Foundations In The Study Of Global Political Economy.pdf

FOUNDATIONS IN THE STUDY OF

GLOBAL POLITICAL ECONOMY

Questions What is the role of domestic actors? What are the nature and purpose of international economic relations? What is the relationship between politics and economics? What are the causes and effects of globalization?

Introduction IPE has been marked by a growing diversity of theories, and some critics point to our failure to develop an all-embracing theory to explain events. However, the existence of different theoretical perspectives should not be viewed as a weakness (Cohn, Theodore H. 2012).

When IPE emerged as a major field of study in the 1970s, the three dominant perspectives were realism (or economic nationalism), liberalism, and Marxism, and IPE theorists tended to view them as separate “ideologies” (Gilpin, 1987; Cohn, 2012).

However, hybrid theories and approaches such as regime theory, hegemonic stability theory, and constructivism are also linked with more than one perspective. Furthermore, the literature examining the relationship between domestic institutions and IPE does not fit easily into a single perspective.

I. Realist Perspective Realism emphasizes power and the national interest, and directs more attention to political security than to economic issues. Realism is the oldest school of thought in international relations (IR)  Classical realism was the dominant approach to IR for so long that it “provides a good starting point and base line for comparison with competing models.”  Realism is an important IPE perspective today because of debates about the decline of U.S. economic hegemony vis-à-vis emerging powers such as China, and about the relative merits of government involvement in the market.

II. Realist Perspective “Gold alone will not procure good soldiers, but good soldiers will always procure gold.” (Machiavelli)

“war is a matter not so much of arms as of money, which makes arms of use.” (Thucydides)

Basic Principles of The Realist Perspective

State as the principal actor  National Sovereignty

The Nature and Purpose of International Economic Relations In a self-help system; a security dilemma results because the actions a state takes to bolster its security may increase the fear and insecurity of others; thus, even if a state arms itself only for defensive purposes, this may raise fears and contribute to an arms race (Cohn, 2012). Even if two states are “gaining absolutely in wealth, in political terms it is the effect of these gains on relative power positions which is of primary importance.” (Gilpin, 1975; Waltz, 1979)

The Nature and Purpose of International Economic Relations

Relative Gains

Zero-sum game

Redistribution of power within the capitalist system

The Relationship Between Politics and Economics Realists give priority to politics over economics

“The economy as a creature of the state.”

Realists also believe that the distribution of political power has a major effect on international economic relations.

The Causes and Effects of Globalization Realists see globalization mainly as an economic process that does not affect the basic international political structure in which states are predominant. (Cohn, 2012)

No evidence that globalization has systematically undermined state control. . . . Transnational activities have challenged state control in some areas, but these challenges are not manifestly more problematic than in the past. (Krasner, Stephen D. 1999)

The Mercantilists Adam Smith, the eighteenth-century liberal economist and philosopher, used the term mercantilism to refer to economic thought and practice that prevailed in Europe from about 1500 to 1750. (Baldwin, David, 1985) Mercantilists believed that a state could use its gold and silver to increase its power by building up its armed forces, hiring mercenaries, and influencing its enemies and allies. viewed IR as a zero-sum game, in which relative gains were more important than absolute gains.

States therefore took all necessary measures to accumulate gold by increasing their exports and decreasing their imports. Because it is impossible for all states to have a balance-of-trade surplus, mercantilists

The Mercantilists Mercantilism was a preindustrial doctrine, and the Industrial Revolution gave new impetus to realists who viewed industrialization as essential for a state’s military power, security, and economic self sufficiency. (Cohn, 2012) Foremost among the realist thinkers at this time were Alexander Hamilton (1755–1804), the first U.S. secretary of the treasury, and Friedrich List (1789–1846), a German civil servant, professor, and politician who was imprisoned and exiled for his dissident political views.

Hamilton’s 1791 Report on the Subject of Manufactures “contains the intellectual origins of modern economic nationalism and the classic defense of economic protectionism.”

Hegemonic Stability Theory Central Idea: Hegemonic stability theory asserts that the international economic system is more likely to be open and stable when a dominant or hegemonic state is willing and able to provide leadership, and when most other major states view the hegemon’s policies as relatively beneficial (Cohn, 2012).  To be a Hegemon, a state must have three attributes: 

  



The Capability to enforce the rules of the system; The Will to do so; A Commitment to a system which is perceived as mutually beneficial to the major states.

Capability rests upon three attributes:   

A large, growing economy; Dominance in a leading technological or economic sector; Political power backed up by projective military power.

