Transcript Schema to understand the post-WW2 IPE

Introduction to International
Political Economy (IPE)
Prof. Amado Mendoza, Jr., Ph.D.
Department of Political Science
International Political Economy
Material reality (ipe) and theory (IPE)
A multidiscipline field of study bridging
economics and political science (and
several other social sciences such as
sociology, geography, among others)
Concerned with interaction between
states, markets, and societies
Clarification of chronology
Classical political economy—18-19th
century (Smith, Ricardo, Marx, Mill)
Modern international political
economy—1960s-to date



Old IPE—1960s-early 1990s
New IPE—early 1990s—to date
The OEP paradigm demarcates between
old and new (modern) IPE
The state and the market: key
categories in old IPE
The state (political component of IPE)—a
sovereign territorial unit with a
government and a population; involved
in the pursuit of POWER
The market (economic component of
IPE)—coordinating mechanism where
supply and demand determine prices,
output and methods of production;
involved in the pursuit of WEALTH
State-market relations I
Opposing institutional logics
State logic--exclusion, national
sovereignty, territorial bounded-ness
Market logic--inclusion, expansion,
economic openness, breaking down of
state barriers
State-market relations II
Complementary and symbiotic relations
States protect property rights, provide
infrastructure to facilitate market
transactions
Internationally, states conclude
agreements/form organizations to
promote economic openness
State-market relations III
State power is largely defined by level
of its economic development
State-market interactions—core issue in
the study of old IPE (late 1960s-early
1990s)
Society and social groups
in the new IPE
State and society interactions
Market-society interactions
State-society interactions
Social groups make demands on the
state for protection against the vagaries
of the international economy
States enter into treaties with other
states for the same purpose
Individuals employed abroad fatten
states’ foreign exchange reserves
State-society interactions II
State-society interactions are bracketed
by tensions


