Notes on International Political Economy

Gilpin, Robert “Global Political Economy.” 2001

“Since the end of the Cold War, globalization has been the most outstanding characteristic of international economic affairs and, to a considerable extent, of political affairs as well” (3).

“This is still a world where national policies and domestic economies are the principal determinants of economic affairs” (3).

“…In the 1980s, the overseas expansion of multinational firms integrated national economies more and more completely” (4).

“…This book takes a consciously realist or state-centric approach to analysis of the international economy. Differing from many contemporary writing on the global economy, I believe that the nation-state remains the dominant actor in both domestic and international economic affairs” (4).

Reasons for expansion of global trade:

a) decline of trade barriers after trade negotiations

b) deregulation and privatization opened up national economies

c) significance of increased investment (mutual funds up)

d) increasing importance of MNCs

Some argue: “The collapse of the Soviet command economy, the failure of the Third World’s import-substitution strategy, and the outstanding success of the American economy in the 1990s have encouraged acceptance of unrestricted markets as the solution to the economic ills of modern society” (8).

Critics argue: “The high costs of economic globalization including growing income inequality both among and within nations, high chronic levels of unemployment in western Europe and elsewhere, and most of all environmental degradation…” (9).

Gilpin argues: “The idea that globalization is responsible for most of the world’s economic, political, and other problems is either patently false or greatly exaggerated” (9).

“Regionalization is not an alternative to the nation-state, as some believe, but rather embodies the efforts of individual states to collectively promote their vital national interests and ambitions” (11).

“Historical experience indicates that the purpose of economic activities is ultimately determined not only by markets and the prescriptions of technical economics, but also by the norms, values and interests of the social and political systems in which economic activities are embedded” (12).

“My own normative commitment is to economic liberalism; that is, to free trade and minimal barriers to the flow of goods, services and capital across national boundaries, although, under certain restricted circumstances, nationalist policies such as trade protection and industrial policy may be justified’ (14).

“The point, however…is that realism and nationalism are not identical. Nationalists may be realists, but realists are not necessarily nationalists” (15).

Global political economy: “the interaction of the market and such powerful actors as states, multinational firms and international organizations” (17).

“It is certainly true that economics and technological forces are profoundly reshaping international affairs and influencing the behavior of states. However, in a highly integrated global economy, states continue to use their power to implement policies to channel economic forces in ways favorable to their own national interests and the interests of their citizenry” (21).

Polanyi, Karl. “The Great Transformation.” 1944.

“Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness” (3).

“The Nineteenth century produced a phenomenon unheard of in the annals of Western civilization, namely a hundred years peace – from 1814-1914” (5).

“The mere growth of wealth and population, or their decrease, is bound to set political forces in motion; and the external balance will invariably reflect the internal. Yet even an organized balance of power system can insure peace without the permanent threat of war only if it is able to act upon these internal factors directly and prevent imbalance in statu nascendi” (9).

“Yet the secret of the successful maintenance of general peace lay undoubtedly in the position, organization and techniques of international finance” (10).

The Rothschilds (wealthy capitalists): “They were anything but pacifists; they had made their fortune in the financing of wars; they were impervious to moral consideration; they had no objection to any number of minor, short or localized wars. But their businesses would be impaired if a general war between the great Powers should interfere with the monetary foundations of the system” (11).

“Haute finance, an institution sui generis, peculiar to the last third of the nineteenth and the first third of the twentieth century functioned as the main link between the political and the economic organization of the world” (10).

Haute finance: no boundaries, not at all territorial

“Yet to the degree to which …it was actually independent of any single government, it was bale to serve a new interest , that had no specific organ of its own, for the service of which no other institution happened to be available, and which was nevertheless of vital importance to the community, namely peace’ (12).

“The chief danger, however, which stalked the capitalists of Europe was not technological or financial failure, but war – not a war between small countries (which could be easily isolated) nor war upon a small country by a Great Power (a frequent and often convenient occurrence), but a general war between the Great Powers themselves” (15).

