INTRODUCTION TO INTERNATIONAL POLITICAL ECONOMY

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INTRODUCTION TO INTERNATIONAL POLITICAL ECONOMY

• Political Science 186
• Global Studies 123

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I. Introduction Conceptual and Analytical
Issues

• 1. What is International Political Economy?
• 2. What are the issues?
• A. Actor behavior
• B. System governance
• C. Globalization

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I. Introduction (contd)

• A. Actor Behavior. How do we explain and
  evaluate the actions of states?
• 1. Levels of analysis international
  (structural, systemic) vs. domestic
• 2. State (government, public sector) vs. society
  (markets, private sector)

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I. Introduction (contd)

• B. System Governance. Formulation,
  implementation, and enforcement of rules
  promotion of cooperation management of conflict
• 1. Governance without government governance
  mechanisms (regimes)
• 2. Organizing principles automaticity,
  supranationality, hegemony, pluralism
  (negotiation, cooperation)

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I. Introduction (contd)

• C. Globalization. Inter-national vs. globalized
  model of world economy

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II. Analytical Perspectives on Political Economy

• 1. Liberalism
• 2. Realism (statism, economic nationalism,
  mercantilism)
• 3. Structuralism (Marxism, historical
  materialism)

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II. Analytical Perspectives on IPE - Liberalism

• A. Focus individuals, households, enterprises
• B. Nature of economic relations harmonious
  interests reconcilable
• C. Relationship between economics and politics
  economics drives politics

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II. Analytical Perspectives on IPE -Realism

• A. Focus states
• B. Nature of economic relations conflictual
  (zero-sum game)
• C. Relationship between economics and politics
  politics drives economics

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II. Analytical Perspectives on IPE - Structuralism

• A. Focus classes, social forces
• B. Nature of economic relations conflictual
  (zero-sum game)
• Relationship between economics and politics
  economics drives politics

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III. Alternative Perspectives on Globalization

• 1. Definition a broadening, deepening, and
  acceleration of interconnectedness of states and
  markets networks of connections at
  intercontinental distances
• 2. Alternative views from hyperglobalists to
  skeptics
• 3. Why do we care? By creating a dissonance
  between the jurisdiction of states and the
  domains of markets, globalization problematizes
  governance who is in charge?

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III. Globalization (contd)

• 4. Perspectives on causes and consequences
• A. Liberalism triumph of markets good for
  economic welfare
• B. Realism product of state policy bad for
  power of states
• C. Structuralism triumph of markets bad for
  poorer states and disadvantaged classes

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IV. International Economic History Nineteenth
Century

• 1. Three major developments
• 2. Political economy issues
• 3. Key lessons

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IV. Nineteenth Century - three major developments

• A. Monetary system classical gold standard
• B. Trading system movement toward free trade in
  1860s-70s, then back toward protectionism
• C. Core-periphery relations rise of new
  imperialism after 1870s

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IV. Nineteenth Century - political economy issues

• A. Gold standard What accounts for its
  stability and relatively smooth operation?
• B. Trade What accounts for the free trade
  movement in the 1860s-70s? What accounts for the
  subsequent return to protectionism?
• C. Core-periphery relations What accounts for
  the new imperialism?

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IV. Nineteenth Century - key lessons

• A. No single (mono-causal) explanations need to
  sift the evidence.
• B. No single rule for all regimes different
  governance mechanisms can exist side by side

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V. International economic history interwar
period

• 1. Major developments
• A. Breakdown during World War I
• B. Attempted reconstruction during 1920s
• C. Renewed breakdown (Great Depression) during
  1930s

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V. Interwar period (contd)

• 2. Political economy issue What explains the
  failure of the attempted reconstruction?
• A. Liberalism markets failed because of
  wrong-headed government policies
• B. Structuralism internal contradictions of
  capitalism
• C. Realism absence of effective governance
  (theory of hegemonic stability)

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VI. International economic history postwar
period

• 1. Major developments
• A. Creation of new international institutions
  IMF, World Bank, GATT
• B. Cold War, leading to two separate blocs
  (East-West) and the rest (Third World)
• C. Unprecedented economic growth (early years)
• D. Rise of Europe, Japan East Asia China and
  BRICs
• E. Globalization
• F. Increasing instability slowing growth

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VI. Postwar period (contd)

• 2. Political economy issues
• A. What explains the origins of the postwar
  system?
• B. What accounts for the relative success of the
  system in its early years?
• C. What accounts for the increased instability,
  slower growth in more recent years?
• D. What can be done to manage the system in the
  future?

