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Chapter 11
The International Economy: A Global Road Map
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Theories of International Political Economy
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Economic Nationalism: Economic Statecraft or Mercantilism
Realist approachIPE as zero-sum game Emphasis on political goals
PracticesImperialism/neoimperialismEconomic incentives and disincentivesProtectionism and domestic economic support
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Economic Internationalism
Capitalism, laissez-faire, liberalism, or free trade
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Idealist approach
IPE as nonzero-sum game
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Practices
Separate politics from economics Adam Smith's exposition of capital theory: The Wealth of Nations (1776)
Keynesian economicsUse IGOs and national governments to regulate international economic interchangeIMF, GATT and other organizations to promote trade
Two main goals of IGOs:Ensure spread of capitalism and free tradeEase worst inequities
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Economic Structuralism: Focus on Economic Structure
Haves (EDCs) exploit have-nots (LDCs)
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Marxism
Economic order determines political and social relationshipsDialectical materialism: history, current situation, and future are determined by economic struggle
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Dependencia theory (neo-Marxist theory or economic radical theory)
LDCs kept economically and politically dependent on EDCs
Hierarchical structure of international politics
South produces primary productsEDCs produce high-profit manufactured goodsNeocolonialism
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Two Economic Worlds: North and South
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Two Economic Worlds: Analyzing the Data
Economic strength of NorthEconomic weakness of South
Greater focus on agriculture, raw materials
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Problems with classifications
Not a clear dichotomyNewly industrializing countries (NICs)Countries in transition (CITs)Inaccurate statisticsQuestionable relevance of data (GNP), GNP-PPP
Economic vulnerability
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Common political experiences among LDCs
History of domination
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Two Economic Worlds: Human Conditions
Disparities LLDCs
• Lower life expectancy• Lower literacy rate• Poor health• Less access to food, water, and sanitation
services
Declining conditions in some LLDCs
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Two Economic Worlds: Approaches to North-South Relations
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Circumstances
Industrialization first in NorthNationalism led to colonialism
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Economic nationalism: Current rules adequate
National self-interestPolitical economy viewed as a zero-sum gameSelf-helpLifeboat analogy
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Economic internationalism: Prosperity for all through economic exchange
Free tradeForeign investmentLoans and aidGlobal economy viewed as a nonzero-sum game
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Economic structuralism: Current system must be altered
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The Growth and Extent of International Political Economy
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Trade
General pattern of expanding tradeMerchandise tradeServices trade
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Trade expansion
Productive technologyResource requirementsMaterialismTransportationFree trade philosophy
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Uneven patterns of trade: North and South
Dominated by NorthLDCs dependent on EDCs for export earningsLDCs rely on primary products
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International Investment
Foreign direct investmentStake in foreign companies or real estate
Foreign portfolio investmentDoes not involve control of companies
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International investment and multinational corporations (MNCs)
Private enterprisesSubsidiaries operating in more than one stateOwnership of plants and/or resource extraction in other countriesMost based in North
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Monetary RelationsGlobalization of money
Four main banking centers: Germany, Japan, United Kingdom, United States
Globalization of financial servicesNorth-South patterns of money and banking
Dominated by North
Exchange ratesBalance of payments
CreditsDebits
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The Impact of Expanded Economic Interchange
Increased economic interdependence
TradeForeign direct investmentForeign portfolio investmentsDomestic portfolio investments
Autarky--an unrealistic concept