Political economy 39.52

International Political Economy- IPE-studies the political battle between the winners and losers of global economic exchange. It examines how this political shapes the evolution of the international trade and monetary systems affects the ability of Multinational Companies ÿ (MNCs)to conduct influences the development strategies governments adopt.38 Thus, IPE suggests that it is hard to understand anything about the global economy without understanding how political competition unfolds.
38. Oatley Thomas, International Political Economy, Pearson Education, Inc., IPE scholars traditionally have studied the global economy through the lens of three schools of thought ÿ mercantilism, liberalism, and Marxism or structuralism. These three dominant analytical approaches-perspectives to stu- dying IPE remain influential today. Each school offers a distinctive window on the global economy, and each emphasizes one aspect of global economic as the central defining element of politics in the global economy.
An approach that emphasizes the interaction between societal interests and political institutions. Such an approach will enable us to develop models how the global economy generates winners and losers how these groups compete to influence the policies that governments how the policies that governments adopt affect the evolution of the Without an understanding of the theories, institutions, and relationships found in International Political Economy it is hard to make sense of a new- spaper, a business investment, or a government policy, D. Bal am and M.
Veseth39 argue. It is difficult in other words, to understand our everyday lives without some understanding of IPE, so deeply are we now affected by interna- tional and ever more global, political, economic, and social forces and events.
One way scholars simplify the study of the global economy is to divide the substantive aspects of global economic activity into distinct issue areas.
Typically, the global economy is divided into four such issue areas: 39. Balaam, D.N. and Veseth M., Introduction to International Political Economy, Pearson Education International, 2008.
40 Part One: PERSPECTIVES OF INTERNATIONAL POLITICAL ECONOMY It is somewhat misleading to study each issue area in relative isolation from the others or independently. MNCs, for instance, are important actors The three Traditional Schools of International Political Economy40 Intervene in the Establish and en- Instrument of the Image of the Conflictual: Coun- Harmonious: The Exploitative: Capi- International triescompeteforde- international econ- talists exploit la- sirable industries omy offers benefits bour within coun- and engage in trade to all countries. tries; rich countries conflicts as a result The chal enge is to exploit poor coun- of this competition createapoliticalfra- tries in the interna- Enhance power of Enhance aggregate Promote an equita- 40. Oatley Thomas, International Political Economy, Pearson Education, Inc., 41. Realism: a theory of state behaviour that focuses on national interest as a determinant of state behaviour. In the view of realists, states, like indivi- duals, tend to act in their own self-interest. On the other hand, Merchantilism is a seventeenth-century idea that won't go away. It was an ideology that put accumulation of national treasure as the main goal of socie- ty. It asserted that power and wealth are inextricably connected. It argues that Chapter One: WHAT IS INTERNATIONAL POLITICAL ECONOMY ÿ IPE? 41 In simple terms, we define IPE as an analytical effort to break down the barriers that separate and isolate the disciplines of politics, economics, and sociology.42 It employs three major analytical perspectives and four interna- tional structures that combine elements of economics, politics and sociology to describe and explain international and global problems and issues in a way that cannot adequately be addressed by each of those disciplines alone. In this course book we focus on its fundamental principles and multidisciplinary nature. We examine how different disciplines would explain these phenome- na, and why those explanations are inadequate. Events like globalization and 9/11 continue to profoundly shape the lives of people not only in the United States but everywhere in the world. Events like these are better understood from the interdisciplinary, multidimensional perspective that IPE provides, as opposed to a single disciplinary explanation. The same holds true for a great the transformation of different national economic systems in Eastern Europe, Southeast Asia, the Middle East, and other parts of the continued problems surrounding the development of some of the efforts by states, international organizations (IOs), and nongovern- mental organizations (NGOs)to solve a host of problems related to Third World poverty and debt, hunger, and global warming.
The three disciplines, which form the core of IPE, are economics, political science, and sociology. Susan Strange, helped to establish the modern study of governments structure their international economic transactions in order to enhance their power relative to other states and domestic society. It predictsIPE as inherently conflictual. Today, it is an economic philosophy and practice of government regulation of a nation's economic life to increase state power and security. Policies of import restriction and export promotion (to accumu- late treasure at the expense of other countries)follow from this goal.
