INTRODUCTION TO INTERNATIONAL POLITICAL ECONOMY Political Science 186 Global Studies 123.

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

Transcript of INTRODUCTION TO INTERNATIONAL POLITICAL ECONOMY Political Science 186 Global Studies 123.

Page 1: INTRODUCTION TO INTERNATIONAL POLITICAL ECONOMY Political Science 186 Global Studies 123.

INTRODUCTION TO INTRODUCTION TO INTERNATIONAL POLITICAL INTERNATIONAL POLITICAL

ECONOMYECONOMY

INTRODUCTION TO INTRODUCTION TO INTERNATIONAL POLITICAL INTERNATIONAL POLITICAL

ECONOMYECONOMY

Political Science 186Political Science 186

Global Studies 123Global Studies 123

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I. Introduction – Conceptual I. Introduction – Conceptual and Analytical Issuesand Analytical Issues

I. Introduction – Conceptual I. Introduction – Conceptual and Analytical Issuesand Analytical Issues

1. What is International Political 1. What is International Political Economy?Economy?

2. What are the issues?2. What are the issues? A. Actor behaviorA. Actor behavior B. System governanceB. System governance C. GlobalizationC. Globalization

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I. Introduction (cont’d)I. Introduction (cont’d)I. Introduction (cont’d)I. Introduction (cont’d)

A. Actor Behavior. How do we A. Actor Behavior. How do we explain and evaluate the actions of explain and evaluate the actions of states?states?

1. Levels of analysis: international 1. Levels of analysis: international (structural, systemic) vs. domestic(structural, systemic) vs. domestic

2. State (government, public sector) vs. 2. State (government, public sector) vs. society (markets, private sector)society (markets, private sector)

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I. Introduction (cont’d)I. Introduction (cont’d)I. Introduction (cont’d)I. Introduction (cont’d)

B. System Governance. Formulation, B. System Governance. Formulation, implementation, and enforcement of rules; implementation, and enforcement of rules; promotion of cooperation; management of promotion of cooperation; management of conflictconflict

1. Governance without government; 1. Governance without government; governance mechanisms (regimes)governance mechanisms (regimes)

2. Organizing principles: automaticity, 2. Organizing principles: automaticity, supranationality, hegemony, pluralism supranationality, hegemony, pluralism (negotiation, cooperation)(negotiation, cooperation)

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I. Introduction (cont’d)I. Introduction (cont’d)I. Introduction (cont’d)I. Introduction (cont’d)

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

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II. Analytical Perspectives on II. Analytical Perspectives on Political EconomyPolitical Economy

II. Analytical Perspectives on II. Analytical Perspectives on Political EconomyPolitical Economy

1. Liberalism1. Liberalism 2. Realism (statism, economic 2. Realism (statism, economic

nationalism, mercantilism)nationalism, mercantilism) 3. Marxism (structuralism, historical 3. Marxism (structuralism, historical

materialism)materialism)

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II. Analytical Perspectives on II. Analytical Perspectives on IPE - LiberalismIPE - Liberalism

II. Analytical Perspectives on II. Analytical Perspectives on IPE - LiberalismIPE - Liberalism

A. Focus: individuals, households, A. Focus: individuals, households, enterprisesenterprises

B. Nature of economic relations: B. Nature of economic relations: harmonious; interests reconcilableharmonious; interests reconcilable

C. Relationship between economics C. Relationship between economics and politics: economics drives and politics: economics drives politicspolitics

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II. Analytical Perspectives on II. Analytical Perspectives on IPE -RealismIPE -Realism

II. Analytical Perspectives on II. Analytical Perspectives on IPE -RealismIPE -Realism

A. Focus: statesA. Focus: states B. Nature of economic relations: B. Nature of economic relations:

conflictual (zero-sum game)conflictual (zero-sum game) C. Relationship between economics C. Relationship between economics

and politics: politics drives and politics: politics drives economicseconomics

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II. Analytical Perspectives on II. Analytical Perspectives on IPE - MarxismIPE - Marxism

II. Analytical Perspectives on II. Analytical Perspectives on IPE - MarxismIPE - Marxism

A. Focus: classes, social forcesA. Focus: classes, social forces B. Nature of economic relations: B. Nature of economic relations:

conflictual (zero-sum game)conflictual (zero-sum game) Relationship between economics and Relationship between economics and

politics: economics drives politicspolitics: economics drives politics

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III. Alternative Perspectives on III. Alternative Perspectives on GlobalizationGlobalization

