1. International Political Economy

2. Introduction International Political Economy (IPE)
Interplay of economics and politics in world affairs
States vs. Markets = Misleading Assumptions
States cannot rule the global economy
Systems of Institutions
The rules, norms, laws, organization, and habits that for the system
A defining feature of IR
Globalization and international cooperation of states and institutions
Modern IPE born from Cold War end
Promoted many of IPE main institutions
UN, IMF, WB, and WTO

3. Post-WWII World-Economy
Bretton Woods Conference
Discussed future of world economy following WWII
Resolve two Serious Problems
Prevent another Great Depression
Stable Global Monetary System
Open World Trading System
Rebuilding War-Torn Europe
Bretton Woods System Established
Promote a New World Economic Order
Created International Monetary Fund (IMF)
Created International Bank for Reconstruction and Development (IBRD)
Later became World Bank (WB)
Created General Agreement on Trade and Tariffs (GATT)
Replace by World Trade Organization (WTO) in 1995

4. International Monetary Fund
Membership of 185 Countries
Promoted International Monetary Cooperation
Created a Stable Exchange Rate Regime
All currencies based on US Dollar
US Dollar would be back by Gold (Gold Standard)
Provided stability for all currencies
Provides emergency assistance to countries facing a temporary economic crisis
Today provides assistance to developing nations
Conditionality or
Requires countries who barrow money to meet certain conditions = liberalization and privatization of economy
Backlash from anti-globalization movement

5. Continue and World Bank
Structural Adjustments
Due to the US raising interest rates (protectionism) on developing nations loans, which caused the counties to defaulting
Counties need to take immediate measures to receive new loans
reduce inflation, cut social welfare, trade liberalization, deregulation, and privatization
Major Backlash from anti-globalization movement
World Bank - Originally IDRB
Assists in the Development of Countries
Original Purpose was Post-WWII Europe
Worlds largest source of Development Funds
$16 Billion in annual loans
Requires Reforms in a barrowers country
Ending Poverty, Promoting Human Rights, etc…
Minor backlash from anti-globalization movement

6. General Agreement on Trade and Tariffs
Forum for negotiation on trade liberalization
Removal of restrictions, barriers or tariffs
Free-Trade
Solved trade conflicts
Interim Agreement = Only established until permanent organization could be formed
Operated for Four Decades
Proved powerless to stop Economic Protectionism (tariffs to promote internal growth) of 1970’s
Replaced by stronger World Trade Organization in 1995
Administering WTO Trade Agreements
Forum for trade negotiations
Handling trade disputes
Monitoring national trade policies
Supplying technical assistance to developing counties

7. IPE and the Cold War Containment Marshall Plan
Prevent the spread of Communism to Western Europe and other nations
Postponed development of Modern IPE
Marshall Plan
Massive Financial Aid to Europe
Promoted IPE Institutions and Western Bloc Organizations
Gold Standard Replaced by Dollar Standard
Western Countries embraced Dollar
Brent Woods System was promoted to develop capitalism globally

8. Continue Collapse of Brent Woods
Economic troubles in the US due to cost of Vietnam and Great Society without raising taxes
US announced in 1971
End of Gold Standard
Allowed major currencies to “Float” through deregulation
Protectionism of US Economy
Charge of 10% on imports to help grow internal industries
Emerging Economies no longer dependent on US
European Economic Community (EEC)
Tigers of Asia (Japan, South Korea, Taiwan, and Eventually China)
Global Stagflation
Low growth (Stagnation) and high inflation
Promoted countries to engage in Protectionism

9. Continue North-South Gap
Gap in economic development in northern hemisphere (Industrialized Nations) and southern hemisphere (Developing Nations)
Challenged by Developing Nations
Promoted New International Economic Order
Sought better representation in institutions
Promoted Fair Trade
Increase in Aide
Protection of Economic Sovereignty
Unsuccessful
New Governments in the 1980’s promoted opposite
Changed the Study of IPE
Tries to answer “why are so many countries in the world under developed” and focus now on Interdependence

10. Continue Neo-Liberalism (Neo-Conservatism in US) of the 1980’s
Challenge to Keynesian Economics of 30’s - 70’s
John Maynard Keynes
Governments should play an active and interventionist role in the economy to ensure both growth and equity.
Neo-Liberalism encourages
Limited or no government role
Deregulation of laws and institutions
Allow markets to regulate business
Washington Consensus
Term implies NL mainly a reflection of US interests

11. Continue End of the Cold War Problem World Trade Organization
Integrating USSR, Soviet Bloc, and Soviet backed developing nations
Burden fell to World Bank and IMF
Conditionality created problems
Coercion and Conformity
World Trade Organization
Created to alleviate problems of WB and IMF
Voting power shifted from US and EU when other powerful economies refused to cooperate unless power adjusted