Economic nationalism ÿthe ideology of mercantilismÿ holds that nations are best off when state and market are joined in a partnership. The state protects domestic business firms, which become richer and more powerful, which in turn increases the power of the state. Alexander Hamilton and Friedrich List are two famous proponents of economic nationalism.
42. Balaam, D.N. and Veseth M., Introduction to International Political Economy, Pearson Education International, 2008.
42 Part One: PERSPECTIVES OF INTERNATIONAL POLITICAL ECONOMY IPE at the London School of Economics and Politics, suggests that IPE repre- sents a return to the idea that up until the twentieth century was, to give her words", a vast, wide open range where anyone interested in the behaviour of men and women in society could roam just as freely as the deer and the antelope. There were no fences or boundary-posts to confine the historians to history, the economists to economics. Political scientists had no exclusive right to write about politics, nor sociologists to writ about social relations".43 One way to understand the nature of IPE is to analyse its name. First IPE is international, meaning that it deals with issues that cross national borders and with relations between and among nation-states. Second, IPE involves a political dimension in that it usually focuses on the use of state power to make decisions about who gets what, and how in society. Politics-among other things ÿ is a process of collective choice, drawing in competing and often conflicting interests and values of different actors, including individuals, and nation-states, on a bilateral and multilateral basis, conflicts between states and international organizations, regional al iances, nongovernmental organiza- tions, and transnational corporations (TNCs). Third, IPE is about the econo- my or economics, which means that it deals with how scarce resources are allocated for different uses and distributed among individuals, groups, and nation-states through the market process. Economic analysis focuses less on issues of state power and national interests and more on issues of income, wealth, and individual interests. The social forces associated with class, et- hnic, religious, and other cultural groups, along with their different beliefs and values, must also be considered in the IPE analytical formula.
IPE is important ÿ it makes front-pages every day because many events affect us all as citizens of the world. IPE is useful ÿ public and private employers increasingly seek out individuals who can think broadly and critically. Real problems require solutions and policies that reflect a comprehensive analysis and understanding of complex and dynamic systems. IPE is inherently interes- ting ÿ IPE is all about life and the many actions and interactions that connect human beings around the globe. The world we live in is changing rapidly. The 43. Susan Strange, ed., Paths to International Political Economy (London: George Chapter One: WHAT IS INTERNATIONAL POLITICAL ECONOMY ÿ IPE? 43 best way to understand some of these changes and cope with some of their consequences is through the wide-open search for knowledge and understan- ding that defines international political economy.
Throughout the1990s a good number of books that focused on globali- zation popularized the idea that ÿfor good or for badÿ through major eco- nomic and technological developments, people the world over were being interconnected in new, different, and profound ways. These changes in the international economy in the 1990s included new production technologies, new communication systems, and unexpected amounts of money moving quite freely throughout the international political economy in search of invest- ment opportunities. Along with expected economic growth came the popula- rity of Western products, including electronic goods, computers, and weapons technology, along with music, clothing, and food. In the late 1990s many began o protest against many of the neoliberal economic policies promoted by the World Trade Organisation (WTO), the International Monetary Fund (IMF), and the World Bank. Some of the critics charged the United States and other industrialized nations that supported globalization with fostering a new form of imperialism in developing nations. One aspect of globalization -ad- vanced communication systems- made it possible for some of the passengers on hijacked planes to be notified on their cell phones by friends and loved ones Almost immediately following 9/11, television news channels carried foo- tage of the noted terrorist Osama bin Laden. He was identified as the leader of al-Quaeda, a transnational terrorist network he had created and funded. The day after the attack on the United States, NATO allies adopted Article 5 of theNATO charter for the first time, making an attack on one an attack on all.
For some people, Balaam, D.N. and Veseth M. argue, the problems of the world could no longer be viewed merely in terms of "foreign" or external affairs. More people than ever realized they were connected to developments in the international economy and to a new style of international terrorism.
Thomas Friedman, a New York Times columnist has the following to say", The world has become an increasingly interwoven place, and today, whether you are a company or a country, your threats and opportunities increasingly derive from who you are connected to. We have gone from an international system built around division and walls to a system increasingly built around 44. Thomas L. Friedman, Longitudes and Attitudes: Exploring the World After September 11 (New York:Farrar, Straus & Giroux, 2002), p. 4.
