Week 3: The Study of Global
Chapter
by Matthew Watson
Political
Economy
and
Its
Historical Roots of Theoretical
Traditions
What is IPE ?
- The study of the interaction of trade, finance, and
the state; and how states respond politically to the
(shock) effects of the global market.
- One of the key features is the global security
architecture or the network of economic and political
institutions designed to promote free trade and
capital flows.
- Many issues are addressed, including unfair
financial/trading practices, the North–South divide,
and environmental problems.
The Study of Global Political Economy (1) - What is Global
Political Economy?
In 1970s , as a sub-field of IR, IPE (or GPE) emerged in
response to:
1. Changes and developments in the world and in world
politics
• End of fixed exchange rate system in early-1970s
• Rise in commodity prices in early-1970s (i.e. OPEC
factor)
• New International Economic Order (NIEO)
2. Trends and evolution in theory building
• Questions about the dominance of the realist agenda
(inter-paradigm debate.)
• Gaps in the agenda of the disciplines of International
Relations and Economics [ as a legacy of
behavioralism]
1- Changes/developments in the world -End of
fixed exchange rate
1- Changes/developments in the world - Rise in commodity
prices
1- Changes/developments in the world -NIEO
• In October 1967, G-77 adopted the Charter of Algiers, highlighting
the shrinking share of developing countries in world trade due to
import barriers and long-term declines in the terms of trade.
• In April 1974 the G-77 adopted the Declaration and Programme of
Action for a NIEO despite lacking the support of the US and a small
group of advanced industrialized countries.
• Prescriptions were designed to stabilize and raise the prices of the
commodities. To improve the South's purchasing power, a new
institution was called for to govern the international commodity
trade.
Group of 77 Member Countries
2.Trends and evolution in theory building : InterParadigm Debate
The Study of GPE (2)
– Central focus is the relationship between public and
private power in the allocation of scarce resources
• ‘who gets what, when, and how?’
– Interested in the problem of cooperation under anarchy
(the distribution of power within the global economy &
potential for collaboration)
– Much of the IPE has focused on the link between power
(i.e.hegemony)
economy)
and
collaboration
(i.e.open
global
"For the world economy to be stabilized,
has to be a stabilizer, one stabilizer" (1973, p. 305).
there
“The 1929 depression was so wide, so deep and so long
because the international economic system was
rendered unstable by British inability and United States
unwillingness to assume responsibility for stabilising it
in three particulars: (a) maintaining a relatively open
market for distress goods; (b) providing counter-cyclical
long-term lending; and (c) discounting in crisis…. The
world economic system was unstable unless some
country stabilised it, as Britain had done in the
nineteenth century and up to 1913. In 1929, the British
couldn’t and the United States wouldn’t. When every
country turned to protect its national private interest,
the world public interest went down the drain, and
with it the private interests of all…” (Kindleberger,1973)
" The Pax Britannica and Pax Americana,
like
the
Pax
Romana,
ensured
an
international system of relative peace and
security. Great Britain and the United
States created and enforced the rules of a
liberal
international
(Gilpin,1981,p. 144).
economic
order"
Under
what
conditions
can
independent
countries cooperate in the world political
economy? In particular, can cooperation take
place without hegemony and, if so, how?
…Cooperation can under some conditions
develop on the basis of complementary
interests, and that institutions, broadly defined,
affect the patterns of cooperation that emerge
(Kehone, 1984,p.9).
Contemporary Perspectives/Approaches in
GPE
• Contemporary perspectives are part of a
longer tradition of thought
– Important to understand historical roots of
contemporary theoretical approaches to GPE
• Contemporary perspectives/approaches
identified in Gilpin’s seminal text:
– Realism ( Statism , Merchantalism, Economic
Nationalism)
– Liberalism
– Marxism/Radicalism
Realist IPE
• Derived from realism in International
Relations
• Ontological basis centred on “the state”
• Underpinned by rational choice theory
• State behaviour seen as maximizing national
interest, which is believed to be self-evident
• Has questionable political economy
foundations
19th Century Economic Nationalism
• Friedrich List:
– The state’s economic interests were to be
balanced between long-term and short-term goals
– “The” national economic interest is comprised of
competing national interests
– A nationalist, not statist, ontology
– Not necessarily unsympathetic to free trade or
liberal economic policies
– Caricatured Adam Smith’s arguments to serve own
political purposes
Mercantilism
• The British Mercantilist School
– “Identified” by Adam Smith through crude
simplification of existing views
• Designed to show where economic theory went wrong
• Key arguments/ideas:
– Importance of a strong state that produced trade
surpluses
– Imports were discouraged
– Nation’s wealth measured by precious metals
Liberalism (Adam Smith’s)
• Political critique of the corruption of the process of
government and simultaneous enrichment of private
corporations
– BUT Smith believed government to be
indispensable to the formation and reproduction
of markets
• Moral critique that emphasized the virtue of “self command”,
and respect for others, within a market economy: without self
command, market economies would not succeed.