III. Alternative Perspectives on III. Alternative Perspectives on GlobalizationGlobalization

1. Definition: a broadening, deepening, and 1. Definition: a broadening, deepening, and acceleration of interconnectedness of states acceleration of interconnectedness of states and markets; networks of connections at and markets; networks of connections at intercontinental distancesintercontinental distances

2. Alternative views: from “hyperglobalists” 2. Alternative views: from “hyperglobalists” to skepticsto skeptics

3. Why do we care? By creating a 3. Why do we care? By creating a dissonance between the jurisdiction of states dissonance between the jurisdiction of states and the domains of markets, globalization and the domains of markets, globalization problematizes governance: who is in charge?problematizes governance: who is in charge?

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III. Globalization (cont’d)III. Globalization (cont’d)III. Globalization (cont’d)III. Globalization (cont’d)

4. Perspectives on causes and 4. Perspectives on causes and consequencesconsequences A. Liberalism: triumph of markets; good A. Liberalism: triumph of markets; good

for economic welfarefor economic welfare B. Realism: product of state policy; bad B. Realism: product of state policy; bad

for power of statesfor power of states C. Marxism: triumph of markets; bad for C. Marxism: triumph of markets; bad for

poorer states and disadvantaged classespoorer states and disadvantaged classes

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IV. International Economic IV. International Economic History – Nineteenth CenturyHistory – Nineteenth CenturyIV. International Economic IV. International Economic

History – Nineteenth CenturyHistory – Nineteenth Century

1. Three major developments1. Three major developments 2. Political economy issues2. Political economy issues 3. Key lessons3. Key lessons

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IV. Nineteenth Century - three IV. Nineteenth Century - three major developmentsmajor developments

IV. Nineteenth Century - three IV. Nineteenth Century - three major developmentsmajor developments

A. Monetary system: classical gold A. Monetary system: classical gold standardstandard

B. Trading system: movement toward B. Trading system: movement toward free trade in 1860s-70s, then back free trade in 1860s-70s, then back toward protectionismtoward protectionism

C. Core-periphery relations: rise of C. Core-periphery relations: rise of “new imperialism” after 1870s“new imperialism” after 1870s

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IV. Nineteenth Century - IV. Nineteenth Century - political economy issuespolitical economy issuesIV. Nineteenth Century - IV. Nineteenth Century - political economy issuespolitical economy issues

A. Gold standard: What accounts for A. Gold standard: What accounts for its stability and relatively smooth its stability and relatively smooth operation?operation?

B. Trade: What accounts for the free B. Trade: What accounts for the free trade movement in the 1860s-70s? trade movement in the 1860s-70s? What accounts for the subsequent What accounts for the subsequent return to protectionism?return to protectionism?

C. Core-periphery relations: What C. Core-periphery relations: What accounts for the “new imperialism?”accounts for the “new imperialism?”

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IV. Nineteenth Century - key IV. Nineteenth Century - key lessonslessons

IV. Nineteenth Century - key IV. Nineteenth Century - key lessonslessons

A. No single (mono-causal) A. No single (mono-causal) explanations; need to sift the explanations; need to sift the evidence.evidence.

B. No single rule for all regimes; B. No single rule for all regimes; different governance mechanisms different governance mechanisms can exist side by sidecan exist side by side

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V. International economic V. International economic history – interwar periodhistory – interwar period

V. International economic V. International economic history – interwar periodhistory – interwar period

1. Major developments1. Major developments A. Breakdown during World War IA. Breakdown during World War I B. Attempted reconstruction during B. Attempted reconstruction during

1920s1920s C. Renewed breakdown (Great C. Renewed breakdown (Great

Depression) during 1930sDepression) during 1930s

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V. Interwar period (cont’d)V. Interwar period (cont’d)V. Interwar period (cont’d)V. Interwar period (cont’d)

2. Political economy issue: What 2. Political economy issue: What explains the failure of the attempted explains the failure of the attempted reconstruction?reconstruction? A. Liberalism: markets failed because of A. Liberalism: markets failed because of

wrong-headed government policieswrong-headed government policies B. Marxism: internal contradictions of B. Marxism: internal contradictions of

capitalismcapitalism C. Realism: absence of effective C. Realism: absence of effective

governance (theory of hegemonic governance (theory of hegemonic stability)stability)

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VI. International economic VI. International economic history – postwar periodhistory – postwar period

