Political Economy to IPE

Introduction to IR II: IPE
Website: http://www3.nccu.edu.tw/~lorenzo/
Contact Information:
Office: 271305 Phone: 2939-3091 ext. 51305
E-mail: [email protected]; [email protected]
Course Description:
This course forms the second half of the year-long Introduction to International Relations offering. Its
focus is on International Political Economy. It covers topics in international trade, international finance,
international economic organizations and economic development.
Course Objectives:
To introduce students to important concepts, theories and topics in international political economy, and
to increase student awareness of the intersections and differences between this field of diplomatic
activity and the more traditional fields of international politics and security.
Joshua Goldstein, and Jon Pevehouse, International Relations, 10th Ed. (New York: Longman Publishers,
2010 or later edition).
Course Information
Midterm: 25%
Final: 35%
Quizzes: 15%
In-class participation: 20%
Project presentation: 10%
Tests will cover materials in the textbook and lectures. They will have a mixed
Midterm: Week of April 15
Final: Week of June 17
Quizzes will cover materials from the textbook reading assignment for the current
week and lecture material from the previous week.
Course Information
Projects consist of group reports on an important international
economic entity. These reports should be sufficiently lengthy to fill
out a ten minute briefing to the class, and should provide
information and materials that considerably exceed any materials
on the entity that have been presented in class.
This includes information on membership, policies, strategies,
histories, assets, and crises. Each member of the group much
participate in some way in the presentation and provide tangible
proof of participation in putting together the briefing materials.
I will provide more information after the midterm test.
February 20, 2013
Origins of IPE
In the West, the origins of International Political
Economy have their roots in older traditions of Political
Economy, i.e., understandings of the interaction of
states and economics.
These older understandings, in concentrating on the role
of the state, primarily had interest in the domestic
aspects of the relationship, though as time went on, the
international dimension became increasingly important.
Medieval Understandings
 Views of kings and counselors:
 Economics was mostly though of in terms of popular
contentment and tax revenue. When the economy was doing
well, the odds of popular revolts and other challenges to
authority would be minimized. The same was true of taxes– a
better economy meant more money would be available for tax
 But there was little sophisticated knowledge of roles the state
could play in economic affairs. Recessions were often meant
by crude stimulatory efforts on the party of royalty and their
households in terms of purchasing more goods, but little
systematic policies were put in place besides the occasional
suspension of taxes.
 Occasionally set out to negotiate on behalf of merchants and
craftsmen with foreign affairs regarding markets
Medieval Political Economy
Ordinary citizens:
Tended to view economics in terms of a moral
economy. Economic affairs should be governed by
ethical rules enforceable by local authorities (and
occasionally national authorities).
This meant demands for price controls during
times of scarcity, as well as views that would outlaw price
manipulation, hoarding of goods, attempts at gaining a
monopoly and other practices that would put the ability
of ordinary people to buy things necessary for life in
Responses to Medieval
The combination of new thinking stemming from the
Enlightenment as well as the creation of more
international trade and an emerging global market in
the 16th, 17th and 18th centuries led to challenges to such
simple thinking:
 Onset of wars over trade and empire
 Greater volume of international trade meant greater
awareness of interdependence and the boom and bust
cycles that accompanied a growing trade and
manufacturing-based economy.
Three Responses
These developments eventually led to three types of
responses in political economy:
 Statist understandings that went under the name of
 Capitalist understandings, as exemplified by Adam
 Critical understandings that culminated in the work of
Karl Marx
State-centered theory associated with such thinkers as JeanBaptiste Colbert, that sees economics as part of the state’s overall
strength in terms of its ability to defend itself and be powerful on
the world stage:
 Economics is about resources, and the state should intervene in
economic transactions of all kinds to ensure that it receives the
maximum benefit. This includes state ownership of national
resources, state-controlled enterprises and close regulation of
economic affairs in general.
 Economic interactions in general, but particularly those that are
international, are zero-sum affairs. That is, any benefit that a
party gains is the result of another party proportional losing.
 Thus saw the market as a competitive place that, again, requires
state intervention. A successful economic policy and a wellregulated economic sector results in trade surpluses.
 Such trade surpluses, in the form of spendable currency, is
an important part of the state’s strength, because such
currency (and preferably bullion) was the underlying
economic basis for war and self-defense– allowed a state to
pay and train troops, buy military supplies, build
fortifications, etc.
 In this understanding, a world economic system is only as
good as the benefits it brings to one’s state in the form of a
trade surplus. Conflicts arising from trade are also seen in
terms of defense of the state, not citizens or businessmen
or the “economy” as a separate entity.
Adam Smith
In contrast to the mercantilists, Smith did not see economics
as merely a part of a state’s arsenal. Nor did he see it in terms
of the medieval understanding of moral economy.
 Rather, economics importantly has to do with markets for
Smith, and these are natural in his understanding. They are
neither the creations of or parts of the state.
 In seeing economics as an importantly natural realm,
Smith differentiated it from politics. As with earlier liberal
theorists, Smith saw the state as artificial, the deliberate
creation of humans who, experiencing natural life as
intolerable, created the state to create safety and order in
life. Economics, on the other hand (and as with early
liberals like Locke, though not protoliberals like Hobbes),
economic activities predate the state.
 Thus for Smith, the type of artificial action that is needed to
create a common good politically is generally not necessary in
the realm of economics. The market can guide the self-interested
actions of individuals into outcomes that are good for everyone
without the state having to intervene by means of coercive rules
and regulations.
 In this understanding of the market as a place of cooperation,
Smith generally did not sharply distinguish domestic from
international markets. The same hidden hand would optimize
the outcomes of individual decisions in all types of markets.
State boundaries being artificial, they pose no natural problems
for markets. They only become problematic when states
themselves make them problematic by imposing tariffs and
other artificial limits on free trade.
 The state’s role in this scheme is relegated to residual
and supportive activities, in the form of creating
currency, enforcing contracts and keeping order (in
the sense of preventing or punishing acts of violence or
actions that violate contracts).
 The real work of facilitating trade and economic
activities in general is conducted by the market and
individuals who use capital to create goods and
participate in market activities.
Karl Marx
Marx also rejects both the concept of a moral economy and
the role of the state, but for different reasons.
 For Marx, the important elements of both politics and
economics are class, capital and labor. The state is only the
vehicle by which the ruling class enforces its will. The
market is also not a place where people voluntarily and
freely exchange goods, but a rigged place where coercion by
capitalists takes place.
 If internally the political and economic arenas are seen by
Marx as dominated by capital, the same is true of the
international realm. In his understanding, the
international marketplace is a venue (though not the only
one) by which the capitalists in strong countries exploit the
peoples of weaker countries.
 Thus, Marx has a great appreciation of international
economics as a human system that operates in
accordance with particular codes and is responsive to
particular interests. As with the mercantilists, he sees
it as a system that produces clearly identifiable
winners and losers, but associates these entities with
classes rather than states.

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