be an order.

“Thanks,” James told him. “I will not take long.”

The BDO was about to pump a bucket of water for him.”

“Oh sir, thanks, but please, I can do it.”

“It’s nothing,” Mr. Verma said.

James pumped the rest of his water and slipped into the bath house. At least he had a small degree of privacy here. He slipped his clothes off. After wetting down and rubbing his body with soap, he poured large cups of the cold water over his body. It was invigorating. He brushed his teeth. When would the shit hit the fan?

The BDO’s wife was preparing prontas. Having mixed the atta or whole wheat flour, she rolled out the dough. She put potato on the dough and folded it over once again before placing it on the hot tava to cook. Their cooking added to the glorious morning aroma. The resulting bread cakes were rather crude but tasty.

It was the first time James had eaten pronta. The BDO settled down to the small table after finishing his bath. The wife set a small bowl of pickled red pepper, and mango achar, on the table and gave bowls of curds to both men. The yogurt had been forming overnight in a large clay pot under the stairway. The idea was to break off small portions of the hot pronta with one’s right hand and scoop up the hot spicy pickle and the curds naturally.

James thought that it was a hell of a thing to have for breakfast. The pronta was quite tasty, with the potato. The spicy pepper pickles tasted too strong for six o’clock in the morning, perhaps. The mango pickles were better. As for curds, he had never eaten yogurt in his entire life. It was simply not eaten in the small Midwestern town where he grew up. It had even known about such a thing.

The BDO’s small daughter was now up and playing around on the floor. She came to her father, who encouraged her to go to her mother. She clung to her mother’s kamiz as she prepared the food. From time to time, she started crying and complaining. Like many children she was somewhat spoiled for attention.

James knew that he was quite hopeless with kids. He was just neither the father not the grandfather type. So he rather ignored the little imp, which was in rather bad taste. He generally had the urge to smack them, rather than to pamper the little monsters.

“Mister James,” the BDO began, as he popped a large portion of a pronta and spicy red pepper achar into his mouth, “we will take your things to the village Happowal this morning. The Jeep has been repaired.”

“Thank you,” James replied. Now he would really get to see the village where he would be spending his next two years. Whatever came, he would take it. He really had no choice anyway, signing up for this outfit.

“We will go to the office, Mister James. You will meet the staff,” Mr. Verma said.

“Thank you, Sir,” James replied.

They had more tea. The BDO changed from his pajama to his tailored pants, a slick brown linen and a striped bush shirt which he wore outside his trousers. It protruded over his flourishing stomach. He slipped his feet into sandals and they were off. James felt rather odd in his American leather shoes and jeans. He would have to do something about that. His attire did not fit the weather. He didn’t either, of course, but that was something else.

It was a short walk to the BDO Office, a single story pucca building. It was stucco, having a coating of cement on the outside of the bricks, and a dull yellow color, as many government offices had. It was discolored with black in several places and badly needed repairing and new paint. The stucco was starting to flake off in some places. As they arrived, a chowkidar, who was sitting on his haunches, stood up quickly and saluted sharply. James felt embarrassed by this odd behavior. At least it was odd to him.

The BDO took the greeting in stride, ignoring the poor peon, and marched on to his office, striding as if he was about to stir up a whirlwind of creative activity at his desk. There was a curtain hanging in the doorway. Inside was a clean and relatively cool room with a worn carpet on the floor. In the center of the room was a large wooden desk. An electric punka was whirling overhead creating down drafts of air. The two large windows had been covered over on the outside with a thick mat which hanged over the windows. The chowkidar kept the mats wet down from the outside, creating a cooling effect as the air wafted through the mat. Around the edge of the room were several wooden chairs woven with reed seats and backs.

The room was quite dark inside so that it took a couple of minutes for one’s eyes to adjust. On the wall, high up, were framed black and white portraits of the Prime Minister, Indira Gandhi. Pundit Nehru, the first Prime Minister of Independent India appeared next to his daughter. Mahatma Gandhi appeared, grinning, in this case. Perhaps, in the back of his mind, he thought it was all a big joke, and he was just having fun with all that nonviolence and Ahimsa business. James sometimes suspected the same about God. He was just having fun and playing jokes on people who took it all too fucking seriously. God knew that it all didn’t mean diddly shit. There were many universes out there that were more significant than that outfit called the earth and its “solar system.” That project had been pretty much a failure from the get go. What James was seeing in India did nothing to disabuse him of that suspicion.