States are still largely circumscribed by
territoriality
Individuals and social groups have
transcended territoriality due to changes in
ipe
Market-society interactions
Market-society relations are based on
supplier-consumer relations
Consumer demand (generated by a
number of variables) stimulates supplier
activity and product innovation and vice
versa
Business cycles induce appropriate
social responses
Key relations for consideration
in IPE
Between state and market
Between economic and political
Between domestic and international
Fundamental premises of modern
IPE
Political and economic domains cannot
be separated in any meaningful sense
States and markets—not necessarily
contrasting principles of social
organization; parts of integrated
ensemble of human governance
Intimate connection between domestic
and international
International economy vs. global economy
International economy: sum total of
economic relations between and among
states
Global economy: the international economy
plus a transnational integrated production
and service economy
Rough schema to understand the
post-WW2 ipe
Dimensions
Period I
Period II
Strategic
environment
Cold War
Post Cold War
--pre 9/11
--post 9/11
Strategic concern
‘High’ politics
‘High’ & ‘Low’ politics
Secular economic
trends
Institutional
architecture
Kondratieff
expansion
Kondratieff
contraction
Bretton Woods
institutions
Post Bretton Woods
institutions
Theory
IR theory esp.
realism
IPE theory
The inter-war years
The Great Depression led governments
to adopt protectionist measures;
deepened crisis and ultimately led to
international war
After WWII, the challenge is to set up a
system that would prevent the repeat of
these occurrences
Necessary features of post-war
systems
Stable exchange rate system
Control of international capital flows
Availability of short-term loans for
countries with BOP problems
Rules to keep economies open to
international trade
A reserve asset or unit of account (such
as the gold standard)
The Bretton Woods system:
anchored on fixed exchange rates
IMF: to provide BOP support
World Bank: to provide longer term
financial support for development
GATT: to help negotiate lower tariffs
and encourage international trade
Negligible LDC participation or voice in
BW institutions; non-participation of
Soviet bloc
Breakdown of the BW system
Increased US spending under LBJ for
domestic programs and Vietnam war
financed without tax increases
Competitiveness of US products and
confidence in the US dollar dropped
Nixon shock of 1971: suspension of the
dollar’s convertibility to gold at $35/oz.
Ups and downs of US hegemony
Creation of liberal world economy coincided
with Cold War
Long ‘post-war’ boom
Marshall Plan and similar efforts aimed
towards Soviet containment
The eventual resurgence of Europe and Japan
undermine US economic predominance
End of Cold War does not result in US
economic hegemony
Key features of the Kondratieff downturn
and beyond
Rise of OPEC and crude oil prices; the petrodollar phenomenon
‘Stagflation’ and new protectionism among
industrial states
Assertion of developing country interests
through NIEO and UNCTAD
Rise in interest rates and Third World debt
crisis
Washington consensus as policy prescription
Emergence of anti-globalization movements
Current state of BW agencies
World Bank: development agency
making loans to developing countries
IMF: gained greater role in defining
economic policy of developing countries
with the 1980s debt crisis
GATT: transformed into WTO which
could better enforce trade rules and
settle disputes
Overall economic trends in the post war
period I
International trade has grown more
than global economic output; increased
competition; drop in trade barriers
Significant increase in trade in services
More goods become trade-able with
decreasing costs of transport (container
van and RORO technology)
Overall trends II
Increased integration of global financial
markets due to financial deregulation,
new financial goods and advances in
ICTs; greater chances for contagion
during crises; financial flows dwarf real
economy
Overall trends III
Rise of new industrial economies
Greater frequency of crises
Increased inequality within and
between nations
Forms of capitalism
Enterprise (Anglo-Saxon) capitalism
Social (market) capitalism
State capitalism
Rise of IPE: big changes
in world economy
Decline of US economic preponderance and
challenge to traditional notions of power and
security posed by US failure in Vietnam
New economic challenges : OPEC, demands
for NIEO, NICs, EU, emerging economies
End of the Cold War and globalization further
underline the centrality of IPE in the study of
international relations
Major theoretical clusters in IPE
theory
Realist/statist theories
Varieties of liberalism
Marxist/critical theories
Other IPE perspectives
Short history of contemporary IPE
Early intervention and abdication of
economists
Enter political scientists and IR scholars
The economists return
Early efforts of economists
Jacob Viner (1948). “Power and plenty”
Richard Cooper (1968). The Economics
of Interdependence.
Charles Kindleberger (1970). Power and
Money.
Raymond Vernon (1971). Sovereignty
at Bay.
Abdication of economists
Chilling effect of post-war anticommunism
Prevailing ontology of economics (after
marginal revolution) concentrated on
private actors, addressing efficiency and
welfare
Prevailing ontology of economists
Not trained to think in terms of the
public sphere
Not comfortable with the political
question of distribution
Importance of institutions are
discounted; rules are given
Attention was directed to policy
outcomes instead of inputs
New institutionalism
North, Williamson, and Coase
Recognize the importance of
organizational variety and path
dependent processes on actor behavior
Institutions as devices to lower
transactions costs and protect property
rights
Resistance to IPE on
epistemological grounds
IPE issues cannot be handled
adequately by the standard toolkit of
neoclassical economics
Discipline became more abstract and
relied more on deductive logic
Opted for deductive simplicity for
theoretical generalization instead of
inductive descriptive for external validity
IR and political scientists
Robert Gilpin. The Political Economy of
International Relations
Robert Keohane and Joseph Nye. Power
and Interdependence.
Susan Strange. “International
Economics and International Relations:
A Case of Mutual Neglect.”
Benjamin Cohen’s transatlantic divide
American IPE: hard science, positivist,
empiricist, formal modeling and
quantification, problem solving
orientation
British IPE: philosophical, normative,
eclectic, big picture orientation
The return of economics to
American IPE
New paradigm in American IPE: ‘open
economy politics’ (OEP)
Coined by Robert Bates and promoted
by David Lake
The OEP paradigm
The analysis starts with individuals with
defined interests
It then proceeds to how political
institutions aggregate these individual
interests
The last step is to study how the
aggregated interests are translated into
government policy (say tariff policy)