VI. International economic VI. International economic history – postwar periodhistory – postwar period

1. Major developments1. Major developments A. Creation of new international institutions: A. Creation of new international institutions:

IMF, World Bank, GATTIMF, World Bank, GATT B. Cold War, leading to two separate blocs B. Cold War, leading to two separate blocs

(East-West) and the rest (Third World)(East-West) and the rest (Third World) C. Unprecedented economic growthC. Unprecedented economic growth D. Rise of Europe, Japan; East Asia; ChinaD. Rise of Europe, Japan; East Asia; China E. GlobalizationE. Globalization F. Increased instability after 1971-73F. Increased instability after 1971-73

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VI. Postwar period (cont’d)VI. Postwar period (cont’d)VI. Postwar period (cont’d)VI. Postwar period (cont’d)

2. Political economy issues2. Political economy issues A. What explains the origins of the A. What explains the origins of the

postwar system?postwar system? B. What accounts for the relative B. What accounts for the relative

success of the system before the 1970s?success of the system before the 1970s? C. What accounts for the increased C. What accounts for the increased

instability after 1971-73?instability after 1971-73? D. What can be done to manage the D. What can be done to manage the

system in the future?system in the future?

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VII. International TradeVII. International TradeVII. International TradeVII. International Trade

1. Basic issue: a tension between desire 1. Basic issue: a tension between desire for material benefits of an open system for material benefits of an open system and pressure to promote/defend state and pressure to promote/defend state and/or particularist interestsand/or particularist interests

a. Advantages of free trade: efficiency, growtha. Advantages of free trade: efficiency, growthb. Disadvantages of free trade: dependence, b. Disadvantages of free trade: dependence,

losses to key constituencieslosses to key constituenciesc. Collective action problem: how to manage c. Collective action problem: how to manage

the basic tensionthe basic tension

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IV. International Trade IV. International Trade (cont’d)(cont’d)

IV. International Trade IV. International Trade (cont’d)(cont’d)

2. Postwar experience: GATT/WTO2. Postwar experience: GATT/WTO a. Purposes: liberalization, dispute resolutiona. Purposes: liberalization, dispute resolution b. Principles: non-discrimination, reciprocity, b. Principles: non-discrimination, reciprocity,

safeguardssafeguards

3. Protectionism (actor behavior)3. Protectionism (actor behavior) a. Instruments of trade policya. Instruments of trade policy b. Arguments for protectionb. Arguments for protection c. Practical motivationsc. Practical motivations

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VII. International Trade VII. International Trade (cont’d)(cont’d)

VII. International Trade VII. International Trade (cont’d)(cont’d)

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

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VIII. Money and FinanceVIII. Money and FinanceVIII. Money and FinanceVIII. Money and Finance

1. Basic issue: as with trade, a tension 1. Basic issue: as with trade, a tension between desire for the material benefits of between desire for the material benefits of an open system and pressure to an open system and pressure to promote/defend state and/or particularist promote/defend state and/or particularist interestsinterests

2. Basic concepts2. Basic concepts a. Balance of payments; deficitsa. Balance of payments; deficits b. Financing: reserves, borrowing, liquidityb. Financing: reserves, borrowing, liquidity c. Adjustment: the “Three D’s,” “Unholy Trinity”c. Adjustment: the “Three D’s,” “Unholy Trinity”

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VIII. Money and Finance VIII. Money and Finance (cont’d)(cont’d)

VIII. Money and Finance VIII. Money and Finance (cont’d)(cont’d)

3. Postwar experience3. Postwar experience a. IMF, Bretton Woods systema. IMF, Bretton Woods system b. Financing/liquidity: US dollar, SDRS, capital b. Financing/liquidity: US dollar, SDRS, capital

marketsmarkets c. Adjustment: breakdown of pegged c. Adjustment: breakdown of pegged

exchange-rate systemexchange-rate system d. Debt problems; financial crisesd. Debt problems; financial crises

4. Managing the system4. Managing the system a. Exchange ratesa. Exchange rates b. International capital mobilityb. International capital mobility

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IX. RegionalismIX. RegionalismIX. RegionalismIX. Regionalism

1. Basic issue: between the national and 1. Basic issue: between the national and global levels, regionalism can complicate global levels, regionalism can complicate the issue of system governancethe issue of system governance

