INTERNATIONAL POLITICAL ECONOMY 2021
PART I: INTRODUCTION TO IPE
I. OATLEY, CHAPTER 1: IPE
II. What is IPE?
Studies: how politics shape developments in global economy // how global economy
shapes politics [very causal focus]
Comparing interests: winners vs. losers of globalization (deeper links vs. barriers)
4 areas of global economy, which are strongly interlinked
o International Trade System: centred around WTO
» “Equal access to members’ markets and lowering tariffs continuously”
» Challenged by regional agreements such as NAFTA
o International Monetary System: facilitating transactions between currencies
» Creation and operation of exchange rates is politically influenced
o MNC’s: an often controversial, but very influential role in multiple economies
o Economic development: developed world, NIC’s, developing world, …
Economic policy choices are complicated because of: scarcity + lack of consensus
o IPE studies this consideration and its eventual translation in policy
o Two major forms of consequences: welfare- and distributional (material- and
peoplewise) consequences
2 forms of IPE: explanatory studies (Oatley) and evaluative studies
III. Traditional Schools of IPE: mercantilism, liberalism, marxism
IV. Interests and institutions
Societal interest (collectively and individually) are strongly related to political
institutions and their functioning
, Interests: goals/objectives that central actors want to achieve by using foreign
economic policy (can be material interest and ideas/beliefs)
Institutions: organizations which establish rules of governing political progress
V. Historical Context of IPE
First global economy in 19th century Europe thanks to technological innovations
providing cheap transportation costs (under GB hegemony, a general gold standard
and with bilateral agreements)
WWI made Europe nations let loose of this mechanism and afterwards it was difficult
to establish a new international economic order (US war-debt policy didn’t help)
o Eventually one of the reasons WWII happened
After WWI it was a key goal! New order with US as leader (e.g. Bretton Woods)
o Reconstruction of 19C system BUT with more intervening governments
VI. RAVENHILL, CHAPTER 1: THE STUDY OF GLOBAL POLITICAL ECONOMY
I. Prologue: GFC
Shows integration of trade, finance, and international institutions + problems that
come with this interdependence
Bankruptcy Lehman Brothers triggered everything (caused by house market
bubble)→
o LB securitized in the sub-prime (i.e. higher than usual risk) mortgage market
o Meaning that: the loans an sich were pooled together and then split up in shares
and sold as tradeable securities (bonds)
Industrialized countries were among the worst to be hit and debt to GDP ratio often
rose over 100%
o BUT the uniqueness lays in the fact that ‘all’ regions of the world were in crisis
together → securitizing of a domestic concept as mortgages became an
international tradeable security
G20 (= finance ministers and central bank governors) became principal
intergovernmental body and more money was sent to International Financial
Institutions (IFI’s)
Stimulus packages were injected everywhere
II. World Economy before WWI
Modern World economy anno 14C/15C (dominance of mercantilism)
No IFI’s whatsoever (not for trade nor for finance)
Transport revolutions were the key for international markets’ integration →
investments and migration booms
Gold standard provided certainty for international transactions (because risk of
foreign exchange losses was minimalized)
III. World Economy Interbellum
Economic interdependence is clearly insufficient to provide world peace
Misalignment of exchange rates (because there was no gold standard anymore)
contributed to problems of economic adjustments in 1920s
, World Economy was in recession even before tariffs started rising in 1930s (although
this did hampered international trade even more)
Again, no IFI’s or even bilateral organisations were created
IV. World Economy post-1945: a major tipping point
Commitment to multilateralism: organizations on the international and regional level
Trade and foreign investments rose immensely (faster than production)
o Transnational Corporations (TNC’s) and Foreign Direct Investments (FDI) became
key agents of internationalization
o Intra-industry trade is most common form
Number of international trading actors increased as well
V. Study of Global Political Economy (GPE)
PART II: INTERNATIONAL TRADE
A. COMMERCE & COALITIONS
Two approaches to trade politics: factor endowments vs. sector specificity
II. Rogowski (’89): Factors and Production
Link: existing political cleavages within country - shifts in commercial activity in
opening to free trade
I. Why changing exposure to trade should affect political cleavages
The Stolper-Samuelson Theorem (SST)
o Endowment: countries trade products using factors they are (relatively) endowed
with in abundance
» Countries with different factor endowments will engage in trade with each
other (e.g. France: wine for Turkey: textiles)
» Comparative Advantage (Ricardo): a country exports goods that it can
produce with the abundant factor, and imports those goods that it produces
with its scarce factor.