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VII. International Trade

• 1. Basic issue a tension between desire for
  material benefits of an open system and pressure
  to promote/defend state and/or particularist
  interests
• a. Advantages of free trade efficiency, growth
• b. Disadvantages of free trade dependence,
  losses to key constituencies
• c. Collective action problem how to manage the
  basic tension

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VII. International Trade (contd)

• 2. Postwar experience GATT/WTO
• a. Purposes liberalization, dispute resolution
• b. Principles non-discrimination, reciprocity,
  safeguards
• 3. Protectionism (actor behavior)
• a. Instruments of trade policy
• b. Arguments for protection
• c. Practical motivations

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VII. International Trade (contd)

• 4. Managing the system (system governance)
• a. Promotion of liberalization
• b. Dispute resolution
• c. Safeguards
• d. Other current issues

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VII. International Trade (contd)

• 5. From multilateralism to regionalism
• a. Types of regional trade agreements (RTAs,
  PTAs)
• b. Advantages and disadvantages
• i. For individual countries
• ii. For overall system (trade creation, trade
  diversion)
• c. Postwar experience
• i. First wave 1950s-60s
• ii. Second wave since 1980s
• d. Why the renewed interest in RTAs?
• e. Significance for system governance

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VIII. Money and Finance

• 1. Basic issue as with trade, a tension between
  desire for the material benefits of an open
  system and pressure to promote/defend state
  and/or particularist interests
• 2. Basic concepts
• a. Balance of payments deficits
• b. Financing reserves, borrowing, liquidity
• c. Adjustment the Three Ds, Unholy Trinity

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VIII. Money and Finance (contd)

• 3. Postwar experience
• a. IMF, Bretton Woods system
• b. Financing US dollar, SDRS, capital markets
• c. Adjustment breakdown of pegged exchange-rate
  system currency wars?
• d. Debt problems financial crises
• 4. Managing the system
• a. Exchange rates
• b. International capital markets
• c. International currencies
• d. Whos in charge?

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IX. Economic Development

• 1. The developing world differentiated,
  difficult to generalize
• 2. Postwar rules based on principle of
  non-discrimination trade was to function as an
  engine of growth
• 3. Postwar experience mixed some success
  stories, many disappointments

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IX. Development (contd)

• 4. Why has trade failed as an engine of growth
  for so many?
• a. Liberalism market failures -- weak demand,
  weak linkages, weak adaptive capacity
• b. Structuralism natural result of capitalism
  exploitation
• c. Realism result of power politics
• i. Role of great powers in writing the rules
• ii. Attempts at collective action by LDCs
• iii. Outcomes partial success

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IX. Development (contd)

• 5. Options for development strategies
• a. Export promotion
• i. Traditional exports
• Problems inelastic demand, protectionism
• Cartels? Three conditions necessary for success
  control largest part of supply no close
  substitutes agreement on the sharing of benefits
• ii. Non-traditional exports manufacturing,
  services
• b. Import substitution (import substitution
  industrialization ISI)
• c. Regionalism

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X. The Environment

• 1. Basic problem the environment is a
  collective good, shared by all and owned by none
  (tragedy of the commons) core issue is
  externalities, which can cross borders
• 2. Economic functions of the environment
• a. A consumption good
• b. A supplier of resources
• c. A receptacle of wastes
• d. The problem not always mutually consistent,
  hence a collective action problem a system
  governance issue

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X. Environment (contd)

• 3. Practical dimensions
• a. Pollution (air, water, etc.)
• b. Deforestation
• c. Endangered species
• 4. Possible solutions approaches to governance
• a. Laissez faire
• b. National regulation
• c. Formal regimes
• d. Market approaches

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XI. Energy

• 1. Importance the worlds single most widely
  traded product
• 2. First regime the Seven Sisters a classic
  cartel, successful because it met all three key
  conditions necessary for success control of
  supply no close substitutes agreement on
  sharing of benefits
• 3. Second regime OPEC
• a. Dramatic emergence in 1973
• b. Ups and downs of OPEC power since 1973

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XI. Energy (contd)

• 4. Reasons for variations of OPEC power over
  time back to the three key conditions for a
  successful cartel
• 5. OPECs biggest challenge agreement on
  benefits (limiting free riding)
• a. Low absorbers vs. high absorbers
• b. Special role of Saudi Arabia
• 6. Prospects
• a. Demand side (conservation)
• b. Supply side exploration, alternative forms
  of energy, technology

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XII. Multinational Corporations

• 1. Definition
• 2. Perspectives on the MNC
• 3. History
• a. Until 20th century, mostly extractive
  (farming, mining, etc.)
• b. Real growth began in 1950s, for 2 reasons
• i. European Common Market (trade diversion)
• ii. Decolonization (ISI development strategies)
• c. Changing sources and destination of foreign
  direct investment (FDI)
• i. Increasing share of FDI from developing world
• ii. Increasing share of FDI going to developing
  world

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XII. MNCs (contd)

• 4. Perspective of home country
• i. Advantages profits, market share
• ii. Disadvantages avoidance of taxes,
  regulation
• 5. Perspective of host country
• i. Advantages capital, technology, management
  expertise, market access
• ii. Disadvantage loss of control
• 6. Shifting and uncertain balance of power
  between states and markets
• i. The obsolescent bargain
• ii. Multinational production, supply chains

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XIII. Prospects for the Future

• 1. Postwar period has seen major structural
  changes
• a. Distribution of power between states
• b. Distribution of power between states and
  markets
• c. Global security environment
• 2. Future scenarios
• a. Automaticity?
• b. World economic government (supranationality)?
• c. Renewed hegemony (US? Europe? Japan? China?)?
• d. Cooperative regimes (automaticity
  pluralism)?
• e. Governance by MNCs?
• f. Collapse and economic warfare?
• g. Most probable a mosaic (all of the above)