International Political Economy and Globalization PDF

International Political Economy and Globalization  International Political Economy  International Political Economy or IPE  IPE studies the relationship between power (politics) and wealth (economics) in world politics.  It also studies the relationship between intern...

International Political Economy and Globalization  International Political Economy  International Political Economy or IPE  IPE studies the relationship between power (politics) and wealth (economics) in world politics.  It also studies the relationship between international and domestic phenomena.  It studies the winners and losers from global processes.  International Political Economy  Three main IPE theoretical perspectives:  Economic Nationalism (also referred to as Mercantilism or Statism)  Economic Liberalism  Radicalism/Marxism  Economic Nationalism, Mercantilism, or Statism  Historically, mercantilism was associated with the rise of Europe in the 16th century.  It emphasizes the importance of state building and power in world politics.  It regards economic activity as a zero-sum game.  It is skeptical of the idea that cooperation creates mutual benefits.  Economic Nationalism, Mercantilism, or Statism  It is a state-centered approach.  Government regulates the economy to increase state power and security.  The economy is subordinated to state needs (also referred to as statism).   Economic Nationalism, Mercantilism, or Statism  Governments sought to accumulate gold and silver, impose state-sanctioned monopolies, and ran a foreign trade surplus.  Contemporary versions are referred to as Neo- Mercantilism and emphasize the role of the state in mediating between global and domestic politics and economics.  Economic Liberalism  It is the dominant approach in international trade since World War II.  It stresses the importance of cooperation and argues that states can mutually benefit from economic exchanges.  States must relax their pursuit of short-term self-interest to realize long-term mutual interests.  It is associated with the work of two economists, Adam Smith and David Ricardo.  Economic Liberalism  Adam Smith argues that trade is mutually beneficial and that free trade maximizes the common good.  David Ricardo argues that the country should specialize in the products it can produce more efficiently relative to other products it can also produce (comparative advantage)  Governments must refrain from intervening in the economy.  A modern version of liberalism, neoliberal institutionalism, focuses on building international organizations, institutions, and norms.  Historical Materialism/ Radicalism/Marxism  It includes different perspectives aimed at changing the existing social order and is associated with the ideas of Karl Marx.  Lenin’s theory of imperialism,  Dependency Theory,  World System Theory. The establishment of the post-World War II economic order  After World War II, the U.S. led efforts to establish a set of international regimes to promote the free flow of trade and capital across borders, and international monetary stability.  It represented a sharp reaction against the protectionism and economic nationalism that had prevailed during the 1930s.  The General Agreement on Trade and Tariffs or GATT  The General Agreement on Trade and Tariffs or GATT was the primary framework for international trade relations in the post-war era until its eventual replacement by the World Trade Organization (WTO) in 1995.  GATT three basic rules https://help.cbp.gov/s/article/Article-250?language=en_US  General Agreement on Tariffs and Trade (GATT) was an essential piece of the post-war economic order.  First, member states embraced the principle of non- discrimination also known as Most Favored Nation (MFN) status.  In the United States, the name was changed from most favored nation (MFN) to permanent normal trade relations (PNTR) in 1998  Most Favored Nation https://www.wto.org/english/res_e/webcas_e/ltt_e/ltt1_e.htm  Any advantage, favor, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.  Does MFN apply to Russia? https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/03/11/remarks-by-president-biden-announcing-actions-to-continue-to-hold-russia-accountable/#:~:text=A%20most%2Dfavored%2Dnation%20status,but%20it's%20the%20same%20thing. President Biden: First, each of our nations is going to take steps to deny most-favored-nation status to Russia. A most-favored-nation status designation means two countries have agreed to trade with each other under the best possible terms — low tariffs, few barriers to trade, and the highest possible imports allowed.  Does MFN apply to Russia? https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/03/11/remarks-by-president-biden-announcing-actions-to-continue-to-hold-russia-accountable/#:~:text=A%20most%2Dfavored%2Dnation%20status,but%20it's%20the%20same%20thing. In the United States, we call this “permanent normal trade relations” — PNTR — but it’s the same thing. Revoking PNTR for Russia is going to make it harder for Russia to do business with the United States. And doing it in unison with other nations that make up half of the global economy will be another crushing blow to the Russian economy that’s already suffering very badly from our sanctions.  GATT three basic rules  Second, member states agreed to ban quantitative and other non-tariff forms of trade restrictions. Tariffs were the only permissible form of discrimination, though they had to be reduced on a periodical and reciprocal basis.  Third, reciprocity.  World Trade Organization (WTO)  LOCATION: Geneva, Switzerland  ESTABLISHED: 1 January 1995  CREATED BY: Uruguay Round negotiations (1986-94)  MEMBERSHIP: 164 members representing 98% of world trade  BUDGET: 197 million Swiss francs for 2020  World Trade Organization (WTO)  Even though world trade continued to grow, the WTO faces significant challenges.  The latest round of trade negotiations (Doha Round) has stalled for years  Politicians from all over the ideological spectrum accuse it of violating sovereignty and of lack of transparency.  Critics such as farming and labor groups regard it as biased toward corporate interests, while indigenous rights and environmental groups blame it for the destruction of cultural and natural habitats. The international monetary system  The drive to establish a post-war international monetary system drew many lessons from the collapse of the world economy during the 1930s.  