International Relations Theory
International Political Economy
GYÖRGY László, PhD
assistant professor
Budapest University of Technology and Economics
http://english.www.bme.hu/
http://mono.eik.bme.hu/~gyorgy/
[email protected]
What is IPE?
Society
Politics
Economics
How to approach this relationship?
(1) Mercantilism (realism) - (2) Economic liberalism - (3) Marxism
Free market?
Economic Policy
THE PENDULUM SIMILE
Command
economy
Hungary in
communism
State determined economic
functioning
Market=f(Government)
Government=g(Party)
Singapore
Market capitalism
Hungary today
“Supercapitalism”
(Robert B. Reich)
Balancing: government’s role
is to correct market failures
Market
Government
Laszlo Gyorgy, [email protected] - http://mono.eik.bme.hu/~gyorgy/
What is IPE?
•
•
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Examining state-business relations
•
Wealth and poverty: who gets what in the international
system?
•
Some scholars even argue that IPE is the more
comprehensive discipline and that IR should
consequently be seen as a subfield of IPE!
(Alternatively both IR and IPE could be subfields of
International Studies)
•
Imperialism of economics (rational choice theory)
MONEY
“A modern market is based on political rules (if not, it
would be a ‘Mafia market’ based on threats, bribes and
force).”
Historical Developments
•
•
Until the 1970s international economics and international politics
were a ‘case of mutual neglect’
Charles de Gaulle: economics is ‘low politics’
Why the change of attitude?
70s: crisis of Bretton Woods
Decolonization
“New International
- US economic difficulties due to Economic Order”
the Vietnam War
- Gold-convertibility of $ had to
be abandoned
- Political measures were taken
that changed the rules of the
game for the economic
marketplace
- Oil crisis: sense of lost
invulnerability (in USA)
3 Streams of IPE
1. Mercantilism
2. Liberalism
3. Structuralism
The end of Cold War
and the aim from
East-European
countries to join the
Western political and
economic systems
Mercantilism
• Intimately connected to the establishment of the modern, sovereign state during sixteenth, seventeenth centuries
World-view of political elites that were at the forefront of building the modern state
Economic activity is and should be subordinated to the primary goal of building a strong state
Economics is a tool of politics
International economy is an arena of conflict between
opposing national interests (rather than an arena of
cooperation and mutual gain)
Economic competition between states is a zero sum game
Material wealth accumulated by one state can be served as a
basis for military-political power (positive feedback loop)
Past: mercantilism; Today: neomercantilism
Defensive mercantilism vs offensive mercantilism
(imperialism)
•
•
•
•
•
•
•
•
Mercantilism
•
16th century, Spain: supply of
gold and silver bullion
•
17th century, the Netherlands:
trade and the creation of the
largest possible trade surplus
Ever since Britain obtain a
leading role: industrialize
Mercantilism is popular to
countries who lagged behind
Britain: catching-up could not be
left to market forces; calls for
political measures to protect
and develop local industry
Neomercantilism: China today
•
•
•
CHINA’S NEOMERCANTILISM
Mercantilist Thinkers
•
Alexander Hamilton: one of the founding fathers of the USA
Calls for protectionist measures
USA was probably the most protectionist developing country
Friedrich List:
•
•
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The theory of productive power: the ability to produce is more
important than the result of producing
• The prosperity of the state depends not primarily on its store of
wealth, but on the extent to which it has developed its ‘powers of
production’
Recent mercantilist thinking focuses on the success of states in East
Asia: Japan, South Korea, Taiwan, Singapore, Malaysia
• E.g. Japanese government
1. Singled out strategic industries
2. Protected them form outside competition
3. Supported their development even by regulating competition
between firms
•
•
Mercantilist View (Fallows,
1994)
•
•
Anglo-American theory: economics is by nature a ‘positive sum
game’
Asian history: economic competition is a form of war in which some
win others lose
• Strong wins, gives orders, has independence and control
• Make difference between ‘us’ and ‘them’
• Different relationships: Koreans, Canadians, Britons, Chinese or
Japanese
Economic Liberalism
•
•
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Critique of the comprehensive political
control and regulation of economic
affairs
Reject theories and policies which
subordinate economics to politics
Adam Smith: markets tend to expand
spontaneously for the satisfaction of
human needs (which has its own
mechanisms or ‘laws’ if it is left to itself.
e.g.: ‘law of comparative advantage’ specialization, efficiency, productivity)
• Core ideas:
1. Rational individual actor (central)
2. Belief in progress
3. Assumption of mutual gain from free
exchange (positive sum game)
4. The key notion that economic
marketplace is the main source of
progress
Adam Smith (1723-1790)
Economic Liberalism
•
“Individuals and companies would not be active in the marketplace
unless it was to their benefit”
•
Comparative advantage
?
