Systemic Theories of IPE
Steve Krasner
Robert Keohane
Lecture 4 – Thursday, 22 September 2011
J A Morrison
1
Lec 4: Systemic Theories of IPE
I. The Big IPE Puzzle:
Globalization
II. Systemic Theories
III.Interstate Competition
IV.Hegemonic Stability Theory
V. Institutions “After Hegemony”
VI.Conclusion
3
Lec 4: Systemic Theories of IPE
I. The Big IPE Puzzle:
Globalization
II. Systemic Theories
III.Interstate Competition
IV.Hegemonic Stability Theory
V. Institutions “After Hegemony”
VI.Conclusion
4
What is globalization?
5
Let’s say globalization is the
minimization of the influence of
space on social, political, and
economic outcomes.
6
Clearly, technology is lowering
the cost of moving people,
products, and capital across
space.
So, is globalization inevitable?
7
What do Grieco & Ikenberry (Ch
1) say about the inevitability of
globalization?
8
In IPE, we might assess the
level of globalization by
measuring the level of trade,
cross-border capital flows,
and/or international migration.
9
Measures of Globalization
• Trade: Share of Exports in World Output
– Peaked in 1913
– This point was not surpassed until 1970 (G&I, 5)
• Capital: Flows relative to National Income
– Level of integration still has not reached the levels
achieved among developed countries between 1870
and 1913 (G&I, 217)
• Migration: Movement relative to World
Population
– More people crossing borders in 1900 than today
(Hatton & Williamson, 1998; Ratha & Xu, 2008.)
10
By some measures, the world
was more fully globalized in
1900 than it is today.
11
Damn.
12
Imagine the implications for
production costs, product
selection, social stability, and
even international relations.
13
This raises a vital question:
If globalization isn’t inevitable or
irreversible, then what explains
variation in the last century of
globalization?
14
 Politics.
States’ foreign economic policies
mitigated against (minimized)
economic integration.
15
Economic models don’t tell us
what happens on the ground.
For a variety of reasons—some
“good” and some “bad”—
policymakers often don’t heed
the prescriptions of economists.
16
“Neoclassical theory recognizes that trade
regulations can . . . be used to correct
domestic distortions and to promote infant
industries, but these are exceptions or
temporary departures from policy
conclusions that lead logically to the support
of free trade…Historical experience
suggests that policy makers are dense, or
that the assumptions of the conventional
argument are wrong. Free trade has hardly
been the norm. Stupidity is not a very
interesting analytic category.” (Krasner, 2021)
17
“[I]n the absence of cooperation,
governments will interfere in
markets unilaterally in pursuit of
what they regard as their own
interests, whatever liberal
economists may say.” (Keohane,
50)
18
Here’s the point...
We can’t understand the
development of the global
economy without understanding
foreign economic policy.
That means understanding
politics.
19
Lec 4: Systemic Theories of IPE
I. The Big IPE Puzzle:
Globalization
II. Systemic Theories
• Interstate Competition
• Hegemonic Stability Theory
• Institutions “After Hegemony”
• Conclusion
20
Trying to understand the retreat
of globalization between 1914
and 1945 is one of the biggest
questions in IPE.
So-called “structural” and
“systemic” theories were among
the first attempts to resolve this
puzzle.
21
What are structural/systemic
theories?
22
Structural/systemic theories
emphasize the role of
structure of the international
system in shaping outcomes
of interest.
23
Focus is on Waltz’s 3rd Image:
the level of the international
system.
This structure is independent of
the ideas, institutions, and
interests that exist within states.
(We’ll look within states next time.)
24
What defines the structure of
the international system?
25
Key Structural Elements of
International System
• Anarchy: the absence of overarching
political power
• The existence of exit-options for market
actors
• The distribution of power among states
(see Krasner, 20)
• The scope and influence of international
regimes
26
Lec 4: Systemic Theories of IPE
I. Some Key Terms
II. Systemic Theories
III.Interstate Competition
• Hegemonic Stability Theory
• Institutions “After Hegemony”
• Conclusion
27
G&I retell the story (from
Doug North and others)
about the role of interstate
competition in shaping
political and economic
development.
(See p 107.)
28
What’s that story?
29
Lec 4: Systemic Theories of IPE
I. Some Key Terms
II. Systemic Theories
III.Interstate Competition
IV.Hegemonic Stability Theory
• Institutions “After Hegemony”
• Conclusion
30
IV. HEGEMONIC STABILITY
THEORY
1.
2.
3.
4.
Overview
The elegance of HST
Krasner’s theory
Testing Krasner
31
Hegemonic Stability Theory (HST) is a systemic
theory of international politics (IP):
“the openness and stability of the world economy
depends on the presence of a hegemonic power
that, acting in its own enlightened self-interest,
plays the role of organizer and supervisor of the
world economy.” (G&I 111)
Distribution of Power (IV)  Patterns of Interstate
Relations (DV)
32
Major Variants of HST
• Kindleberger (1973): Willing hegemon is
needed to support international monetary
system
• Krasner (1976): Hegemony brings
economic openness (read: free trade)
– “State Power and the Structure of
International Trade.” (1976)
-- (There are lots more theorists in this
tradition!)
33
We’ll focus on Krasner today
and Kindleberger when we
study money in several
weeks.
34
IV. HEGEMONIC STABILITY
THEORY
1.
2.
–
–
Overview
The elegance of HST
Krasner’s theory
Testing Krasner
35
HST is elegant.
