Download Chapter 9: Int`l Political Economy

Chapter 9
International Political Economy (IPE)
International Political Economy (IPE)
• Study of interrelationship between politics and economics,
between states and markets
– How politics can be used to achieve economic goals; how economic
instruments are used for political purposes
– Political bargaining over economic issues within and between states
• Increasingly important (facilitated by new technologies)
– Growing transactions in trade, investment, lending among states
(economic globalization = broadening, thickening of economic ties
among different actors -- states, international organizations, NGOs,
multinational corporations, and individuals)
– Expectation that governments are responsible for economic policies
– Outcomes increasingly transparent to individuals and groups; more
controversial, politicized
Economic Liberalism
• Dominant paradigm in post-WWII era (aka, Neoliberalism,
Washington Consensus)
– Origins in Adam Smith, Wealth of Nations (1776)
• Individual level
– Humans are rational, seek ways to maximize self-interest
• State level
– Markets develop to produce, distribute, consume goods; market
efficiency leads to improved welfare
– State provides basic order; institutions facilitate free flow of trade
and exchange; market efficiency requires separation of economics
and politics; the free market, free of government interference
• International level
– Free flow of commerce, absence of state intervention allows for
efficient allocation of resources by market; increasing
interdependence leads to greater economic development based on
comparative advantage; international wealth maximized; MNCs are
engines of growth
International Institutions: WB
• Bretton Woods institutions (1944); IGOs set up at end of
WWII
– World Bank (WB), International Monetary Fund (IMF), General
Agreement on Tariffs and Trade (GATT)  World Trade
Organization (WTO)
• World Bank
– Initially geared toward reconstruction of Europe following WWII;
1950s shifted focus to development
– Loans money to states for economic development projects
– 1950s-1960s, large infrastructure projects
– 1970s, health, education, and housing
– 1990s, sustainable development
– Consistent advocate of economic liberalism, structural adjustment
policies (SAPs): privatization, trade liberalization, foreign direct
investment, government deregulation, tax reform
IMF, GATT WTO
• International Monetary Fund (IMF)
– Initially aimed at stabilizing exchange rates through short-term loans
to states with balance-of-payments difficulties
– With end of gold standard, shifted to become short-term and long
term lender (not unlike WB)
– Two key issues: debt, transition
– Like WB, advocate of SAPs (see figure 9.2)
• General Agreement on Tariffs and Trade (GATT)
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Trade liberalization
Non discrimination (treat all members as if most-favored)
Exclusive use of tariffs
Preferential access in developed markets for South
“national treatment” of foreign enterprises (MNCs)
• Morphed into World Trade Organization (WTO)
– Forum for trade negotiations, review, dispute settlement, and
enforcement
– Criticized as too closely aligned with North; degrading human
welfare, environmental and labor standards
Mercantilism/Statism
• Mercantilism
– 15th-18th century European states pursued economic wealth;
encouraged exports over imports, industrialization over agriculture;
protected domestic production (protectionism); intervened in trade
to promote employment
– Surplus balance of payments thought to be critical to protect
national interest
• Statism
– Modern version of mercantilism; emphasizes role of state,
subordination of economic activities to state building
– Economic policies should increase state power
– Examples of modern statist regimes: Japan, Singapore, South
Korea, Taiwan, Thailand
• Used state power to promote industrial growth; singled out
industries for tax advantages; promoted exports over imports;
encouraged education and technological innovation to become
competitive
Radicalisms
• Radicalism/Marxist/Dependency/World System
– At one time, advocated planned domestic economies and
rapid industrialization (USSR)
– Post-WWII, import substitution industrialization (ISI)
strategies and statist development
– United in advocating restructuring of international political
economy
• Economic Liberalism and activities of MNCs put LDCs in state of
permanent dependency
• MNCs exploit working class and developing countries; co-opt
state decision-makers
• Capitalist system and economic liberalism responsible for
inequalities within and between states
• WB, IMF, WTO perpetuate dominance of North and global
inequality; agents of dependency, exploitation, imperialism
• Distribution of international and economic power must be altered
if disadvantaged position of developing countries is to be
improved
Global Inequalities
• Major differences in economic development between North
and South (see Table 9.1, 266)
• New International Economic Order (NIEO) (1974)
– Call by South for global economic change (in terms of trade,
establishment of common fund, regulation of MNCs, restructuring of
debt, increasing foreign aid, change in structure of WB and IMF)
– Resulted in minor gains (preferential access to European markets;
more favorable terms for commodity price stabilization plans; some
rescheduling of debts)
– North refused to negotiate on major issues (common fund, MNC
regulation, debt cancellation, institutional reforms)
• Millennium Development Goals (MDGs)
– UN’s goals with regard to poverty reduction, better education,
improved health, environmental sustainability, and global
partnerships
– Asia and Pacific appear on track; Sub-Saharan Africa not on track
to meet goals
Human Development Index, 2002