International Political Economy
Examples of Politics Impacting the International Economy
#1) Bretton Woods System Crisis: 1944 Us abandoned convertibility of the US dollar in to gold (Gold Standard) Exchange rates became free flowing and the US dollar became the standard. #2) Decolonization: New groups of politically and economically weak states. New international order, collapse of communist order in East and Central Europe, want economic and political equality and opportunity.
Traditional Approaches to International Economics
-Mercantilism, Economic Liberalism, Marxism
Mercantilism
14th-17th Century
Economic Liberalism
-Response to mercantilism.
-Bretton Woods
-Adam Smith in the Wealth of Nations: markets tend to expand spontaneously to satisfy human needs/desires- absent government interference. Invisible Hand to dictate market forces.
-Markets most efficient way of allocating resources, states should have a minimal role.
-Concept of rational individual actor and belief in progress.
-Economics is autonomous. Laissez-Faire freedom of markets from all kinds of political interference. State politics do need to set minimum underpinnings for them market to function properly (regulations).
-Keynesian (John Maynard Keynes) Still based on market economy but with a considerable degree of state interference and direction.
-Main Actors: individuals and private firms, rational, self-seeking, human prosperity thus depends on unfettered expansion of a free market economy across international boundaries.
Nature: cooperative, positive sum game. Ricardo’s Comparative Advantage
Goals: Maximize individual and social well being
Marxism in IPE
-Economic production is the basis for all other human activities, including politics.
-Basis consists of forces of production (technical level of economic activity) and the relations of production (social ownership)
-Bourgeoisie dominate capitalist economy through control of the means of production, also tend to dominate in the political sphere because economics is the basis of politics.
-States driven by ruling-class interests of respective bourgeoisie and capitalism as a system is never-ending in its search for new markets and more profit.
-Robert Cox: focus on materialism through the inclusion of ideas and institutions. Social forces, forms of state and world orders.
Social forces: shorthand for the process of capitalist production. An analysis of this aspect will inform us about the present state of development on the capitalist economy on a global scale.
-Forms of state: point to the ways in which states change in the interplay with the social forces of capitalist development.
-World Orders: current organization of IR, including those between major states and groups of states, international law an d international institutions
-Antonio Gramsci: World Systems Theory Core and Periphery
-Economics decisive
-Main Actors: classes
-Nature: conflict and zero-sum
-Goals: class interests
Rational Choice in IPE
-Explains outcomes in IPE as a result of actors’ choices which are assumed always to be rationally power or utility maximizing within incentive and institutional restraints.
Institutionalists in IPE
-Apply rational choice to states in interactions with other states to explain international cooperation in economic affairs.
Constructivism in IPE
-Pay attention to how governments, states and other actors construct their preferences, highlight the role of identity, belief, traditions and values.
Feminist IPE
Distribution of Wealth and Power in IPE
Hegemonic Stability
Internationalization
Aspects of Globalization
1) internationalization
2) tech revolutions
3) deterritorialization
4) liberalization
Technology Revolutions
-Modern communications shrink distance. Location is less important for government (both local and regional) but also for other actors such as firms and social movements
Deterritorialization
-accelerated by a decrease in the influence of territorial places, boundaries and distances in the way people collectively identify themselves or seek political recognition. Permits transnational political and economic activity
Liberalization
-describes government policies that reduce the role of the state in the economy by dismantling trade tariffs, barriers and deregulating the financial secret to foreign investment and privatization.
Why is a Hegemon Required Liberal World Economy
Why is a Hegemon Required Marxist
Discontents with Globalization
Traditional Approaches to IPE True and False
Mercantilism
-true: political regulation is the framework for economic activity
-false: politics controls the economy
Liberalism
-true: market is an economic dynamic of its own
-false:the autonomous sphere of economy
Marxism
-true: economics affects and influences politics
-false: economics determines politics
Globalization of Trade and Finance
International Trade
International Finance
Regulation of Global Trade