Download International Political Economy

International Political
Economy
Introduction
• International Political Economy (IPE)
– Interplay of economics and politics in world affairs
• States vs. Markets = Misleading Assumptions
– States cannot rule the global economy
– Systems of Institutions
• The rules, norms, laws, organization, and habits that for
the system
– A defining feature of IR
» Globalization and international cooperation of states and
institutions
– Modern IPE born from Cold War end
• Promoted many of IPE main institutions
– UN, IMF, WB, and WTO
Post-WWII World-Economy
• Bretton Woods Conference
– Discussed future of world economy following WWII
• Resolve two Serious Problems
– Prevent another Great Depression
» Stable Global Monetary System
» Open World Trading System
– Rebuilding War-Torn Europe
– Bretton Woods System Established
• Promote a New World Economic Order
– Created International Monetary Fund (IMF)
– Created International Bank for Reconstruction and Development
(IBRD)
» Later became World Bank (WB)
– Created General Agreement on Trade and Tariffs (GATT)
» Replace by World Trade Organization (WTO) in 1995
International Monetary Fund
• Membership of 185 Countries
• Promoted International Monetary Cooperation
– Created a Stable Exchange Rate Regime
• All currencies based on US Dollar
• US Dollar would be back by Gold (Gold Standard)
• Provided stability for all currencies
• Provides emergency assistance to countries
facing a temporary economic crisis
– Today provides assistance to developing nations
• Conditionality or
– Requires countries who barrow money to meet certain conditions
= liberalization and privatization of economy
» Backlash from anti-globalization movement
Continue and World Bank
• Structural Adjustments
– Due to the US raising interest rates (protectionism) on developing
nations loans, which caused the counties to defaulting
» Counties need to take immediate measures to receive new
loans
• reduce inflation, cut social welfare, trade liberalization,
deregulation, and privatization
• Major Backlash from anti-globalization movement
• World Bank - Originally IDRB
– Assists in the Development of Countries
• Original Purpose was Post-WWII Europe
– Worlds largest source of Development Funds
» $16 Billion in annual loans
• Requires Reforms in a barrowers country
– Ending Poverty, Promoting Human Rights, etc…
» Minor backlash from anti-globalization movement
General Agreement on Trade and Tariffs
• Forum for negotiation on trade liberalization
• Removal of restrictions, barriers or tariffs
– Free-Trade
• Solved trade conflicts
– Interim Agreement = Only established until
permanent organization could be formed
• Operated for Four Decades
– Proved powerless to stop Economic Protectionism (tariffs to
promote internal growth) of 1970’s
» Replaced by stronger World Trade Organization in 1995
• Administering WTO Trade Agreements
• Forum for trade negotiations
• Handling trade disputes
• Monitoring national trade policies
• Supplying technical assistance to developing counties
IPE and the Cold War
• Containment
– Prevent the spread of Communism to Western
Europe and other nations
• Postponed development of Modern IPE
• Marshall Plan
– Massive Financial Aid to Europe
• Promoted IPE Institutions and Western Bloc
Organizations
– Gold Standard Replaced by Dollar Standard
» Western Countries embraced Dollar
• Brent Woods System was promoted to
develop capitalism globally
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• Collapse of Brent Woods
– Economic troubles in the US due to cost of Vietnam
and Great Society without raising taxes
• US announced in 1971
– End of Gold Standard
» Allowed major currencies to “Float” through deregulation
• WWW.XE.COM
• Protectionism of US Economy
– Charge of 10% on imports to help grow internal industries
– Emerging Economies no longer dependent on US
• European Economic Community (EEC)
• Tigers of Asia (Japan, South Korea, Taiwan, and Eventually
China)
– Global Stagflation
• Low growth (Stagnation) and high inflation
– Promoted countries to engage in Protectionism
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– North-South Gap
• Gap in economic development in northern hemisphere
(Industrialized Nations) and southern hemisphere
(Developing Nations)
– Challenged by Developing Nations
» Promoted New International Economic Order
• Sought better representation in institutions
• Promoted Fair Trade
• Increase in Aide
• Protection of Economic Sovereignty
• Unsuccessful
– New Governments in the 1980’s promoted opposite
• Changed the Study of IPE
– Tries to answer “why are so many countries in the world
under developed” and focus now on Interdependence
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• Neo-Liberalism (Neo-Conservatism in US) of
the 1980’s
– Challenge to Keynesian Economics of 30’s - 70’s
• John Maynard Keynes
– Governments should play an active and interventionist role in
the economy to ensure both growth and equity.