• GPE commentators typically ignore Smith’s The Theory of
Moral Sentiments
Absolute Advantage vs. Comparative
Advantage – Specialization
Absolute Advantage: One nation can produce
more output with the same resources as the
others.
Comparative Advantage: One nation produces a
good of a lower opportunity cost than the
other. Exp: Doctor & Nurse
Marx’s Political Economy
• Critique of the social basis of capitalism
– The autonomy of individuals is constrained by the
need to reproduce the capitalist system
• Capitalism depends on an ever more-finely detailed
division of labour
• Capitalism dehumanizes individuals (“alienation”)
– Workers’ interests do not coincide with interest of
the capitalist system
• “False consciousness” as a means of procuring consent
• The logic of extracting “surplus value” from labour
results in a procedural injustice
Surplus Value
Difference between a worker's wages
(exchange value) and the value of goods and
services she/he produces (use value).
Since use value is higher than the exchange
value, workers produce a positive surplus
value through their labor.
Marx used surplus value as a measure of
worker exploitation (or profit) by capitalism.
Read more: http://www.businessdictionary.com/
Modern Marxists (1)
• Seek to uncover exploitative dynamics in capitalist society,
and to present them as infringements of global justice
• Structuralist approach conceives of world economy as a
single, integrated capitalist system
– E.g. Lenin
• Imperialism is the “highest stage of capitalism”
• Capitalism had become a world system
– Dependency Theory (e.g., dos Santos)
– World Systems Theory (e.g., Wallerstein)
“Imperialism emerged as the development and direct
continuation of the fundamental attributes of
capitalism in general. But capitalism only became
capitalist imperialism at a definite and very high
stage of its development…when the features of a
period of transition from capitalism to a higher social
and economic system began to take shape and reveal
themselves all along the line. Economically, the main
thing in this process is the substitution of capitalist
monopolies
for
capitalist
free
competition…Monopoly is the transition from
capitalism to a higher system. “ ( Lenin, p. 88.)
Dependency Theory
• Developed in the 1960s and 1970s to account for
structural inequalities in global wealth and power.
• The dependency theorists not only rejected
modernisation theory but also radically undermined
Marx’s view that capitalism is able to promote
development.
• Dependency refers to externally imposed structurally
unequal relations between the core and the
periphery.
• The result is chronic underdevelopment.
The Brandt Line
World Systems Theory
• Primary unit is world-system that is ‘capitalist worldeconomy’ refers to the inter-regional and transnational
division of labor, which divides the world into core, semiperiphery, and the periphery countries.
• Core countries focus on higher skill, capital-intensive
production, and the rest of the world focuses on low-skill,
labor-intensive production and extraction of raw materials.
This constantly reinforces the dominance of the core
countries.
• Nonetheless, the system is dynamic, in part as a result of
revolutions in transport technology, and individual states
can gain or lose the core (semi-periphery, periphery) status
over time.
The Western interpretation of its own "Rise of the
West" has suffered from a case of "misplaced
concreteness." What should become increasingly
apparent is that "development" was not so much
"of the West" as it was of and in the world
economy. "Leadership" of the world system has
been temporarily "centered" in one sector and
region ,only to shift again to one or more others.
That happened in the nineteenth century, and it
appears to be happening again at the beginning of
the twenty-first, as the "center" of the ‘world
economy seems to be shifting back to the"East."
(Frank,p.8)
Modern Marxists/Critical Theory
(2)
• Robert Cox
– Made a distinction between
• “Problem solving” goals of non-radical approaches
and
• Transformative goals of critical approaches
– Question the political and moral legitimacy of the
foundations of the world ( i.e. value free social
science)
– Aspirations for a “better” world free of the logic of
economic exploitation – a continuation of the political
Marx
Methodological Distinction to Sub-Divide the
Field
• “IO School” / “American School”
•
•
•
•
Emphasizes the “scientific” method
Adopts rational choice framework
Links economic outcomes to interests
Much more restricted scope of study
• “British School”
• Emphasizes the normative method
• Focuses on the social construction or origins of
economic interests and identities
• Economic behaviour is understood to be more than a
purely rational response to external circumstances
• Focuses on the “bigger picture”
Alternative Distinctions
Conclusion
• Simple, clear-cut divisions obscure the
complex and diverse theoretical
underpinnings of IPE as a field of study
• A more accurate understanding of the
historical roots of contemporary theories
suggests that the categorization of
contemporary theories is a problematic
exercise