International Political Economy

Benjamin J. Cohen

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781351926591
• Topic: Politics & International Relations
• Subtopic: Political Economy
• Index: Politics & International Relations

Prior to the 1970s, few serious efforts were made to bridge the gap between economics and political science in the study of international relations. Systematic scholarly analysis of International Political Economy (IPE), emphasizing formal integration of elements of orthodox market and political analysis, is really of very recent origin. This volume brings together some of the most important research papers published in the modern field of IPE since its birth less than four decades ago, emphasizing work that has significantly advanced theoretical and analytical understandings. Coverage includes grand questions of systemic transformation and system governance as well as more narrowly focused explorations of the two most central issue-areas of the world economy, trade and money and finance. The introductory essay locates this selection of articles in the context of the field's broad evolution and development to date.

Part I

Modern Origins

[1]

INTERNATIONAL ECONOMICS AND INTERNATIONAL RELATIONS

A CASE OF MUTUAL NEGLECT

Susan Strange

Susan Strange, now a Research Specialist at Chatham House, was formerly Economic Correspondent of The Observer from 1952–57 and Lecturer in International Relations at University College, London.

THE purpose of this article is to put forward a proposition which, if accepted as correct, seems to me to be of rather major importance to the academic study of international relations. It concerns the unequal pace of change in the international political system and in the international economic system, and the effects of this unequal rate of change on the international society, and on the relations of states with one another.

These changes have gone very largely unnoticed. There are two possible reasons why this has been so. Partly, they have crept up on us rather quickly in the last decade or so. And partly, many academics engaged in international relations, politics and history in these years have been absorbed and preoccupied with arguments about theory and methodology which have focused, far too exclusively, in my view, on the political and strategic relations between national governments, to the neglect of all else.

I believe that this neglect is already apparent from the state of the literature on international economic relations, and that it will become even more evident as time passes. There are some questions which are vital to the coherence and relevance of our view of the world to which we—the teachers and writers, that is, of international relations, politics, history, law and organisation—shall soon badly need the answers, but answers which, equally, we cannot safely leave to others to provide. The situation is also responsible, I believe, for a growing and as yet rather ill-defined uneasiness in the universities—or at least, in some of them—about the adequacy of international relations courses and about the gap between international relations and international economics. But it is one thing for a busy academic to be aware of a neglected void, and another to know how best it should be filled. To these practical questions I shall come later.

When I try to put in precise terms my basic proposition, from which the rest follows, I do not find it all that easy. For it is apt to sound as though I am only repeating the banal platitude that we are all closer together economically than we used to be. But what I have in mind is more specific than the increase in economic interdependence and interaction. It is that the pace of development in the international economic system has accelerated, is still accelerating and will probably continue to accelerate. And that, in consequence, it is out-distancing and outgrowing the rather more static and rigid international political system. Many economists and some bankers and the executives of international companies, observing this outgrowing process, are inclined to assume that the political system will have, as it were, to catch up: that it, too, is bound to change its character and become less firmly based than it was (and is) on the unit of the individual state and government. I am not persuaded of this. I can only see that in certain respects it will have to adapt and find adjustment mechanisms and synchronising devices—as it has before. How far these devices will substantially change the nature of the political system and the behaviour of states is, of course, the key question.

THREE KINDS OF CHANGE

There seem to be three main kinds of change which the developing international economy has brought about and which directly affect international relations.

First, there are the direct effects on states of their common involvement in the expanding international economic network. Richard Cooper, subdividing again, finds three different ways in which states are affected.¹ One is by what he calls the ‘disturbance’ effects—the increase in the disturbance, originating externally in some other part of the international economy, of some important part of the domestic economy—whether it is the level of employment, of prices, of interest rates, or of the country’s monetary reserves.

Second, there are the hindrance effects, when the mutual sensitivity of national economies to each other slows down or diminishes the effectiveness of national economic policies—as when a credit squeeze and tight money policy which is intended to dampen domestic demand pulls in foreign funds which will tend (unless sterilised, insulated or counteracted) to frustrate the policy-makers’ intentions.

