Week 3: The Study of Global Political Economy and Its Historical Roots of Theoretical Traditions

1. Week 3: The Study of Global Political Economy and Its Historical Roots of Theoretical Traditions Chapter by Matthew Watson

2. What is IPE ? - Thestudy of the interaction of trade, finance, and the state; and how statesrespond politically to the (shock) effects of the global market. - One of thekey features is the global securityarchitecture or the network of economic and politicalinstitutions designedto promote free trade and capital flows. - Manyissues are addressed, including unfair financial/trading practices, theNorth–South divide, and environmental problems.

3. 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: • 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) • Trends and evolution in theory building • Questions about the dominance of the realist agenda (inter-paradigmdebate.) • Gaps in the agenda of the disciplines of International Relations and Economics [ as a legacy of behavioralism]

4. 1- Changes/developments in the world -End of fixed exchange rate

5. 1- Changes/developments in the world - Rise in commodity prices

6. 1- Changes/developments in the world -NIEO • In October 1967, G-77 adoptedthe 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 adoptedthe 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.

7. Group of 77 Member Countries

9. 2.Trends and evolution in theory building : Inter-ParadigmDebate

10. 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) and collaboration (i.e.open global economy)

12. "For the world economy to be stabilized, therehas to be a stabilizer, one stabilizer" (1973, p. 305).

13. “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)

15. " The Pax Britannica and Pax Americana,like the Pax Romana, ensured an international system of relativepeace and security. Great Britain and the United States created andenforced the rules of a liberal international economic order" (Gilpin,1981,p. 144).

17. Underwhat conditions can independent countries cooperate in the worldpolitical economy? In particular, can cooperation take place withouthegemony and, if so, how? …Cooperation canunder some conditions develop on the basis of complementary interests,and that institutions, broadly defined, affect the patterns of cooperationthat emerge (Kehone, 1984,p.9).

18. 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

19. 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

20. 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

24. 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

25. 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

28. 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

31. 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

32. Surplus Value Difference between a worker'swages(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)bycapitalism. Read more: http://www.businessdictionary.com/

33. 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)

35. “Imperialism emerged as the development and direct continuation of the fundamentalattributes 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.)

36. Dependency Theory • Developed in the 1960s and 1970s toaccount for structural inequalities in global wealth and power. • The dependency theorists not only rejected modernisation theory butalso radically undermined Marx’s view that capitalismis able topromote development. • Dependency refers to externallyimposed structurally unequal relations between thecore and the periphery. • The result is chronic underdevelopment.

37. The Brandt Line

39. World Systems Theory • Primary unitis world-system that is ‘capitalistworld-economy’ refers to the inter-regional and transnational division of labor, which divides the world into core, semi-periphery, 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.

43. 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)

45. 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. valuefreesocialscience) • Aspirations for a “better” world free of the logic of economic exploitation – a continuation of the political Marx

48. 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”

49. Alternative Distinctions

50. 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