Anarchy on the Easter Islands: Caused or Constituted?
Purpose: The primary goal of this Assignment is to explore another very important concept in
international relations discussed during this course: the logic of international interactions. Two logicbased arguments commonly used in social science research are rationalist (logic of consequence)
and constructivist (logic of appropriateness). In particular, you will investigate the progression
towards anarchy on the Easter Islands and determine if the anarchy was caused or constituted.
Prepare: Review Chapters 8, 9, and 10 in the course text. In addition, watch the video, Easter Island
in Context: From Paradise to Calamity.
Reflect: When Dutch sailors landed on Easter Island, they found a warlike people recovering from
anarchy and cannibalism. What had gone wrong with a civilization that had lived in peace for nearly
a thousand years? Claudio Cristino, the island’s resident archaeologist; William Liller, of the Easter
Island Foundation; Patricia Vargas Casanova, of the Easter Island Studies Institute at the University
of Chile; and others offer their views on moai, rongorongo tablets, the Birdman Cult, and the
devastating effects of overpopulation, to provide a captivating glimpse of a complex culture driven to
the brink of extinction. An unresolved question concerning the anarchy on the Easter Islands
involves the logical arguments explaining why and how it occurred or was the anarchy caused or
constituted. Rationalists would argue that the anarchy resulted from a change in capabilities or
material resources, while constructivists would argue that the anarchy was a result of changed
ideas, values, or norms. Both schools of thoughts are able to explain the changes on the islands but
one of them may make a stronger case in explaining anarchy.
Write: In your assignment, complete the following:
Explain the anarchy that developed on the Easter Islands using a rationalist argument.
Explain the anarchy that developed on the Easter Islands using a constructivist argument.
Assess which argument provides the most logical explanation for the anarchical events on
the Easter Islands.
The Week Four Assignment:
Must be at least two pages (not including title and reference pages) and formatted according
to APA style
Must include a separate title page with the following:
o Title of paper
o Student’s name
o Course name and number
o Instructor’s name
o Date submitted
Must use at least three appropriate sources:
o These could include the article, the course text, and any of the required or
recommended resources for this week.
Must document all sources in APA style as outlined in the In-Text Citation Guide.
Must include an introductory paragraph with a succinct thesis statement.
Must include a conclusion that summarizes the main points and restates the thesis.
Must include a separate references page that is formatted according to APA style as outlined
in the APA References List.
Perspectives on International Relations, 5th Edition
Henry R. Nau
APA Citation: Nau, H. R. (2017). Perspectives on international relations: Power, institutions, and
ideas (5th ed.). Thousand Oaks, CA: CQ Press.
8 Realist and Liberal Perspectives on
Globalization Trade, Investment, and Finance
Lines of people wait to get inside the Apple store on Fifth Avenue in New York City to purchase
the new iPhone6. Do the economic policies that make their purchases possible make the
countries of the world increasingly interdependent—and more vulnerable?
Timothy A. Clary/AFP/Getty Images
How does globalization actually work? What policies and institutions govern it? Too many
scholars and commentators write about globalization without saying anything about how the
actual economic mechanisms of globalization work.
In this chapter, we consider the domestic economic, trade, investment, and financial policies that
make the international economy work or not work. Domestic policies provide the ballast for the
world economy. Most of the economic activity in which a country engages still takes place inside
that country. Foreign trade (exports and imports) constitutes only about one quarter of total
national production in the United States and about one-third in Japan; in the case of the EU as a
whole, foreign trade dependence is smaller, around one-sixth. Even in the poorest countries
receiving the most foreign aid, domestic saving accounts for more than 90 percent of all savings.
So domestic economic policies are crucial for all countries and constitute, so to speak, the
ground floor or foundation of that country’s participation in the world economy. If the domestic
economy is poorly managed, global markets are unlikely to compensate. The domestic policies
of the larger countries are especially important because they have the largest impact on global
International trade, investment, and finance build on domestic policies and constitute the
principal upper floors of the world economy. To switch metaphors, trade and investment are the
meat and potatoes of the global market. When they function properly (and domestic policies
support them), the world economy flourishes. Economists refer to trade and investment markets
as the real economy. International finance provides the money to pay for trade and investment
and to encourage and allocate savings. It is the wine or beverage of the world economy. It
supplies the liquidity that enables the world economy to digest the meat and potatoes and to
invest in the next meal of meat and potatoes. Economists refer to saving and lending markets as
the financial economy.
When trade and investment markets go bad, financial markets lose their anchor and slosh around
with plenty of speculation and much instability. They act like diners who have had too much
wine and too little meat and potatoes. Perhaps that’s what happened to the world economy in
2008–2009. International bankers and investors sold and swapped mountains of mortgage and
credit card debt and related derivatives that were less and less tied to the real economy of
property and productive investment. On the other hand, if the world economy does not have
enough liquidity or wine, markets stagnate or choke on meat and potatoes. That’s probably what
happened in the 1970s when government financing became insufficient to cover oil debts and
private capital markets were not yet liberalized. Global lending was relatively scarce, and
factories and farms could not get enough capital to break bottlenecks and move new products to
market. For the world economy to work properly, the real and financial economies have to work
in sync. Meat, potatoes, and wine—trade, investment, and finance—are all necessary for a good
meal or healthy world economy.
In this chapter, we focus largely on realist and liberal aspects of the global economy. Realist
perspectives view the world economy primarily in terms of relative gains and security. Global
markets are unlikely to emerge, they argue, unless countries feel safe. Nations do not trade
eagerly with adversaries. Thus, from a realist perspective, as the causal arrow suggests, security
relations create the context for economic relations and determine whether free trade or
mercantilist policies prevail. From the historical record, realists observe that extensive global
markets in which governments reduce barriers to economic exchanges do not emerge usually
except under the aegis of a hegemonic power. The hegemonic power dominates security
relations, has little to fear from rivals, and therefore supports and gains most from extensive
economic relations. That’s why globalization accelerated under British and American hegemony
and may be sustained, according to realist perspectives, only if the United States or another
hegemon exercises dominance in world affairs. Otherwise, under conditions of equilibrium,
states worry more about their security and limit their economic ties primarily to allies. Even then
allies may be temporary. Thus, during periods of multipolar security relations, such as in the
seventeenth century before British hegemony and in the 1930s between the British and American
hegemonies, global markets slowed or contracted. They became mercantilist, not laissez-faire,
with governments seeking to intervene more in economic exchanges rather than to reduce
government barriers to trade.
Liberal perspectives, by contrast, focus on absolute or collective gains. They stress the joint
benefits that can be obtained through comparative advantage in trade, investment, and finance
and expect, as the causal arrow shows, that over time growing wealth tempers security
competition and creates a world of satisfied powers with compatible norms. Such satisfied
powers, despite the existence of equilibrium in power relations with one another, seek to
preserve economic interdependence and avoid the disruptions of security conflicts and war.
Unlike realist perspectives, where security leads economic ties, liberal perspectives see economic
interdependence eventually determining and lessening security competition. International
institutions such as the Bretton Woods institutions set up after World War II diminish the
significance of national institutions and establish more global standards of security. Once again
the direction of the causal arrows is key to distinguishing between realist and liberal
Snapshot of Globalization
Let’s begin by looking at globalization and how it affects you directly through the various
domestic and international economic policies that make up the world economy. Let’s assume you
buy a new smartphone. What are the policies that affect your purchase?
Domestic economic policies: Maybe you purchased the smartphone because you got a new job,
received a tax cut, or were able to borrow money cheaply. Government policies lie behind each
of these options. Most jobs are created by the private sector, but government regulations affect
those jobs indirectly, and government spending or tax cuts may stimulate the creation of new
jobs directly. Interest rates may be low because the Federal Reserve System is also trying to
stimulate the economy. Government spending and tax policy we call fiscal policy; Federal
Reserve policy we call monetary policy. Taken together, fiscal and monetary policies
constitute macroeconomic policy—that is, broad policy that affects the domestic economy as a
whole. Government regulations constitute microeconomic policy—specific policy that affects
only targeted sectors or industries, such as antitrust policy that ensure competition among the
telecom companies handling your smartphone calls.
Trade policies: The smartphone you bought was probably imported from overseas. It may have
been assembled in China with components made in Taiwan and Singapore. Production on such a
global basis cannot be profitable unless government policies reduce barriers to trade. Lower
barriers mean that when items move across national boundaries they are not subjected to
excessive tariffs or limited by quotas and other regulations called nontariff barriers. If the United
States imports more goods and services from China and other countries than it exports to them,
it runs a trade deficit. And if net government transfers (for example, foreign aid) and net interest
and dividend earnings on foreign investment (earnings from previous U.S. investments abroad
minus earnings of previous foreign investments in the United States) are added, it runs a current
account deficit in its balance of payments (more on these accounts later).
Investment and savings policies: If a country spends more than it earns in the international
economy—that is, runs a current account deficit because it imports more than it exports—it has
to borrow from abroad to pay for those extra imports. Where does that money come from?
Workers and companies in Taiwan, Singapore, and China save more than do workers in the
United States. They do not spend all their wages and profits from producing your smartphone.
Because their governments provide fewer retirement and health care benefits, workers have to
save more for their own future. Chinese workers, for example, put almost half their earnings in
Developing countries use some of those savings for domestic investments. But if savings are
larger than domestic investments, those savings go abroad. The outflow—or inflow for the other
country—of those savings equals what we call the capital account of a country’s balance of
payments. This account includes portfolio investment, the transfer of money to buy stocks and
bonds, and foreign direct investment (FDI), the transfer of new capital in that year to build
factories or purchase real estate abroad. Since the 1980s, barriers to capital flows have been
reduced, just like those for trade flows. Companies can now move whole factories to other
countries without heavy fees or restrictions and, as our example suggests, invest easily in other
countries’ stock and bond markets. This liberalization of capital markets is the distinctive feature
of globalization 3.0 (see the introduction to Part III).