What is Hegemony? 

Realists define the term hegemony as an extremely unequal distribution of power, in which “a single powerful state controls or dominates the lesser states in the [international] system.” (Cohn, 2012)

What Are the Strategies and Motives of Hegemonic States?

Benevolent

Mix-Models

Coercive

The Historical Record Portugal 1494 to 1580 (end of Italian Wars to Spanish invasion of Portugal) Based on Portugal's dominance in navigation - Hegemonic pretender: Spain Holland 1580 to 1688 (1579 Treaty of Utrecht marks the foundation of the Dutch Republic to William of Orange's arrival in England) Based on Dutch control of credit and money -Hegemonic pretender: England

Britain 1688 to 1792 (Glorious Revolution to Napoleonic Wars) Based on British textiles and command of the High Seas - Hegemonic pretender: France

Britain 1815 to 1914 (Congress of Vienna to World War I) Based on British industrial supremacy and railroads - Hegemonic pretender: Germany

United States 1945 to 1971 Based on Petroleum and the Internal Combustion Engine. - Hegemonic pretender: the USSR

I. The Liberal Perspective Liberalism is the most influential perspective in IPE. The term liberal is used differently in IPE and in U.S. politics. Whereas U.S. conservatives support free markets and minimal government intervention, U.S. liberals support greater government involvement in the market to prevent inequalities and stimulate growth (Cohn, 2012).

Liberals deal with a wider range of actors and levels of analysis.

II. The Liberal Perspective Orthodox liberals promote “negative freedom,” or freedom of the market to function with minimal interference from the state. Interventionist liberals believe that negative freedom is not sufficient because the market does not always produce widespread benefits; thus, they support some government involvement to promote more equality and justice in a free market economy. Institutional liberals also view some outside involvement as necessary to supplement the market, and they favor strong international institutions such as the WTO, IMF, and World Bank.

Cohn, 2012

Free Trade Government intervention in trade Tariffs, Quotas Non-Tariff Barriers

The Role of The Individual, The State and Societal Groups Liberals see politics in “bottom-up” or pluralist terms, in which individuals and groups seek to achieve their goals through political means. In IPE, liberals therefore give primacy of place to the individual consumer, firm, or entrepreneur. (Moravcsik, Andrew, 1997)

Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society. (Smith, Adam. 1910)

The Relationship Between Politics and Economics Liberals tend to view economics and politics as separate and autonomous spheres of activity.

Orthodox liberals argue that governments should not interfere in economic transactions and that their role should be limited to creating an open environment in which individuals and private firms can freely express their economic preferences.

The state should prevent restraints on competition and provide public goods such as infrastructure (roads and railways) and national defense to facilitate production and transportation.

The Causes and Effects of Globalization “our new international financial regime . . . was not built by politicians, economists, central bankers or by finance ministers. . . . It was built by technology.” (Wriston, Walter. 1988)

Orthodox liberals argue that governments should not interfere in economic transactions and that their role should be limited to creating an open environment in which individuals and private firms can freely express their economic preferences.

Most liberals believe that the state lacks the capacity to deal with many global issues such as climate change, capital mobility, and financial crises.

Liberalism and Institutions Robert Keohane defines institutions as “persistent and connected sets of rules (formal and informal) that prescribe behavioral roles, constrain activity and shape expectations.” (Keohane, 1989)

Interdependence can be defined as “mutual dependence,” in which “there are reciprocal (although not necessarily symmetrical) costly effects of transactions.” (Keohane & Nye, 1989) Liberalist criticize realists for overemphasizing the division between international and domestic politics.

Regime Theory Regime theory first developed from efforts to explain why international interactions are more orderly in some issue areas than in others.

Regimes are “sets of implicit or explicit principles, norms, rules, and decision-making procedures around which actors’ expectations converge in a given area of international relations.” (Krasner, 1983) Regime principles and norms refer to general beliefs and standards of behavior that guide relations in specific areas; for example, principles of the global trade regime include trade liberalization, reciprocity, and nondiscrimination.

LIBERALISM, GLOBAL GOVERNANCE, AND REGIMES Governance refers to formal and informal processes and institutions that organize collective action, and global governance describes formal and informal arrangements that produce a degree of order and collective action above the state in the absence of a global government. (Young, Oran R. 1989)

Global governance studies by contrast assess the degree to which authority is being relocated from states to subnational, transnational, and supranational actors. (Vogler, John. 1999) Global governance by contrast is a more encompassing concept that examines the linkages among issue areas and helps us understand these linkages. Global governance studies are less obsessed with order and cooperation among states and more open to NGO demands for greater equity and justice.

