Description
Chapter 5 applies realism and liberalism to international political economy. Economic realism, known as mercantilism, argues that accumulating wealth and protecting domestic industries from foreign competition (protectionism) increase the economic power of a state. Link (Links to an external site.)Links to an external site. Economic liberalism (also known as laissez faire economics), on the other hand, argues against protectionist policies by governments. Unlike mercantilists, economic liberals argue that governments should allow market forces to determine what goods are produced and traded and that states should engage in free trade (free from excessive government regulation) based on comparative advantage–states should produce and trade those products they can produce more efficiently. You are a Senator from Michigan, which is home to major car manufacturers (Chrysler, GM, Ford). Your top three industries are agriculture, tourism, and manufacturing. One half of U.S. vehicle parts manufacturers are in Michigan. Agriculture and manufacturing in Michigan largely focus on the U.S. market. Do you eliminate trade restrictions to expand your access to Japan’s market? This will increase demand for products in export-oriented sectors and increase wages in this area, but increased Japanese imports will lead to greater competition, which will lower car and car parts prices for U.S. consumers. If Americans buy more Japanese cars, however, this will lead to lay-offs in U.S. auto manufacturers. Do you increase trade restrictions? This will lead to retaliation by Japan, which will sell fewer cars to the U.S. In response, U.S. auto workers may have more job opportunities at higher wages, but U.S. consumers will pay higher prices for cars and car parts since U.S. companies will face less competition and the supply of cars will be smaller. Discuss the costs and benefits of protectionism vs. free trade for your state. Be sure to reference specific points in the text and videos in your answer. Links: https://www.investopedia.com/video/play/mercantilism/ https://www.youtube.com/watch?v=Y2X3KPilAt0