Money is a medium of exchange (transaction value) and reserve (store value).  The international monetary system  The post-war international monetary system was established at a conference in Bretton Woods, New Hampshire in 1944.  Participating states agreed to a system of fixed exchange rates.  The U.S. dollar was convertible into gold at a fixed rate of $35 per ounce and all other currencies were pegged to the U.S. dollar. The international monetary system  The Bretton Woods conference also established two international financial institutions:  the International Monetary Fund (IMF)  TheInternational Bank of Reconstruction and Development (IBRD), also known as the World Bank.  The international monetary system  The IMF was created to give short-term loans (up to eighteen months) to countries with balance of payments problems.  It would also advise countries on monetary issues in order to maintain fixed exchange rates.  The World Bank would provide long-term loans to help countries rebuild after the destruction of World War II and promote development. The international monetary system  Unlike other international organizations such as the UN, the IMF and World Bank rely on a weighted voting system, in which each state has a vote share equivalent to its financial contributions.  Under this arrangement, the U.S. has great influence in these institutions. The international monetary system  https://thedocs.worldbank.org/en/doc/ a16374a6cee037e274c5e932bf9f88c6- 0330032021/original/ IBRDCountryVotingTable.pdf  https://www.imf.org/en/About/executive-board/ members-quotas#3  The international monetary system  The Bretton Woods system relied on the trust in the U.S. promise to exchange gold for dollars.  However, during the 1960s, the world gradually lost its confidence in the U.S. ability to pay in gold.  In the early 1970s, the system cracked.  In August 1971, President Nixon stopped gold convertibility, initially devalued the U.S. dollar and, in 1973, allowed the U.S. dollar to float freely.  This signaled the end of the Bretton Woods system. The international monetary system  One of the most important features of this period is the institutionalization of macroeconomic policy coordination in the face of periodic crisis of the world economy.  The Group of Seven (G7) in 1975.  G7 (funded 1973) https://ec.europa.eu/info/food-farming-fisheries/farming/international-cooperation/international-organisations/g7_en US, Canada, UK, Germany, Italy, France, Japan, EU (as a non-enumerated member) G7 used to be G8. But Russia’s membership was suspended following the annexation of Crimea in 2014 G20 (founded 1999) https://g20.org/about-the-g20/  The international monetary system  Another feature is the raised profile of central banks and convergence of ideas and policies regarding fiscal and monetary policies.  Finally, there was the rise of regional currencies and the unilateral adoption of foreign currencies to replace national ones (dollarization).  The creation of the Euro in 1999 is the most notable example of a common regional currency. The transnational production system and the rise of MNCs  Another key piece of the post-war economic order was the growth of foreign direct investment and transnational production.  The transnational production system is a very complex process with millions of workers and hundreds of thousands of affiliates located around the world and integrated into global value chains. The transnational production system and the rise of MNCs  The most important actor in transnational production is the multinational corporation (MNC).  MNCs are enterprises organized in one country but with direct investment and production overseas.  The post-war rise of MNCs was an overwhelmingly U.S.-led phenomenon. The transnational production system and the rise of MNCs  Foreign direct investment (FDI) is the stock of capital in one country owned by an individual or enterprise of another country.  By 1970, 52% of all FDI in the world consisted of U.S. companies. The transnational production system and the rise of MNCs  Japanese and European MNCs expanded vigorously in the 1980s.  Today, more than 70% of all FDI in the world is held by U.S., European, and Japanese companies, which are also the main points of destination for FDI. The transnational production system and the rise of MNCs  MNCs are independent, non-state actors.  Their goal is profit, not political control.  They are large employers worldwide.  They are also increasingly powerful.  The issue of relations between MNCs and governments is politically sensitive.  MNCs are both criticized and praised for their impact on countries. The transnational production system and the rise of MNCs  The effects of MNC operations can be both advantageous and disadvantageous.  MNCs help create jobs, expand the internal market, bring capital, technology, and training, etc.  Yet, MNCs can also lead to government interference, corruption, and state capture.  MNCs may also impede the development of local firms and reduce competition.  MNCs may overexploit natural resources. Critics of MNCs argue that they undermine local culture by imposing foreign values.  Globalization  Globalization as a concept attempts to explain social, cultural, geographic, economic, and political characteristics of the present international system.  It is defined as the increasing integration of economies around the world, particularly through the movement of goods, services, and capital across borders, including labor and technology.  Globalization  Explaining globalization has consistently divided opinions.  Scholars also disagree about the future of globalization.  Some of them believe that we have reached the end of globalization, while others have pointed to its continuing resilience and describe the current challenges as momentary lapses.  Globalization  Critics argue that globalization only benefits the rich, the elites, and big business while it disproportionately hurts the poor, labor, minorities, indigenous groups, and the environment.  Proponents, on the other hand, point to the hundreds of millions of people lifted out of poverty in Asia and the unprecedented era of economic growth since World War II.  The debate is not likely to be over soon.