LIBERALISM, GLOBAL GOVERNANCE, AND REGIMES “Global governance is governing, without sovereign authority, relationship that transcend national frontiers. Global governance is doing internationally what governments do at home”. (Finkelstein, 1995)

“...efforts to bring more orderly and reliably responses to social and political issues that go beyond capacities of states to address individually ”. (Weiss, Thomas) “ Global Governance is about the interaction that is required to solve problems that affect more than one state or region when there is no power enforcing compliance”. (Mercury, Gold)

The Critical Perspectives Structuralism has its roots in the ideas of Karl Marx, but not quite the same. The structure in “structuralism” is the global capital system. In structuralism, it acts as an underlying system or order that is the driving force in society (Balaam & Dillman). •

Besides, the structuralist perspective has no single method of analysis or unified set of policy recommendations. Rather it is the site of active, exciting debate that forces us to ask the following important questions:

What are the historical events that created the capitalist structure? How does the global capitalist system operate? How are resources allocated? Is it fair? What comes next and how do we get there?

Feudalism, Capitalism, Socialism -Marx’s Theory of History

2.1 Historical materialism : History is a great, dynamic, evolving creature, determined fundamentally by economic and technological forces.

2.2 Capitalism Karl Marx 1818-1883 --the first great scholar to pioneer a structural approach to political economy. .

2.3 Comparation between neo-marxism and Marxism

> Context: Europe’s cultural, political and economic climate in 19th century.

Historical materialism: History is a great, dynamic, evolving creature, determined fundamentally by economic and technological forces. •

Primitive communism——Slavery——Feudalism——Capitalism ------Socialism

•

Forces of production is the starting point as well as the driving force It defined as the sum total of knowledge and technology contained in society, set the parameters for the whole political-economic system.

•

The key Marxist claim: The change in technology determines the changes in the social system.

•

The agents of change are human beings organized into conflicting social classes.

•

3 objective laws that would destroy capitalism: The law of the falling rate of profit The law of disproportionality (also called the problem of under consumption) The law of concentration (or accumulation of capital).

➢ The course of history is steadily evolving from the one system of political economy (or “mode of production”) to another due to the growing contradiction between the technical forces of production and the social class or property relations in which they develop.

Capitalism It is more than unhappy stop on the road to socialism. It is also a necessary stage, which builds wealth and raises material living standards.

Two roles that capitalism plays: a. It transforms the world and in so doing breaks down feudalism. b. it creates the social and economic foundations for the eventual transition to a “higher” level of social development.

Comparation between neo-marxism and Marxism Neo-marxism VS Marxism

• Neo-Marxists still accept the notion of exploitation, although it has been separated from the labor theory of value. • Most neo-Marxists no longer accepted the claim that capitalism will someday destroy itself and the socialism in not inevitable. • Neo-marxists take the socialism as a possible political choice rather than something imposed on society.

Some Specific Contributions of Marx to Structuralism

1 the definition of Class

2 Class Conflict and the

Exploitation of Workers

3 Capitalist Control over the State 4 Ideological Manipulation

> Four ideas that are central to contemporary structuralist analyses of IPE.

The definition of Class • Capital: what Marx called the means of production, refers to the privately owned assets used to produce the commodities in an economy.

Productive assets (rather different with possessions) Someone has legal ownership and effective control over that assets.

•

Class: is determined by the the ownership, or lack of ownership, of capital. A minority of people will own a disproportionate share of the productive assets of the society----the capitalist class (the bourgeoisie) The majority of the the population will own very little capital and indeed many people will own no productive assets or any shares of stocks-----the working class (the proletariat)

. Marxists regard the original distribution of assets as unjust, noting that historically a small number of people confiscated large amounts of land and other resources by means of violence and coercion.

Class Conflict and the Exploitation of Workers • The exploitation : -------the production requires the combination of physical assets and labor. ------ but capitalists can create an artificial scarcity of capital by restricting access to their productive assets. -------which will cause the unemployment -------while the fear of unemployment forces workers to accept low wages • That is to say, unemployment allows capitalists to dominate workers and serve as the foundation for exploitation. •

In sum, exploitation means that capitalists, because they have greater labor market power, are able to expropriate a share of the economic output that should belong to workers.

• Class Conflict: The relationship between capitalists and workers is built upon an objective division of the economic output of a society into wages and profits. Class conflict is a fundamental objective characteristic of capitalist societies. It doesn’t always play itself out by war. It will depend on many concrete historical variables.