– Neo-Liberalism encourages
• Limited or no government role
• Deregulation of laws and institutions
• Allow markets to regulate business
– Washington Consensus
• Term implies NL mainly a reflection of US interests
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• End of the Cold War
– Problem
• Integrating USSR, Soviet Bloc, and Soviet backed
developing nations
• Burden fell to World Bank and IMF
– Conditionality created problems
» Coercion and Conformity
– World Trade Organization
• Created to alleviate problems of WB and IMF
• Voting power shifted from US and EU when other
powerful economies refused to cooperate unless power
adjusted
Traditional Approaches to IPE
• The Liberal Tradition
– Free Market and exchanges currencies
• Voluntary exchange and markets that are efficient and
morally desirable
– Allows countries to benefit from their advantages (natural,
resources, endowments, and specializations)
– Little or no regulation of markets or currencies by
governments
– Order in markets will be self-regulatory
• The Mercantilist Tradition
– Realist Perspective = Power of States
• World economy is an arena of competition among
states seeking to maximize relative strength and power
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– For survival, states must maximize wealth in independence
– Trade protectionism is emphasized
– Governments must use protective measures (invest in
strategic industries, subsidies, trade tariffs, etc…) to ensure
the strengths of the domestic and international economy of
the state
– IS controlled by hegemony, who sets the norms and
institutions to benefit itself
• Marxian Tradition
– World-Economy is an arena of competition, and
capitalism is the driving force
• Class struggle between oppressed (workers) and
oppressors (Capitalist)
– Capitalist seek profits at expensive of workers
• Unequal exchange between Periphery (developing) and
Core (developed) nations
– Wealth flows from poor to rich countries
New Approaches to IPE
• Rational Choice
– Neo-Utilitarian Approach
• John Stuart Mill’s book “Utilitarianism”
– Weighing the pros and cons, actors will choose the most
advantageous choice
– Preferences are known/fixed and actors will make best choice to
promote their interest
– Two Approaches to Rational Choice
• Political Economy Approach
– Focus on Interest Groups and how they impact the IPE
» Societies are pluralist and governments follow the actions of
groups promoting specific interest
» Governments make their IPE choices by the actions of
specific interest groups within the economy
» Coalitions of interest groups influence governments and
institutions for their personal gain
Continue
• Institutionalism Approach
– Focuses on the interaction of states and how they impact the
IPE
» States create institutions in order to maximize utility
within the constraints of world markets and world politics
– Social Constructivism
• Policies in the world-economy are affected by historical
and sociological factors
– Actors formulate preferences and behaviors based on beliefs,
roles, traditions, ideologies, and patterns of influences
» There is no set/fixed preferences in IR or IPE
» Preferences reflect actors ideas, culture, and knowledge
– Choice will often reflect the hegemony
» Institutions promote hegemony
» Coercion or consent prevails
» Legitimacy is promoted and desired
Globalization and the IPE
• Globalization is strongly debated in IPE Studies
– Four Aspects of Globalization in IPE
• Internationalization
– Increase economic interactions and interdependence across
borders
• Technological Revolution
– Impact on new communication technologies
• Deterritorialization
– Extent distances, borders, and places influence the way
people identify themselves and act
• Liberalization
– Reduction in government role in the economy which allows
the new IPE to exist
– Debate exist between how each impacts the world
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• Is globalization diminishing the role of the
state in the world economy
– The Globalists Response = Yes
• As interdependence occurs
– Multinational trade, production, investment, and finances
move in and out of countries more easily
» Governments lose their capacity to regulate economy
• Footloose Modern Businesses
• Companies will leave if no econ liberalization
– The Sceptics Response = NO
• Footloose Modern Business model is false
– Globalist have no evidence to back up claims
» Knowledge-Intensive Economy
• Skilled or semi-skilled workforce, good infrastructure,
and proximity to markets dictate choice
Institutions and the IPE
• Globalization increases interdependence
– Both good and bad
• Asian Financial Crisis
– Meltdown of South East Asia Economies that lead to sever
economic impact in other countries
– Demonstrates how a crisis in one country can easily spill into
other countries
– Led to a call for stronger international economic institutions,
more cooperation, monitoring, and regulation
– Institutions
• States create institutions to achieve better gains
through cooperation and coordination
• States agree to be bound by certain norms, rules, and
decisions
– States don’t always follow
Continue
• Institutionalist = Institutions reflect liberalization
– Institutions emerge primarily as solutions to universal
problems or market failures
– Will regulate gaps and failures of open system
– Focus on absolute gains
» Over all the benefits of everyone involved
• Realist = Promote states power and wealth
– Hegemony is liberal-democracy
– Institutions reflect will of hegemony to ensure survival and
power gain of hegemony
– Focus on relative gains
» The benefits of the individual states
– Cooperation is constrained by power struggles
» Institutions will be abandoned if no positive gain for state
» Institutions only accommodate the needs of weaker
states when needs don’t interfere with powerful states
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• Social Constructivists
– Reject the definable/fixed rational choice of realist and
institutionalists
» Realist wrong because institutions don’t always reflect
power politics
» Institutionalists wrong because institutions don’t always
reflect the need of markets, trade, etc…
– Interest are impacted by identity
» Which is created by social structure of interactions,
normative ideas, and beliefs
• Institutions change when identity of states change
• Social movements with a state impact IPE
• Human Rights Moments
• Environmental Movements
• Etc..
• All impact modern IPE because they change
identity of states
• Puts pressure on political leaders to change
institutions