It works Chapter 9 International Political Economy IPE International Political by MikeJenny


									            Chapter 9
International Political Economy (IPE)
International Political Economy (IPE)
• Study of interrelationship between politics and economics,
  between states and markets
   – How politics can be used to achieve economic goals; how economic
     instruments are used for political purposes
   – Political bargaining over economic issues within and between states
• Increasingly important (facilitated by new technologies)
   – Growing transactions in trade, investment, lending among states
     (economic globalization = broadening, thickening of economic ties
     among different actors -- states, international organizations, NGOs,
     multinational corporations, and individuals)
   – Expectation that governments are responsible for economic policies
   – Outcomes increasingly transparent to individuals and groups; more
     controversial, politicized
                Economic Liberalism
• Dominant paradigm in post-WWII era (aka, Neoliberalism,
  Washington Consensus)
   – Origins in Adam Smith, Wealth of Nations (1776)
• Individual level
   – Humans are rational, seek ways to maximize self-interest
• State level
   – Markets develop to produce, distribute, consume goods; market
     efficiency leads to improved welfare
   – State provides basic order; institutions facilitate free flow of trade
     and exchange; market efficiency requires separation of economics
     and politics; the free market, free of government interference
• International level
   – Free flow of commerce, absence of state intervention allows for
     efficient allocation of resources by market; increasing
     interdependence leads to greater economic development based on
     comparative advantage; international wealth maximized; MNCs are
     engines of growth
      International Institutions: WB
• Bretton Woods institutions (1944); IGOs set up at end of
  – World Bank (WB), International Monetary Fund (IMF), General
    Agreement on Tariffs and Trade (GATT)  World Trade
    Organization (WTO)
• World Bank
  – Initially geared toward reconstruction of Europe following WWII;
    1950s shifted focus to development
  – Loans money to states for economic development projects
  – 1950s-1960s, large infrastructure projects
  – 1970s, health, education, and housing
  – 1990s, sustainable development
  – Consistent advocate of economic liberalism, structural adjustment
    policies (SAPs): privatization, trade liberalization, foreign direct
    investment, government deregulation, tax reform
                   IMF, GATT WTO
• International Monetary Fund (IMF)
  – Initially aimed at stabilizing exchange rates through short-term loans
    to states with balance-of-payments difficulties
  – With end of gold standard, shifted to become short-term and long
    term lender (not unlike WB)
  – Two key issues: debt, transition
  – Like WB, advocate of SAPs (see figure 9.2)
• General Agreement on Tariffs and Trade (GATT)
  –   Trade liberalization
  –   Non discrimination (treat all members as if most-favored)
  –   Exclusive use of tariffs
  –   Preferential access in developed markets for South
  –   “national treatment” of foreign enterprises (MNCs)
• Morphed into World Trade Organization (WTO)
  – Forum for trade negotiations, review, dispute settlement, and
  – Criticized as too closely aligned with North; degrading human
    welfare, environmental and labor standards
• Mercantilism
  – 15th-18th century European states pursued economic wealth;
    encouraged exports over imports, industrialization over agriculture;
    protected domestic production (protectionism); intervened in trade
    to promote employment
  – Surplus balance of payments thought to be critical to protect
    national interest
• Statism
  – Modern version of mercantilism; emphasizes role of state,
    subordination of economic activities to state building
  – Economic policies should increase state power
  – Examples of modern statist regimes: Japan, Singapore, South
    Korea, Taiwan, Thailand
     • Used state power to promote industrial growth; singled out
       industries for tax advantages; promoted exports over imports;
       encouraged education and technological innovation to become
• Radicalism/Marxist/Dependency/World System
  – At one time, advocated planned domestic economies and
    rapid industrialization (USSR)
  – Post-WWII, import substitution industrialization (ISI)
    strategies and statist development
  – United in advocating restructuring of international political
     • Economic Liberalism and activities of MNCs put LDCs in state of
       permanent dependency
     • MNCs exploit working class and developing countries; co-opt
       state decision-makers
     • Capitalist system and economic liberalism responsible for
       inequalities within and between states
     • WB, IMF, WTO perpetuate dominance of North and global
       inequality; agents of dependency, exploitation, imperialism
     • Distribution of international and economic power must be altered
       if disadvantaged position of developing countries is to be
                Global Inequalities
• Major differences in economic development between North
  and South (see Table 9.1, 266)
• New International Economic Order (NIEO) (1974)
  – Call by South for global economic change (in terms of trade,
    establishment of common fund, regulation of MNCs, restructuring of
    debt, increasing foreign aid, change in structure of WB and IMF)
  – Resulted in minor gains (preferential access to European markets;
    more favorable terms for commodity price stabilization plans; some
    rescheduling of debts)
  – North refused to negotiate on major issues (common fund, MNC
    regulation, debt cancellation, institutional reforms)
• Millennium Development Goals (MDGs)
  – UN’s goals with regard to poverty reduction, better education,
    improved health, environmental sustainability, and global
  – Asia and Pacific appear on track; Sub-Saharan Africa not on track
    to meet goals
Human Development Index, 2002

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