The BDO settled down into the large office chair behind the desk and motioned for the American Sahib to take the chair to his right.

The large desk was cluttered with stacks of papers and documents, held down by heavy glass paperweights. The edges of the papers fluttered in the air as the fan whirled, the documents threatening to take off and fly. James noticed that the papers were held together by straight pins inserted in the corners. There were a couple of rubber stamps and stamp pads on the desk and some dirty journals and reference books. There was a pen and pencil set and a small container for straight pins. There was a small bell within the officer’s reach.

Presently, the BDO picked up the bell and rang it loudly. Another chowkidar appeared instantly as if by magic. He jumped quicker than Pavlov’s dog when he heard that bell. The muscles in his legs sprang instantaneously. He approached the BDO timidly with folded hands and a stupid blank look on his face as if his recent lobotomy had been a glorious success.

“Honjee Sahib,” he said, stupidly. The BDO delivered an order to him in Punjabi.

The chowkidar saluted and marched out quickly as if he was made of wood, the tail of his khaki kamiz trailing behind him.

“Mister James, the driver is just now coming to take your things,” the BDO announced.

Just then a young agricultural officer appeared. He was a young Sikh with a tightly tied maroon pugri. James wondered if that tight pressure on one’s head from such a turban might affect one’s brains. Even if the hot sun did not cause sardars to go pagal or crazy at noon, as the legend had it, those turbans seemed like they might.

The young man appeared and salaamed in front of the BDO. They discussed something in Punjabi, which James did not understand.

The officer, Santokh Singh, introduced himself to James.

“Mister James, welcome to India,” he said enthusiastically. “I am Santokh Singh, the block maize inspector. I will introduce you to the other officers.”

James followed Santokh Singh out. There were a series of rooms that served as offices. There were two or three desks in each room with a chair behind them. The tops of the small tacky wooden desks were completely bare. There was a sugar cane inspector, a wheat inspector, a rice inspector, and so on. James learned that they had university degrees from various agricultural universities in India. In addition, there were ten village level workers (VLWs) for some one hundred villages in the development block. However, these VLWs were not around now.

As they walked around to the offices, James had spied a small brick building in the garden that appeared to him to be a toilet.

Shit, if that is a toilet, it is my chance to take a shit, he thought. After meeting with the officers, he chatted with them a bit. They asked him some questions about agriculture in the USA. As they were talking, he was surprised to see one of the officers tearing a piece of paper into tiny pieces, after which he tossed them on the floor under the desk. James noticed that there were no waste baskets in the room.

When he had the chance, he asked Santokh Singh if that building in the garden was a toilet.

“Yes, you are welcome to use it,” he said.

James jumped at the chance and quickly fled to the building. Sure enough it was a toilet, although Asian style with the porcelain bowl in the floor. Good enough for government work, James thought. He opened the clumsy metal door and went inside. The inside latch was broken, so he would have to watch for others who might have the same idea to use it while he was there.

He pushed the door closed and pulled down his pants and shorts. He would have to balance himself on his haunches to take the shit. He had not yet mastered the art of this and lost his balance from time to time, having to prop himself up with one hand behind him. The beautiful thing was that his bowels moved. He had won the morcha for the day, as the Punjabis said. His stool had started to be quite soft, but was still solid. Thanks be to God, he thought. The Lord will provide, up to a point, at least. Even in these nether regions.

Having finished, James turned the tap on his left side to fill the small plastic bucket with water, but nothing happened. Shit, he thought. What will I do now? He noticed that there were a few drops of water left in the bottom of the bucket, enough to wet his fingers. He could not clean himself properly with that but it would have to do. The heat had increased and the sweat was now dripping off of his face. Not only his face, but also his arms were dripping with perspiration. The flies decided to have some fun with him while his hands were occupied with the immediate enterprise. This going native was not as much fun as he had anticipated.

Still in a precarious position, he pulled up his shorts and then his pants and buckled his belt. At least it was sweet relief, even if not a completely pleasant experience. It would have to do. Next time he would take more caution about the water, if time permitted.

