International Political Economy

Contrasting World Views

Raymond C. Miller

• Publisher: Routledge
• Year: 2018
• ISBN:
  9781317215752
• Edition: 2
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

The second edition of International Political Economy continues to be the perfect short introduction to the fundamental theories and issues of international political economy (IPE).

Written in a concise, accessible style by an experienced teacher and scholar, it combines theoretical perspectives, real-world examples, and comparative policy analysis. The text offers students an in-depth, balanced understanding of the contrasting core perspectives in IPE, allowing them to critically evaluate and independently analyze major political-economic events.

Having emerged from both the classical and modern schools of political economy, the book's unique structure is organized around the threefold world view classification of IPE that the author labels as free-market, institutionalist, and Marxist.

The book:

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• Compares, contrasts, and critiques the different approaches in the context of major global issues such as financial crises, free vs. fair trade, ecological degradation, growing inequality, gender, globalization, and multinational corporations;

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• Explains key economic concepts such as financial markets, banking systems, monetary policy, foreign exchange, Keynesian economics, fiscal policy, comparative advantage, value theory, money, role of corporations, and ecological economics as well as their relationship to political concepts such as international regimes and governance;

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• Contains 30 original figures and tables, review questions at the end of each chapter, and a detailed glossary to enhance student learning;

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• Responds to the call from eminent IPE specialists Robert Keohane and Benjamin Cohen for textbooks that take a pluralistic approach.

This thoroughly updated second edition is essential reading for students of international political economy, economics, political science and global governance.

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CHAPTER 1

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The field of study known as “IPE”

International Political Economy (IPE) is a central component of the interdisciplinary field of International Studies. IPE’s current form is only about five decades old. Modern IPE combines primarily the relevant parts of the disciplines of Political Science and Economics. To deepen and broaden the analysis it also draws on relevant facets of other disciplines such as Sociology and Geography as well as interdisciplines such as Critical and Women Studies.

Contemporary IPE is a reconstitution of a field of study known as classical political economy that existed throughout the nineteenth century. The generally recognized founder of the older version of IPE is Adam Smith, a Scottish moral philosopher, whose 1776 book The Wealth of Nations is considered the originating treatise. The European scholars who followed in Adam Smith’s footsteps created a field that provided comprehensive social analysis. However, near the end of the century, thanks to the differentiating impact of the Industrial Revolution, greater and greater specialization permeated all aspects of life. The disciplinary structure of the university was no exception. Consequently, classical political economy was divided into the modern academic disciplines of Economics, Political Science, and Sociology. Thus, for most of the twentieth century, the subject matters of these disciplines were studied separately. However, by the 1980s the increasing evidence of comprehensive global interdependences could no longer be ignored. The issues that were being studied in disciplinary isolation required a more integrative analysis. Therefore, the field of IPE was recreated (Wolf, Europe and the People Without History, 1982).

In the late twentieth century technological developments in transportation and communications brought the world together in ways that had never before been possible. Thanks to the Internet, international financial transactions could now be carried on instantaneously 24 hours a day, 7 days a week. Manufacturing processes could now be located in multiple countries, with the result that it has become almost impossible to tell what the home-production country of any complex product such as an automobile actually is. Transnational corporations operate globally with decreasing loyalty to any particular nation-state. Nation-states, through international organizations such as the International Monetary Fund and the World Trade Organization, try to retain some kind of control. Countries like China and India, which hardly counted in the global economy for the first few decades after World War II, are now major players. Studying a world of such complexity required a new field that could effectively encompass all of these rapidly changing circumstances (Amin et al., Review of International Political Economy, spring 1994).

Formally, therefore, International Political Economy is an interdisciplinary social science field of study that investigates, analyzes, and proposes changes in the processes of economic flows and political governance that cross over and/or transcend national boundaries. These flows include the exchange of goods and services (trade), funds (capital), technology, labor, natural resources, environmental pollution, etc. The field attempts to provide explanations, to evaluate consequences, and to propose possible policy initiatives. Within the field there are competing perspectives that offer different analyses of the same phenomena.

To better understand the origin and development of the field, it seems helpful to briefly recount the historical evolution of the global political economy of both the classical and modern eras along with the intellectual efforts that have been made to make sense of them.

HISTORICAL CREATION OF THE GLOBAL POLITICAL ECONOMY

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The subject matter of IPE has a long history. In fact, one of the main subjects, long-distance trade, goes back thousands of years. During this long period trade has served as a major means of exchanging commodities, accumulating wealth, diffusing ideas, imposing control, spreading disease, and proselytizing religion. Organized long-distance trade was engaged in by many civilizations, starting 6,000 years ago with the Assyrians, who established regular trade between Mesopotamia (Iraq) and Anatolia (Turkey) to the west and India to the east. One thousand years later the Phoenicians (in what is now Lebanon) established the first civilization based predominantly on trade. Within another thousand years the first known laws regulating trade and commerce were promulgated in Babylon, as part of the Hammurabi Code. Long-distance trade was a lucrative but dangerous activity, and both the merchants and states that gained from the trade had a strong interest in protecting it. One of the most interesting examples of this connection was the overland trading route from China to the eastern Mediterranean that has come to be called the Silk Road. It was at its safest and most dependable when the Mongol Empire controlled its entire length. For more than a thousand years the camel caravans on the Silk Road provided the most cost-efficient method available of transporting high-value goods. Ocean-going ships did not become competitive until the thirteenth century, when significant technological developments in ship design, construction, and navigation took place in both China and the Italian city-states (Chanda, Bound Together, 2007).