And third, there are competitive or what used to be called ‘beggar-my-neighbour’ policies, by which states seeking to serve their own national economic interests (as by trying to control overseas investments, or by trying to regulate mergers and takeovers) coincidentally damage the national economic interests of other states, and thus risk creating new sources of international conflict.

Indirectly, all these changes have produced two kinds of response in the behaviour of states which therefore constitute a dynamic element in international politics as well as in economics. One response is co-operative, the other defensive, and I am not foolhardy enough to guess which is the predominant. The co-operative response produces a steady expansion in international economic co-operation and organisation. ‘The central problem,’ to quote Cooper again, ‘is how to keep the manifold benefits of extensive international economic intercourse free of crippling restrictions while at the same time preserving a maximum degree of freedom for each nation to pursue its legitimate economic objectives.’ Let us leave aside the political observation that it is never so easy to get governments to agree on which objectives are ‘legitimate’ and which are not. The point here is that the expanding and pervading international economy is now the major innovative influence in the field of international organisation. Swaps, Special Drawing Rights, recycling of short-term funds, and a number of other recent devices invented by co-operative official minds, or adapted and restyled by them from the blueprints produced by idealistic reformers, were all in a sense forced upon governments, because there seemed no alternative way for them to continue to co-exist within the same economic system without losing some of its benefits.

The defensive response, however, has also been important. No contemporary analysis of state behaviour in international relations would be complete that did not recognise this and try to account for it. It follows logically that as governments tend to increase their concern with domestic welfare, including economic welfare, they will have to devise and to adopt new defensive weapons to protect this welfare should it be threatened or jeopardised from outside.

This is a big and complex subject. But perhaps one specific example will illustrate what I have in mind. The six governments of the EEC once upon a time proclaimed their intention to extend and increase their monetary co-operation with the ultimate objective of a common currency. But in practice, the pressures of the last ten years upon their respective central banks have led them to do almost the opposite. They have had to devise new weapons which a monetary economist sees as ‘a material enrichment in the craft of central banking,’² but which research also makes clear were motivated by the desire to attain domestic economic goals ‘even when such policies conflicted with the requirements of international balance’ (my italics). As Katz says, ‘Central bankers in our generation have not been prepared to watch passively as international influences disturb the internal economy without regard to domestic priorities’.

The other general effect of these developments of the international economy is one of those differences of degree so great as to be a difference of kind. I do not count as changes in the political system the swapping of roles among the actors in the system, the relative rise or fall of different states or the rearrangement of states in looser or closer groupings, or in new multipolar instead of bipolar patterns, and so forth. But it seems to me that the shape or structure of international society must be materially affected by a pronounced trend towards lopsided development. That is to say, when the economic system so favours the increasing wealth of a minority of developed national economies over the majority of less developed ones that it produces a list to port, so to speak, in the political system, then this can count as a political as well as an economic change. The label ‘populist’, attached first, I think, by Robert Cox³ to the states on the wrong side of the divide, is in this context an apt one, for it underlines the point that the growing inequality has produced a new basis of political alignment in international society—not strategic, nor religious, nor cultural, nor ideological—the consequence of which for the operation of that system neither we nor the economists can yet foresee.

THE STATE OF THE LITERATURE

My next point is that the study of international relations, in most universities at the present time—and not only in this country, is not keeping up very successfully with the changes I have tried very briefly to outline. Instead of developing as a modern study of international political economy, it is allowing the gulf between international economics and international politics to grow yearly wider and deeper and more unbridgeable than ever. This dichotomy is well reflected in the current state of the literature dealing with this middle ground—or perhaps I should say middle void—between the two, whether you call it the economic aspects of international relations or that large part of international economics that is susceptible and sensitive to political considerations.