It resolves Thomas Hobbes’ old
question…
36
We know that economic
integration generally does not
follow without some
cooperation.
Why not?
37
 A state might use asymmetric
costs of closure as leverage
against other states
(e.g. After opening Canada’s markets, the
US could threaten to close the borders if
Canada does not support the US in Iraq.)
38
But states exist in anarchy, in a
“self-help” system.
As Hobbes asked, how do we
get cooperation without a state
authority to enforce
agreements?
39
HST provides a potential
answer: hegemons serve as a
proxy for state authority to
reduce the “anarchy.”
Hegemons can use both sticks
and carrots to open foreign
markets.
40
IV. HEGEMONIC STABILITY
THEORY
1.
2.
3.
–
Overview
The elegance of HST
Krasner’s theory
Testing Krasner
41
Be sure to “Get” Krasner
• Exemplary of Systemic Approach
• Classic, widely cited article with
•
extraordinary influence
Lucid—if not problematic—analysis
of IPE (see Keohane, 1997)
• Notice the explicit discussion of his research
design: defines his variables clearly,
highlights his operationalization, and
discusses all of his findings
42
Puzzle: Openness vs Social
Stability
• Policymakers have cross-cutting
preferences: power, wealth (income &
growth), social stability,
• Openness brings wealth, choice, and
interdependence
• BUT openness also undermines social
stability: inequality, shocks, transition
costs (job loss)
43
 Given these cross-cutting
preferences, how do
policymakers choose the
degree of openness they’ll
allow?
44
Different Systems -->
Different Levels of Openness
• Small, Developed Economies 
Openness
• Large, Unequally Developed  Closure
• Hegemonic System  Openness
– In interest of hegemon
– Small states have little choice; mine as well
get benefits of openness
45
Krasner: Hegemony  Trade
“The most important conclusion of
this theoretical analysis is that a
hegemonic distribution of potential
economic power is likely to result in
an open trading structure.” 20
46
IV. HEGEMONIC STABILITY
THEORY
1.
2.
3.
4.
Overview
The elegance of HST
Krasner’s theory
Testing Krasner
47
Now, let’s operationalize and
test the argument.
48
The DV: “Economic
Openness”
“The degree of openness can be described
both by the flow of goods and by the
policies that are followed by states with
respect to trade barriers and international
payments.” 24
49
The IV: Distribution of
Potential Economic Power
Narrower version of “potential power,” “such
factors as gross national product, per
capita income, geographical position, and
size of armed forces.” 28
50
Testing the Argument
✓
Moves toward Closure!
✓
Increasing Closure
Increasing Closure
≈
Sharp closure; American
!
resistance
Increasing openness ✓
Increasing openness !
Time Period
IV: Distribution of Power
DV: Level of Openness
1820-1880
British Ascendance
Increasing Openness
1880-1900
British Maintain
1900-1914
Early British Decline
1914-1930
British decline; Very early
American rise
1930-1945
British down; Americans
rise
1945-1960
Americans ascendant
1960-Present (1976)
American decline
51
How does Krasner amend the
argument?
52
Lag the dependent variable:
institutional trends are sticky;
sometimes it takes a while
and/or an exogenous jolt.
53
Lec 4: Systemic Theories of IPE
I. Some Key Terms
II. Systemic Theories
III.Interstate Competition
IV.Hegemonic Stability Theory
V. Institutions “After Hegemony”
• Conclusion
54
Led by Robert Keohane, a
group of scholars (sometimes
called neoliberal
institutionalists) questioned
whether it was possible to have
openness after hegemony.
(Note the title of Keohane’s book!)
55
This followed largely from the
recognition that openness has
persisted (and expanded!) even
as American relative economic
power has declined.
56
What explains this persistence?
 International Regimes.
57
International regimes: "sets of implicit or
explicit principles, norms, rules and
decision-making procedures around which
actors' expectations converge in a given
area of international relations. Principles are
beliefs of fact, causation, and rectitude.
Norms are standards of behavior defined in
terms of rights and obligations. Rules are
specific prescriptions or proscriptions for
action. Decision-making procedures are
prevailing practices for making and
implementing collective choice”
(Keohane, 57)
58
What Regimes Do
• Define obligations  convergence of
expectations
• Provide information  monitoring &
compliance
• Reduce transaction costs  more likely to
cooperate again
• Ensure “repeated play”  increase
importance of reputation
• Enforcement through denial of “carrots”
(and sometimes use of “sticks”)
59
Lec 4: Systemic Theories of IPE
I. Some Key Terms
II. Systemic Theories
III.Interstate Competition
IV.Hegemonic Stability Theory
V. Institutions “After Hegemony”
VI.Conclusion
60
So, IPE scholars are particularly
interested in the variation in the
level of economic integration
observed over the last several
centuries.
That is one of the biggest DVs
of interest.
61
Systemic theories suggest that
the structure of the international
system is the key IV that
shapes states’ foreign economic
policies—which determine
whether globalization occurs.
62
Hegemonic stability theorists
(Krasner & Kindleberger) think
that the concentration of power
in the hands of one state is
enough to overcome states’
reluctance to open markets.
63
Scholars like Robert Keohane
(“neoliberal institutionalists”)
argue that it is possible to
achieve cooperation without
hegemony by using
international regimes.
64
But does the structure of the
international system really
explain all of states’ foreign
economic policies? What about
domestic politics: the
institutions, interests, and ideas
within states?
65
That’s where
we’re headed
next time!
I can’t wait!
66