However, largely due to the state of transportation technology, the long-distance trade carried on for several thousands of years by these pre-modern civilizations was mostly limited to high-value goods for the benefit of the elite, such as silk, spices, ivory, and precious metals. Furthermore, most people would not have had any direct contact with the traders or the commodities traded, as around 90 percent of the population lived in small villages and gained their livelihood from agriculture. However, influences from trade did diffuse out to the countryside, religion being one example. Nayan Chanda argues that since traders have to deal with people of many different cultures, countries, and languages, they are especially comfortable spreading religions that claim universal applicability. Historically, the first religion to follow this path was Buddhism, the second was Christianity, and the third was Islam. In fact, Mohammed himself was a merchant and trader (Chanda, Bound Together, 2007).

Besides long-distance trade, markets are another example of institutions that have been around a long time. However, when people in pre-modern, rural-based societies spoke about markets, they were not referring to the larger realm of economic activity, as would be the case today. Instead, markets were once-a-week gatherings in the region’s largest village or town where people brought their chickens or turnips or wooden benches, etc., to exchange, often through bartering, for something they needed.

The pre-modern market was a place, and its primary purpose was the trading of commodities. Sometimes, in pre-modern times, especially in the larger markets such as those in Baghdad and Rome, slaves were among the “commodities” traded, but the numbers were small. In medieval Europe trading in the marketplace was supposed to be conducted at the “just price,” that is, the seller was supposed to only recover costs, nothing more. Official Church morality frowned upon merchants who made their living from trade. Morally speaking, money-lending was even worse. At that time Christianity shared with Islam the condemnation of usury, the extraction of presumably undeserved interest payments from borrowers (Heilbroner, The Making of Economic Society, 1962).

The extent and intensity of long-distance trade varied over time, reflecting the relative strength and objectives of the involved governments and peoples. Trading centers and routes had to be protected from bandits and arbitrary confiscation. With the collapse of the Roman Empire in the fifth century, European-wide trade contracted significantly. But by the eighth century the Vikings had established a trading network stretching from Scandinavia to Constantinople. Arab trading, centered in the Middle East, was most active in the tenth to thirteenth centuries, encompassing most of the known world including southern Europe, northern and eastern Africa, as well as central, southern, and southeastern Asia. The spread of Islam followed quite closely the geographic spread of this extensive Arabic trading network. In the Baltic and North Sea area the Hanseatic League of northern European cities dominated trading from the thirteenth to the sixteenth centuries. In the 1400s the Chinese had the largest ships and merchant fleets in the world, but they allowed their control of the ocean-going trade in Asia to slip away when the Emperor decided to focus the regime’s economic energies inward. Around the same time the trading prowess of the Italian city-states in the Mediterranean area reached its peak (Landes, The Wealth and Poverty of Nations, 1998).

Not until the fifteenth and sixteenth centuries did Western Europeans begin to embark on expeditions and conquests that would result in a truly global trading network. Thanks to developments in navigation, ship-building, and military technology (especially cannons), the Portuguese began exploring the world and establishing trading enclaves in Africa, Asia, and South America. Their basic technology was borrowed from the Arabs, who had occupied southern Spain and Portugal for 500 years. The Arabs in turn had acquired some of their knowledge from the ancient Greeks and Chinese. For instance, the invention of the compass, an important navigation instrument, has been attributed to the Chinese. These pre-modern connections demonstrate that there was a diffusion of information and commodities over long distances, but there was not yet an integrated global political-economic system.

The symbolic date of the beginning of the establishment of the first global economy is 1492, when Columbus arrived in the Caribbean. Columbus was financed by Spanish royalty, who were actually more interested in finding (and stealing) gold and silver than in finding a direct trading route to the spices, tea, porcelain, and silk in Asia. In an act of royal arrogance, the Spanish and Portuguese kings divided up the world between them. Columbus headed west across the Atlantic for Spain while the Portuguese ships sailed around Africa. The ostensible objective of these expeditions was a trading route to the luxurious commodities of the East that avoided the merchants of the Middle East and the Mediterranean, who always took a substantial cut of the trading profits. By the fifteenth century the Turks of the Ottoman Empire had mostly taken over from the Arab traders in the Middle East. The Spanish had a special interest in gold and silver because these precious metals were the basis of wealth, the means with which to buy the consumption goods necessary for better living and war-making. Both kings experienced successful results. Portuguese ships made it to the Indian Ocean and beyond. Meanwhile the Spanish were so successful in their acquisition of gold and silver from the Americas, especially from Mexico and Peru, that by the seventeenth century the European money supply, which was based on gold and silver, had doubled. Many observers believe that this massive transfer of wealth was crucial in the ultimate rise of the European economies to global pre-eminence. An indigenous Latin American leader recently made the claim that if the Europeans were to return these precious metals in bullion form to their original home with 500 years of compound interest, the weight would be greater than that of the planet earth (Guaicaipuro Cuautemoc, quoted by Andrew Simms in Ecological Debt, 2005).

While the Portuguese initiated global trading in the 1500s, it was the Dutch and then the English who really developed the global trading system in the 1600s. They initiated a system of credit, built large fleets of ships, greatly expanded the colonial cash crop production of cotton, tobacco, and sugar, gave monopoly franchises to trading companies, and militarily defended their global reach. Even though private firms were involved, the key instigator of the system was the state. This state-run commercial expansion was known as mercantilism. State-sanctioned monopolies, or exclusive franchises, gave the trading companies the “right” to establish colonies, which at first were small port enclaves and later encompassed whole countries. The most famous of the trading companies were the English East India Trading Company, which colonized India, and the Dutch East India...