44 Part One: PERSPECTIVES OF INTERNATIONAL POLITICAL ECONOMY If there are lessons to be learned from the events of 9/11, one of them surely is that we now live, and for a long time have been living, in a worldwi- de web of sorts- and not of just the computer type, but a web of international and in some cases global systems, structures, and networks to be referred to further on in the educational materials. Today, we all confront a tightly interconnected, thoroughly multidimensional world. It is a world that begs for the sort of complex and multidimensional analytical frameworks thatIPE provides.
Disciplinary Explanations of Globalisation and 9/11 International Economics-Many experts are still debating the extent to which the same fluid system that made international investment possible on a massi- ve scale ÿsometimes attributed to economic globalizationÿ also permitted organized crime and terrorist groups to finance their operations efficiently.
Moreover, many developing countries, feel threatened by globalization. De- mocracy is not a universally desired political system.
International relations ÿ Many sets of bilateral and multilateral relations between the United States and other countries were affected. For example, the United States has since tightened immigration rules in an attempt to prevent terrorists from entering the country secretly, an action that divided the U.S.
populace and generated tensions with Mexico.
Sociology ÿ a sociologist might be concerned with how matters of class, race, ethnicity, and gender enter into the issues of globalization and terrorism.
Anthropology ÿ an anthropologist might view conflict as a clash of cultu- res or cultural values, not so much as a result of tensions between different History ÿ culture and history matter, and an attempt by the West to liberalise or modernize Islamic peoples is necessarily problematic.
Each of these disciplinary specialties makes an important but also in- complete contribution to our understanding of global events. Because IPE draws on elements of all these fields, it has the potential to provide a more complete and meaningful analysis. An understanding of issues such as globa- lization and 9/11 necessitates that we use a variety of approaches that draw together methods and insights from several different disciplinary perspectives and from al four levels of analysis-individual, state, and international and Chapter One: WHAT IS INTERNATIONAL POLITICAL ECONOMY ÿ IPE? 45 Analytical Building Blocks: States, Markets, and Societies A strict distinction between the state, the market, and society is quite arbitrary and imposed by disciplinary traditions. It is not always clear where the boun- dary lines between these analytical, but very real, entities are drawn, which is reflected in the three perspectives that dominate IPE studies outlined earlier.
One political value that both states and markets value strongly is security.
Theorists view the international system as exhibiting a potential state of an- archy or war at any time, given their differences in strength and weaknesses and their conflicting interests and values. We will later on examine some of the instruments such as military weapons and wealth, that states often use to help secure themselves. Some states, like some individuals, feel more insecure than others. State officials will provide their farmers with subsidy payments to not produce as many commodities, store them, or help them export them. These subsidies, however, create problems in international food markets, generating conflict between states and lessening security for farmers who face cutbacks in Realist ÿ type international relations experts like to focus on how states "allocate and distribute power". The classical realist Hans Morgenthau defi- ned power as the ability to control the minds and actions of others. Susan Strange calls this relational power, or the ability of one actor to get another Structural power45, is what S.Strange defines as "the power to shape and determine the structures of the global political economy within which other states, their political institutions, their economic enterprises and (not least) their scientists and other professional people have to operate".
Still another way to think about power is the distinction Joseph Nye Hard power refers to the application of military force and economic instruments to compel, coerce, influence, or persuade enemies, oppo- Soft power incorporates the influence of culture, beliefs, values, and ideals and is less direct but perhaps more effective than hard power.
45. See Strange, States and Markets, pp. 24-25.
46. Joseph Nye, Soft Power: The Means of Success in World Politics, New York: 46 Part One: PERSPECTIVES OF INTERNATIONAL POLITICAL ECONOMY The EU, is not a single nation-state but a supranational organization of nation-states that "pools" some elements of sovereignty around a number of According to realists - IOs ÿInternational Organisationsÿ are the crea- tion of nation-states and, at their whim, serve their purposes. Most I0s, such as the United Nations, the North Atlantic Treaty Orgnisation (NATO) , the World Health Organisation, and a number of economic organizations inclu- ding the WTO, IMF, and World Bank, do not have much authority beyond what member states grant them. On the other hand, many idealists and poli- tical liberals look to IOs to gradually acquire more authority as they accom- plish institutional objectives by promoting cooperation between nation-states, and between nation-states and other actors. Likewise, as IOs benefit them member states will be willing to grant them more decision-making authority.
