International Relations Theory
Nemzetközi Politikaelmélet
Nemzetközi politikai gazdaságtan.
György László
egyetemi tanársegéd
BME GTK, Pénzügyek Tanszék, Gazdaságpolitika és
Gazdaságtörténet Szakcsoport
What is IPE?
Politics
Economics
How to approach this relationship?
(1) Mercantilism (realism) - (2) Economic liberalism - (3) Marxism
Free market?
What is IPE?
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The examination of the complex interplay in the international context
between politics and economics, between states and markets
MONEY
“A modern market is based on political rules (if not, it would be a
‘Mafia market’ based on threats, bribes and force).”
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
Historical Developments
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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
US economic difficulties due “New International
to the Vietnam War
Economic Order”
Gold-convertibility of $ had
to be abandoned
Political measures were
taken that changed the rules
of the game for the economic
marketplace
Oils crisis: sense of lost
invulnerability
The end of Cold War and
the aim from EastEuropean countries to
join the Western
political and economic
systems
Mercantilism
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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)
Defensive mercantilism vs offensive mercantilism (imperialism)
Mercantilism
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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
Mercantilist Thinkers
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Alexander Hamilton: one of the founding fathers of the USA
• Calls for protectionist measures
• USA was probably the most protectionist developing country
Friedrich List:
• 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)
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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
Economic Liberalism
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“Individuals and companies would not be active in the marketplace
unless it was to their benefit”
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Economic Liberalism
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Laissez-faire
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John Stuart Mill,
Keynes: “risk, uncertainty, ignorance” potential evils of market economy
Marxism
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Fundamental critique of economic liberalism
Human exploitation and class inequality
Zero-sum argument of mercantilism applied to classes
• But: economics first and state second
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
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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
(i.e. the system of
social ownership
which determines
the actual control
over the
productive forces)
PRIVATE
PUBLIC
(Feudalism)
Capitalism
Communism
Specific
mode of
production
Marxism
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“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”
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
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Need for detailed historical analysis: events must be analysed in
their specific historical context. E.g.:
• Interdependence around the First World War was often armslength 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 States are not independent: social forces
condition of anarchy. No concrete specification (ruling classes) drive them
of social forces
Unhistorical: same damned things over and
over again
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 reduces the
state to a simple tool of ruling classes
Conceded point: “relative autonomy”
(safeguarding the capitalist system)
The Marxist Framework of IPE
Robert Cox
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The concept of historical structures: the particular configuration of
forces
• Categories of forces: material capabilities, ideas, institutions
Historical structures
Social forces
(process of capitalist production)
Forms of state
World orders
(ways in which states change)
(current organization of international relations)
The Marxist Framework of IPE
Robert Cox
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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)
Establishing the Capitalist
World Economy (Wallerstein)
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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 north-west Europe:
• Diversify its agriculture
• Connect it with industrial advance in textiles and shipping
Capitalist world-economy is built on a hierarchy of
• CORE areas (complex and advanced economic activities
controlled by an indigenous bourgeoisie)
• PERIPHERAL areas (produce primer goods)
• SEMI-PERIPHERAL areas (economically mixed, shock absorber)
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
Establishing the Capitalist
World Economy (Wallerstein)
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Prospect is the demise of the capitalist system: contradictions of the
system are now unleashed on a world scale.
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
Waltz vs Wallerstein
Waltz
(realist)
Wallerstein
(structuralist)
Relative political-military power
Economic power and capability connected to
political power
Focus on the system
What happens to the countries much depends on their position in the system
System as a hierarchy with strong states at the top
Analyzing international balance of power in the Analyzing historical development from the 16th
20th century
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
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
40 to 47 years
• In the past decade the proportion of the population with access
to safe water nearly doubled - from 25% to 43%
• There is only one doctor for every 18.000 people, compared with
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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Colonial development
Neomarxist issue (1950-) after decolonization and newly emerging
countries became member of UN
Cold War issue
Modernization theory (liberal): making the long path from agrarian
society towards a modern, industrial, mass-consumption society on
the shortest way
(Economic) Dualism
Relative isolation
Reservoir of labour
The Liberal Economic
Development Theory
Traditional society
Modern society
Modernization
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Essential modernization factors:
• a market economy, free of political interference
• “take off”: a growing rate of economic investment
• foreign direct investment
Dependency Theory (Structuralist
and/or critical constructivist)
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Critique of liberal theory
Neither Marxist, nor Soviet
Rather a ‘Socialist model’ which is more decentralized and
democratic
Attack on late capitalism
Difference between underdevelopment and undevelopment
1. Underdevelopment is caused by external factors. Third World
countries are dominated by foreign interests.
2. Development and underdevelopment are both results of a single
process of global capitalist development
3. Underdevelopment is due to external, primarily economic forces;
these forces result in crippled and distorted societal structures
inside Third World countries
4. To overcome underdevelopment a delinking from external
dominance is required
Mercantilism, The Middle Way
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Prebisch (1950) and Myrdal (1957) already argued against free trade
based on comparative advantage
Between autonomy and full integration
Between the market and the state
• Finding a balance between bureaucratic vs market failures
• ‘red tape’ problems of high cost and inefficiency are as dangerous
as monopolies, externalities, provision of public goods
• E.g. Japan is a good example of state led modernization and
economic development and that political and bureaucratic
establishment is unable or unwilling to devise new strategies for
viable economic development
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
E.G.
Then and now.
E.G.
Then and now.
E.G.
Then and now.
E.G.
Then and now.
E.G.
Then and now.
Lee Kuan Yew
E.G.
Then and now.
Lee Kuan Yew
Suharto
E.G.
Then and now.
Lee Kuan Yew
Suharto
Kádár János
E.G.
Then and now.
Indonesia (23x)
GDP per capita
GDP per capita
GDP per capita
Singapore (43x)
$ 457 $ 10.818
$ 54 $ 1.289
$ 625 $ 26.991
Hungary (23x)
E.G.
Then and now.
SIngapore in the ‘50s
Singapore today
E.G.
Then and now.
Indonesia today
Indonesia today
Modernization and Growth as a
Complex Issue
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Specific problems: particular historical experiences and variation in
local conditions
Many different voices: grass-roots, NGOs, peasant movements,
political parties and governments, international institutions,
international research community
Mainstream view on growth and modernization vs alternative view
focusing on distribution and welfare (democracy, participation,
freedom and self-realization)
UNDP (United Nations Development Programme): annual Human
Development Report examines male-female gaps, child nutrition,
health profiles, rural-urban gaps, and North-South gaps
• 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
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Why? Because world order is (with all symptoms) a public good
• Free-riders, underprovision, non-excludability
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What is needed from a hegemon?
• Capability (power resources)
• Willingness
• Commitment (in recession as well)
Power Resources
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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
Tangible
Basic resources
Military
Economic
Science/technology
Intangible
National cohesion
Universalistic culture
International institutions
USA
RUSSIA
EUROPE
JAPAN
CHINA
“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.
1970s - US hegemony in decline:
decreasing economic power
1950s, 1960s - reconstruction of Japan
and Western Europe
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