David Ricardo (1772-1823)
Economic Liberalism
•
Laissez-faire
?
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•
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Alfred Marshall (1842-1924)
John Stuart Mill
Alfred Marshall
Keynes: “risk, uncertainty, ignorance” potential evils of market economy
Marxism vs. Economic Liberalism
?
Marxism
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•
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Fundamental critique of economic liberalism
Zero-sum argument of mercantilism applied to
classes
• But: economics first and state second
Human exploitation and class inequality
Classes: bourgeoisie (owns the means of
production) and proletariat (owns only its
labour)
Profit: derived from class exploitation
Marx did not see the growth of capitalism as a
negative or retrogressive event. Capitalism
means progress for Marx!
1. Capitalism destroys previous relations of
production, such as feudalism, which were
even more exploitative. Capitalism is a step
forward in the sense that labour is free to sell
2. Capitalism paves the way for socialist
revolution where the means of production will
be placed under social control
Marxism
•
Materialist: the core activity in any society concerns the way in
which human beings produce their means of existence.
Forces of production
(i.e. technical level of economic activity)
ARTISAN HANDICRAFT INDUSTRIAL MACHINERY
Relations of
production
PRIVATE
(i.e. the system of
social ownership
which determines
the actual control
over the
PUBLIC
productive forces)
(Feudalism)
Capitalism
Specific
mode of
production
Communism
Marxism
•
“The bourgeoisie, which dominates the capitalist economy
through control of the means of production, will also tend to
dominate in the political sphere because economics is the
basis of politics according to Marxists” (Jackson- Sörensen)
Who stated something similar?
The Marxist Framework of IPE
1. States are not autonomous (are driven by ruling-class interests)
• Wars between countries should be seen in the economic context
of competition between capitalist classes of different states
2. Capitalism is expansive: never-ending search for new markets and
profit
• History of IPE: history of capitalist expansion across the globe
1. Imperialism and colonization
2. Economic globalization led by giant transnational corporations
• Lenin’s “law of uneven development”: capitalist expansion is
always uneven and unequal (e.g. Britain and Germany: at the
beginning of 20th century as Germany was catching up wanted a
redivision of international spheres of influence, according to
relative strength of the countries)
The Marxist Framework of IPE
•
Need for detailed historical analysis: events must
be analyzed in their specific historical context.
E.g.:
•
Interdependence around the First World War
was often arms-length import export relations
between independent companies
•
Today it is frequently integrated circuits of
production between subsidiaries of the same
transnational company (this later is a different
and closer type of cooperation with its specific
consequences)
The Marxist Framework of IPE
Realism
Marxism
Both agree: perennial competition and conflict between
states
Abstract: existence of
independent states as a
condition of anarchy. No
concrete specification of social
forces
Unhistorical: same damned
things over and over again
States are not independent: social
forces (ruling classes) drive them
Historical: conflict of earlier historical
phases require a different
explanation (historians have to find
the social forces behind conflicts
and competition)
Criticize the Marxist view that it Conceded point: “relative autonomy”
reduces the state to a simple tool (safeguarding the capitalist system)
of ruling classes
The Marxist Framework of IPE
Robert Cox
•
The concept of historical structures: the particular configuration of
forces are determining “historical structures”
• Categories of forces: material capabilities, ideas, institutions
Historical structures
Social configuration
(process of capitalist production)
Forms of state
(ways in which states change)
World orders
(current organization of international relations)
The Marxist Framework of IPE
Robert Cox
•
The task for the analyst is to find out how these relationships play
out in the current phase of human history
• Social forces: economic globalization, meaning an
internationalizing of production as well as migration movements.
