2. I. Introduction – Conceptual and
Analytical Issues
1. What is International Political
Economy?
2. What are the issues?
A. Actor behavior
B. System governance
C. Globalization
3. I. Introduction (cont’d)
A. Actor Behavior. How do we explain
and evaluate the actions of states?
1. Levels of analysis: international (structural,
systemic) vs. domestic
2. State (government, public sector) vs.
society (markets, private sector)
4. I. Introduction (cont’d)
B. System Governance. Formulation,
implementation, and enforcement of rules;
promotion of cooperation; management of
conflict
1. Governance without government; governance
mechanisms (regimes)
2. Organizing principles: automaticity,
supranationality, hegemony, pluralism (negotiation,
cooperation)
6. II. Analytical Perspectives on
Political Economy
1. Liberalism
2. Realism (statism, economic
nationalism, mercantilism)
3. Marxism (structuralism, historical
materialism)
7. II. Analytical Perspectives on IPE -
Liberalism
A. Focus: individuals, households,
enterprises
B. Nature of economic relations:
harmonious; interests reconcilable
C. Relationship between economics and
politics: economics drives politics
8. II. Analytical Perspectives on IPE -
Realism
A. Focus: states
B. Nature of economic relations:
conflictual (zero-sum game)
C. Relationship between economics and
politics: politics drives economics
9. II. Analytical Perspectives on IPE -
Marxism
A. Focus: classes, social forces
B. Nature of economic relations:
conflictual (zero-sum game)
Relationship between economics and
politics: economics drives politics
10. III. Alternative Perspectives on
Globalization
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?
11. III. Globalization (cont’d)
4. Perspectives on causes and
consequences
A. Liberalism: triumph of markets; good for
economic welfare
B. Realism: product of state policy; bad for
power of states
C. Marxism: triumph of markets; bad for
poorer states and disadvantaged classes
12. IV. International Economic History
– Nineteenth Century
1. Three major developments
2. Political economy issues
3. Key lessons
13. 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
14. IV. Nineteenth Century - political
economy issues
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?”
15. IV. Nineteenth Century - key
lessons
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
16. V. International economic history –
interwar period
1. Major developments
A. Breakdown during World War I
B. Attempted reconstruction during 1920s
C. Renewed breakdown (Great Depression)
during 1930s
17. V. Interwar period (cont’d)
2. Political economy issue: What explains
the failure of the attempted
reconstruction?
A. Liberalism: markets failed because of
wrong-headed government policies
B. Marxism: internal contradictions of
capitalism
C. Realism: absence of effective governance
(theory of hegemonic stability)
18. VI. International economic history
– postwar period
1. Major developments
A. Creation of new international institutions: IMF,
World Bank, GATT
B. Cold War, leading to two separate blocs (East-
West) and the rest (Third World)
C. Unprecedented economic growth
D. Rise of Europe, Japan; East Asia; China
E. Globalization
F. Increased instability after 1971-73
19. VI. Postwar period (cont’d)
2. Political economy issues
A. What explains the origins of the postwar
system?
B. What accounts for the relative success of
the system before the 1970s?
C. What accounts for the increased instability
after 1971-73?
D. What can be done to manage the system
in the future?
20. 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
21. IV. International Trade (cont’d)
2. Postwar experience: GATT/WTO
a. Purposes: liberalization, dispute resolution
b. Principles: non-discrimination, reciprocity,
safeguards
3. Protectionism (actor behavior)
a. Instruments of trade policy
b. Arguments for protection
c. Practical motivations
22. VII. International Trade (cont’d)
4. Managing the system (system
governance)
a. Promotion of liberalization
b. Dispute resolution
c. Safeguards
d. Other current issues
23. VIII. Money and Finance
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
a. Balance of payments; deficits
b. Financing: reserves, borrowing, liquidity
c. Adjustment: the “Three D’s,” “Unholy Trinity”
24. VIII. Money and Finance (cont’d)
3. Postwar experience
a. IMF, Bretton Woods system
b. Financing/liquidity: US dollar, SDRS, capital
markets
c. Adjustment: breakdown of pegged exchange-rate
system
d. Debt problems; financial crises
4. Managing the system
a. Exchange rates
b. International capital mobility
25. IX. Regionalism
1. Basic issue: between the national and
global levels, regionalism can complicate the
issue of system governance
2. Trade Regionalism (regional trade
agreements)
3. Monetary regionalism (monetary unions,
etc.)
26. IX. Regionalism – Trade (RTAs)
a. Types of RTAs
b. Advantages and disadvantages
i. For individual countries
ii. For overall system (trade creation, trade diversion)
c. Postwar experience
i. First wave: 1950s-60s
ii. Second wave since 1980s
d. Why the renewed interest in RTAs?
e. Significance for system governance
27. IX. Regionalism - Money
a. Types of monetary regionalism:
horizontal, vertical
b. Advantages and disadvantages
c. Recent experience
i. Precedent of the euro
ii. Rise of currency competition
iii. Currency regime choices today
d. Significance for system governance
28. X. Economic Development
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
29. X. Development (cont’d)
4. Why has trade failed as an engine of growth
for so many?
a. Liberalism: market failures -- weak demand, weak
linkages, weak adaptive capacity
b. Marxism: natural result of capitalism exploitation
c. Realism: result of power politics
i. Role of great powers in writing the rules
ii. Attempts at collective action by LDCs
iii. Outcomes: partial success
30. X. Development (cont’d)
5. Options for development strategies
a. Export promotion
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
31. XI. The Environment
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
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
32. XI. Environment (cont’d)
3. Practical dimensions
a. Pollution (air, water, etc.)
b. Deforestation
c. Endangered species
4. Possible solutions – approaches to
governance
a. Laissez faire
b. National regulation
c. Formal regimes
d. Market approaches
33. XII. 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
a. Dramatic emergence in 1973
b. Ups and downs of OPEC power since 1973
34. XII. Energy (cont’d)
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)
a. Low absorbers vs. high absorbers
b. Special role of Saudi Arabia
6. Prospects
a. Demand side (conservation)
b. Supply side: exploration, technology, alternative
forms of energy
35. XIII. Multinational Corporations
1. Definition
2. Perspectives on the MNC
3. History
a. Until 20th century, mostly extractive (farming, mining, etc.)
b. Real growth began in 1950s, for 2 reasons
i. European Common Market (trade diversion)
ii. Decolonization (ISI development strategies)
c. Changing sources and destination of foreign direct investment
(FDI)
i. Increasing share of FDI from developing world
ii. Most FDI goes to Europe and North America, not LDCs
36. XIII. MNCs (cont’d)
4. Perspective of home country
i. Advantages: profits, market share
ii. Disadvantages: avoidance of taxes, regulation
5. Perspective of host country
i. Advantages: capital, technology, management
expertise, market access
ii. Disadvantage: loss of control
6. Shifting and uncertain balance of power
between states and markets
i. The obsolescent bargain
ii. Production chains
37. XIV. Prospects for the Future
1. Postwar period has seen major structural changes
a. Distribution of power between states
b. Distribution of power between states and markets
c. Global security environment
2. Future scenarios
a. World economic government (supranationality)
b. Renewed hegemony (US? Europe? Japan? China?)
c. Cooperative regimes (automaticity + pluralism)
d. Governance by MNCs
e. Collapse and economic warfare
f. A “mosaic” (all of the above)
