Politics of the World Economy

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  • Created by: Michael
  • Created on: 02-05-14 12:05

Realism (Gilpin)

  • Nation states as key actors pursuing national interest
    • other actors not as important (or shouldn't be) or serve interests of state
    • national security is principle concern of states (Gilpin)
  • Economy serves politics
    • economic policy used to protect sovereignity or gain power
    • economics as a tool of national security 
  • International policial economy as a zero sum game. Someone wins, someone else loses.
    • Relative economic position is the most important
  • Supra-national authority (e.g. KIEOs) - thin at most
    • They do not constrain the powerful states
    • When the do constrain states they are tools of the powerful states
    • If they seem autonomous they can always be taken over again
    • They rely on state participation 
  • Globalisation
    • States are still the key actors
    • Globalisation only occured due to self-interested actions of powerful states.
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Hegemonic Stability Theory (Kindleberger)

  • A liberal eceonomic order requires a hegemon to act as leader, however a dominant state won't always lead to liberal global economy
  • Hegemon is a dominant state willing/ able to support liberal economic order
    • Economic dominance more important than military dominance
  • Functions of Hegemon:
    • Prevent free-riding
    • Manage primary international currency (USD)
    • Normal times: Maintain flow of income to poor counties, Stabilise foreign exchange rates & Arrange some co-ordination of macro-economic policy
    • Crisis times: open market for goods in depression and ensure their supply, lender of last resort and co-ordinate international response.
  • Hegemonic decline:
    • Other states start to catch up with the hegemon therefore hegemon more likely to use its power for self interest
    • International collaboration declines - shift to bilateral rather than multilateral, protectionism increases , KIEOs less effective
  • Criticisms: Co-operation possible without hegemon, hegemons rare/irrelevant, too simple/ignores ideas, US in decline but co-operation not, democracy/domestic politics casue protectionism
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Economic Nationalism

  • Mercantilism
    • Pre industrial revolution - aim is to increase gold stocks by exporting more than importing
    • Tarrifs used to decrease imports 
  • Protectionism
    • States should protect some domestic (and 'infant') industries by using tarrifs/quotas to limit foreign competition.
  • Economic nationalism
    • economics subordinate to the goals of the state
    • state intervention in domestic and international trade
  • Criticism of this idea of Economic Nationalism (Abdelal): it confuses economic statism for economic nationalism
    • States: actions of govts in society of states
    • Nationalism: values issues of national culture and identity - critiques liberal individualism
    • Nationalism not tied to any particular policy - may or may not be protectionist, can also support liberal, realist our autarchy (self sufficiency) policies
    • Economic nationalism is economic policy which follows national purpose/direction, not statist self interest
    • Constructavist approach. 
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Liberalism

  • Individuals and firms are the key actors
    • States try to gain from mutualy beneficial economic interaction (althopugh sometimes policy distorted by vested interests
    • States may be constrained by economic factors and international organisations. This is good as it provides certainty which encourages investment.
  • Positive sum - everyone can benefit
  • Absolute position  more important than relative position
  • Possible to constain actions of nation states
  • Politics conducted in the interest of an open world economy
    • aim of KIEOs is to facilitate the effective allocation of resources by market mechanisms
  • KIEOs can obtain a degree of autonomy
  • Subsidies/ tarrifs on imports damages domestic welfare by raising prices
  • Globalisation is the expansion of the division of labour
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KIEOs - Problems and design

  • Three problems to intergration
    • Free riding: State enjoying benefits of free trade while imposing tarrifs
      • Protectionism (closed) is a nash equilibrium. Realist argument for a hegemon.
    • Assurance: Unable to trust partners to competently act(e.g. banking regulation)
      • Both acting and not acting are nash  equilibriums. Which one happens depends on trust
    • Burden sharing: How are the costs and benefifts shared?
      • Collaboration is a nash equilibrium
  • Solutions: Hegemon, shadow of the future, institutions (liberal institutionalism)
  • Scope (what issues are covered by institution)
    • Increases with larger number of states and variety of states.
    • Increases with distribution/ burden sharing issues
    • Increases with enforcement issues
  • Centralization (how centralised decision making is)
    • Increases with uncertainty about countries behavior & uncertainty about the world
    • Increases with number of countries
    • Increases with enforcement issues
  • Control
    • individual countries control declines the more countries there are
    • asymmetry of control increases with asymmetry of countries involved
    • individual countries control to block increases with uncertainty about the world
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Structural Marxism

  • Emphasis on crisis and transformation - useful in thinking about permanance of current system
  • Material conditions always changing
  • This material change undermines superstructure (ideas & institutions) that were once supported and brought about by material conditions
  • Capitalism, like other systems, would collapse
  • Tensions between proletariats and bourgeoisie
  • Sometimes transformed into actions by the state
  • Global economy as zero-sum (like realism)
  • Developed countries ease class tension by exploiting foreign workers
  • Developed countries also use power to open up new markets while protecting domestic capitalists from competition
  • States role is to serve the interests of capitalists or capital (even if they're minority they have control through dependence of state on growth, elitism etc)
  • Globalisation caused by expansion into new markets - search for profit
  • Dependency theory - MEDCs keep LEDCs dependent on them, LEDCs should disengage from world economy to an extent (similar to infant industry policy)
  • Issues for depencency theory include the fact the BRIC countries have grown rapidly while engaged in global economy. 
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Gramscian Marxism & Neo-gramscian (Gramsci, Cox)

  • Culture and politics are also important for explaining stability of capitalism
  • Neo-gramscian hegemony - class based. Ruling class must gain consent of subordinate class through culture (e.g. nationalism), ideas (e.g. dominance of liberal economics), institutions and traditional (hard) power.
  • Robert Cox criticism of IR theory (liberal/realist)
    • State should be seen as state/society complex (similar to economic nationalist argument)
    • IR theory doesn't give enough attention to historical change
    • Main point is the unchanging idea of 'the state'
  • Cox's three elements of historical structure
    • Material capibilities - tech, wealth, natural resources (& subsequent military power)
    • Ideas - Social norms, rules & principles and collective images (ideologies)
    • Institutions - Reflect material capabilities and collective images present at their birth but can evolve and contribute to new ideas and material capabilities
  • Hegemony (Cox): Powerful actors trade concessions for consent from less powerful. Justified in universal rather than particularist terms ('open liberal economy' rather than 'US interests').
    • Operates on different levels: Domestic production, state, world order
  • Criticisms of structural & Gramscian Marxism: Capitalism hasn't collapsed, doesn't propose alternative, lacks contemporary relevance as it takes the long view, looks like realism, Cox doesn't provide clear answers, who generates hegemony?
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Constructivism (Abdelal)

  • Challenges assuptions in IR (liberal/realist) theory
  • World is constructed by experts/ thinkers - these constructions prevent other ideas emerging/being taken seriously
  • Ideas determine outcomes
  • Greater emphasis on social identities, norms and collective shared ideas & beliefs
  • Social facts which only exist because people believe in them - like money
  • Less emphasis on material facts
  • Change in world economy not inevitable (but not necessarily reversible)
  • Challenges to explainations
    • Meaning - the world has to be interpreted before puropse/goals can be decided
    • Cognition - can't assume knowledge of how things work- understanding may vary between groups
    • Uncertainty - uncertainty in the world makes decision making impossible 
    • Subjectivity - theories about the world can change the world
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