Driven by market forces, but new social movements (NGOs, antiglob movements) will grow with the aim of tighter control and
regulation of economic globalization
• Integration into the global economy is unavoidable (autarchy is
not a real solution)
• Forms of state: Non-territorial power is becoming more
important for states (markets and opportunities become more
important)
• World order: long term tendency - replacement of the current
global US dominance
1. international order of ‘conflicting power centres’
2. ‘post-hegemonic order’ using the current global framework for
peaceful cooperation
The Marxist Framework of IPE
Immanuel Wallerstein
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World system analysis: not necessarily
the whole world; unified areas
characterized by particular economic and
political structures Ties economics and politics together; two
basic varieties of world systems in human
history: • ‘world-empires’ (political and economic
control is concentrated) • ‘world-economies’ (tied together in a
single division of labor, but political
authority is decentralized)
I. Wallerstein (1931-)
World system theory
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•
•
In the long 16th century
(1450-1640)
International division of labour
covered Europe first
Within division of labour a process
of specialization took place because of two reasons in northwest Europe:
• Specialize its agriculture
• Connect it with industrial advance
in textiles and shipping
I. Wallerstein (1931-)
World system theory
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Capitalist world-economy is built on a hierarchy
Basic mechanism is UNEQUAL EXCHANGE
Accentuated by the emergence of strong state-machineries
Capitalist system as such does not change, but states can move
from one category to another
•
World system theory
•
Success, not failure, is the real threat
to global capitalism
• When the possibilities for expansion
are all used up, the never ending
quest for more profit will lead to new
crises in the world capitalist economy
which sooner or later will spell its
transformation
I. Wallerstein (1931-)
Waltz vs Wallerstein
Waltz (realist)
Wallerstein (structuralist)
System-level
Structure determines to high extent
Anarchy in which strong players dominate
Relative political-military power
Economic power and capability,
converted to political power
Analyzing international balance of
power in the 20th century
Analyzing historical development from
the 16th century
Putting politics first
Putting economics first and politics
second
IPE: Contemporary Debates
1. The relationship between politics and economics: the
debate on US hegemonic stability
2. The development and underdevelopment in the Third
World (Who gets what?)
3. Economic globalization and changing role for the states
Development or Underdevelopment in
sub-Saharan Africa
PROGRESS
DEPRIVATION
HEALTH
• Between 1960 and 2003 life expectancy at birth increased from • There is only one doctor for every 18.000 people, compared with
40 to 47 years
• In the past decade the proportion of the population with access
to safe water nearly doubled - from 25% to 43%
6.000 in the developing world as a whole and 390 in the industrial
countries
•More than 10 million people are infected by HIV (2/3 of the world)
EDUCATION
• During the past two decades adult literacy more than doubled - • Only about half the entrants to grade 1 finish grade 5
from 27% to 55%
•At the primary and secondary levels more the 80 million boys
• between 1960 and 1991 the net enrollment ratio at the primary and girls are out of school
level increased from 25% to 50%, and at the secondary level from
13% to 38%
INCOME AND POVERTY
• Over the period 1975-2003 four countries - Botswana, Cape
Verde, Lesotho and Mauritius - had an annual GDP growth rate
more than 3%
• About 170 million people (1/3 of total) do not get enough to eat
•During the past three decades the military to social spending
ratio increased from 27% in 1960 to 43% in 1991
CHILDREN
• Over the past three decades the infant mortality rate dropped
from 167 per thousand live births to 97
• About 23 million children in the region are malnourished, and
16% of babies are underweight
Development and Underdevelopment in the Third World
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Neomarxist issue (1950-) after
decolonization and newly emerging
countries became member of UN
(Economic) Dualism
Cold War issue
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Modernization theory (liberal):
making the long path from agrarian
society towards a modern, industrial,
mass-consumption society on the
shortest way
The Liberal Economic
Development Theory
Traditional society
Modern society
Modernization
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Essential modernization factors:
a market economy, free of political interference
joining the global economy, accessing world markets
FDI (modern technology and know how)
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Dependency Theory (Structuralist
and/or critical constructivist)
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Critique of liberal theory
Neither Marxist, nor Soviet
Attack on late capitalism
Distinction between
underdevelopment and
undevelopment
• Delinking (André Gunder
Frank, Samir Amin)
Mercantilism, The Middle Way
•
‘
•
Lee Kuan Yew
(1959-1990)
Prebisch (1950) and Myrdal (1957) • Finding balance between
• Global openness and protectionism
• Between market (market failures) and
state (‘red tape’ problems)
•
TNCs have the potential for benefiting
Third World development, but only under
certain conditions (e.g. cluster model in
Singapore). Host government has to be
strong enough to oversee TNC activity
Third World countries need a fairly high
political-administrative capacity
Mobutu Sese Seko Kuku Ngbendu Wa Za Banga
(1967-1997)
Modernization and Growth as a
Complex Issue
•
Specific problems: particular historical
experiences and variation in local conditions
•
Many different voices
•
Mainstream view on growth and modernization vs alternative view focusing on distribution and welfare •
UNDP (United Nations Development Programme) •
World Bank: Millennium Development
Goals (2000): ambitious targets to
reduce poverty
Annex.