2. Trade Regionalism (regional trade 2. Trade Regionalism (regional trade agreements)agreements)

3. Monetary regionalism (monetary 3. Monetary regionalism (monetary unions, etc.)unions, etc.)

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IX. Regionalism – Trade IX. Regionalism – Trade (RTAs)(RTAs)

IX. Regionalism – Trade IX. Regionalism – Trade (RTAs)(RTAs)

a. Types of RTAsa. Types of RTAs b. Advantages and disadvantagesb. Advantages and disadvantages

i. For individual countriesi. For individual countries ii. For overall system (trade creation, trade ii. For overall system (trade creation, trade

diversion)diversion) c. Postwar experiencec. Postwar experience

i. First wave: 1950s-60si. First wave: 1950s-60s ii. Second wave since 1980sii. Second wave since 1980s

d. Why the renewed interest in RTAs?d. Why the renewed interest in RTAs? e. Significance for system governancee. Significance for system governance

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IX. Regionalism - MoneyIX. Regionalism - MoneyIX. Regionalism - MoneyIX. Regionalism - Money

a. Types of monetary regionalism: a. Types of monetary regionalism: horizontal, verticalhorizontal, vertical

b. Advantages and disadvantagesb. Advantages and disadvantages c. Recent experiencec. Recent experience

i. Precedent of the euroi. Precedent of the euro ii. Rise of currency competitionii. Rise of currency competition iii. Currency regime choices today iii. Currency regime choices today

d. Significance for system governanced. Significance for system governance

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X. Economic DevelopmentX. Economic DevelopmentX. Economic DevelopmentX. Economic Development

1. The developing world: 1. The developing world: differentiated, difficult to generalizedifferentiated, difficult to generalize

2. Postwar rules: based on principle 2. Postwar rules: based on principle of non-discrimination; trade was to of non-discrimination; trade was to function as an “engine of growth”function as an “engine of growth”

3. Postwar experience: mixed – 3. Postwar experience: mixed – some success stories, many some success stories, many disappointmentsdisappointments

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X. Development (cont’d)X. Development (cont’d)X. Development (cont’d)X. Development (cont’d)

4. Why has trade failed as an engine of 4. Why has trade failed as an engine of growth for so many?growth for so many? a. Liberalism: market failures -- weak demand, a. Liberalism: market failures -- weak demand,

weak linkages, weak adaptive capacityweak linkages, weak adaptive capacity b. Marxism: natural result of capitalism b. Marxism: natural result of capitalism

exploitationexploitation c. Realism: result of power politicsc. Realism: result of power politics

i. Role of great powers in writing the rulesi. Role of great powers in writing the rules ii. Attempts at collective action by LDCsii. Attempts at collective action by LDCs iii. Outcomes: partial successiii. Outcomes: partial success

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X. Development (cont’d)X. Development (cont’d)X. Development (cont’d)X. Development (cont’d)

5. Options for development strategies5. Options for development strategies a. Export promotiona. Export promotion

i. Traditional exportsi. Traditional exports Problems: inelastic demand, protectionismProblems: inelastic demand, protectionism Cartels? Three conditions necessary for Cartels? Three conditions necessary for

success: control largest part of supply; no close success: control largest part of supply; no close substitutes; agreement on the sharing of substitutes; agreement on the sharing of benefitsbenefits

ii. Non-traditional exports: manufacturing, servicesii. Non-traditional exports: manufacturing, services b. Import substitution (import substitution b. Import substitution (import substitution

industrialization – ISI)industrialization – ISI) c. Regionalismc. Regionalism

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XI. The EnvironmentXI. The EnvironmentXI. The EnvironmentXI. The Environment

1. Basic problem: the environment is a 1. Basic problem: the environment is a collective good, shared by all and owned by collective good, shared by all and owned by none (“tragedy of the commons”); core none (“tragedy of the commons”); core issue is “externalities,” which can cross issue is “externalities,” which can cross bordersborders

2. Economic functions of the environment2. Economic functions of the environment a. A consumption gooda. A consumption good b. A supplier of resourcesb. A supplier of resources c. A receptacle of wastesc. A receptacle of wastes d. The problem: not always mutually consistent, d. The problem: not always mutually consistent,

hence a collective action problem – a system hence a collective action problem – a system governance issuegovernance issue

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XI. Environment (cont’d)XI. Environment (cont’d)XI. Environment (cont’d)XI. Environment (cont’d)

3. Practical dimensions3. Practical dimensions a. Pollution (air, water, etc.)a. Pollution (air, water, etc.) b. Deforestationb. Deforestation c. Endangered speciesc. Endangered species

