1. Ch 11. International Political Economy

2. Q: What is International Political Economy(IPE)?
A: interplay of economics and politics in world affairs
Wait! Usually, we assume that IPE is market vs. states…
BUT, it is actually, NOT!!

3. IPE from 1940s to current days
1944, Bretton Woods system created.
-1. Had to protect the global market from possible
depression in the future
-2. Had to rebuild the war-torn economies of Europe
3 major institutions to rebuild postwar economy

4. IPE from 1940s to current days
However, Bretton Woods were postponed by the rise of containment policy by Soviet bloc, and Marshall plan by United States in Western bloc
IMF, World bank, GATT could be in effect since 1950s
European allies were benefiting from the growing and deepening economic integration in Europe while the values of US goods and services dropped in global market compared to the goods from allied countries
Supported by Bretton Woods system, most European countries could diverge from US position
These resulted major shift in rules of international monetary system by United States in 1971

5. IPE from 1940s to current days
In 1970s, rise of Europe, Asia led United States to change economic policy in 1971
-1. Imposing tariff on imported goods
-2. No more conversion dollars to gold at $35 per ounce by US gov’t
->These measures by US broke the Bretton Woods system which was actually
encouraged by US
Furthermore..
- 1st Oil crisis occurred in 1973 led global economy into stagflation
Weakened IMF framework
Rise of G7
Changed from cooperation to protectionism..
-1. Multifiber Arrangement of ↔ New International Economic Order (NIEO)
Stagflation 설명
G7 누가 있는지
Multifiber arrangement 에 대해 설명
NIEO 설명

6. IPE from 1940s to current days
NIEO turned out to be failed for several reasons
Although UNGA(United Nations General Assembly) is the institution for all countries including developing countries, it is not the institution that implements policies only for developing countries
Industrialized countries weren’t helpful at all.
In 1980s, US Federal Reserve raised interest rates
- These caused debt crisis from developing countries
-How IMF managed on this issue?
-1. Enforce indebted countries to exercise structural
adjustment Neo-liberalism
- These include reduce inflation, gov’t expenditure, gov’t role
in domestic economy (trade liberalization, privatization, deregulation)

7. IPE from 1940s to current days
Shifted to summit diplomacy
Ex. G20 summit
World Bank tried to improve
its relation with both governments
and NGOs.
GATT is changed due to the creation of WTO in 1995
-Difference from previous version?
-WTO focuses not only on traditional trade issues,
but also on intellectual property rights, investment
measures, and food safety standards

8. Various approaches on IPE
Liberal tradition
Mercantilist tradition
Marxian traditions
Free market
Free trade essential
Less role to gov’t
Maximum wealth interdependence
Protectionism
Again, class struggle
Core Periphery

9. Various approaches on IPE
Depending on different tastes and preferences by all actors, the concept of rational choice (or neo-utilitarian) added into IPE
Rational choice focuses on incentive structure faced by those making decisions
Political economy with rational choice
Institutionalism with rational choice
Social constructivism
Explains how particular groups in the economy emerge and what their goals and policy preferences are
Provide framework for understanding the coalitions into which these groups enter and their interactions with other institutions
States create international institutions and delegate power to them in order to maximize utility within the constraints of world markets and world politics
Comes down to the need to resolve collective action problems
Focuses on beliefs, roles, traditions, ideologies, and patterns of influence that shape preferences, behavior, and outcomes
Dominant powers will promulgate institutions, ideologies, and ideas, all of which help to persuade other actors that their best interests converge with those of the dominant power

10. Globalization debate in IPE
Globalization in 4 processes in the world economy
Internationalization
Technological revolution
Deterritorialization
Liberalization
Still, there is on-going debate on globalization
- Conflict on internationalization
- Conflict on liberalization
- Conflict on deterritorialization

11. International institutions in IPE
As the world has been faced with several economic recessions before, the role of institutions in global economy increased than before
Institutionalists
Realists
Constructivists
States will create institutions in order to better achieve gains through policy coordination and cooperation
Institutions will smooth over many gaps and failures in the operation of markets, and serve to ensure that states make genuinely rational and optimizing decisions to cooperate
Argue that international institutions will always reflect the interests of dominant states in the system
They would take care of relative gain rather than absolute gain
For them, cooperation and institutions are heavily constrained by underlying calculations about power
Rejects both views from institutionalists and realists
Certain state’s interests are affected by its identity as a state, and that both its interests and identity are influenced by a social structure of interactions, normative ideas, and beliefs.

12. Questions
How do you think about the role of globalization in global economy? Do you think it strengthened global economy or rather diminished global economy?
Do you agree with the statement that the institutions played a crucial role in international political economy?
How do you see the image of the global economy in next 5 years? Which kind of trade would the most countries prefer in next 5 years? Multi-lateral trade or bilateral trade? Free- trade or protective trade?