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Ipe02

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  • 1. Y376 International Political Economy January 11, 2012
  • 2. The Theory of Hegemonial Stability <ul><li>The world’s largest economy is called a “ hegemon .” </li></ul><ul><ul><li>Britain in the 19th century (after 1815) </li></ul></ul><ul><ul><li>US after World War II </li></ul></ul><ul><li>Hegemony often arises as a result of a global war. </li></ul><ul><li>The hegemon establishes regimes after such a war that are favorable to its own interests. </li></ul>
  • 3. British Example <ul><li>Pound-sterling as key currency </li></ul><ul><li>Gold standard (at least part of the time) </li></ul><ul><li>Abolition of the Corn Laws established low tariffs for world trade unilaterally </li></ul><ul><li>Investment regime based primarily on rules for portfolio investment </li></ul>
  • 4. US Goes On and Off the Gold Standard
  • 5. 19 th Century US Debate over Silver and “ Bi-Metallism ” <ul><li>East Coast establishment favored gold </li></ul><ul><li>Silver miners of Colorado favored silver or bi-metallic standard in the 1860s and 1890s </li></ul>
  • 6. William Jennings Bryan <ul><li>Cross of Gold Speech, 1896 </li></ul><ul><li>Endorsed the free coinage of silver at a ratio of silver to gold of 16 to 1 </li></ul><ul><li>Lost to McKinley in 1896 election </li></ul>
  • 7. Transition from British to US Hegemony <ul><li>Occurred gradually during the period between WW1 and WW2 </li></ul><ul><li>US reluctant to assume burden of leadership </li></ul><ul><li>Outcome of WW2 led to British decline and full leadership for US </li></ul>
  • 8. US Example <ul><li>Postwar establishment of the Bretton Woods System </li></ul><ul><ul><li>IMF, World Bank </li></ul></ul><ul><ul><li>GATT/WTO </li></ul></ul><ul><ul><li>Informal monetary regime </li></ul></ul><ul><li>Continued leadership despite some change over time in the strength of regimes </li></ul>
  • 9. Hegemonial Stability (continued) <ul><li>As hegemony wanes, regimes weaken and challengers to the hegemon arise. </li></ul><ul><li>The weakening of the regimes hastens the relative decline of the hegemon. </li></ul><ul><li>A new hegemon arises either because of inequal rates of growth or because of another global war. </li></ul><ul><li>The cycle starts all over. </li></ul>Source: Robert Gilpin, War and Change
  • 10. Key Historical Examples <ul><li>Decline of British hegemony in the 1930s leads to weaker regimes and eventually the Great Depression </li></ul><ul><li>Decline of US hegemony in the 1970s leads to weakening of the monetary regime (move from fixed to floating exchange rates) and challenges to the trade regime </li></ul>
  • 11. Key Questions for the Current Period <ul><li>Has U.S. economic power declined relative to potential challengers? </li></ul><ul><li>Has that decline resulted in weaker regimes and greater international economic instability? </li></ul><ul><li>Which of the potential challengers to U.S. hegemony has the best chance of becoming the next hegemon? </li></ul>SNL skit on the dollar

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