The document discusses different models of national economic systems and capitalism. It describes market oriented capitalism, which is based on private property, individual freedom, and competitive markets. Developmental capitalism is characterized by a strong state role in guiding development, while social market capitalism blends market forces with social policies. National economies also differ in the role of the state, purposes of economic activity, and structure of private business. Understanding these differences is important for studying the global economy.

1. 208-Geopolitics & World
Economic Systems
UNIT1:
1. Introduction to Global Economic &
political Systems: Meaning of Global
Economy and its History Structure and
Components of Global Economy, Theory of
Hegemonic Stability, Differences among
National Economies, Market Oriented
Capitalism, Developmental Capitalism, Social
Market Capitalism, Comparative Analysis,
Effects of Globalization on Indian Economy

2. Geopolitics is a term which was first used in 1899 by Rudolf
Kjellen. It`s first meaning was a combination of geography
and political interests.
At that time, people believed there was a strong
connection between physical land and politics. The first
people who worked on geopolitics were from nations
who had build empires.
Therefore, their understanding was based on the relationship
between the center of the empire and colonies.
The empire was based on international trade, production of
goods and taxes and other resources brought from the
imperial colonies
Introduction to Global Economic &
political Systems:

3. Kjellen (Swedish citizen, 1864-1922) was the first who coined the concept of
Geopolitics in 1899 (Cohen, 2003), defining it as: “the theory of the state as a
geographical organism or phenomenon in space”
In 1993, Peter Taylor wrote that the revival of Geopolitics had taken shape in three
ways:
“…geopolitics has become a popular term for describing global rivalries
in world politics.”
“…the second form…is an academic one, a new more critical
geopolitics. Critical historiographical studies of past geopolitics have
been a necessary component of this ‘geographer’s geopolitics’.”
“…the third form…is associated with the neo-conservative, pro-military
lobby which have added geopolitical arguments to their ‘Cold War
rhetoric’. Such studies talk of ‘geopolitical imperatives’ and treat
geography as ‘the permanent factor’ that all strategic thinking must
revolve around.”

4. Gottman defines geopolitics as “the influence of
geographical factors on political action”
• Physical geography: relates to the surface of the earth
• Cultural geography: relates to human interaction w/h
the land (language, religion, economics)
There is a relationship between the two
• Theories: abstractions that are systematically developed
and convincing
• Geopolitical actors: international organisations and nation-
states
• Deterritorialisation: doing away with territory
• Reterritoralisation: creation of new territory – redefining

5. Politics and Markets
○ Role of the state in liberal democracies: to induce
economic performance
○ Pluralist Approach
▸ The state is a neutral arena
▸ Actors have varying particular interests
▸ State has no intrinsic interests
▸ The study of politics is about government processes
○ Class Approach
▸ There are common class interests
▸ The ruling class controls the agenda
▸ It implements policy
▸ Thereby reducing popular influence

10. Silk roads (1st century BC-5th century AD, and
13th-14th centuries AD)
For the first time in history, luxury products from China started to appear on the
other edge of the Eurasian continent – in Rome.
Spice routes (7th-15th centuries)
Islamic trade in those Middle Ages were spices.
Age of Discovery (15th-18th centuries)
Aided by the discoveries of the so-called “Scientific Revolution” in the fields
of astronomy, mechanics, physics and shipping, the Portuguese, Spanish
and later the Dutch and the English first “discovered”, then subjugated,
and finally integrated new lands in their economies.
Introduction to Global Economic &
political Systems:

11. First wave of globalization (19th century-1914)
By the end of the 18th century, Great Britain had started to dominate the
world both geographically, through the establishment of the British
Empire, and technologically, with innovations like the steam engine,
the industrial weaving machine and more.
The world wars
In the years between the world wars, the financial markets, which were still
connected in a global web, caused a further breakdown of the global
economy and its links. The Great Depression in the US led to the end of
the boom in South America, and a run on the banks in many other
parts of the world. Another world war followed in 1939-1945. By the end
of World War II, trade as a percentage of world GDP had fallen to 5% –
a level not seen in more than a hundred years.
Introduction to Global Economic &
political Systems:

12. Second and third wave of globalization
The end of the World War II marked a new beginning
for the global economy. Under the leadership of a
new hegemon, the United States of America, and
aided by the technologies of the Second Industrial
Revolution, like the car and the plane, global trade
started to rise once again. At first, this happened in
two separate tracks, as the Iron Curtain divided the
world into two spheres of influence. But as of 1989,
when the Iron Curtain fell, globalization became a
truly global phenomenon.
Introduction to Global Economic & political Systems:

13. Globalization 4.0
In a world increasingly dominated by two global
powers, the US and China, the new frontier of
globalization is the cyber world. The digital
economy, in its infancy during the third wave of
globalization, is now becoming a force to reckon
with through e-commerce, digital services, 3D
printing. It is further enabled by artificial intelligence,
but threatened by cross-border hacking and
cyberattacks.
Introduction to Global Economic & political Systems:

