Chap VII. INTERNATIONAL POLITICO-ECONOMICAL
RELATIONS. by Dr. Aime MUYOMBANO
VII.I International Politico-Economy
(IPE)
IPE also known as Global
Political Economy, is an academic discipline within the social sciences
that analyzes international relations in combination with political economy. As an interdisciplinary field it draws on many distinct
academic schools, most notably political science and economics, but also sociology, history, and cultural studies. The academic boundaries of IPE are flexible, and along
with acceptable epistemologies are the subjects of robust debate. This debate is
essentially framed by the discipline's status as a new and interdisciplinary
field of study.
Despite such disagreements, most
scholars can concur that IPE ultimately is concerned with the ways in which
political forces (states, institutions, individual actors, etc.) shape the
systems through which economic interactions are expressed, and conversely the
effect that economic interactions (including the power of collective markets
and individuals acting both within and outside them) have upon political
structures and outcomes.
VII.I.1 Origin
IPE emerged as a heterodox approach
to international studies during the 1970s as the 1973 world oil
crisis and the breakdown of the Bretton Woods system alerted academics, particularly in the U.S., of the
importance, contingency, and weakness of the economic foundations of the world
order.
IPE scholars such as Eugene Low asserted that earlier studies of
international relations had placed excessive emphasis on law, politics, and diplomatic history.
Similarly, neoclassical economics was accused of abstraction and being
ahistorical. Drawing heavily on historical sociology and economic history,
IPE proposed a fusion of economic and political analysis. In this sense, both
Marxist and liberal IPE scholars protested against the reliance of Western
social science on the territorial state as a unit of analysis, and stressed the international system.
VII.I.2
Traditional approaches
The 'liberal' view believes
in freedom for private powers at the expense of public power (government). It
asserts that markets, free from the distortions caused by government controls
and regulation, naturally will harmonise demand and supply of scarce resources
resulting in the best possible world for populations at large.
The 'realist' view (formerly
commonly labelled "nationalist") accepts the power of free markets to
deliver favourable outcomes, but holds that optimum conditions generally are
obtained with moderately strong public power exerting some regulatory control.
The 'Marxist' view believes
that only robust application of strong public power can check innate tendencies
for private power to benefit elites at the expense of populations at large.
The 'constructivist' view
assumes that the domain of international economic interactions is not
value-free, and that economic and political identities, in addition to material
interests, are significant determinants of economic action.
VII.I.3 The
liberal approach
Much work in IPE examines the role of institutions such as
the International Monetary Fund and World Bank, which were established at this hotel near Bretton Woods
In economic terms, Liberalism is an
approach associated with classical economics, neoclassical economics, Austrian School economics, and Chicago school
economics.
VII.I.3.1 Favored
policies
Minimal or zero government control
and regulation of trade is the favored liberal policy, which calls for the
privatisation of any organisations producing exportable goods.
The Liberal approach often is
wrongly traced to the work of Adam Smith. Economics, as we know it, has been viewed as dawning with
the Smithian revolution against Mercantilism. The next major
contribution to liberal theory was made by David Ricardo, whose theory of comparative advantage suggested that trade
between different nations could benefit both parties even in circumstances
where one would feel intuitively that one nation would benefit from trade at
the expense of the other.
Keynes's approach to international
relations, including his thinking on the economic causes of war and economic
means of promoting peace, has received further attention with the onset of the
global financial crisis and recession since 2008, especially through the work
of Donald Markwell.
In policy making terms Western
governments have generally pursued mixed agendas drawing on both the liberal
and realist view point. This has been the case from the dawning of modern
commerce to the present day, although there have been periods where one or the
other school had gained temporary ascendency.
Sometimes the period leading up to
1914 is described as a golden age of classical economics, but in practice
governments continued to be partially influenced by mercantilist ideology, and
following WW1 economic freedom was constricted. After World War II the Bretton
Woods system was established, reflecting the political orientation described as
Embedded liberalism.
This has been described as a
compromise between the realist and liberal viewpoints, in that it allowed
governments to manage international finance, while still allowing considerable
freedom of action for private commerce. In 1971 President Richard Nixon began
the rolling back of the Bretton Woods system and until 2008 the trend has been
for increasing liberalization of international trade and finance. Domestically,
the Atlantic nations since the 1970s and large Asian states such as China and
India since the 1990s also have largely pursued a mixture of realist and
liberal policies.
The only close to wholesale
implementations of the liberal viewpoint being carried out is by smaller
developing nations, often with some degree of coercion by actors such as the
U.S. treasury or IMF, who have been able to apply financial pressure when the
developing nations faced various crises.
During 2008, liberal influences began
to wane in the wake of the 2008–2009 Keynesian resurgence which the Financial Times described as a "stunning reversal of the orthodoxy of
the past several decades". From later 2008 world leaders have also been
increasingly calling for a New Bretton Woods System.
