IPE: Framing horizontal questions

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IPE Framing horizontal questions

• WHY? What is the driving force in the global
  economy?
• In this case?
• Market competition - Collective search for
  efficiency
• national ambitions and interstate rivalries
• technology OR Ideas and values
• WHO? Who adjusts?
• Importer/ exporters
• My constituency / your constituency
• Low skill labor in the North/in the South
• EU / candidate countries
• FOR WHOM? In Whose Interest? Great power
  Collective those in need

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International Political Economy Caveat emptor
(Ce que je crois)-gt An actor-centred good
story-gt liberal assumptions opportunity to cut
deals positive sum game shared stake in a
stable international economic order governance
issues-gt realist assumptions state centric but
not exclusive-gt outside liberal framework
issues of global justice, issues of identity and
norms-gt Role of narratives Europe as a model
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Lecture 2 The Post-War Order and US Hegemony

• . And what about Europe?

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Negotiating at Bretton Woods
Imperial system of preferences
Laisser-faire 1930s
?

• Beggar-thy-
• neighbour
• Competitive
• devaluations

• gold standard
• Prevention of crisis
• Employment

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1945 - United States power Hegemony Stability
theory

• From Pax Britannica (19th) to Pax Americana
  (20th)
• What is the point of hegemonic power ?
• The benign view
• to ensure economic growth and stability
  (Kindleberger)
• to ensure peace and security through a liberal
  economic order (Gilpin)
• to make up for free riders
• Order created by a single power
• Marxist variant
• overcome contradictions of capitalism through
  imperialism Gramscian unity of structure and
  superstructure power hidden under ideological
  consensus legitimacy of dominance (not
  imperialism )

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Hegemony Stability theory

• What are the sources of hegemonic power?
• Control over markets maintains an open market
  for other countries surpluses discretion
• Control over sources of capital outflows for
  investment credits to friends
• Control over raw materials
• Competitive superiority technological and
  organisational superiority
• Stable national currency supported by facilities
  in times of crisis
• Indicators share of world trade monetary
  reserve production of raw material
• Military power as background condition

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Hegemonic leadershipHegemony Stability theory
refined

• How does the hegemon transfer his resources into
  rules for the system as a whole?
• Leadership (willingness to lead) activates the
  link between power and outcome.
• Domestic politics and other (dis)incentives
• Hegemony as a situation in which one state is
  powerful enough to maintain the essential rules
  governing interstate relations and willing to do
  so (Keohane and Nye)
• Analyse deference of secondary states ST and LT
  benefits vs ST costs for Hegemon elites vs
  countries.

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Hegemonic Stability theory revisited

• 1. Power and interests HST
• Weak version necessary but not sufficient
• Alternatives not necessary at all!
• 2. The role of ideas, shared belief and
  ideological consensus
• 3. The role of institutions

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Negotiating at Bretton Woods
Imperial system of preferences
Laisser-faire Orthodoxy
?
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The Bretton Woods compromise Hegemonic stability
and embedded liberalism

• Broad forces shaping settlement
• System congenial to US interests breaks down
  German, Japanese and UK barriers
• Broad outline openness
• Convergence of interests and their redefinition
• range of post war orders possible
• Role of expert community change in thinking
  Keynesian revolution

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The Bretton Woods compromise (cd)

• 3 beliefs
• Need currency stability and convertibility
  adjustment subject to international agreement
• International stabilization fund to assist
  governments in the short term (creditor/debitors?)
  
• Managed world economy through collaboration among
  governments and mutual supervision (what is
  legitimate?)

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A complementary explanationEmbedded Liberalism

• The essence of the compromise of embedded
  liberalism was that post war economic
  reconstruction unlike economic liberalism of
  the 1930s, was aimed to be multilateral in
  character and unlike unfettered liberalism of the
  gold standard and free trade, post-war
  multilateralism would be predicated upon
  domestic interventionism to ensure attainment of
  national objectives (Ruggie, 1982)

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Embedded Liberalism variants on a theme

• Reconcile openness with the commitment to full
  employment
• E.g. contraction and unemployment are not
  satisfactory solutions for deficit countries
• Keynes management of currency must not undermine
  domestic expansionary policies
• Unique blend of laisser-faire and interventionism
• social welfare must dictate international
  economic plans not the other way around.
• Not liberal with domestic cheating-
  Internationalism based on a sense of shared
  purpose political power represents a fusion of
  power with social purpose
• Differentiated commitment among countries yet
  shared

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Negotiating at Bretton Woods
Imperial system of preferences Keynes 1
?
Laisser-faire 1930s
Openness with convertibility White /
US But safeguards (Double screen to cushion
domestic economy) Keynes 2 / Europe 1.
Assistance in case of BoP deficit (IMF) 2.
Adjustment of exchange rate who adjusts?
No international currency Tax excess reserves
of creditors Exchange control
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Hegemonic Stability theory Creating the GATT
(1947)

• Trade liberalization non discrimination 1)
  National treatment 2) most favored nation (MFN)
• gt Multilateralism NOT free trade
• BUT safeguards, exemptions, exceptions to protect
  social policies
• (Wide range of responses to protectionist
  pressures)
• Progressive liberalisation
• Domestic industry injury
• Surge of imports and BoP crisis - Employment
• Discrimination authorised
• superior public policy goals such as the
  protection of human life or health, the
  conservation of exhaustible natural resources, or
  the protection of public morals
• - regional preferences admitted

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What Next?
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1950s to 1980sHegemonic Stability theory
revisted

• Presence of Hegemon gt order-stability-wealth
• (1) (3) (2)
• -gt What can we observe? (in the 70s-80s)
• 1) Declining hegemony?
• 2) Declining order? Chaos?
• 3) Causal relationship?
• ( Absence of Hegemon gt.instability?)

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After Hegemony? (Keohane) The diagnosis of the
1980s

• Assumption 1 Hegemonic decline? Dont panic!
  Post hegemonic cooperation is possible.
• Supply and demand May be necessary to supply
  international order but then demand quicks in
• Creation of the international order
• vs .Maintenance (life of their own congruence
  of social purpose)
• gt international regimes principles, rules and
  procedures around which expectations converge
• gt The function of regimes information reduce
  costs of agreement coping with uncertainty
  diffuse reciprocity

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After Hegemony? The diagnosis of the 1980s

• Assumption 2 significant disorder?
• Post 1971 inconvertibility of the dollar
  (inevitable liquidity requirements)
• New protectionism
• Adjustement
• Debt crisis
• In fact consistent with embedded liberalism

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After Hegemony?The role of international regimes

• Assumption 3 Causal relation Hgtorder
• 1) liberal hegemon
• 2) influential hegemon
• 3) responsible hegemon

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Hegemonic Stability theory Change in the
1970s? 80s? 90s?
Hegemony?
Yes
No
Continued hegemonic stability Q other causes? Hegemony not necessary -gt International Regimes (After Hegemony)
Hegemony not sufficient -gt Hegemony without leadership Hegemonic decline gt New protectionism regionalism
Yes
Stability?
No
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The long view US vs EU

• Long term growth of GDP/cap the post war anomaly

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The long view US vs EU



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US vs EU The long view

2004 trade pop GDP Europe 18 450
m 25 US 15 291 m 21 (?)


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US vs EU Western HegemonyOr Rival Projects?