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INTRODUCTION TO INTERNATIONAL POLITICAL ECONOMY

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Title: INTRODUCTION TO INTERNATIONAL POLITICAL ECONOMY


1
INTRODUCTION TO INTERNATIONAL POLITICAL ECONOMY
  • Political Science 186
  • Global Studies 123

2
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

3
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)

4
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)

5
I. Introduction (contd)
  • C. Globalization. Inter-national vs. globalized
    model of world economy

6
II. Analytical Perspectives on Political Economy
  • 1. Liberalism
  • 2. Realism (statism, economic nationalism,
    mercantilism)
  • 3. Structuralism (Marxism, historical
    materialism)

7
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

8
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

9
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

10
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?

11
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

12
IV. International Economic History Nineteenth
Century
  • 1. Three major developments
  • 2. Political economy issues
  • 3. Key lessons

13
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

14
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?

15
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

16
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

17
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)

18
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

19
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?

20
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

21
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

22
VII. International Trade (contd)
  • 4. Managing the system (system governance)
  • a. Promotion of liberalization
  • b. Dispute resolution
  • c. Safeguards
  • d. Other current issues

23
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

24
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

25
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?

26
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

27
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

28
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

29
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

30
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

31
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

32
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

33
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

34
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

35
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)
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