International Political Economy

The Struggle for Power and Wealth in a Globalizing World

Thomas D. Lairson,David Skidmore

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781134111930
• Edition: 1
• Topic: Politica e relazioni internazionali
• Subtopic: Politica

This text offers a rethinking of the field of international political economy in an era of growing but uneven globalization. Even as global integration advances, states play central roles as partners with the largest of global firms, as the catalysts of competitiveness and economic growth, as the creators of global institutions, and in promoting and responding to global interdependence. Indeed, the struggle for power and wealth within and among states underscores the primacy of politics in understanding current realities. At the same time, new issues and actors complicate the global agenda as it expands to address the environment, global health, and food security. By offering a clear explanation of basic concepts, contextualizing the presentation of theoretical debates, and placing current events in historical context, International Political Economy ensures students a deep understanding of how the global economy works and the ways in which globalization affects their lives and those of people around the world.

Key Content and Features

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• Engages debates over the reach and significance of globalization.

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• Examines the sources and consequences of global financial instability.

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• Explores the origins and consequences of global inequality.

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• Compares various strategies of development and state roles in competitiveness.

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• Discusses the role of key international economic institutions.

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• Considers the impact of the rise of China on the global economy and the potential for war and peace.

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• Illustrates collective efforts to fight hunger, disease, and environmental threats.

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• Includes numerous graphs and illustrations throughout and end of chapter discussion questions.

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• Links key concepts for each chapter to a glossary at the end of the book.

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• Provides a list of acronyms at the outset and annotated further readings at the end of each chapter.

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• Offers additional resources on a web site related to the text, including a list of links to IPE-related web pages.

Part I
Politics and Economics

1 International Political Economy

As Jill catches the morning news before rushing to work, she learns of violence in the Middle East, protests against budget cuts in some debt-riddled European country, and new export data from China. The latest numbers from financial markets in New York, London, Frankfurt, and Singapore scroll across the bottom of the screen. On her morning commute, she fills up her car – a South Korean brand – with gasoline that originated in Venezuela. At the office, she hears rumors about jobs in the firm being outsourced to India. Jill spends the morning banging away on an office computer that was assembled in Guangdong, China, but that includes components from a dozen different countries. A conference call during the afternoon brings together marketing directors from Brazil, South Africa, Italy, and Indonesia. On the way home, she stops to pick out a toy produced in Vietnam for her son’s birthday. The take-out dinner she enjoys that night was prepared by a chef who recently emigrated from Hong Kong. As Jill catches up on Facebook before bed, she scrolls through wall posts updating her on the lives of friends from half a dozen different countries.

Such is a typical day in a globalizing world. While it is easy to take for granted the degree to which our lives have become intertwined with those of peoples beyond our country’s borders, globalization is, in reality, the product of a complex and rather extraordinary set of political and economic dynamics. Globalization is neither automatic nor inevitable and its consequences are far-reaching and varied. Understanding how the global economy works – and for whom – is a challenging task but essential to comprehending the world.

This book draws upon the relatively young field of international political economy to explore the causes and consequences of globalization. Although its intellectual roots can be traced back much earlier, the contemporary field of international political economy was born in the early 1970s as a hybrid between the disciplines of economics and political science.¹ Scholars began to appreciate that the growth of international interdependence – a phenomenon later called globalization – could not be adequately grasped by either economists or political scientists working in isolation. Rather, the political and economic dimensions of globalization must be analyzed in conjunction with one another.

While at one level, this may seem an obvious statement, in fact popular discourse in the media and among politicians and pundits often obscures or oversimplifies the relationships among politics, economics, and international interdependence. The financial crisis of 2008 offers a case in point. The near-collapse of the US financial system cut the net worth of American households by half while pitching the US economy into a lasting recession that cost millions of jobs. Media commentary on the crisis sought to fix blame on greedy bankers, crooked mortgage brokers, profligate borrowers, incompetent credit agencies, and lax regulators. Often overlooked was the role played by America’s imbalanced relationship to the global economy. In other words, the international dimensions of the crisis were often not fully appreciated.

In the years leading up to the crisis, large US trade deficits left major trading partners in possession of huge pools of American dollars. These dollars made their way back into the US economy as loans or investments. Combined with lax US monetary policy, the effect of these inflows of capital was to push down interest rates. Access to cheap loans encouraged home buying, pushing up housing prices. As the value of their homes shot up, Americans borrowed against the equity in their homes to finance expanded consumption. For their part, investors sought higher returns in a low interest rate environment by lowering lending standards and accepting greater risk. All of this fed a speculative bubble in the housing market that finally burst in 2008 as homeowners began to default on inflated mortgages. While much of the drama played out on Wall Street, in Washington, DC and in communities across the United States, the international roots of the financial crisis lay in Americans’ growing dependence upon foreign borrowing to finance excess consumption.