Heading back to the offices, he noticed the center office where the secretary worked. It was then that he saw Ravi Kaur sitting behind a large old typewriter in a bright red Punjabi outfit. He saw at once that she was a very attractive young woman. He did not dare to go inside and introduce himself fearing that he might be guilty of another faux pas. There would surely be a chance if she was there every day. She is beautiful, he thought. Imagine finding a beauty like that in the agricultural development office. She was doing OK in the way of development, as far as he could see, unlike the rest of the place.

James returned to the BDO’s office having been informed earlier that the driver was “just now coming.” Apparently his status had not yet changed from “just now coming.” But if he was, it was not happening very fast.

James waited around another hour or so, twiddling his thumbs near the BDO’s desk, while the officer shuffled the papers, taking out the pins and rearranging the documents, sometimes adding another one, and sticking the pins back in. It struck him that the country had not yet entered the era of paper clips. Now there was a revolutionary possibility. Was it possible that the use of straight pins had some advantage? Not likely he speculated. This sticking of pins through the papers seemed to take up an awfully lot of time. It could not be very pleasant when they went the wrong direction and stuck in one’s finger.

James noted that there was no telephone in the office. It was necessary to call upon him in person if one needed something. Telephone connections were still very difficult and sometimes it took years to get a hook up.

From time to time, an elderly peasant would appear and approach the big Sahib in an exceedingly timid manner with hands folded in front of his face and give his humble “Namaste.” He would make some humble request to the official. The BDO would pretend to listen carefully, making grunting noises as if he agreed, wag his head, and tell him not to worry. It would just now be solved. New seeds were just now coming. Fertilizer was just now coming. Loans were just now coming. Repairing the water canal was just now coming and on and on. Everything was just now coming. Then the peasants would go back to their villages while the status of the requested items never changed. Sure enough, the BDO was right. They were just now coming. They would always be just now coming. That they never arrived was neither here nor there. Good enough for government work.

The driver too, was just now coming.



Mercer County Missouri Library

November 2, 2015. Updated January 13, 2016

Mercer County Library, Princeton, Missouri (Keeping the locals in the dark.)

I have sent six of my books to the Mercer County Library in Princeton, Missouri. They have been given various treatment.

Books on the Shelf:

1.People and Power: An Introduction to Politics. This is the old first edition of my textbook. It is available on the shelf. (Third Edition not sent)

2.Killing Me Softly (Co-authored). This is my book on hazardous waste and Waste Tech in Mercer County. It is available on the shelf.

Books Available but not out on the shelf: (Ask Librarian)

3.Global Political Economy. This is my textbook on Political Economy, covering a wide variety of areas. It might be kept hidden because I talk about Karl Marx in the book, who was, of course, a giant of nineteenth century political economy. No one can understand political economy without dealing with Marx. So I wonder why it is not being put on the shelf. Can’t let that kind of knowledge slip out in Mercer County, Missouri. It might bring on a REVOLUTION! 

4.Confessions of a Renegade: Peace Corps Years. This is a memoir of my years in the Peace Corps in India. It appears that it is also being hidden from the public for some reason. My ideas would just be so poison to the tender sensibilities of those folks in Mercer County, that it could not possibly be allowed. Protect those people from themselves forever!

5.USA and the New Middle East. This is my book mainly on the US invasion of Iraq in 2003. Not fit for the public, apparently. But it seems pretty perceptive given current events in the Middle East, particularly Iraq and Syria. Now if the people in Mercer County knew what the USA was really doing over here in the Middle East… Well, just can’t have that, can we. They might see what George W. Bush and Dick Cheney really brought about and why.

Book sent but which has not appeared nor listed in library holdings. Apparently not available in the library.

  1. Autobiography of a Black Sheep. Since it is a story about Princeton, where I grew up, one might think that it would be available to readers in the area.All of the other autobiographies written by people from Mercer County, Missouri are in the library. That number is precisely ZERO! The local folks will enjoy reading those. They will have to write their own, I guess.

All of my books are available on (Except for my textbook published in Turkey) People and Power (Third Edition) can be ordered from Literatur Books in Istanbul, Turkey.

These books and others, including my four novels, are available on Amazon. So if one wants to read them, just go to Amazon. Don’t depend upon your local library, even though you paid your taxes to them to provide you with the informative books! I sent them the books free. But now they keep these hidden from the public. Well, perhaps the librarians enjoyed them. But they have not told me so. Good luck.