What is IPE?

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Linda Young POLS 400 International Political
Economy Wilson Hall Room 1122
What is IPE?
Fall 2005
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Politics and Economics
Wallerstein disciplines due to historical
developments shape their methodology

• Modernity defined by a division between the
  market, the state, and civil society
• Political Science, Sociology and Economics
• Spheres dominated by laws deduced by
  empirical analysis different from history

Immanuel Wallerstein
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History of the Term

• Adam Smith PE was a branch of the science of a
  legislator or statesman
• John Stuart Mill the science of how nations get
  rich
• Alfred Marshall used economics not political
  economy denied importance of politics

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Questions generated by the interactions of
economic and political affairs (Gilpin)

• The interaction of markets and powerful actors
• Because an explanation from one viewpoint is
  narrow
• 1992 study of Japan and East and SE Asia
• Interdisciplinary
• Questions determined the answers
• Political Scientists
• Looked at trade/investment of Japanese firms
  and development assistance
• Concluded that Japan trying to create sphere of
  influence
• Pacific Asian economy as hierarchical
• Economists
• Trade flows and other measurable data
• Concluded events and patterns could be explained
  by the market
• No evidence of Japan trying to create a sphere of
  influence

Japan
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Differences

• Political scientists economy as having powerful
  economic and state actors
• Economists defined the economy in terms of
  economic forces
• No conscious strategy on the part of states or
  multinational corporations (MNCs)
• Explainable due to economic forces
  investment due to appreciation of the Yen
• Differences reflected their assumptions
• Can be complimentary

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International Political Economy

• Susan Strange IPE concerns the social, political
  and economic arrangements affecting the global
  systems of production, exchange and distribution,
  and the mix of values reflected therein. Those
  arrangements are not divinely

• ordained, nor are they the outcome of blind
  chance. Rather they are the result of human
  decisions taken in the context of manmade
  institutions and sets of self-set rules and
  customs.

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Definitions
States political institutions of the modern
nation state, a geographic unit with a coherent
and autonomous system of government
Institutions debate between the economic and
political perspective North institutions
result from intentional (and rational) actions by
actors to maximize their economic interests
Political science places more emphasis on
irrational, political (including power
relationships) and historical factors shaping
institutions
Markets economic institutions of modern
capitalism a force that motives human behavior
to produce and supply goods or to seek out
goods and jobs
Society embeds both the State and the Market

• Tension between the State and the Market

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Tension between the State and the Market

• Example is the film and news industry
• States want control over entry political
  motivations
• Market wants to export US movies for example
• Problem for some countries

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Political Science

• Distribution of gains from exchange
• Between actors in an economy
• Between states

States, MNCs and powerful actors intervene to
shape the nature of international regimes
Design and functioning of institutions To
advance their political and economic interests
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Economics

• Concerned with efficiency
• Who considers income inequality to be a problem?
• Gains of mutual exchange
• Regard markets as self-regulating and immune from
  politics
• Unconcerned with institutions
• Economics assumes that exchange occurs because it
  benefits all parties
• Distributional effects (welfare analysis)

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Economists Disagree
Over the relative importance of market failure
and government failure

• Market failure when imperfections in the market
  mean that the market will not deliver its promise
  (its theoretical beneficial results)
• Justification for government intervention
• Government failure some economists studying
  institutions take a view that public officials
  are not disinterested serve their own interests
  public choice
• Justification for limiting government

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What's More Important?

• Positive gains or relative gains?
• Grieco states care about relative gains
• Cooperation more likely if positive gains are
  enough
• Examples? Trade negotiations

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Sovereignty and Interdependence

• States want both they conflict
• Gilpin says the logic of the market is to put
  more and more aspects of society into the price
  mechanism
• Examples social security, water
• Trade rules how do they increasingly impinge on
  national autonomy?
• Biotechnology
• WTP dispute settlement

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States and Markets
States want to control economic activity (and
accumulation of capital) and its gains for their
own ends
Market locate activities where profitable

• World systems analysis state developed and used
  to facilitate market transactions in the
  capitalist world economy

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Political Economy

• Assumes the market is embedded in a larger
  framework
• Market structured by social and political
  environment
• What is the purpose of economic activity to
  benefit individual consumers, or to promote
  certain goals of social welfare, or to maximize
  the power of the state? (example?)
• Neoclassical economists assert that the purpose
  of economic activity is to satisfy consumers
  desires, BUT
• Applies to the US more than to Japan and Asia
• Priority on social cohesion
• Prevalence of welfare state in France

• Dani Rodriks evaluation is that successful
  states innovate with economic and social policy
  in unexpected ways
• Diversity needs to be preserved

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Dimensions of International Political Economy

• Some think of IPE as the study of
  multidimensional bargains between powerful actors
  and states (bargains can take the form of
  agreements, rules, conventions)

Levels of analysis individual, state and
international

• Global structures (such as the rules governing
  international trade, and international finance)

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Dimensions of International Political
Economycont
Perspectives and Values

• Filters through which we interpret the world
• Mercantilism economic nationalism rooted in
  political realism (like Gilpin) which evaluates
  IPE issues in terms of the national interest
• Liberalism evaluates IPE interests largely
  through the perspective of the individual, and an
  emphasis on free markets associated with the
  study of economics
• Structuralism rooted in Marxism, and evaluates
  the world economy as a capitalist one with
  classes of nations and people within nations
  society structured by dominant economic forces