12. Traditional Approaches to IPE
The Liberal Tradition
Free Market and exchanges currencies
Voluntary exchange and markets that are efficient and morally desirable
Allows countries to benefit from their advantages (natural, resources, endowments, and specializations)
Little or no regulation of markets or currencies by governments
Order in markets will be self-regulatory
The Mercantilist Tradition
Realist Perspective = Power of States
World economy is an arena of competition among states seeking to maximize relative strength and power

13. Continue Marxian Tradition
For survival, states must maximize wealth in independence
Trade protectionism is emphasized
Governments must use protective measures (invest in strategic industries, subsidies, trade tariffs, etc…) to ensure the strengths of the domestic and international economy of the state
IS controlled by hegemony, who sets the norms and institutions to benefit itself
Marxian Tradition
World-Economy is an arena of competition, and capitalism is the driving force
Class struggle between oppressed (workers) and oppressors (Capitalist)
Capitalist seek profits at expensive of workers
Unequal exchange between Periphery (developing) and Core (developed) nations
Wealth flows from poor to rich countries

14. New Approaches to IPE Rational Choice Neo-Utilitarian Approach
John Stuart Mill’s book “Utilitarianism”
Weighing the pros and cons, actors will choose the most advantageous choice
Preferences are known/fixed and actors will make best choice to promote their interest
Two Approaches to Rational Choice
Political Economy Approach
Focus on Interest Groups and how they impact the IPE
Societies are pluralist and governments follow the actions of groups promoting specific interest
Governments make their IPE choices by the actions of specific interest groups within the economy
Coalitions of interest groups influence governments and institutions for their personal gain

15. Continue Social Constructivism Institutionalism Approach
Focuses on the interaction of states and how they impact the IPE
States create institutions in order to maximize utility within the constraints of world markets and world politics
Social Constructivism
Policies in the world-economy are affected by historical and sociological factors
Actors formulate preferences and behaviors based on beliefs, roles, traditions, ideologies, and patterns of influences
There is no set/fixed preferences in IR or IPE
Preferences reflect actors ideas, culture, and knowledge
Choice will often reflect the hegemony
Institutions promote hegemony
Coercion or consent prevails
Legitimacy is promoted and desired

16. Globalization and the IPE
Globalization is strongly debated in IPE Studies
Four Aspects of Globalization in IPE
Internationalization
Increase economic interactions and interdependence across borders
Technological Revolution
Impact on new communication technologies
Deterritorialization
Extent distances, borders, and places influence the way people identify themselves and act
Liberalization
Reduction in government role in the economy which allows the new IPE to exist
Debate exist between how each impacts the world

17. Continue
Is globalization diminishing the role of the state in the world economy
The Globalists Response = Yes
As interdependence occurs
Multinational trade, production, investment, and finances move in and out of countries more easily
Governments lose their capacity to regulate economy
Footloose Modern Businesses
Companies will leave if no econ liberalization
The Sceptics Response = NO
Footloose Modern Business model is false
Globalist have no evidence to back up claims
Knowledge-Intensive Economy
Skilled or semi-skilled workforce, good infrastructure, and proximity to markets dictate choice

18. Institutions and the IPE
Globalization increases interdependence
Both good and bad
Asian Financial Crisis
Meltdown of South East Asia Economies that lead to sever economic impact in other countries
Demonstrates how a crisis in one country can easily spill into other countries
Led to a call for stronger international economic institutions, more cooperation, monitoring, and regulation
Institutions
States create institutions to achieve better gains through cooperation and coordination
States agree to be bound by certain norms, rules, and decisions
States don’t always follow

19. Continue Institutionalist = Institutions reflect liberalization
Institutions emerge primarily as solutions to universal problems or market failures
Will regulate gaps and failures of open system
Focus on absolute gains
Over all the benefits of everyone involved
Realist = Promote states power and wealth
Hegemony is liberal-democracy
Institutions reflect will of hegemony to ensure survival and power gain of hegemony
Focus on relative gains
The benefits of the individual states
Cooperation is constrained by power struggles
Institutions will be abandoned if no positive gain for state
Institutions only accommodate the needs of weaker states when needs don’t interfere with powerful states

20. Continue Social Constructivists
Reject the definable/fixed rational choice of realist and institutionalists
Realist wrong because institutions don’t always reflect power politics
Institutionalists wrong because institutions don’t always reflect the need of markets, trade, etc…
Interest are impacted by identity
Which is created by social structure of interactions, normative ideas, and beliefs
Institutions change when identity of states change
Social movements with a state impact IPE
Human Rights Moments
Environmental Movements
Etc..
All impact modern IPE because they change identity of states
Puts pressure on political leaders to change institutions