In other cases, the economic motivations for a new policy initiative may be evident, but the political dynamics are unclear. Why, for instance, did the United States give such priority to the recently completed Trans-Pacific Partnership (TPP), a multilateral agreement that will remove many barriers to trade among countries in Asia and the Americas that border on the Pacific Ocean? The economic motivation is easiest to spot. The TPP represents a step toward freer markets, as prescribed by economists. Participating states will each realize gains as greater international specialization creates expanded openings for trade and profit.

From another perspective, however, the TPP is also about power politics. The terms of the agreement require that participating states adopt free market policies that favor private over state-owned enterprises (SOEs). This effectively excludes China, whose economy remains heavily dependent upon state guidance and state-owned enterprises. As a result, the TPP, should it be successful, will likely enhance US political and economic influence in Asia at China’s expense. The terms of the agreement will also serve to discourage other Asian countries from emulating China’s statist economic model, instead locking them into the kind of pro-market policies that the United States favors.

While China’s exclusion thus offers relative gains for the United States, the United States will also gain should China someday join the Partnership. China’s participation would require it to abandon some of the state economic controls that the United States finds most objectionable. Either way, the TPP serves American political, as well as economic, purposes.

Finally, there are cases where international political disagreements hide underlying economic factors. China, Vietnam, the Philippines, Brunei, Malaysia, and Taiwan each claim sovereignty over all or part of the small islands and surrounding waters of the South China Sea. Untangling the competing legal and historical claims has been rendered all the more complicated by the economic stakes. The area not only straddles key shipping lanes and fishing grounds, but is also thought to contain large underwater oil reserves that each nation is eager to exploit.

As these examples suggest, understanding how states manage international interdependence requires that we draw upon theories and concepts from the fields of both economics and political science. As is typical in the social sciences, there is no universally accepted theoretical approach to the study of international political economy. Rather, there exist a number of competing perspectives, each of which conceptualizes the relationship between political and economics in distinct ways. This chapter examines these contending theoretical approaches to international political economy. Since these perspectives differ in how they understand globalization and its impacts, mastering the underlying logic of each will help us navigate policy debates over how globalization should be managed.

Understanding anything as complex as international political economy requires, somewhat paradoxically, that we make it simpler. This is usually done by developing ideas about how the system works by focusing on one main factor that affects outcomes. In the study of international political economy, three of these broad perspectives have been important. One perspective focuses on markets, one on states, and the third on class power. Each seeks to explore the implications and effects of a given factor for international political economy. The assertions of each perspective come in two main forms. First is a policy preference that emphasizes how choices in political economy should be made. Second is a claim about how we should study international political economy, which comes down to asserting the primacy of one causal force over others.

Three Perspectives on International Political Economy

The study of international political economy has been shaped by three overarching perspectives: liberalism, realism/statism, and Marxism. These sets of ideas about political economy function at two levels. First, they structure social scientific research programs that arise from collaboration among communities of like-minded scholars. Second, these ideas also work as ideologies that are employed by political actors whose interests are served by the growing influence of particular ideas over others. While we will describe liberalism, realism, and Marxism as these perspectives are understood and employed by scholars, it is important to keep in mind that ideas are seldom neutral or disinterested, but instead reflect certain values and interests and are employed by political actors in service of their particular goals.

Liberalism

Liberal scholars focus on the role that markets play in providing for the efficient exchange of goods, services, and labor among individuals and firms. Liberals make two very important assertions: first, that unimpeded markets provide the greatest economic welfare for the largest number of people; and second, that market operations define the political choices of governments and individuals.² Thus, liberals assert the correct way to study and analyze international political economy is through the role of markets, thereby attributing little independent force to politics itself.

Liberalism can be traced to the writings of eighteenth-century Scottish philosopher Adam Smith and the later work of early nineteenth-century economist David Ricardo.³ With respect to international economics, Smith sought to counter the dominance of mercantilist thinking, which prescribed that states simultaneously protect their economies from imports while promoting exports so as to earn growing reserves of gold through trade. Smith argued instead that free trade was the superior path to wealth, even where other states continued to practice protectionism. Ricardo elaborated upon this thesis by demonstrating that trade was desirable and beneficial for both states, even in cases where one party was the low-cost producer across all categories of goods (i.e., the theory of comparative advantage, explained in Chapter 2).

This defense of free trade – later expanded to encompass the free movement of capital across borders – continues to serve as a core belief for liberal economists. It is grounded in the view that unimpeded marke...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Preface
• List of Acronyms
• Part I Politics and Economics
• Part II Contemporary Globalization
• Part III Sustainability
• Glossary
• Index