What is IPE?

Linda YoungPOLS 400International Political EconomyWilson Hall – Room 1122

Fall 2005

Linda Young, POLS 400, International Political Economy

Politics and Economics

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

Wallerstein: disciplines due to historical developments – shape their methodology

Linda Young, POLS 400, International Political Economy

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

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

Linda Young, POLS 400, International Political Economy

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

MNCs

Linda Young, POLS 400, International Political Economy

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.

Linda Young, POLS 400, International Political Economy

Definitions

Tension between the State and the Market

States: political institutions of the modern nation state, a geographic unit with a coherent and autonomous system of government

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

Society embeds both the State and the Market

Markets: economic institutions of modern capitalism – a force that motives human behavior – to produce and supply goods or to seek out goods and jobs

Linda Young, POLS 400, International Political Economy

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

Linda Young, POLS 400, International Political Economy

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

Linda Young, POLS 400, International Political Economy

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)

Linda Young, POLS 400, International Political Economy

Economists Disagree

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

Over the relative importance of market failure and government failure

Linda Young, POLS 400, International Political Economy

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 Joseph Grieco

Linda Young, POLS 400, International Political Economy

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

Robert Gilpin

Linda Young, POLS 400, International Political Economy

States and Markets

World systems analysis: state developed and used to facilitate market transactions in the capitalist world economy

States: want to control economic activity (and accumulation of capital) and its gains for their own ends

Market: locate activities where profitable

Linda Young, POLS 400, International Political Economy

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

Dani Rodrik’s evaluation is that successful states innovate with economic and social policy in unexpected ways

– Diversity needs to be preserved

Linda Young, POLS 400, International Political Economy

Dimensions of International Political Economy

Levels of analysis: individual, state and international

Global structures (such as the rules governing international trade, and international finance)

Some think of IPE as the study of multidimensional bargains between powerful actors and states (bargains can take the form of agreements, rules, conventions)

Linda Young, POLS 400, International Political Economy

Dimensions of International Political Economycon’t

– 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

Perspectives and Values: