INTRODUCTION TO
INTERNATIONAL POLITICAL
ECONOMY
Political Science 186
Global Studies 123
I. Introduction – Conceptual and
Analytical Issues
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1. What is International Political
Economy?
2. What are the issues?
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A. Actor behavior
B. System governance
C. Globalization
I. Introduction (cont’d)

A. Actor Behavior. How do we explain
and evaluate the actions of states?
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1. Levels of analysis: international (structural,
systemic) vs. domestic
2. State (government, public sector) vs.
society (markets, private sector)
I. Introduction (cont’d)

B. System Governance. Formulation,
implementation, and enforcement of rules;
promotion of cooperation; management of
conflict
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1. Governance without government; governance
mechanisms (regimes)
2. Organizing principles: automaticity,
supranationality, hegemony, pluralism (negotiation,
cooperation)
I. Introduction (cont’d)

C. Globalization. Inter-national vs.
globalized model of world economy
II. Analytical Perspectives on
Political Economy
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1. Liberalism
2. Realism (statism, economic
nationalism, mercantilism)
3. Structuralism (Marxism, historical
materialism)
II. Analytical Perspectives on IPE Liberalism
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A. Focus: individuals, households,
enterprises
B. Nature of economic relations:
harmonious; interests reconcilable
C. Relationship between economics and
politics: economics drives politics
II. Analytical Perspectives on IPE Realism
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A. Focus: states
B. Nature of economic relations:
conflictual (zero-sum game)
C. Relationship between economics and
politics: politics drives economics
II. Analytical Perspectives on IPE Structuralism
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A. Focus: classes, social forces
B. Nature of economic relations:
conflictual (zero-sum game)
Relationship between economics and
politics: economics drives politics
III. Alternative Perspectives on
Globalization