From the international relations side of the void has come only a meagre contribution, except in certain specialised fields. Two such fields that come to mind are studies of international economic organisations, where a useful beginning has been made. I do not count in this context the ‘company history’ type of books written by international organisation-men, but such critical, analytical works, for example, as William Diebold’s study of the Schuman Plan or Michael Kaser’s of Comecon.⁴ The other is what could loosely be described as area studies—where it is so immediately and evidently impossible, in any serious analysis of international relations between pairs or groups of countries, to divorce the economic and political aspects. I have in mind, for example, such studies as Richard Gardner’s Sterling-Dollar Diplomacy, recently reissued, Dennis Austin’s study of Britain and South Africa, Trevor Reese’s recent book on Australia, New Zealand and the United States, Arthur Hazelwood’s African Integration and Disintegration, or Miriam Camps’ European Unification in the Sixties.⁵

What is noticeably missing from the picture are more general studies of international economic relations—whether of problems or issue areas—treated analytically, with the political analysis predominating over the economic analysis.

These general questions have so far been very much left to the economists. And admirable and distinguished as their work undoubtedly is, it seems to me that when looked at from a critical international relations point of view it has shortcomings that perhaps are unavoidable, given the nature of the discipline. To put it bluntly, the literature contributed to the void by the economists suffers, first from a certain partiality for some aspects and questions over others, and, second, from a certain political naïveté in its conclusions. The partiality is shown particularly to the questions concerning international trade and international payments and to the mechanistic questions which they raise. With trade and payments, part of the fascination is probably explained by the opportunities for mechanistic analysis—roughly, how it works and what happens in the economic mechanism—and the availability of quantifiable data that can be subjected to model calculations.

It also happens that the study of economics is led and dominated by the United States, and that the national interests of the United States, both political and economic, are much concerned with both subjects—not only from a narrow national point of view, but also as what I would call the Top Currency country which by definition has a special concern with the preservation of order and stability in the international economic system. The result of this partiality in the economists’ contributions is that what I might call the foreign economic policy analysis side of the subject has been seriously neglected. Gardner Patterson’s book on discrimination in international trade and Gerard Curzon’s on multilateral commercial diplomacy⁶ are valuable, but they are not enough. They do not make up for the lack of a substantial literature on the theory of international political economy—not applied or descriptive international economics but a political theory of analysis and explanation. The result is that great gaps are left wide open to be occupied by popular myth and legend.

Why, for example, has there never been a general political study of international loans and debts to match, for later periods, Herbert Feis’ Europe, The World’s Banker? Why is the subject of economic warfare so neglected? Apart from the pre-war Chatham House study on sanctions, and Klaus Knorr’s somewhat abortive attempt to get to the bottom of war potential, the only real contribution has been from Professor Medlicott, an international historian.⁷ Again, though the political role of the oil companies has come in for some attention by Edith Penrose and others,⁸ the role of other large enterprises in international situations of conflict or association has had short shrift since the happy muckraking days of the Left Book Club. Significantly, perhaps, some of these gaps left by the university economists have tempted distinguished non-university academics. I am thinking, for example, of two distinguished ex-financial journalists—Andrew Shonfield and Fred Hirsch—both of whom have pioneered new ground.⁹

My other criticism is that the economists’ contributions to the study of international economic relations have shown political naïveté. Too often they write on international economic problems as though political factors and attitudes simply did not exist, and could be brushed aside as some kind of curious quirk or aberration of dim-witted politicians. When the economists tell you that it is all just a matter of will, of summoning up the necessary will-power, does it not remind you of those who used to say and write so glibly, forty odd years ago, that the League of Nations would be fine and all international problems could be resolved if only the members showed the necessary will to make the system work? Yet only recently, the Pearson Committee¹⁰ came up with the same kind of conclusion about aid and development. The problems are new, but the responses are the same old ‘infantile internationalism’—if I may be allowed a perverted Leninism. Even Professor Cooper, whom I quoted earlier, is also inclined to lapse into the tell-tal...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgements
• Series Preface
• Introduction
• PART I MODERN ORIGINS
• PART II SYSTEMIC TRANSFORMATIONS
• PART III SYSTEM GOVERNANCE
• PART IV INTERNATIONAL TRADE
• PART V INTERNATIONAL MONEY AND FINANCE
• Name Index