Financial and exchange rate policies: The capital account and current account taken together
constitute the balance of payments. The balance of payments records all economic transactions
with other countries, and these international transactions involve the use of foreign currencies.
Net supply and demand for a country’s currency yields its exchange rate, that is, the value of the
country’s currency in terms of a foreign currency. In fall 2015, for example, one U.S. dollar
equaled roughly one hundred and twenty Japanese yen. Exchange rates have a powerful impact
on the prices of imports and exports. A higher exchange rate makes exports more expensive,
and a lower exchange rate makes imports more expensive. Thus, exchange rate movements are
controversial among countries.
In a system of floating exchange rates, the current and capital accounts more or less offset one
another because exchange rates go up or down to clear accounts. In a system of fixed or
managed exchange rates, however, a country may lose or accumulate foreign currencies, called
foreign exchange reserves, as the country buys or sells its currency to maintain a fixed or
targeted rate for its currency. If countries hold large foreign exchange reserves, they may target
a lower value for their exchange rate, which helps them sell more exports than they would if
market forces prevailed. China has been accused of doing this in recent years. Meanwhile,
countries with surplus foreign exchange reserves invest in sovereign debt funds that buy assets
abroad. China today owns more than $1.2 trillion in U.S. Treasury bonds.
If, on the other hand, a country runs consistent current account deficits and its foreign exchange
reserves are low or exhausted, it has to borrow an equivalent amount from abroad, which
shows up on its capital account. If foreign lenders doubt that the country will be able to pay
back such loans, foreign lending dries up and the country’s currency plummets, because without
loans the currency has to go down to make exports cheaper and imports more expensive. This is
the stuff of which foreign debt and currency crises are made, such as the eurozone crisis in
Greece in 2015 and similar crises in Ireland, Spain, and Portugal. Theoretically, the United States
could face such a crisis as well, and indeed it did in 2008–2009. It has run current account
deficits for most of the past forty years, and there is always the possibility that foreign countries
might start selling the dollars they have accumulated. But because many international trade
(such as oil) and financial transactions are paid for in dollars and markets for dollars are large
and liquid, countries are willing to hold large reserves of dollars. As long as they are willing to do
so, the United States can cover its debt by simply printing more dollars—that is, until dollars
become worth less due to inflation in the United States or foreign governments begin to sell
dollars for political reasons, as France did during the Cold War and China may do in the future.
The crisis in 2008–2009 was not a run on the U.S. dollar as much as it was a drying up of liquidity
in the global, private-sector banking system, which came into existence only in the 1970s and
1980s. Concerned about bad loans, private banks everywhere—in Europe, Asia, and the United
States—suddenly began to lend less. With all banks drawing back, private-sector lending froze
up. Governments had to step in big time.
All these policies interact with one another. For example, when the United States uses monetary
policies to lower interest rates, as it has done since the financial crisis of 2008–2009, dollar
assets such as bonds yield lower returns and investors are encouraged to buy bonds or other
assets in foreign currencies, such as the yen, to earn higher interest rates abroad. The demand for
foreign currency drives up the exchange rates of those countries and makes their exports more
expensive. Countries such as Brazil and South Korea complained bitterly during the financial
crisis that easy U.S. monetary policy had a detrimental effect on their economic growth.
Similarly, domestic policies affect exports. When European countries faced debt crises and
tightened fiscal policies, the United States complained because it wanted Europe to spend more
and increase demand for U.S. exports and stimulate U.S. recovery.
Countries are increasingly interdependent. If they want to retain the economic benefits of
international markets, they have to give up a certain amount of control over their domestic
policies. As the first causal arrow in the margin illustrates, liberal perspectives generally assume
that they will do so to preserve mutual benefits and override security concerns. Realist
perspectives are not so sure. They worry, as the second causal arrow shows, that security
concerns place limits on interdependence to preserve national autonomy. For example, what if
China decides for political reasons not to lend its savings to the United States anymore? When it
stops, U.S. interest rates will rise, U.S. housing and growth will slow, and companies may cut
back production and employment. American housing and jobs did decline in 2008–2009, and so
did Chinese lending. Of course, Chinese exports to the United States also slowed. Both sides
paid a price, and that’s why liberal perspectives assume they will continue to cooperate.
Nevertheless, others believe it makes no sense and may even be immoral to take savings out of
poor countries like China and give it to rich countries like the United States. From this moral or
identity perspective, as the third arrow indicates (addressed more fully in Chapter 9), the world is
supposed to help poor countries grow rich, not help rich countries indulge their insatiable
consumer appetites. It’s not surprising therefore that globalization, just like the balance of power,
looks different from the standpoints of different perspectives.
OK, that’s a first cut at the way globalization works. Take a deep breath now, while we look
more slowly and systematically at each of these mechanisms.
current account: the net border flows of goods and services, along with government transfers and net income on
capital account: the net flows of capital, both portfolio and foreign direct investment, into and out of a country.
portfolio investment: transfers of money to buy stocks, bonds, and so on.
foreign direct investment (FDI): capital flows to a foreign country involving the acquisition or construction of
manufacturing plants and other facilities.
balance of p ...
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