11 CONCEPTUAL BASICS What is Political Economy? Political economy is about the relationship between politics and economics. It is all about power and money. Whether they are looking at domestic systems or international systems, power and money are under analysis. International Political Economy is all about how political and economic dynamics change within an international and transnational arena. The line between what is comparative and what is international is commonly blurred and depends on your theoretical position
12 What is Political Economy? Let’s separate out some disciplines - Accountants manage the accountability of units within an economic system, as well as alternative ways of accounting. Economists reflect upon the efficiency and efficacy of economic systems and their alternatives. Political Economists reflect upon how the distribution of power within an economic system is, and can be, justified in different contexts.
14 What is Political Economy? Ruskin argued that to exclude moral problems from political and economic analysis is akin to ‘being interested in ‘a science of gymnastics which assumed that men had no skeletons’. Or: the ‘essence of wealth consists in its authority over men’. Political economists must seek to learn more than how states become wealthy, but understand systems of domination.
17 Approaches to Explaining and Understanding all of this… Economic Nationalism Economic Nationalist or Mercantilist theories see the state as the key actor The state is more important than the market International anarchy, markets are zero-sum. Might is right. Protection of national wealth (and culture) by barriers to foreign penetration. Trade is a strategic tool to enhance a state’s power in the world economy
18 Approaches to Explaining and Understanding all of this… Robert Gilpin ‘As the mercantilist theorist of American economic development, Alexander Hamilton, wrote: "not only the wealth but the independence and security of a country appear to be materially connected to the prosperity of manufactures" (Gilpin, 1987: 33)’
19 Approaches to Explaining and Understanding all of this… Liberalism Liberal theories see the individual and self-interest as the starting point of analysis Markets are more important than states. TNCs can bring advantages International cooperation, markets are positive-sum. Rights are right. Furthering global economic integration is an aim, with increased peace the consequence. International regimes can hold together order.
20 Approaches to Explaining and Understanding all of this… Robert Keohane “Fragmentation of power between competing countries leads to fragmentation of the international economic regime; concentration of power leads to stability. Hegemonic powers have the capabilities to maintain international regimes that they favor” (Keohane 1991: 78).
21 Approaches to Explaining and Understanding all of this… Critical Perspectives Marxist crtiical theories see class conflict as the starting point of analysis Class is more important than states and markets. TNCs exploit the working classes, as do the transnational capitalist class International relations are typified by exploitation between the owners of the means of production and the workers who are exploited. Capitalism leads to uneven development and reinforces international dependencies between the core and the periphery.
22 Approaches to Explaining and Understanding all of this… Stephen Gill “the power of capital is both direct (e.g. capital’s superior bargaining power over labour, or relative to states which bid for investment against one another) and indirect (e.g. discipline exercised on firms, their workers, or on governments in the financial, e.g. stock and bond markets). Thus the state is also subjected to market disciplines. Indeed, public policy has been redefined in such a way that governments seek to prove their credibility, and of the consistency of their policies according to the degree to which they inspire the confidence of investors. In this way, new political and constitutional initiatives in the sphere of money and finance are linked to the imposition of macro- economic and microeconomic discipline in ways that are intended to underpin the power of capital in the state and civil society” (Gill, 2000: 2).
24 Key figures in the field Susan Strange “Even at their most extensive, the ‘directional’ or ‘azimuthal’ agendas that exist are still far too restrictive and so do not really qualify as the study of politcal economy. The literature on the politics of international economic relations reflects the concerns of governments, not people. It tends always overweight the interests of the most powerful governments. Scholars who accept this definition of the subject thus become the servants of state bureaucracies, not independent thinkers or critics” (1988: 13).
25 Key figures in the field Robert Keohane ‘Two features of the international context are particularly important: world politics lacks authoritative governmental institutions, and is characterised by pervasive uncertainty. Within this setting, a major function of international regimes is to facilitate the making of mutually beneficial agreements among governments, so that the structural conditions of anarchy does not lead to a complete “war of all against all”’ (1991: 106).
26 Key figures in the field Robert W. Cox “the purpose served by problem-solving theory is conservative, since its aim is to solve the problems arising in various parts of a complex whole in order to smooth the functioning of the whole. The aim rather belies the claim of problem-solving theory to be value-free… Critical theory contains problem-solving theories within itself, but contains them in the form of identifiable ideologies, thereby pointing to their conservative consequences, not their usefulness as guides to action” (1986: 207).
27 Key figures in the field Other approaches – Rational Choice - self-interested individual choices over iterated games – Institutionalism - institutional environments for politics – Constructivism - role of ideas and social norms in creation of structures
Course Objectives: To examine the changing environment for businesses within the international political economy. To engage critically with the key approaches of International Political Economy in explaining multinational and other business activities and debating their role and influence in the international system. To develop a critical understanding of the emerging international business agenda
Term 1: Week 1Introduction: what is IPE? Week 2Historical Processes 1: The World Economy before World War One Week 3Historical Processes 2: From Inter-War Crisis to Bretton Woods Week 4Historical Processes 3: The Collapse of Bretton Woods, and the Emergence of a Global Economy Week 5Introduction to Theorising IPE: British and American Schools