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1. Definition: a broadening, deepening, and
acceleration of interconnectedness of states and
markets; networks of connections at
intercontinental distances
2. Alternative views: from “hyperglobalists” to
skeptics
3. Why do we care? By creating a dissonance
between the jurisdiction of states and the
domains of markets, globalization problematizes
governance: who is in charge?
III. Globalization (cont’d)
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4. Perspectives on causes and
consequences
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A. Liberalism: triumph of markets; good for
economic welfare
B. Realism: product of state policy; bad for
power of states
C. Structuralism: triumph of markets; bad for
poorer states and disadvantaged classes
IV. International Economic History
– Nineteenth Century
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1. Three major developments
2. Political economy issues
3. Key lessons
IV. Nineteenth Century - three
major developments
A. Monetary system: classical gold standard
B. Trading system: movement toward free
trade in 1860s-70s, then back toward
protectionism
C. Core-periphery relations: rise of “new
imperialism” after 1870s
IV. Nineteenth Century - political
economy issues
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A. Gold standard: What accounts for its
stability and relatively smooth operation?
B. Trade: What accounts for the free
trade movement in the 1860s-70s? What
accounts for the subsequent return to
protectionism?
C. Core-periphery relations: What
accounts for the “new imperialism?”
IV. Nineteenth Century - key
lessons
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A. No single (mono-causal) explanations;
need to sift the evidence.
B. No single rule for all regimes; different
governance mechanisms can exist side by
side
V. International economic history –
interwar period
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1. Major developments
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A. Breakdown during World War I
B. Attempted reconstruction during 1920s
C. Renewed breakdown (Great Depression)
during 1930s
V. Interwar period (cont’d)
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2. Political economy issue: What explains
the failure of the attempted
reconstruction?
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A. Liberalism: markets failed because of
wrong-headed government policies
B. Structuralism: internal contradictions of
capitalism
C. Realism: absence of effective governance
(theory of hegemonic stability)
VI. International economic history
– postwar period
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1. Major developments
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A. Creation of new international institutions: IMF,
World Bank, GATT
B. Cold War, leading to two separate blocs (EastWest) and the rest (Third World)
C. Unprecedented economic growth (early years)
D. Rise of Europe, Japan; East Asia; China and BRICs
E. Globalization
F. Increasing instability; slowing growth
VI. Postwar period (cont’d)
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2. Political economy issues
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A. What explains the origins of the postwar
system?
B. What accounts for the relative success of
the system in its early years?
C. What accounts for the increased instability,
slower growth in more recent years?
D. What can be done to manage the system
in the future?
VII. International Trade
1. Basic issue: a tension between desire for
material benefits of an open system and
pressure to promote/defend state and/or
particularist interests
a. Advantages of free trade: efficiency, growth
b. Disadvantages of free trade: dependence,
losses to key constituencies
c. Collective action problem: how to manage
the basic tension
VII. International Trade
(cont’d)
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2. Postwar experience: GATT/WTO
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a. Purposes: liberalization, dispute resolution
b. Principles: non-discrimination, reciprocity,
safeguards
3. Protectionism (actor behavior)
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a. Instruments of trade policy
b. Arguments for protection
c. Practical motivations
VII. International Trade (cont’d)
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4. Managing the system (system
governance)
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a.
b.
c.
d.
Promotion of liberalization
Dispute resolution
Safeguards
Other current issues
VII. International Trade
(cont’d)
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5. From multilateralism to regionalism
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a. Types of regional trade agreements (RTAs, PTAs)
b. Advantages and disadvantages
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c. Postwar experience
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i. For individual countries
ii. For overall system (trade creation, trade diversion)
i. First wave: 1950s-60s
ii. Second wave since 1980s
d. Why the renewed interest in RTAs?
e. Significance for system governance
VIII. Money and Finance
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1. Basic issue: as with trade, a tension between
desire for the material benefits of an open
system and pressure to promote/defend state
and/or particularist interests
2. Basic concepts
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a. Balance of payments; deficits
b. Financing: reserves, borrowing, liquidity
c. Adjustment: the “Three D’s,” “Unholy Trinity”
VIII. Money and Finance (cont’d)
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3. Postwar experience
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a. IMF, Bretton Woods system
b. Financing: US dollar, SDRS, capital markets
c. Adjustment: breakdown of pegged exchange-rate
system – currency wars?
d. Debt problems; financial crises
4. Managing the system
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a.
b.
c.
d.
Exchange rates
International capital markets
International currencies
Who’s in charge?
IX. Economic Development
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1. The developing world: differentiated,
difficult to generalize
2. Postwar rules: based on principle of
non-discrimination; trade was to function
as an “engine of growth”
3. Postwar experience: mixed – some
success stories, many disappointments
IX. Development (cont’d)
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4. Why has trade failed as an engine of growth
for so many?
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a. Liberalism: market failures -- weak demand, weak
linkages, weak adaptive capacity
b. Structuralism: natural result of capitalism
exploitation
c. Realism: result of power politics
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i. Role of great powers in writing the rules
ii. Attempts at collective action by LDCs
iii. Outcomes: partial success
IX. Development (cont’d)
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5. Options for development strategies
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a. Export promotion
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i. Traditional exports
 Problems: inelastic demand, protectionism
 Cartels? Three conditions necessary for success:
control largest part of supply; no close substitutes;
agreement on the sharing of benefits
ii. Non-traditional exports: manufacturing, services
b. Import substitution (“import substitution
industrialization” – ISI)
 c. Regionalism
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X. The Environment
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1. Basic problem: the environment is a
collective good, shared by all and owned by
none (“tragedy of the commons”); core issue is
“externalities,” which can cross borders
2. Economic functions of the environment
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a. A consumption good
b. A supplier of resources
c. A receptacle of wastes
d. The problem: not always mutually consistent,
hence a collective action problem – a system
governance issue
X. Environment (cont’d)
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3. Practical dimensions
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a. Pollution (air, water, etc.)
b. Deforestation
c. Endangered species
4. Possible solutions – approaches to
governance
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a.
b.
c.
d.
Laissez faire
National regulation
Formal regimes
Market approaches
XI. Energy
1. Importance: the world’s single most widely
traded product
2. First regime: the Seven Sisters – a classic
cartel, successful because it met all three key
conditions necessary for success: control of
supply; no close substitutes; agreement on
sharing of benefits
3. Second regime: OPEC
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a. Dramatic emergence in 1973
b. Ups and downs of OPEC power since 1973
XI. Energy (cont’d)
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4. Reasons for variations of OPEC power over
time – back to the three key conditions for a
successful cartel
5. OPEC’s biggest challenge: agreement on
benefits (limiting free riding)
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a. Low absorbers vs. high absorbers
b. Special role of Saudi Arabia
6. Prospects
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a. Demand side (conservation)
b. Supply side: exploration, alternative forms of
energy, technology
XII. Multinational Corporations
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1. Definition
2. Perspectives on the MNC
3. History
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a. Until 20th century, mostly extractive (farming, mining, etc.)
b. Real growth began in 1950s, for 2 reasons
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i. European Common Market (trade diversion)
ii. Decolonization (ISI development strategies)
c. Changing sources and destination of foreign direct investment
(FDI)
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i. Increasing share of FDI from developing world
ii. Increasing share of FDI going to developing world
XII. MNCs (cont’d)
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4. Perspective of home country
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5. Perspective of host country
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i. Advantages: profits, market share
ii. Disadvantages: avoidance of taxes, regulation
i. Advantages: capital, technology, management
expertise, market access
ii. Disadvantage: loss of control
6. Shifting and uncertain balance of power
between states and markets
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i. The obsolescent bargain
ii. Multinational production, supply chains
XIII. Prospects for the Future
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1. Postwar period has seen major structural changes
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a. Distribution of power between states
b. Distribution of power between states and markets
c. Global security environment
2. Future scenarios
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a.
b.
c.
d.
e.
f.
g.
Automaticity?
World economic government (supranationality)?
Renewed hegemony (US? Europe? Japan? China?)?
Cooperative regimes (automaticity + pluralism)?
Governance by MNCs?
Collapse and economic warfare?
Most probable: a “mosaic” (all of the above)