Introduction to international political economy

2. Annual Report
9th Meeting of the Board of Governors
MY University, Islamabad
Thursday, March ,2024
Lecture Overview
1.Realism (Statism, Mercantilism, Neomercantilism, Economic
Nationalism)
2.Liberalism
3.Structuralism (Marxism, historical materialism)
4.Constructivism

3. Theories of IPE
• Levels of analysis
• global level: global economic constraints and opportunities resulting from changes in
technology, global markets, and the natural environment
• interstate level: how the relationships between states affect global outcomes
• state-societal level: how bureaucratic decision making and the type of government
shape outcomes and how lobbying, electoral pressures, culture, and a country’s class
structure determine foreign policy actions
• individual level: what individual policymakers do to cause or influence events. We try
to understand the psychology, goals, and ideology of state leaders
• State: legal entity and an autonomous set of institutions that governs
a specific geographic territory and people of a nation.

4. Theories of IPE
• IPE structures
• The Production Structure: who produces what and on what terms
• The Trade Structure: International trade agreements and national regulations shape the flows of
goods and services across borders
• The Finance and Monetary Structure: who has access to money and on what terms, and thus
how capital is distributed among nations
• The Security Structure: security structure is comprised of those persons, states, international
organizations, and NGOs that seek to provide safety for all people everywhere
• The Knowledge Structure: Knowledge and technology are sources of wealth and power for those
who use them effectively.

5. Theories of IPE
• Realism
• Machiavelli, Thomas Hobbes, Hans Morgenthau, Kenenth Waltz,
• States are the primary actors in international politics, and they operate in an anarchic system where
there is no higher authority to enforce rules or resolve disputes. Therefore, states must prioritize their
own interests and security above all else, often leading to competition and conflict between them
• Countries are mainly interested in their own security and power, and that the world is a competitive
place where conflict is inevitable. They think that there's no world government to keep countries in
line, so they have to look out for themselves
• “All men are wicked and that they will always give vent to the malignity that is I their minds when
opportunity offers “ (Machiavelli)
• States, anarchy, national interest, power politics

6. Theories of IPE
• Realism
• Game Theory (Prisoner's Dilemma): Imagine two friends, let's call them Saif and Zain, are arrested
for a crime. The police suspect they committed a bigger offense, but lack solid evidence. To get a
confession, they isolate and offer them a deal:
• Cooperate (Stay Silent): If both stay silent (cooperate), they each get a light sentence (2 years).
• Defect (Confess): If one confesses (defects) while the other stays silent, the one who confesses gets a
lighter sentence (1 year) and the other gets a harsher sentence (5 years).
• Both Defect (Confess): If they both confess (defect), they both get a moderate sentence (3 years).
• Neo Realism (Structural Realism): Structure, Distribution of Power, Balance of Power, Unitary Actors,
Security Dilemma, Systemic Constraints

7. Theories of IPE
• Statism
• concentration of economic controls and planning in the hands of a highly centralized government often
extending to government ownership of industry
• State ownership of industries, centralized economic planning, regulations to control markets
• Mercantilism: nation-states to use power to protect themselves and generate wealth for their citizens
• Classical Mercantilism: (from the 16th until the 19rh centuries)
• focuses on state efforts to generate trade surpluses by promoting exports and limiting imports
• trade surpluses strengthen a nation’s economy, thereby contributing to its security and protecting
certain public and private groups within society
• state intervention in the economy to promote national power, wealth, and security
• nation's wealth was measured by its stock of precious metals, particularly gold and silver
• zero-sum game: competition between two parties results in a gain for one party that is exactly
equal to the loss of the other party. The total outcome, if you were to add up the gains and
losses of all participants, would be zero

8. Theories of IPE
• Mercantilism: constant need to prepare for war was the primary factor that motivated monarchs
and other officials to organize their societies and to adopt measures that would help secure the nation
• In Europe, governments pushed harder and harder to extract income and resources from towns and
cities to finance the state’s growing demand for military security
• Maintaining and expanding strong armies and navies was every nation-state's highest priority, but also
very expensive
• accumulating wealth and manipulating the economy and trade policy to maximize revenue became a
key security strategy for any state
• Colonialism and Imperialism
• Mercantilism represented a set of ideal policies for achieving this
• Violence, occupation, and slavery
• This altered economic hierarchy of production in many societies. Whereas agriculture had constituted
the dominant source of income for state treasuries
• The state increasingly looked to merchants and their trade as a larger source of tax revenue

9. Theories of IPE
• Mercantilism:
• Neomercantilism : in the 1970s, scholars used the term “neomercantilism” to describe many defensive
economic policies that states use to safeguard their societies in an interdependent and intensely competitive
international political economy
• Rather than focusing simply on producing trade surpluses, neomercantilism today promotes a wide
variety of protectionist trade, finance, and development policies to generate national wealth and
enhance national security. (e,g Japan)
• Neo mercantilist states work closely with their domestic private sector to advance national interests in
an intense competitive international economy, efforts to generate economic growth, control the
business cycle, and eliminate unemployment
• governments increased spending on various social programs, imposed new regulations on industries,
introduced some capital controls, and manipulated interest rates
• subsidies for state owned corporations and funding for research and development
• nations employed export subsidies to lower the price of goods, making them more attractive to importers
overseas
• to reduce the vulnerability of states and international businesses to international competition without
undermining a commitment to freer trade under the GATT

10. Theories of IPE
• Mercantilism:
• Benign Mercantilism A defensive strategy through which a state seeks to protect the domestic
economy against damaging international political and economic forces. What one nation intends as
benign can be interpreted by another as malevolent (hostile).
• Malevolent Mercantilism Intentionally harmful economic policies that aim to weaken or defeat an
enemy or potential enemy. Associated with Germany and Japan before World War II