14. UUUU

15. Meaning of Global Economy and its History Structure and Components of
Global Economy

17. Meaning of Global Economy and its History Structure and Components of
Global Economy

18. Those who organize & sustain it
–States & governments
–International organizations & associations
•Those who play a role in it
–Capitalists & investors
–Int’l financial institutions (IFIs)
–Production managers
–Consumers
–Labor
•Those marginal but connected to it
–The global poor, small farmers
–Grey & black marketeers
•Transborder flows of goods, information, money, people &
other things
What is included in the “global
economy”

19. Theory of Hegemonic Stability

20. Hegemonic Stability Theory
• Central Idea: The stability of the International System requires a
single dominant state to articulate and enforce the rules of
interaction among the most important members of the system.
• To be a Hegemon, a state must have three attributes:
– The Capability to enforce the rules of the system;
– The Will to do so;
– A Commitment to a system which is perceived as mutually
beneficial to the major states.
• Capability rests upon three attributes:
– A large, growing economy;
– Dominance in a leading technological or economic sector;
– Political power backed up by projective military power.

21. The Historical Record
• Portugal 1494 to 1580 (end of Italian Wars to Spanish invasion of
Portugal) Based on Portugal's dominance in navigation
– Hegemonic pretender: Spain
• Holland 1580 to 1688 (1579 Treaty of Utrecht marks the foundation of the
Dutch Republic to William of Orange's arrival in England) Based on Dutch
control of credit and money
– Hegemonic pretender: England
• Britain 1688 to 1792 (Glorious Revolution to Napoleonic Wars) Based on
British textiles and command of the High Seas
– Hegemonic pretender: France
• Britain 1815 to 1914 (Congress of Vienna to World War I) Based on British
industrial supremacy and railroads
– Hegemonic pretender: Germany
• United States 1945 to 1971 Based on Petroleum and the Internal
Combustion Engine
– Hegemonic pretender: the USSR

22. What does the Hegemon Do?
The system is a collective good which means that it is
plagued by a "free rider" syndrome. Thus, the hegemon
must induce or coerce other states to support the system
The US system tries to produce democracy and capitalism,
thus it champions human rights and free trade.
Other nations will try to enjoy the benefits of these institutions,
but will try to avoid paying the costs of producing them.
Thus, the US must remain committed to free trade even if
its major trading partners erect barriers to trade. The US
can erect its own barriers, but then the system will
collapse.

23. What does the Hegemon Do?
• Over time, there is an uneven growth of power within
the system as new technologies and methods are
developed. An unstable system will result if economic,
technological, and other changes erode the
international hierarchy and undermine the position of
the dominant state. Pretenders to hegemonic control
will emerge if the benefits of the system are viewed as
unacceptably unfair.

27. study of the different types of national economies or “national
systems of political economy” and their significance for the
global economy has become an important aspect of the
study of international political economy
While national systems of political economy differ from one
another in many important respects, differences in the
following areas are worthy of particular attention:
(1) the primary purposes of the economic activity of the nation,
(2) the role of the state in the economy, and
(3) the structure of the corporate sector and private business
practices.
Differences among National Economies

28. The purpose of economic activity in a particular
country largely determines the role of the state in
that economy. In those liberal societies where the
welfare of the consumer and the autonomy of the
market are emphasized, the role of the state tends
to be minimal.
Although liberal societies obviously differ in the extent
to which they do pursue socialwelfare goals, the
predominant responsibility of the state in these
societies is to correct market failures and provide
public goods.
Differences among National Economies

29. On the other hand, in those societies where
more communal or collective purposes
prevail, the role of the state is much more
intrusive and interventionist in the economy.
Thus, the role of such states can range from
providing what the Japanese call
“administrative guidance” to maintaining a
command economy like that of the former
Soviet Union.
Differences among National Economies

30. Capitalism, as I define the term, is an indirect system of governance
based on a complex and continually evolving political bargain in
which private actors are empowered by a political authority to own
and control the use of property for private gain subject to a set of
laws and regulations.
Workers are free to work for wages, capital is free to earn a return, and
both labor and capital are free to enter and exit from various lines of
business.
Capitalism relies upon the pricing mechanism to balance supply and
demand in markets; it relies on the profit motive to allocate
opportunities and resources among competing suppliers; and it relies
upon a political authority (government) to establish the rules and
regulations so that they include all appropriate societal costs and
benefits.
Market Oriented Capitalism

31. The key institutions that form the foundation of a
market-oriented economy are:
1. Private Property: Private individuals, rather than
governments, are the primary owners of resources,
goods, and other assets.
2. Individual Freedom: Those who own resources,
goods, and other assets have the freedom to use
their property as they see fit.
3. Competitive Markets: Market are used to exchange
privately owned commodities and to answer the
three questions of allocation.
Market Oriented Capitalism

32. ○ Consumer sovereignty exists in the economy i.e.
producers produce those goods only that are
○ wanted by the customers.
○ Extreme competition exists in the market between
firms which uses tools like advertisement and
○ discounts to call customer attention.
○ The profit motive is the key component; that
encourages people to work hard and earn wealth.

34. ,, Differences among National Economies, Market
Oriented Capitalism, Developmental Capitalism, Social
Market Capitalism,