International political economy
in an age of globalization
Choi moon joung(IR)
Oct 31. 2005
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Introduction
The post-war world-economy
The rise of IPE in the study of international relations
Traditional approaches to IPE
New approaches to IPE
The globalization debate in IPE
International institutions in the globalizing world-economy
Conclusion
Introduction
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International political economy(IPE)
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Interplay of economics and politics in world affairs
Core questions: what drives and explains events in
the world-economy?
World markets and countries, local firms, and
multinational corporations which trade and invest
within them are all shaped by layers of rules, norms,
laws, organizations and even habits.
Political scientists call it ‘institutions’
IPE explains what creates and perpetuates
institutions and what impact institutions have on the
world economy
The post-war world-economy
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Bretton Woods system in 1944
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Two aims
 no more Great Depression of the 1930s
 reconstruction of the war-torn economies of
Europe
Three institutions planned
 International Monetary Fund(IMF)
 International Bank for Reconstruction and
Development(IBRD later called the World Bank)
 General Agreement on Tariffs and Trad(GATT) trade liberalization
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1947
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US announced Marshall Plan
gold standard was replaced by the dollar standard
IMF, World Bank and GATT began to function in the
1950s: Western-bloc organization which heavily depend
on the US
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US support change for the Bretton Woods system
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why?
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Weakness in the US economy
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costly military involvement in Vietnam
more money on public education and urban redevelopment
programmes without raising taxes
prices rose-> competitiveness dropped-> confidence in the US
dollar plummeted
European allies benefited from economic integration
Asia: success of export-led growth in Japan and in newly
industrializing economies such as South Korea and Taiwan
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in 1971
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US changed the rules of the international monetary
system
 no longer convert dollars to gold at $35 per
ounce
 impose a 10 per cent surcharge on import duties
the Breakdown of Bretton Woods system
In 1773
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the end of high growth and the first oil crisis ->
stagflation(low growth and high inflation)
IMF role collapsed -> Group of Seven(US, UK, Japan,
Germany, France, Italy and Canada) in 1975
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The post-war Trading system
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cooperation had steadily grown under GATT
In 1970s,however, marked by lack of international
economic cooperation among the industrialized
countries with new protectionism
new protectionism fuelled the anger of developing
countries
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launched a campaign in the UN General Assembly for
New International Economic Order(NIEO)
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The 1980s a shift in US economic policy
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in 1979 US Federal Reserve raised interest rates to stem
inflation
Both borrowers and creditors realized that many of the
loans could not be repaid
Debt crisis
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IMF’s role in the world-economy became ensuring that
indebted countries undertook structural adjustment in
their economies
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By the end of the cold war, the three
institutions still existed but with different roles
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World Bank-development agency making loans to
developing countries
GATT- failed to stem new protectionism and to
meet aspirations of developing countries, but
created a new World Trade Organization(WTO)
IMF- lost its original role after breakdown of Bretton
Woods system but gained a new role with the debt
crisis of the 1980s: offering financial and technical
assistance to developing and transition economies
The rise of IPE in the study of
international relations
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Until the 1970s, IPE was a neglected subject
By the early 1970s, IR began to change: pay
more attention to economic affairs
why?
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decline in US economic preponderance
challenge to traditional notions of power and
security posed by the US failure in Vietnam
economic challenges in the 1970s
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OPEC oil price rise
 developing countries push for a NIEO
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the end of cold war and globalization
Traditional approaches to IPE
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The Liberal Tradition
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The world-economy has the potential to be
a seamless global market place in which
free trade and the free movement of capital
shape the policies of governments and
economic actors.
Order would be achieved by the ‘invisible
hands’ of competition in the global market
place
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The Mercantilist tradition
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The world-economy is an arena of
competition among states seeking to
maximize their wealth and independence
Most powerful states define the rules and
limits of the system
Order is achieved only where there is a
balance of power or hegemony
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The Marxist tradition
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The world-economy is an arena of capitalist
competition, not among states but a class struggle
between the ‘oppressor and the
oppressed’(capitalists and workers)
Capitalism is the driving force in the worldeconomy
Order is achieved only where they succeed in
exacting the submission of all others
The three traditional perspectives usefully highlight
different actors, different processes, and different
levels of analysis in the study of IPE
New approaches to IPE
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What is ‘rational choice’ or neo-utilitarianism?
