International economics, what is it?

-Midterms on the first half of the course, and the final on the secondo
-Lectures explain the major concepts of the booko
-Second half will be case studies/ guest speakers

Part 1: definitions
Part 2: Brief history of International Economics (Governments and companies)
Part 3: example of case study: KPN
There is a great deal of path determination in International Economics i.e. there are
set institutions in IE that are well established

Definitions
- Global policy
-Politics
-Economics
-Culture
Clashes of cultures and economic ideologies
- E.g. Marxism

Players (Primary concern for this course)

Governments
International Corporations
Companies now so powerful that no government canstop themo
- Not true, but the economy is highlydetermined by these corporations
These are the engines of capital The group who makes wealth in an
economy
Entrepreneurs
Individual entrepreneurs who may be allied withcorporations
NGOs
Incl. supranational organizations such as the UN, EUetc.

Government
o Borrowing/ debt
Why does debt matter?
o Aim of government to increase GDP and see economic growth
- Protection of domestic companieso
- Maintenance/ protection of currency

=Companieso
-What are their principle interestso
-For them to exist is to make money and maximise profito
- They need to manage
-They lobby for favourable government policies
How do they play?
- Began with a virtual monopoly on economic ruleso
-Governments are first and foremost in the economy, they hold the
power over economic rules

o Institutions are the basis of economicso Currency

Governments want to ensure strong currency
But also currency that can be manipulated to stimulatetrade

o Debt
Governments have learned how to borrow money bothfrom their citizens
and supranational organizations (e.g.IMF)

o Imports/ exports

This makes a difference to the quality of life in a givencountry

Does a government employ protectionist policies (such astariffs) to protect
economic conditions for citizens

o Immigration/ labour support

Do we allow more people into our country?
A stressed issue today, for example in the EU
o Economics does not drive economicso New theory today that
government institutions are thedeterminant of international economics

Government interests

o What do governments seek to do with the above mentionedconcepts

o Governments seek to maintain economic growth in their country,above
average levels
o The goal is ultimately self interested
o Governments need to balance economic tools to make
favourableconditions for various things

E.g. inflation
Trade
o Seek to manipulate the military situation to their advantage, and/or against
their disadvantage

Wealth= military might

o Democratic governments must appease interests of theirconstituents (or

rulers)
 Maintain alliances with like minded nations, often definedin economic
termso Seek to increase economic dominance, as a way of increasingpolitical
pull

Currency
o Create/ back currencies
o Regulate monetary supply
Need to avoid inflation
o Regulate value of currency (to a degree)
o Buy/ sell foreign reserves
Try to keep faith in your currency
o Buy/ sell gold
To back their currency
o Joint international currency unions/ stability regimes

Beneficial for trade

Keeps it stable
Make intelligent strategies based around the value ofcurrencies
Example: EU

o Done through a central bank

Debt

o Governments borrow from both inside and outside of theirborders

o For a long time, government debts were a safe investment
o Stocks have to be competitive with government debt
o If a governments credit rating is bad, this can trigger a cascade ofadverse
effects
Money will flee the country (lack of investment)
Taxes need to be raised/ spending cut (austerity)

Imports/ exports

o Governments regulate fiercely on a broad range of import/ exportrules and

regulations
o Currency imports

o Farm protections/ subsidieso Manufacturing protections/ subsidies

o Pharmaceuticals
E.g. in India generic substitutes were used to circumvent
high cost of US better alternatives
Patents removed, is it fair?

o Foodstuffs, consumer goods

o Internet/ music/ books/ copyright/ intellectual property
o Foreign direct investment
o Large impact of life in a given country- higher prices?

Immigration/ Labour supply

o Economists agree that increasing population is good

Keeps wages low
Maintains supply of unskilled workers, in countries whereeducation is
advancing
Puts pressure on unions
Contributes to GDP growth, employment
o Wealth/ education= fewer women/ children