4. Possible solutions – approaches to 4. Possible solutions – approaches to governancegovernance a. Laissez fairea. Laissez faire b. National regulationb. National regulation c. Formal regimesc. Formal regimes d. Market approachesd. Market approaches

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XII. EnergyXII. EnergyXII. EnergyXII. Energy

1. Importance: the world’s single most 1. Importance: the world’s single most widely traded productwidely traded product

2. First regime: the Seven Sisters – a 2. First regime: the Seven Sisters – a classic cartel, successful because it met classic cartel, successful because it met all three key conditions necessary for all three key conditions necessary for success: control of supply; no close success: control of supply; no close substitutes; agreement on sharing of substitutes; agreement on sharing of benefitsbenefits

3. Second regime: OPEC3. Second regime: OPEC a. Dramatic emergence in 1973a. Dramatic emergence in 1973 b. Ups and downs of OPEC power since 1973b. Ups and downs of OPEC power since 1973

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XII. Energy (cont’d)XII. Energy (cont’d)XII. Energy (cont’d)XII. Energy (cont’d)

4. Reasons for variations of OPEC power 4. Reasons for variations of OPEC power over time – back to the three key over time – back to the three key conditions for a successful cartelconditions for a successful cartel

5. OPEC’s biggest challenge: agreement 5. OPEC’s biggest challenge: agreement on benefits (limiting free riding)on benefits (limiting free riding) a. Low absorbers vs. high absorbersa. Low absorbers vs. high absorbers b. Special role of Saudi Arabiab. Special role of Saudi Arabia

6. Prospects6. Prospects a. Demand side (conservation)a. Demand side (conservation) b. Supply side: exploration, technology, b. Supply side: exploration, technology,

alternative forms of energyalternative forms of energy

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XIII. Multinational XIII. Multinational CorporationsCorporations

XIII. Multinational XIII. Multinational CorporationsCorporations

1. Definition1. Definition 2. Perspectives on the MNC2. Perspectives on the MNC 3. History3. History

a. Until 20a. Until 20thth century, mostly extractive (farming, mining, century, mostly extractive (farming, mining, etc.)etc.)

b. Real growth began in 1950s, for 2 reasonsb. Real growth began in 1950s, for 2 reasons i. European Common Market (trade diversion)i. European Common Market (trade diversion) ii. Decolonization (ISI development strategies)ii. Decolonization (ISI development strategies)

c. Changing sources and destination of foreign direct c. Changing sources and destination of foreign direct investment (FDI)investment (FDI)

i. Increasing share of FDI from developing worldi. Increasing share of FDI from developing world ii. Most FDI goes to Europe and North America, not LDCsii. Most FDI goes to Europe and North America, not LDCs

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XIII. MNCs (cont’d)XIII. MNCs (cont’d)

4. Perspective of home country4. Perspective of home country i. Advantages: profits, market sharei. Advantages: profits, market share ii. Disadvantages: avoidance of taxes, regulationii. Disadvantages: avoidance of taxes, regulation

5. Perspective of host country5. Perspective of host country i. Advantages: capital, technology, management i. Advantages: capital, technology, management

expertise, market accessexpertise, market access ii. Disadvantage: loss of controlii. Disadvantage: loss of control

6. Shifting and uncertain balance of power 6. Shifting and uncertain balance of power between states and marketsbetween states and markets i. The obsolescent bargaini. The obsolescent bargain ii. Production chainsii. Production chains

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XIV. Prospects for the XIV. Prospects for the FutureFuture

XIV. Prospects for the XIV. Prospects for the FutureFuture

1. Postwar period has seen major structural 1. Postwar period has seen major structural changeschanges a. Distribution of power between statesa. Distribution of power between states b. Distribution of power between states and marketsb. Distribution of power between states and markets c. Global security environmentc. Global security environment

2. Future scenarios2. Future scenarios a. World economic government (supranationality)a. World economic government (supranationality) b. Renewed hegemony (US? Europe? Japan? China?)b. Renewed hegemony (US? Europe? Japan? China?) c. Cooperative regimes (automaticity + pluralism)c. Cooperative regimes (automaticity + pluralism) d. Governance by MNCsd. Governance by MNCs e. Collapse and economic warfaree. Collapse and economic warfare f. A “mosaic” (all of the above)f. A “mosaic” (all of the above)