Download IPE: Framing horizontal questions

IPE: Framing horizontal questions
• WHY? What is the driving force in the global economy?
In this case?
Market competition - Collective search for efficiency
 national ambitions and interstate rivalries
technology …OR Ideas and values
•WHO? Who adjusts?
Importer/ exporters
My constituency / your constituency
Low skill labor in the North/in the South
EU / candidate countries
•FOR WHOM? In Whose Interest? Great power; Collective;
those in need
International Political Economy
Caveat emptor (Ce que je crois)
-> An actor-centred “good story”
-> liberal assumptions: opportunity to cut deals;
positive sum game; shared stake in a stable
international economic order; governance issues
-> realist assumptions: state centric but not
exclusive
-> outside liberal framework: issues of global
justice, issues of identity and norms
-> Role of narratives: “Europe as a model”
Lecture 2: The Post-War Order
and US Hegemony
…. And what about Europe?
Negotiating at Bretton Woods
Imperial system
of preferences
•gold standard
•Prevention of crisis
•Employment
?
Laisser-faire
1930s
•Beggar-thy-
neighbour
•Competitive
devaluations
1945 - United States power:
Hegemony Stability “theory”
• From Pax Britannica (19th) to Pax Americana (20th)
• What is the point of hegemonic power ?
• The benign view:
- to ensure economic growth and stability (Kindleberger)
- to ensure peace and security through a liberal economic order
(Gilpin)
- to make up for “free riders”
 Order created by a single power
• Marxist variant:
- overcome contradictions of capitalism through imperialism;
Gramscian unity of structure and superstructure – power hidden
under ideological consensus: legitimacy of dominance (“not
imperialism” )
Hegemony Stability “theory”
• What are the sources of hegemonic power?
1. Control over markets: maintains an open market for
other countries’ surpluses; discretion
2. Control over sources of capital: outflows for investment;
credits to friends
3. Control over raw materials
4. Competitive superiority: technological and organisational
superiority
5. Stable national currency supported by facilities in times
of crisis
Indicators: share of world trade; monetary reserve;
production of raw material…
Military power as background condition
Hegemonic leadership:
Hegemony Stability “theory” refined
• How does the hegemon transfer his resources
into rules for the system as a whole?
– Leadership (willingness to lead) activates the link
between power and outcome.
– Domestic politics and other (dis)incentives
– Hegemony as a situation in which “one state is
powerful enough to maintain the essential rules
governing interstate relations and willing to do so”
(Keohane and Nye)
• Analyse deference of secondary states: ST and
LT benefits vs ST costs for Hegemon; elites vs
countries.
Hegemonic Stability theory revisited
• 1. Power and interests – HST
– Weak version: necessary but not sufficient
– Alternatives: not necessary at all!
• 2. The role of ideas, shared belief and
ideological consensus
• 3. The role of institutions
Negotiating at Bretton Woods
Imperial system
of preferences
?
Laisser-faire
Orthodoxy
The Bretton Woods compromise:
Hegemonic stability and embedded
liberalism
• Broad forces shaping settlement:
- System congenial to US interests; breaks down
German, Japanese and UK barriers
- Broad outline; openness
• Convergence of interests and their redefinition
– range of post war orders possible
– Role of expert community; change in thinking;
Keynesian revolution
The Bretton Woods compromise:
(cd)
• 3 beliefs:
1) Need currency stability and convertibility –
adjustment subject to international
agreement
2) International stabilization fund to assist
governments in the short term
(creditor/debitors?)
3) Managed world economy through
collaboration among governments and
mutual supervision (what is legitimate?)
A complementary explanation:
Embedded Liberalism
• “The essence of the compromise of embedded
liberalism was that post war economic
reconstruction – unlike economic liberalism of
the 1930s, was aimed to be multilateral in
character and unlike unfettered liberalism of
the gold standard and free trade, post-war
multilateralism would be predicated upon
domestic interventionism to ensure attainment
of national objectives” (Ruggie, 1982)
Embedded Liberalism : variants on
a theme
• Reconcile openness with the commitment to full
employment
– E.g. contraction and unemployment are not satisfactory
solutions for deficit countries
– Keynes: management of currency must not undermine
domestic expansionary policies
– Unique blend of laisser-faire and interventionism
• social welfare must dictate international economic
•
•
plans not the other way around.
Not liberal with domestic cheating- Internationalism
based on a sense of shared purpose : ”political
power represents a fusion of power with social
purpose”
Differentiated commitment among countries yet
Negotiating at Bretton Woods
Imperial system
of preferences
Keynes 1
?
Laisser-faire
1930s
Openness with convertibility…
White / US
…But safeguards (Double screen to cushion domestic economy):
Keynes 2 / Europe
1. Assistance in case of BoP deficit (IMF)
2. Adjustment of exchange rate – who adjusts?
No : international currency;
Tax excess reserves of creditors; Exchange control
Hegemonic Stability “theory”
Creating the GATT (1947)
• Trade liberalization –non discrimination: 1) National
treatment ; 2) most favored nation (MFN)
=> Multilateralism NOT free trade
• BUT safeguards, exemptions, exceptions to protect
social policies:
(Wide range of responses to protectionist pressures)
– Progressive liberalisation
– Domestic industry injury
– Surge of imports and BoP crisis - Employment
• Discrimination authorised:
– superior public policy goals such as the protection of human
life or health, the conservation of exhaustible natural
resources, or the protection of public morals
– - regional preferences admitted
What
Next?
1950s to 1980s:
Hegemonic Stability “theory” revisted
• Presence of Hegemon => order-stability-wealth
(1)
(3)
(2)
-> What can we observe? (in the 70s-80s)
1) Declining hegemony?
2) Declining “order”? Chaos?
3) Causal relationship?
( Absence of Hegemon =>….instability?)
After Hegemony? (Keohane)
The diagnosis of the 1980s
Assumption 1: Hegemonic decline? Don’t panic! Post
hegemonic cooperation is possible.
1. Supply and demand: May be necessary to supply
international order but then demand quicks in
2. Creation of the international order
vs ……….Maintenance (life of their own; congruence of social
purpose)
=> international regimes : principles, rules and procedures
around which expectations converge
=> The function of regimes: information; reduce costs of
agreement; coping with uncertainty; diffuse reciprocity
After Hegemony?
The diagnosis of the 1980s
Assumption 2: significant disorder?
- Post 1971 inconvertibility of the dollar
(inevitable liquidity requirements)
- New protectionism
- Adjustement
- Debt crisis
- In fact consistent with embedded liberalism
After Hegemony?
The role of international regimes
Assumption 3: Causal relation H=>order
– 1) liberal hegemon
– 2) influential hegemon
– 3) responsible hegemon
Hegemonic Stability “theory” :
Change in the 1970s? 80s? 90s?
Hegemony?
Yes
Yes
Continued hegemonic
stability
Q: other causes?
Stability?
Hegemony not sufficient
No
-> Hegemony without
leadership
No
Hegemony not necessary
-> International
Regimes
(“After Hegemony”)
Hegemonic decline
=> New protectionism;
regionalism
The long view: US vs EU
• Long term growth of GDP/cap: the post
war anomaly
The long view: US vs EU
US vs EU: The long view
2004
Europe:
US:
trade
18%
15%
pop
450 m
291 m
GDP
25%
21% (?)
US vs EU:
Western Hegemony…
Or Rival Projects?