“Trade was now dependent upon an international monetary system which could not function in general war. It demanded peace…” (16).

“The breakdown of the international gold standard was the invisible link between the disintegration of world economy which started at the turn of the century and the transformation of a whole civilization in the thirties” (21).

“The dissolution of the system of world economy which had been in progress since 1900 was responsible for the political tension that exploded in 1914; the outcome of the war and the treaties had eased the tension superficially by eliminating German competition while aggravating the causes of tension and thereby vastly increasing the political and economic impediments to peace” (22).

“The only viable solution of the burning problem of peace – balance of power – was completely out of reach” (22). All losers were disarmed, by the way.

“First among the statesmen of the time, Woodrow Wilson appears to have realized the interdependence of peace and trade” (23). JE – If you remember, EH Carr was very harsh towards Wilson in his The Twenty Year’s Crisis.

Tenets of breakdown:

1. currency collapses is Russia, Germany and Austria
2. final fall of the gold standard
3. liberal state transformed into totalitarian dictatorships

“But whatever the scenery and the temperature of the final episodes, the long-run factors which wrecked that civilization should be studied in the birthplace of the Industrial Revolution, England” (32).

Economic liberalism misread the history of the Industrial Revolution because it insisted on judging social events from the economic viewpoint” (35).

Smith, Adam “Wealth of Nations” 1776.

“The greatest improvements in the productive powers of labor, and the greater part of the skill, dexterity and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labor” (161).

On pinmaking and the division of labor: “But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades” (161).

“The most opulent nations, indeed, generally excel all their neighbors in agriculture as well as in manufactures; but they are commonly more distinguished by their superiority in the latter than in the former” (163).

The advantage is due to three circumstances: a) improved dexterity; b) saving of time; and c) application of machinery invented by workmen, or by machine-makers and philosophers (164).

“It is the great multiplication of the productions of all the different arts, in consequence of the division of labor, which occasions, in a well-grounded society, that universal opulence which extends itself to the lowest ranks of the people” (166).

“The division of labor arises from a propensity in human nature to exchange. This propensity is found in man alone” (168).

“It is encouraged by self-interest and leads to division of labor, thus giving rise to differences of talent more important than the natural differences, and rendering those differences useful” (169).

“Division of labor is limited by the extent of the power of exchanging. Various trades cannot be carried on except in towns” (171).

“The great commerce is that between town and country, which is obviously advantageous to both” (248).

“The cultivation of the country must be prior to the increase of the town, though the town may sometimes be distant from the country from which it derives substances” (249).

“This order of things is favored by the natural preference of man for agriculture” (249).

Ruggie, John G. “Reconstituting the Global Public Domain – Issues, Actors and Practices” 2004.

“My aim in this article is to provide a more comprehensive set of lenses, drawing attention to the beginnings of a fundamental reconstitution of the global public domain—away from one that equated the ‘public’ in international politics with states and the interstate realm to one in which the very system of states is becoming embedded in a broader, albeit still thin and institutionalized arena…” (500).

“Not surprisingly, interest in the political significance of TNCs stayed alive and more recently has enjoyed a minor renaissance in the international relations literature inspired by the so-called critical theory” (502).

“Thus, Wapner’s notion of a ‘world civic politics’ associated with civil society organizations and Cutler’s concept of ‘private governance’ associated with transnational corporations are two of the building blocks of what I call the new global public domain…” (504).

“Although the new global public domain is hardly unchallenged, its emergence, like globalization, to which it is closely linked, is part of a broadening and deepening sociality at the global level” (504).

“States constituted the international ‘public’ – as in public international law and public international unions, the name given to 19^th century international organizations” (505).

“The spatial map characteristic of the traditional international political world has undergone a major transformation over the past generation. Above all there has been a shift in the locus of issues on the global governance agenda along a set of axes depicting ‘external’, ‘internal’ and ‘universal’ dimensions of policy spaces” (507).

