IPE: Framing horizontal questions • WHY? What is the driving force in the global economy? In this case? Market competition - Collective search for efficiency national ambitions and interstate rivalries technology …OR Ideas and values •WHO? Who adjusts? Importer/ exporters My constituency / your constituency Low skill labor in the North/in the South EU / candidate countries •FOR WHOM? In Whose Interest? Great power; Collective; those in need International Political Economy Caveat emptor (Ce que je crois) -> An actor-centred “good story” -> liberal assumptions: opportunity to cut deals; positive sum game; shared stake in a stable international economic order; governance issues -> realist assumptions: state centric but not exclusive -> outside liberal framework: issues of global justice, issues of identity and norms -> Role of narratives: “Europe as a model” Lecture 2: The Post-War Order and US Hegemony …. And what about Europe? Negotiating at Bretton Woods Imperial system Laisser-faire of preferences ? 1930s •Beggar-thy- •gold standard neighbour •Prevention of crisis •Competitive •Employment devaluations 1945 - United States power: Hegemony Stability “theory” • From Pax Britannica (19th) to Pax Americana (20th) • What is the point of hegemonic power ? • The benign view: - to ensure economic growth and stability (Kindleberger) - to ensure peace and security through a liberal economic order (Gilpin) - to make up for “free riders” Order created by a single power • Marxist variant: - overcome contradictions of capitalism through imperialism; Gramscian unity of structure and superstructure – power hidden under ideological consensus: legitimacy of dominance (“not imperialism” ) Hegemony Stability “theory” • What are the sources of hegemonic power? 1. Control over markets: maintains an open market for other countries’ surpluses; discretion 2. Control over sources of capital: outflows for investment; credits to friends 3. Control over raw materials 4. Competitive superiority: technological and organisational superiority 5. Stable national currency supported by facilities in times of crisis Indicators: share of world trade; monetary reserve; production of raw material… Military power as background condition Hegemonic leadership: Hegemony Stability “theory” refined • How does the hegemon transfer his resources into rules for the system as a whole? – Leadership (willingness to lead) activates the link between power and outcome. – Domestic politics and other (dis)incentives – Hegemony as a situation in which “one state is powerful enough to maintain the essential rules governing interstate relations and willing to do so” (Keohane and Nye) • Analyse deference of secondary states: ST and LT benefits vs ST costs for Hegemon; elites vs countries. Hegemonic Stability theory revisited • 1. Power and interests – HST – Weak version: necessary but not sufficient – Alternatives: not necessary at all! • 2. The role of ideas, shared belief and ideological consensus • 3. The role of institutions Negotiating at Bretton Woods Imperial system Laisser-faire of preferences ? Orthodoxy The Bretton Woods compromise: Hegemonic stability and embedded liberalism • Broad forces shaping settlement: - System congenial to US interests; breaks down German, Japanese and UK barriers - Broad outline; openness • Convergence of interests and their redefinition – range of post war orders possible – Role of expert community; change in thinking; Keynesian revolution The Bretton Woods compromise: (cd) • 3 beliefs: 1) Need currency stability and convertibility – adjustment subject to international agreement 2) International stabilization fund to assist governments in the short term (creditor/debitors?) 3) Managed world economy through collaboration among governments and mutual supervision (what is legitimate?) A complementary explanation: Embedded Liberalism • “The essence of the compromise of embedded liberalism was that post war economic reconstruction – unlike economic liberalism of the 1930s, was aimed to be multilateral in character and unlike unfettered liberalism of the gold standard and free trade, post-war multilateralism would be predicated upon domestic interventionism to ensure attainment of national objectives” (Ruggie, 1982) Embedded Liberalism : variants on a theme • Reconcile openness with the commitment to full employment – E.g. contraction and unemployment are not satisfactory solutions for deficit countries – Keynes: management of currency must not undermine domestic expansionary policies – Unique blend of laisser-faire and interventionism • social welfare must dictate international economic plans not the other way around. • Not liberal with domestic cheating- Internationalism based on a sense of shared purpose : ”political power represents a fusion of power with social purpose” • Differentiated commitment among countries yet Negotiating at Bretton Woods Imperial system of preferences Keynes 1 ? Laisser-faire 1930s Openness with convertibility… White / US …But safeguards (Double screen to cushion domestic economy): Keynes 2 / Europe 1. Assistance in case of BoP deficit (IMF) 2. Adjustment of exchange rate – who adjusts? No : international currency; Tax excess reserves of creditors; Exchange control Hegemonic Stability “theory” Creating the GATT (1947) • Trade liberalization –non discrimination: 1) National treatment ; 2) most favored nation (MFN) => Multilateralism NOT free trade • BUT safeguards, exemptions, exceptions to protect social policies: (Wide range of responses to protectionist pressures) – Progressive liberalisation – Domestic industry injury – Surge of imports and BoP crisis - Employment • Discrimination authorised: – superior public policy goals such as the protection of human life or health, the conservation of exhaustible natural resources, or the protection of public morals – - regional preferences admitted What Next? 1950s to 1980s: Hegemonic Stability “theory” revisted • Presence of Hegemon => order-stability-wealth (1) (3) (2) -> What can we observe? (in the 70s-80s) 1) Declining hegemony? 2) Declining “order”? Chaos? 3) Causal relationship? ( Absence of Hegemon =>….instability?) After Hegemony? (Keohane) The diagnosis of the 1980s Assumption 1: Hegemonic decline? Don’t panic! Post hegemonic cooperation is possible. 1. Supply and demand: May be necessary to supply international order but then demand quicks in 2. Creation of the international order vs ……….Maintenance (life of their own; congruence of social purpose) => international regimes : principles, rules and procedures around which expectations converge => The function of regimes: information; reduce costs of agreement; coping with uncertainty; diffuse reciprocity After Hegemony? The diagnosis of the 1980s Assumption 2: significant disorder? - Post 1971 inconvertibility of the dollar (inevitable liquidity requirements) - New protectionism - Adjustement - Debt crisis - In fact consistent with embedded liberalism After Hegemony? The role of international regimes Assumption 3: Causal relation H=>order – 1) liberal hegemon – 2) influential hegemon – 3) responsible hegemon Hegemonic Stability “theory” : Change in the 1970s? 80s? 90s? Hegemony? Yes No Continued hegemonic Hegemony not necessary stability Yes Q: other causes? -> International Regimes Stability? (“After Hegemony”) Hegemony not sufficient Hegemonic decline No -> Hegemony without => New protectionism; leadership regionalism The long view: US vs EU • Long term growth of GDP/cap: the post war anomaly The long view: US vs EU US vs EU: The long view 2004 trade pop GDP Europe: 18% 450 m 25% US: 15% 291 m 21% (?) US vs EU: Western Hegemony… Or Rival Projects?
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