NGOs are perhaps the fastest- growing group of actors in the international political economy today. Their ranks include the Red Cross and Medecins Sans Frontieres, environmental organizations such as Green peace, and a host of other humanitarian, development, and human-rights-oriented private A value many people (should)strongly hold that is reflected in market activity is economic efficiency ÿ the ability to use and distribute resources (and hence power)effectively and with little waste. In effect, individual consumer purcha- ses and sales end up coordinating or directing society to produce the right amount of what people need and want. In many countries the state is often the biggest buyer of goods and services ÿ military weapons, police, and other services. It also supplies the economy with educated people and tax monies for highway infrastructure and controls the banking system. The market should play a large role in a decentralized decision ÿ making process. Yet, many neo- liberals decry the more usual situation in which states do interfere in the In his influential book, The Political Economy of International Relations Robert Gilpin suggests that, theoretically (and practically as well), open mar- kets and free trade (the absence of protection for certain groups)creates a dilemma for the state. According to Gilpin ". the tendency of government is to restrict, to channel, and to make economic activities serve the perceived Chapter One: WHAT IS INTERNATIONAL POLITICAL ECONOMY ÿ IPE? 47 interests of the state and of powerful groups within it. The logic of the market is to locate economic activities where they are most productive and profitable; the logic of the state is to capture and control the process of economic growth While Gilpin stresses the conflicting goals between states and markets, we could go one step further and argue that, by definition, markets exist within some form of political arrangement or bargain whereby states or some other form of political unit helps maintain their existence and ultimately decides their primary function, whether it be which class interests they support most- the structural focus-, how "open" they will be when it comes to trade policy or the extent to which they will be used as some kind of weapon or strategic instrument. In other words, markets do not exist in a political, or for that matter, social vacuum. Modern capitalist systems require an effective legal system to enforce contracts related to purchased goods and deliveries. Aside from the need for national defense, Adam Smith recognized that markets would not work well without state establishment and maintenance of a com- mon standard by which money is valued.
An issue that concerned the noted economist J. Maynard Keynes was the equity of fairness, which markets do not guarantee. In many nations, people prefer more state control or regulation over market activity in an effort to guide outcomes in directions that favour ÿ or disfavour certain people or groups. In "command economies" such as the former Soviet Union before 1989, for example, the state tried to make nearly all allocation and distribu- tion choices based on the leadership's notion of society's and the national interest ÿ which included anti-capitalism. In most cases, markets are another tool that states use to achieve an array of political goals and objectives.
Society adds another element of tension to the state, market, and society mix, because different societal groups usually want to preserve and promote the history, culture, and values of their social system. It may take a good deal of money and effort to preserve what one writer refers to as jihad in the face of 47. Robert Gilpin, The Political Economy of International Relations, Princeton, NJ: Princeton University Press, 1987, p. 8 (this is the definition used by him).
48 Part One: PERSPECTIVES OF INTERNATIONAL POLITICAL ECONOMY globalization (McWorld)and its leveling effect on society.48 There are usually many different social groups within a state, such as tribes, clans, and ethnic or other types of communities whose borders often cut across national bounda- ries. Even if academics and political officials tend to fold these groups into one nation-state or another, we need to account for cases such as Iraq, Iran, and many other Middle Eastern nation-states, for example, where tensions be- tween different religious groups often play a major role in shaping social, political, and economic behaviour, as well as the relationship of these states Lindblom suggests that the economy is actually nothing more than a system for coordinating social behaviour.
Market systems link people and their different values and interests with one another when they make products better, cheaper, or more attractive to people in other nations. Relatively unregulated markets can perform a social "coordinating without a coordinator" function, whereas, in more authorita- rian systems, markets serve as a "cruel and harsh coordinator".
Playing off of Gilpin's tension between the state and market, Lindblom49 suggests that the market is like a dance with an orchestra (the state). The standards used to to judge the effectiveness or efficiency of markets and mar- ket systems always reflect the dominant ideas about society's values and be- liefs. Markets are a force, but not one that is easily separated from social and political forces that give them purpose and provide them with different func- tions. What is interesting are the patterns of interaction between the state, society, and markets that change over time and that shape local, national, and international institutions as well as individual behaviour patterns in dyna- mic ways. At times the market may dominate more than the state or society, resulting in a shifting configuration of group and actor interests and values.
