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IPE-What is IPE

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					Linda Young
POLS 400
International Political Economy
Wilson Hall – Room 1122




            What is IPE?



                                  Fall 2005
Politics and Economics

Wallerstein: disciplines due to historical
developments – shape their methodology

Modernity defined by a division between
the market, the state, and civil society
– Political Science, Sociology and Economics
– Spheres dominated by laws deduced by
  empirical analysis – different from history
                                                                  Immanuel Wallerstein




              Linda Young, POLS 400, International Political Economy
History of the Term
      Adam Smith: PE was a branch of the
      science of a legislator or statesman…



      John Stuart Mill: the science of how
      nations get rich



      Alfred Marshall: used economics not
      political economy – denied importance of
      politics




        Linda Young, POLS 400, International Political Economy
Questions generated by the interactions
of economic and political affairs (Gilpin)
 The interaction of markets and powerful actors
 Because an explanation from one viewpoint is narrow
 1992 study of Japan and East and SE Asia
   – Interdisciplinary
       • Questions determined the answers
                                                                Japan
   – Political Scientists
       • Looked at trade/investment of Japanese firms – and
         development assistance
       • Concluded that Japan trying to create sphere of influence
       • Pacific Asian economy as hierarchical
   – Economists
       • Trade flows and other measurable data
       • Concluded events and patterns could be explained by the
         market
       • No evidence of Japan trying to create a sphere of influence
Differences
Political scientists: economy as having powerful economic
and state actors

Economists: defined the economy in terms of economic forces
– No conscious strategy on the part of states or multinational
  corporations (MNCs)
– Explainable due to economic forces – investment due to
  appreciation of the Yen

Differences reflected their assumptions

Can be complimentary

                                                                      MNCs


             Linda Young, POLS 400, International Political Economy
International Political Economy

Susan Strange: IPE concerns the social,
political and economic arrangements affecting
the global systems of production, exchange
and distribution, and the mix of values reflected
therein. Those arrangements are not divinely
ordained, nor are they the outcome of blind chance.
Rather they are the result of human decisions taken in the
context of manmade institutions and sets of self-set rules
and customs.




            Linda Young, POLS 400, International Political Economy
Definitions
States: political institutions of the modern nation state, a geographic
unit with a coherent and autonomous system of government

Institutions: debate between the economic and political perspective
 – North: institutions result from intentional (and rational) actions by
   actors to maximize their economic interests
 – Political science places more emphasis on irrational, political (including
   power relationships) and historical factors shaping institutions

Markets: economic institutions of modern capitalism – a force that
motives human behavior – to produce and supply goods or to seek
out goods and jobs

Society embeds both the State and the Market
Tension between the State and the Market


                 Linda Young, POLS 400, International Political Economy
Tension between the State and the Market
  Example is the film and news industry

  States want control over entry – political motivations

  Market wants to export US movies for example

  Problem for some countries




             Linda Young, POLS 400, International Political Economy
Political Science
Distribution of gains from exchange
– Between actors in an economy
– Between states

States, MNCs and powerful actors intervene to
shape the nature of international regimes
– Design and functioning of institutions
– To advance their political and economic
   interests




         Linda Young, POLS 400, International Political Economy
Economics
 Concerned with efficiency
   – Who considers income inequality to be a problem?

 Gains of mutual exchange

 Regard markets as self-regulating and immune from
  politics

 Unconcerned with institutions

 Economics assumes that exchange occurs because it
  benefits all parties
   – Distributional effects (welfare analysis)




          Linda Young, POLS 400, International Political Economy
Economists Disagree
Over the relative importance of market failure and government
failure

 Market failure: when imperfections in the market mean
  that the market will not deliver its promise (its theoretical
  beneficial results)
   – Justification for government intervention
 Government failure: some economists studying
  institutions take a view that public officials are not
  disinterested – serve their own interests – public choice
   – Justification for limiting government




            Linda Young, POLS 400, International Political Economy
What's More Important?
 Positive gains or relative gains?
 Grieco: states care about relative gains
 Cooperation more likely if positive gains are
  enough
 Examples? Trade negotiations                                        Joseph Grieco




             Linda Young, POLS 400, International Political Economy
Sovereignty and Interdependence

States want both – they conflict

Gilpin says “the logic of the market is to put
more and more aspects of society into the
price mechanism”
– Examples: social security, water

Trade rules: how do they increasingly                                Robert Gilpin
impinge on national autonomy?
– Biotechnology
– WTP dispute settlement




            Linda Young, POLS 400, International Political Economy
States and Markets
States: want to control economic activity (and accumulation of
capital) and its gains for their own ends


Market: locate activities where profitable


World systems analysis: state developed and used to facilitate
market transactions in the capitalist world economy




              Linda Young, POLS 400, International Political Economy
Political Economy
 Assumes the market is embedded in a larger framework
   – Market structured by social and political environment
      • What is the purpose of economic activity – to benefit
        individual consumers, or to promote certain goals of
        social welfare, or to maximize the power of the state?
        (example?)
   – Neoclassical economists assert that the purpose of
     economic activity is to satisfy consumer’s desires, BUT
   – Applies to the US more than to Japan and Asia
      • Priority on social cohesion
      • Prevalence of welfare state in France

 Dani Rodrik’s evaluation is that successful
  states innovate with economic and social
  policy in unexpected ways
   – Diversity needs to be preserved
                                                                       Dani Rodrik
              Linda Young, POLS 400, International Political Economy
Dimensions of International Political Economy

Some think of IPE as the study of multidimensional bargains
between powerful actors and states (bargains can take the
form of agreements, rules, conventions)


Levels of analysis: individual, state and international



 Global structures (such as the rules governing
 international trade, and international finance)




              Linda Young, POLS 400, International Political Economy
Dimensions of International Political Economy
con’t

  Perspectives and Values:
  – Filters through which we interpret the world
  – Mercantilism: economic nationalism – rooted in political
    realism (like Gilpin) which evaluates IPE issues in terms
    of the national interest
  – Liberalism: evaluates IPE interests largely through the
    perspective of the individual, and an emphasis on free
    markets – associated with the study of economics
  – Structuralism: rooted in Marxism, and evaluates the
    world economy as a capitalist one with classes of nations
    and people within nations – society structured by
    dominant economic forces



              Linda Young, POLS 400, International Political Economy