International political economy summary

Lecture 1: introduction:

 Economics: The study of production distribution and consumption of scarce resources

 Political economy: The study of the role of the state and politics in the production,
distribution and consumption of scare resources


 There is no pure economy that has the hand of the state involved in some way


 What is IPE?

 Studies the politics of flows of production distribution and consumption across national
borders

 It is not only national governments that matter but also foreign governments
international institutions and foreign businesses


 Mostly focus on winners and losers of
- Who is going to benefit or lose from policies?
- State makes decisions that have heterogenous consequences across society
- Some benefit some lose out ( taxation/ trade policy/ social programs)
- Sometimes general welfare is increased sometimes small groups win at the expense of
general welfare
 Distributional consequence of policy matter
- Who wins and loses can tell us about which decisions are made and why they are
made ( instead of assuming that the government is trying to improve general welfare (
as many economists do)

 Implications of focusing on winners and losers (material benefits)
- Focuses less on ideas
- They do matter but question is do they really matter as much as its perceived to matter
( maybe not so much) ( window dressing for material intreses)
- It is difficult to determine to theorize and quantify  if ideas matter do people act
against their interest because of ideas ( certainly)  but there is more tendency for
citizens and Politian’s to act rationally



 Keynesian economics:

, - The idea that in economic recession it is good for aggregate society (most people) if
the government engages in cyclical fiscal policy ( government puts a lot of money
into economy)
- Did most post WWII leaders adopt Keynesian economics because they read it or
because it was rationally ( politically favorable )?

 Marxism

- Did communism rise because it was attractive idea or because the political
circumstances make it politically convenient at the time
- Said something about inequality at the time


 Could say the same thing about modern monetary theory
- Doesn’t make much sense but gained a lot of attraction for those who want more gov
involvement

 Difficult questions to answer but often we give too much attention to ideas ( when
incentives and identifying winners and losers might offer a more compelling answer)
- Politics (election) plays key role In what policies eventually get adopted ( not the
ideas but political constraints)

 The consequences of international flows:

- Trade (goods and services)
- Capital (finance currency)
- Immigration (people labor)
- Environment (pollutants)
- Violence (terrorism conflict)

 Understanding the consequences helps us understand the outcome


 American approach to IPE ( mainstream)

 The old schools:
( used to taught similar to IR)

- Mercantile
- Liberalism
- Marxisms

 I don’t do isms
- It doesn’t add anything to our knowledge
- A single paradigm cant even explain natural sciences
- - I am an “empiricist.” I try not to hold assumptions and try to base my conclusions on
available scientific evidence and compelling theory.
- In practice, your professors conduct mid-level theory or focus on a specific topic •
Believe it or not, we don’t debate liberalism vs. realism anymore

,  Instead modern approaches
1. Interests
2. Institutions


 Mercantilism

- Similar to IR realism
- Focus on state rather than subnational interests
 Assumption: state is responsible for directing economic activity both domestically and
within the globe
- What determines economic flows and international political economy ( states are
dictating policy )

 National power comes from economic power
- Exports bring money in and increase power imports
- Imports sends money out (decreasing power and strengthening other states )
- Exports vary in their importance ( manufactured goods are superior to agriculture)


 Limit
 Was more true back (when money was gold)  when democracy not a thing
unaccountable
 Not true today
( unitary actors ) ( ignores domestic pressure – transnational- strong ( interest groups stake
holders)

 Implication:

- Policy prescription
- The economy should be controlled to gain power ( normative)

 Liberalism

 Countries and individuals gain from trade by exploiting comparative advantage
 Main focus on individuals welfare not state
 No harm in trade ( all trade is good)

 Implication:

 State should not be involved in economy ( Limited role)
 Market  bc they have less incentive to act in short term thing long term unlike
politicians




 Marxism

,  Focus:
- On two groups of society the rich ( capital) and the poor (the labor)

 The struggle for power

- Natural tendency of capital concentration
- For the wealth to get even wealthier
 competition efficiency  small elite  unequal society ( inequality)  revolution

- More sects with in groups


 Implication:

- State exists to protect capital not labor
- Internationally: exploitation of south by the north
- Capitalism is bad for distribution

 Each of these approaches offer some truth
- Alone doesn’t
- Who the important actors
- The relationship between them
- What should be done

 Each is limit because of their rigid frameworks & dependence on questionable
assumptions ( normative views


 Modern approaches

 Attempt to take the good things of these modern approaches and have another
approach that is more inclusive and adaptable to help us answer key questions and
outcomes

 Interest and institution

The interaction between societal interests and the pollical institutions that funnels to policy

 through domestic institutions  internationally interact with international ios and interests




 Interests

 What drives your political behavior?  Interests