This seems to have been the pattern of the 1990s when globalization became To recapitulate, states, markets, and society seek different goals (such as security, efficiency, and the preservation of culture), employ different means (decentralized markets and voluntary bargains versus collective action and force), and reflect different values (justice, peace, equity, fairness). For many political, economic, and social reasons, and despite the popularity of neo- liberal economic policies that would minimize the role of the state, in the international political economy at present, the state continues to play an im- 48. Benjamin Barber, Jihad vs. Mc World, New York: Ballentine Books, 1995.
49. Lindblom, Market System Ascendant, p. 14.
Chapter One: WHAT IS INTERNATIONAL POLITICAL ECONOMY ÿ IPE? 49 portant, and some argue vital, role in the economy, depending on economic conditions but also on society's demands and needs. Some state functions help the national and international market systems work efficiently, whereas others The most important dimensions of IPE, are 1. Three analytical perspectives: mercantilism, liberalism, and structura- 2. Four levels of analysis: the individual, the state, the international 3. Four international structures: security, production, finance, and 1. The Three Analytical PerspectivesMercantilism ÿ or economic nationalism, is the IPE perspective most closely associated with political science, especially the political philosophy of realism, which looks at IPE issues mainly in terms of national interests and state strug- Libealism ÿ especially economic liberalism-is rooted in a focus on IPE issues mainly in terms of individual interests. Economic or neo-liberalism is most closely associated with the study of markets and the behaviour of diffe- rent actors associated with them. Many liberal values and ideas are the ideo- logical foundation behind globalism and the globalization campaign.
Structuralism ÿ rooted in Marxist analysis but not limited to it, looks at IPE issues mainly in terms of how classes, class interests, and ultimately all of society are shaped by the dominant economic structures of society. Structura- lism is most closely associated with the methods of analysis employed by many 2. The Four Levels of AnalysisWhen it comes to explaining issues, most IPE problems involve all four diffe- 50 Part One: PERSPECTIVES OF INTERNATIONAL POLITICAL ECONOMY what is increasingly recognized as a global level 3. The Four Global StructuresThe institutions, arrangements, and "rules of the game" that govern the beha- viour of states and markets in the international political economy can be an- alyzed as four networks, structures or bargains that result in the production, exchange, and distribution of global wealth and power. They can take many forms, including formal agreements that are signed, ratified, and enforced.
Other bargains are merely conventions, understandings, or rules of thumb.
The four IPE structures are the following.
iv. The Knowledge and Technology Structure The examples of globalization and 9/11 used in this chapter illustrate the importance of IPE both of which have made millions of people realize that the world has changed and is changing around them. The very foundations of wealth, power, and security are revealed to be much more delicate and more important than we had imagined them to be especially since the end of the Cold War. Toward the goal of explaining and understanding these and a host of other issues covered in these materials, reference has been made to three approaches or analytical perspectives, four levels of analysis, and four interna- tional structures that students can use to analyse different problems and is- 1. Pick a recent news article that focuses on some international or global problem, and give examples of how and where state, market, and socie- ty interact and at times conflict with one another. How hard is it to determine the boundaries between the state, market, and society in this Chapter One: WHAT IS INTERNATIONAL POLITICAL ECONOMY ÿ IPE? 51 2. How do states, markets, and society differ in terms of their values and goals and in the means different actors use to achieve goals related to each of them? Discuss the question both in general and with respect to the current event topic in the previous question.
3. In your view, which matters most in IPE, the state, the market, or society? Explain with reference to the reading.
4. Find a newspaper article and outline some elements in it that fit into any of the four IPE structures. If there is more than one, explain their connec- 5. Find a newspaper article and use the levels of analysis to explain the perspective from which the author explains the problem or issue under study. What can we conclude about understanding this problem from Suggested links to sites on the World Wide Web which can provide informa- tion of greater depth for the reader. Internet addresses change frequently, however, so do not be discouraged if some of the addresses you find here are The IPE Network ÿ sponsored by the IPE section of the International Studies Association. http://csf.Colorado.edu/ipe The Economist, a British weekly magazine that is required reading for The Financial Times, a British daily newspaper in which IPE issues are discussed and debated: http://news.ft.com 52 Part One: PERSPECTIVES OF INTERNATIONAL POLITICAL ECONOMY

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