“A similar blurring of the two spheres has occurred as a result of the trade regime expanding horizontally to encompass entirely new dimensions that previously has not been associated with trade at all” (508).

“In short the spatial configuration of the global governance agenda has become far more open, fluid and tightly coupled across states than the baseline picture represented by figure 1” (509).

“[Non-state actors] include transnational corporations and financial institutions; civil society organizations; faith-based movements; private military contractors that in some respects resemble the mercenaries of yore; and such illicit entities as transnational terrorist and criminal networks’ (509-510).

“The rights of transnational corporations have expanded manifold over the past quarter century as a result of multilateral trade agreements, bilateral investment pacts, and domestic liberalization – often pushed by external actors, including states and the international financial institutions” (510).

“But the iconic case of civil society actions to redress imbalances in global rulemaking remains its role in defeating the Multilateral Agreement on Investment, strongly supported by TNCs and international business associations” (511).

“CSOs, in turn, have pushed for companies and industries to adopt verifiable measures to reduce the incidences of such behavior” (512).

“A third and very different rationale for targeting the transnational corporate sector has emerged in the past few years – the sheer fact that it has global reach and capacity, and that it is capable of making and implementing decisions at a pace that neither governments nor international agencies can match” (514).

“There is a certain moral and intellectual obtuseness to a position that considers people’s welfare to be an uninteresting concern for international relations theorizing, particularly at a time when the individual enjoys more extensive recognition in international politics and law than ever before” (519).

“Political leaders and international relations theorists alike ignore the emergence of the new global public domain at their peril. Without it, one cannot fully understand recent developments in human rights, environmental policy, global public health, changing social expectations regarding the role of corporations, and the normative context for considerations of the use of force – indeed, according to some scholars, even the fate of the Soviet Union and its empire” (521).

“But the resulting picture would show the progressive arrival on the global stage of a distinctive public domain – thinner, more partial, and more fragile than its domestic counterpart, to be sure, but existing and taking root apart from the sphere of interstate relations.

Rodrik, Dani. “Governance of Economic Globalization.” 2000.

“If it was the nineteenth century that unleashed capitalism in its full force, it was the twentieth century that tamed it and boosted its productivity by supplying the institutional underpinnings of market-based economics” (347).

“These institutional innovations greatly enhanced the efficiency and legitimacy of markets and in turn drew strength from the material advancement unleashed by market forces” (347).

“But globalization also undercuts the ability of nation-states to erect regulatory and redistributive institutions and does so at the same time that it increases the premium on solid national institutions” (348).

“The dilemma that we face as we enter the twenty-first century is that markets are striving to become global while the institutions needed to support them remain by and large national” (348).

“National borders seem to have a significantly depressing effect on commerce, even in the absence of formal tariff or nontariff barriers, linguistic or cultural differences, uncertainty about the exchange rate, and other economic obstacles” (349).

“The most obvious way we can attain such a world is by institutin federalism on a global scale. Global federalism would align jurisdictions with the market, and remove the “border” effects” (353).

“National governments would not necessarily disappear, but their powers would be severely circumscribed by supranational legislative, executive, and judicial authorities” (353).

“The price of maintaining national jurisdictional sovereignty while markets become international restricting politics to a narrow domain” (354).

“Hence for cooperation to be sustainable, the short-term benefits of defection must be small, the discount rate low, and the future benefits from cooperation high” (357).

“As long as nation-states remain at the core of the international system, considerations of sustainability and diversity require that the rule allow selective disengagement from multilateral disciplines” ( 361).

“Global federalism would not mean that the United Nations turns itself into a world government. What we would be likely to get is a combination of traditional forms of governance (an elected global legislative body)with regulatory institutions spanning multiple jurisdictions and accountable to perhaps multiple types of representative bodies’ (363).