International Political Economy

1
International Political Economy
SIS 401 Summer 2005
Wolfram Latsch

• Presentation 3.
• How the West Grew Rich I.

2
International Political Economy
SIS 401 Summer 2005
Wolfram Latsch

• Presentation 3.
• How the West Grew Rich I.

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Europe AD 600
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Europe AD 1000
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Europe AD 1200
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Europe
Navigable Rivers
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Preface

• Absence of overall human design, presence of
  accident, experiment and survival (gradualism,
  evolution)
• Relations between economic and political
  spheres
• Non-hierarchical organizational principles
  markets

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Introduction

• Focus on institutional mechanismsbuilt deep
  into the structure of Western economiesseeking
  out and adopting growth-inducing changes

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Introduction Possible Explanations for the Rise
of the West

• Science and Invention
• Natural Resources
• Psychology
• Luck
• Inequalities of Income and Wealth
• Exploitation
• Colonialism and Imperialism
• Slavery

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Introduction Western Growth System?

• Decentralization
• Domestication of political specialists
• Autonomy of economic specialists
• Less control of exchange
• Broad property rights
• Competitive Markets allocation and reward
• Innovation, Science
• Institutionalized change

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Introduction Western Growth System?
Bargaining

• Decentralization
• Domestication of political specialists
• Autonomy of economic specialists
• Less control of exchange
• Broad property rights
• Competitive Markets allocation and reward
• Innovation, Science
• Institutionalized change

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Middle Ages

• The Manor
• The role of prices and markets
• The role of money
• The role of custom
• The role of status

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Middle Ages

• The Town
• Burgher and Bourgeois
• Points of exchange
• Town charters and autonomy
• Emergence of city states

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Middle Ages

• Political Economy of Europe
• Pluralism
• Decline of Feudalism
• Warfare
• Taxation

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Growth of Trade to 1750

• Conditions of exchange (Europe, overseas)
• Exchange specialists
• Specialists connected to exchange
• Transaction costs

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Growth of Trade to 1750

• China and Europe
• merchants and mandarins

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Growth of Trade to 1750

• Political and economic competition
• Life in an expanding economy
• Non-agricultural opportunities

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Institutions Favorable to Commerce

• Commercial law
• Double-entry book-keeping
• Bills of Exchange
• Deposit banking
• Insurance
• Reducing the threat of confiscation
• Mercantilist partnership
• Enforcement of property rights

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Development The Big Challenges

• Promote the movement from personal to impersonal
  exchange, the growth of markets, doing business
  with strangers
• which tends to promote the division of labor,
  the growth of productivity and the growth of real
  incomes
• Creating incentives that induce people to compete
  at productivity-increasing margins (development)
  rather than redistributive margins (predation)
• Design market-enhancing government institutions,
  foster economic participation, limit government
  predation, promote fair competition

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