What is IPE?

1. Linda Young POLS 400 International Political Economy Wilson Hall – Room 1122 What is IPE? Fall 2005

2. Politics and Economics Wallerstein: disciplines due to historical developments – shape their methodology Modernity defined by a division between the market, the state, and civil society – Political Science, Sociology and Economics – Spheres dominated by laws deduced by empirical analysis – different from history Immanuel Wallerstein

3. History of the Term Adam Smith: PE was a branch of the science of a legislator or statesman… John Stuart Mill: the science of how nations get rich Alfred Marshall: used economics not political economy – denied importance of politics

4. Questions generated by the interactions of economic and political affairs (Gilpin) • The interaction of markets and powerful actors • Because an explanation from one viewpoint is narrow • 1992 study of Japan and East and SE Asia • Interdisciplinary • Questions determined the answers • Political Scientists • Looked at trade/investment of Japanese firms – and development assistance • Concluded that Japan trying to create sphere of influence • Pacific Asian economy as hierarchical • Economists • Trade flows and other measurable data • Concluded events and patterns could be explained by the market • No evidence of Japan trying to create a sphere of influence Japan

5. MNCs Differences Political scientists: economy as having powerful economic and state actors Economists: defined the economy in terms of economic forces – No conscious strategy on the part of states or multinational corporations (MNCs) – Explainable due to economic forces – investment due to appreciation of the Yen Differences reflected their assumptions Can be complimentary

6. International Political Economy Susan Strange: IPE concerns the social, political and economic arrangements affecting the global systems of production, exchange and distribution, and the mix of values reflected therein. Those arrangements are not divinely ordained, nor are they the outcome of blind chance. Rather they are the result of human decisions taken in the context of manmade institutions and sets of self-set rules and customs.

7. Definitions States: political institutions of the modern nation state, a geographic unit with a coherent and autonomous system of government Tension between the State and the Market Institutions: debate between the economic and political perspective – North: institutions result from intentional (and rational) actions by actors to maximize their economic interests – Political science places more emphasis on irrational, political (including power relationships) and historical factors shaping institutions Markets: economic institutions of modern capitalism – a force that motives human behavior – to produce and supply goods or to seek out goods and jobs Society embeds both the State and the Market

8. Tension between the State and the Market • Example is the film and news industry • States want control over entry – political motivations • Market wants to export US movies for example • Problem for some countries

9. Political Science Distribution of gains from exchange – Between actors in an economy – Between states States, MNCs and powerful actors intervene to shape the nature of international regimes – Design and functioning of institutions – To advance their political and economic interests

10. Economics • Concerned with efficiency • Who considers income inequality to be a problem? • Gains of mutual exchange • Regard markets as self-regulating and immune from politics • Unconcerned with institutions • Economics assumes that exchange occurs because it benefits all parties • Distributional effects (welfare analysis)

11. Economists Disagree Over the relative importance of market failure and government failure • Market failure: when imperfections in the market mean that the market will not deliver its promise (its theoretical beneficial results) • Justification for government intervention • Government failure: some economists studying institutions take a view that public officials are not disinterested – serve their own interests – public choice • Justification for limiting government

12. Joseph Grieco What's More Important? • Positive gains or relative gains? • Grieco: states care about relative gains • Cooperation more likely if positive gains are enough • Examples? Trade negotiations

13. Robert Gilpin Sovereignty and Interdependence States want both – they conflict Gilpin says “the logic of the market is to put more and more aspects of society into the price mechanism” –Examples: social security, water Trade rules: how do they increasingly impinge on national autonomy? – Biotechnology – WTP dispute settlement

14. States and Markets States: want to control economic activity (and accumulation of capital) and its gains for their own ends World systems analysis: state developed and used to facilitate market transactions in the capitalist world economy Market: locate activities where profitable

15. Dani Rodrik Political Economy • Assumes the market is embedded in a larger framework • Market structured by social and political environment • What is the purpose of economic activity – to benefit individual consumers, or to promote certain goals of social welfare, or to maximize the power of the state? (example?) • Neoclassical economists assert that the purpose of economic activity is to satisfy consumer’s desires, BUT • Applies to the US more than to Japan and Asia • Priority on social cohesion • Prevalence of welfare state in France • Dani Rodrik’s evaluation is that successful states innovate with economic and social policy in unexpected ways • Diversity needs to be preserved

16. Dimensions of International Political Economy Some think of IPE as the study of multidimensional bargains between powerful actors and states (bargains can take the form of agreements, rules, conventions) Levels of analysis: individual, state and international Global structures (such as the rules governing international trade, and international finance)

17. Dimensions of International Political Economycon’t Perspectives and Values: • Filters through which we interpret the world • Mercantilism: economic nationalism – rooted in political realism (like Gilpin) which evaluates IPE issues in terms of the national interest • Liberalism: evaluates IPE interests largely through the perspective of the individual, and an emphasis on free markets – associated with the study of economics • Structuralism: rooted in Marxism, and evaluates the world economy as a capitalist one with classes of nations and people within nations – society structured by dominant economic forces