Historically
aggressive trade tariffs were employed to advantage domestic industry at the
expense of competitors based in foreign nations. Colonial powers also
encouraged trade with their own colonies. Contemporary advocates tend to favor
the use of tariffs to protect infant industries in developing nations and
sometimes specific sectors (e.g. agriculture) in developed ones.
Some advocates
within this approach come fairly close to the Liberal point of view, and
stipulate conditions where all market controls should be dropped once certain
development thresholds are exceeded (this is true even as far back as the late
nineteenth to early twentieth century, in the work of influential scholars such
as Friedrich List
and Alexander Hamilton).
The
mercantilist view largely characterized policies pursued by state actors from
the emergence of the modern economy in the fifteenth century up to the
mid-twentieth century. Sovereign states would compete with each other to accumulate
bullion either by achieving trade surpluses or by conquest. This wealth could
then be used to finance investment in infrastructure and to enhance military
capability.
The contemporary realist view
generally agrees with liberals in viewing international trade as a win-win
phenomenon where firms should be allowed to collaborate or compete depending on
market forces. The chief point of contention with liberals is that realists
assert national interests can be served best by protecting new industries from
foreign competition with high tariffs until they’ve built up the capability to
compete on the world market. One of the earliest formal expressions of this
view was found in Alexander Hamilton’s ‘Report on Manufacturers’ which he wrote
for the U.S. government in 1791.
A contemporary statement of the
Realist view is strategic trade theory, and there has been much debate as to whether the policies
it suggests could be effective in solving some of the issues with
globalisation, such as persistent north/south inequality divide.
VII.I.3.2 The
Marxist view
This category
has been used to group together an array of different approaches which
sometimes have very little in common with Marx’s focus on class, but which all
believe in a strong role for public power. Labels for approaches within this
category include: feminist, radical, structuralist, critical, underdevelopment
and 'world systems'. Broadly the Marxist approach is associated with heterodox economics.
VII.I.3.2.1 Favoured
policies
The Marxist
view generally favours strong protection from market forces by means of high
tariffs and other controls. At the extreme a preference for centrally directed
trade with ideologically similar trading partners that is the command economy
as opposed to markets.
Marx’s Das Kapital was published in 1867 and an economic system based on his
ideas was implemented after the Russian Revolution of 1917.
Since the collapse of the Soviet Union and the COMECON trading bloc in 1991 no major group of
trading partners or even single large economy has been run along Marxist lines.
Problems with a Marxist command economy are seen as including the very high
informational demands required for the efficient allocation of resources and
corruptive tendencies of the very high degree of public power need to govern
the process.
Few academics currently promote
classical Marxist views, especially in America, but there are a few exceptions
in Europe. More popular perspectives include feminist, environmental and
radical developmentalist. The social constructivist view is an unusual school
of thought sometimes grouped into this category. Rather than focus on the
tradition factors affecting trade such as distribution of resources,
technology, and infrastructure, it emphasises the role of dialogue and debate
in determining future developments in international trade and globalisation.
VII.I.3.3 Criticisms
of the traditional divide into the liberal, nationalist, and Marxist views
Critics have asserted there is now
too much variation in the different viewpoints grouped into each category,
especially those under the Nationalist and Marxist headings. Also, the names
can be considered misleading for the general public. The labels nationalist and
Marxist have negative connotations, with many of the perspectives grouped under
the Marxist label have very little to do with the classical Marxist position.
Many advocates within the nationalist tradition, being themselves strongly
opposed to nationalism in the commonly understood fascist or racist sense, and some professors, have replaced the
label "nationalist" with "realist" in their most recent
books and courses.
VII.I.3.3.1 The
constructivist view
Constructivism is an emerging field in international political economy. In
general, the constructivist view propounds that material interests, which are
central to liberal, realist, and Marxist views, are not sufficient to explain
patterns of economic interactions or policies, and that economic and political
identities are significant determinants of economic action. Jalal Alamgir's
works are examples of constructivist applications in political economy. In his
book India's Open-Economy Policy, Alamgir argues that India's economic reforms since 1991
have been fueled in strong part by policymakers' interpretation of India's own
identity vis-a-vis the identity of its rivals, such as China.
VII.I.3.5.2 American
vs. British IPE
Benjamin Cohen
provides a detailed intellectual history of IPE identifying American and British
camps. The Americans being positivist and attempting to develop intermediate
level theories that are supported by some form of quantitative evidence.
British IPE is more "interpretivist" and looks for "grand
theories". They use very different standards of empirical work. Cohen sees
benefits in both approaches. A special edition of New Political Economy has been issued on The ‘British School' of international
political economy and a special edition
of the Review of International Political
Economy (RIPE) on American IPE.
This characteristion of IPE has been
hotly debated. One forum for this was the "2008 Warwick RIPE Debate:
‘American’ versus ‘British’ IPE" where Cohen, Mark Blyth, Richard Higgott,
and Matthew Watson followed up the recent exchange in RIPE. Higgott and Watson
in particular querrying the appropriateness of Cohen's categories
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