Capitalist Control over State • Structuralists’ view of State: Definition: the organization in a society that governs, by force if necessarily, a population within a participation with a particular territory.

Comparation between Structuralists and Mercantilists on their view of state •

Both of them agree that any state can be regarded as an actor in a global system made of other states.

~

•

Differences: whereas mercantilists see the states as an actor with its own interests.

•

Structuralists believe that a state will act to advance the narrower interests of the class that dominates it, typically the capitalists.--------always see Imperialism as a natural feature in the global capitalist system.

> "Since the structure of the real politic game is unfair, the capitalist aways can win over the workers."

Ideological Manipulation •

Structuralists agree that power has a softer side---the control over people’s hearts and minds, which also can be called as “Ideology”.

•

In the Marxist tradition, it also can be distinguished by the class: a capitalist ideology VS a working-class ideolog

•

The significance of ideology----to give legitimacy to its certain social political and economic system, with which people believe the system is proper and just.

•

Competition: surely there will be a competition of ideological manipulation. Such as the capitalist class will actively seek to create an ideology in society that gives legitimacy to procapitalist institution.

•

Structure of this game is also unfair that is biased in favor of capitalists. the superior financial resources-------the procapitalist messages are stronger

The end: It leads to a belief in the legitimacy of capitalism by workers. Such kind of belief is some sort of False Consciousness.

Lenin and International Capitalism V.I.Lenin (1870-1924)

The Highest Stage of Capitalism (1917) In this book, he explained how advanced capitalist core states,through imperialism, expanded control over and exploited colonial regions of the world, leaving then unevenly developed, with some classes to prosper and others mired in poverty.

Why imperialism happened? • The crisis of capitalism: the centralization of market power will cause the falling rate of profit, which will than cause the collapse of the capitalist mode of production. To prevent from capitalism from imploding, the imperialism was a necessary outlet for surplus finance and allowed capitalism to survive. Since imperialism allowed rich capitalist nations to sustain their profit rated while keeping the poorer nations underdeveloped, deep in debt, and dependent on the rich nations for manufactured goods,jobs,and financial resources.

➢The assumption: It is in capitalism’s nature for the finance and production structures among nations to be biased in favor of the owners of capital.

What is imperialism? and significance of imperialism • What is imperialism? It also signified the monopoly phase of capitalism and another epoch of history between capitalism to socialism.

•

The significance of imperialism It helped convert the poorer colonial regions into the new “proletariat” of the world or “international capitalist systems”

Imperialism and Global World Orders -- some recent structuralist theories

1.

Dependence Theory

2. Modern World System Theory

Dependence Theory What is the Dependence Theory? ----a structuralist perspective that highlights the relationships between what are referred t as core and peripheral countries, while calling attention to the constraints out on countries in the latter group.

The common point: The structure of the global political economy essentially enslaves the less developed countries of the South by making them reliant to the point of being vulnerable to the nations of the capitalist core of the North.

•

three eras of dependence in modern history.

•

The reasons of Underdevelopment

•

How to deal with it?

Colonial dependence

Smiling curve

Reform international economy

Financial-industrial dependence

IPR

Redistribute power and income

Structure of dependence

Money

Modern World System Theory Contemporary structuralism mainly focuses on the way in which the global system has developed since the middle of the 15th century. •

Modern World System (MWS)Theory: with capitalist in nature, the world system largely determines political and social relations, both within and between nations and other international entities.

•

Three characteristics of MWS:

•

Representative:

Immanuel Wallerstein

A single division of labor whereby nation-states are mutually dependent on economic exchange; The sale of products and goods for the sake of profit; The division of the world into 3 functional areas or socioeconomic units which correspond to the roles that nations within these regions play in the international economy: the core, the semi-periphery, the periphery.

Criticism: Being too deterministic, both economically and in terms of the constraining effects of the global capital system.

Three Paradigms Right

liberalism

Left

nationalism

structuralism

dependency

Marxism

Right vs. left: amount of government intervention

Three classical theories of IPE? (Jackson & Sorensen) Mercantilism

Economic Liberalism Marxism

Relationship b/n economics and politics

Politics decisive

Economics autonomous

Economics decisive

Main actors/ units of analysis

States

Individuals

Classes

The nature of economic relations

Conflictual zerosum game

Cooperative positive-sum game

Conflictual

Economic goals

State power

Maximum individual Class interests well-being