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. Text: Joshua Goldstein, and Jon Pevehouse, International Relations, 10th Ed. (New York: Longman Publishers, 2010 or later edition). Course Information Grades: Midterm: 25% Final: 35% Quizzes: 15% In-class participation: 20% Project presentation: 10% Tests: Tests will cover materials in the textbook and lectures. They will have a mixed format. Midterm: Week of April 15 Final: Week of June 17 Quizzes: Quizzes will cover materials from the textbook reading assignment for the current week and lecture material from the previous week. Course Information Projects: 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 purposes 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 question. Responses to Medieval Understandings 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 mercantilism Capitalist understandings, as exemplified by Adam Smith Critical understandings that culminated in the work of Karl Marx Mercantilism 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. Mercantilism 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. Smith 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. Smith 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. Marx 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.