IPE Framing horizontal questions

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					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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posted:8/29/2012
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