IPE: Contemporary Debates
1. The relationship between politics and economics: the
debate on US hegemonic stability
2. The development and underdevelopment in the Third
World
3. Economic globalization and changing role for the
states
Recent Theoretical Developments
in IPE
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•
Rational choice theory - “imperalism of economics”
Methodological individualism: New institutional theory (“New
Economics of Organization”) - starts with the rational and selfinterested actor
Neo-Marxists: argue against the basic idea that individuals are
always rational and self-seeking and that they always know what
they want
• Cost of voting - why to vote?
• Altruism?
• Preferences created in a process of interaction with others
•
IPE: Contemporary Debates
1. The relationship between politics and economics: the
debate on US hegemonic stability
2. The development and underdevelopment in the Third
World
3. Economic globalization and changing role for the states
IPE: Contemporary Debates
1. The relationship between politics and economics: the
debate on US hegemonic stability
2. The development and underdevelopment in the Third
World
3. Economic globalization and changing role for the states
The Relationship Between
Politics and Economics
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Hegemonic stability theory (Kindleberger, Gilpin): a hegemon, a
dominant military and economic power is necessary for the creation
and development of a liberal world market economy
Why? Because world order is (with all symptoms) a public good
Free-riders, underprovision, non-excludability
•
What is needed from a hegemon?
Capability (power resources)
Willingness
Commitment (in recession as well)
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Power Resources
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1.
2.
3.
4.
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Military power
Plus control over four sets of world economic resources (Keohane)
Raw materials
Capital
Markets
Hegemon’s competitive advantage in the production of goods that
can command a very high value
Soft power: or co-optive power. I.e. the ability ‘to structure situation
so that other nations develop preferences or define their interests in
ways consistent with one’s own nation’ (Nye, 1990) • (modernization vs westernization, Huntington)
Power Resources
Is the United States or the Western World still in the position of the hegemon?
SOURCE OF POWER
USA
RUSSIA
EUROPE
JAPAN
CHINA
Tangible
Basic resources
Military
Economic
Science/technology
Intangible
National cohesion
Universalistic culture
International institutions
“The West and the REST”
West
1920
2020
Control of world
Territory
49%
24%
Population
48%
10%
Economy
70%
30%
Industrial output
84%
24%
The story...
1950 - US hegemony
dominant economic and military power.
Able and willing to set up a liberal world
economy.
1950s, 1960s - reconstruction of Japan
and Western Europe
1970s - US hegemony in decline:
decreasing economic power
1970s - US looks after its own interests.
The liberal world economy in crisis.
+ Oil money appears in the world finance
system
1980s - debt crises (debt trap)
1990s, 21st century - gobalization of the
liberal world economy, Washington
Consensus
Power Resources
SOURCE OF POWER
USA
RUSSIA
EUROPE
JAPAN
CHINA
Basic resources
strong
strong
strong
medium
strong
Military
strong
medium
medium
weak
medium
Economic
strong
medium
strong
strong
medium
Science/technology
strong
weak
strong
strong
weak
National cohesion
strong
medium
weak
strong
strong
Universalistic culture
strong
medium
strong
medium
medium
International institutions
strong
medium
strong
medium
medium
Tangible
Intangible
Summary
TRUE CLAIM
Mercantilism
FALSE CLAIM
Political regulation creates
Politics is in full control of
a framework for economic
economics
activity
Marxism
Economics affects and
influences politics
Economics determines
politics
Liberalism
The market has an
economic dynamic of its
own
The market is an
autonomus sphere in
society