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focus on the incentive structure faced by those
making decision
assumption-actors’ interests and preferences are
known or fixed and actors can make strategic
choices as to how best to promote their interests
means that for the actor or group concerned, this
was the optimal choice given the specific incentives
and institutional constraints and opportunities that
existed at the time
Two different applications of rational choice:
political economy and institutionalism
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Political economy: the application of rational
choice to groups within the state
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world-economy- characterized by competition
among vested interests within different kinds of
states
core actors- interest groups formed within the
domestic economies of the states
key driving force- rational choice at the level of
groups within the domestic economy responding to
changes in the international economy
order- not concerned with theorizing about the
conditions necessary for international order
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Institutionalism: the application of rational
choice to states
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world-economy- see an arena of inter-state
cooperation
core actor-governments and the institutions to
which they delegate power
key driving forces- rational choice at the level of
the state motivated by the potential gains from
cooperation
order- existence of international institutions which
permit cooperation to continue
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Social Constructivism
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assumption- policies within the world-economy are affected
by historical and sociological factors
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The neo-Gramscian approach: a radical variant
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World-economy- overarching structure of knowledge, ideas,
and institutions which reflects the interests of dominant actors
and within which competition takes place
Key driving force- capitalist competition which is constrained
by the need of the powerful to gain the consent of the less
powerful.
Order- dominance by one state is insufficient condition.
Hegemony requires control over the structures of knowledge
and ideas as well
The globalization debate in IPE
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Four aspects of Globalization
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Internationalization
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The technological revolution
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effect of new electronic communication permits firms and other
actors to operate globally with much less regard for location,
distance, and borders
Deterritorialization
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increase in economic transactions across borders
diminution of influence of territorial places, distances and
boundaries over the way people collectively identify themselves or
seek political recognition
not only expansion of global civil society but also terrorist networks
Liberalization
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government policies reduce the role of the state in the economy
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Is globalization diminishing the role of the sate in
the world economy?
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The globalists
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governments and states are losing their capacity to
control economic interactions
why? quantity and rapidity of flows make it more difficult
for governments to regulate trade, investment or capital
The sceptics
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the role of states is not eroding; still have a very
important and substantial
why? in the new knowledge-intensive economy, factors
such as market proximity, good infrastructure and
availability of skilled labour are crucial
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The impact of globalization on different kinds of states
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The Asian financial crisis in 1997 highlights that states
have different capacities to respond to globalization
strong states
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weak states
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shape the rules and institutions which have made a
global economy possible- ruler makers
control the nature and speed of their integration into the
world-economy
little or no influence in the creation and enforcement of
rules in the system- ruler takers
exercised little control over their own integration into the
world-economy
common to all states
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search for greater stability and predictablilty
International institutions in the
globalizing world-economy
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Institutionalist or neo-liberal institutionalist
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conditions
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impact of institutions on IR
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expand the possible gains to be made from cooperation
implications for globalization
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for mutual gains
institutions can manage globalization to ensure a transition
to a more ‘liberal’ economy
institutionalists argue that international institutions will
play an important and positive role in ensuring that
globalization results in widely spread benefits in the
world-economy
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Realist(or ‘neo-realist’)
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conditions
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impact on IR
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facilitate the coordination of policies and actions but only in
so far as this does not alter the balance of power among
states
implications for globalizaiton
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only where relative position vis-a-vis other states is not
adversely affected
institutions will ‘manage’ globalization in the interests of
dominant and powerful states
Realists reject the institutionalist argument on the
grounds that it does not account for the unwillingness of
states ever to sacrifice power relative to other states
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Constructivist
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conditions
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impact on IR
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reinforce particular patterns of interaction, and reflect new ones
implications for globalization
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institutions arise as a reflection of the identities and interests of
states and groups which are themselves forged through interaction
changing pattern of interaction and discourse will be reflected in
institutional responses to globalization
Constructivists pay more attention to how governments,
states and other actors construct their preferences,
highlighting the role that state identities, dominant beliefs
and ongoing debates and contestation play in this
process
Conclusion
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Globalization increases the challenges faced by all actors in
the world-economy; increase global interdependence,
interconnectedness and capacity of some states to
influence others.
Thus it requires more concerted global response with
international institutions playing more vital role in IR
Given the Asian financial crisis, it is true that more effective
and strong international institutions are needed.
However, the crisis also revealed the problems and flaws of
existing international institutions and the bias of interests
which they reflect.
Therefore, we also need an effort to strike an balance of
voice between strong states and weak states in the worldeconomy policy choice
Thank you
Choi Moon Joung(IR)