o SST = trade liberalization benefits owners of factors in which a society is
generously provided with (because society is specialized in this which creates
foreign demand), as well as producers who use that factor intensively (because it
will become cheaper)
o Obviously: it hurts owners and users of scarce factors
o Thus, in a society rich in labour but poor in capital (extra factor is land)
» Protection: benefits capital and harms labour
» Liberalization: benefits labour and harms capital
Political implications of SST
, o Distributional effects of trade: beneficiaries of a policy will try to continue and
accelerate it, while victims will endeavor to retard or halt it
» Importance of Rogowski: in both directions (!) [defensiveness ≠ protectionist]
o Political mobilization: those who enjoy an increase in wealth income will be
enabled to expand political influence (while political influence of ‘losers’ declines)
o Influence: as the desire and means for a particular political preference increase
the likelihood grows that collective action obstacles will be overcome
Simple models of the polity and the economy: beneficiaries of safer/cheaper trade
will support greater openness, while gainers from dearer/riskier trade will pursue
greater self-sufficiency
Political effects of expanding trade
o Stolper-Samuelson applied to the model above implies that increasing exposure
to trade must result in: urban-rural conflict in 2 types of economies + class
conflict in the other 2
o Empirical evidence late 19th
» Radicalism: UK (liberal party asking for expanded suffrage and curtailment of
aristocratic power) + Belgium
» Populism: US: populist movement (agrarians taking a free trade role and
labor/capitalists in protectionist coalition)
» Socialism: Germany (socialist movement) + Italy
[→ only class cleavage]
Historically interesting because can be seen as a cause (repression of
socialists) for the rise of authoritarianism in both countries
PART I: INTRODUCTION TO IPE
I. OATLEY, CHAPTER 1: IPE
II. What is IPE?
Studies: how politics shape developments in global economy // how global economy
shapes politics [very causal focus]
Comparing interests: winners vs. losers of globalization (deeper links vs. barriers)
4 areas of global economy, which are strongly interlinked
o International Trade System: centred around WTO
» “Equal access to members’ markets and lowering tariffs continuously”
» Challenged by regional agreements such as NAFTA
o International Monetary System: facilitating transactions between currencies
» Creation and operation of exchange rates is politically influenced
o MNC’s: an often controversial, but very influential role in multiple economies
o Economic development: developed world, NIC’s, developing world, …
Economic policy choices are complicated because of: scarcity + lack of consensus
o IPE studies this consideration and its eventual translation in policy
o Two major forms of consequences: welfare- and distributional (material- and
peoplewise) consequences
2 forms of IPE: explanatory studies (Oatley) and evaluative studies
III. Traditional Schools of IPE: mercantilism, liberalism, marxism
IV. Interests and institutions
Societal interest (collectively and individually) are strongly related to political
institutions and their functioning
, Interests: goals/objectives that central actors want to achieve by using foreign
economic policy (can be material interest and ideas/beliefs)
Institutions: organizations which establish rules of governing political progress
V. Historical Context of IPE
First global economy in 19th century Europe thanks to technological innovations
providing cheap transportation costs (under GB hegemony, a general gold standard
and with bilateral agreements)
WWI made Europe nations let loose of this mechanism and afterwards it was difficult
to establish a new international economic order (US war-debt policy didn’t help)
o Eventually one of the reasons WWII happened
After WWI it was a key goal! New order with US as leader (e.g. Bretton Woods)
o Reconstruction of 19C system BUT with more intervening governments
VI. RAVENHILL, CHAPTER 1: THE STUDY OF GLOBAL POLITICAL ECONOMY
I. Prologue: GFC
Shows integration of trade, finance, and international institutions + problems that
come with this interdependence
Bankruptcy Lehman Brothers triggered everything (caused by house market
bubble)→
o LB securitized in the sub-prime (i.e. higher than usual risk) mortgage market
o Meaning that: the loans an sich were pooled together and then split up in shares
and sold as tradeable securities (bonds)
Industrialized countries were among the worst to be hit and debt to GDP ratio often
rose over 100%
o BUT the uniqueness lays in the fact that ‘all’ regions of the world were in crisis
together → securitizing of a domestic concept as mortgages became an
international tradeable security
G20 (= finance ministers and central bank governors) became principal
intergovernmental body and more money was sent to International Financial
Institutions (IFI’s)
Stimulus packages were injected everywhere
II. World Economy before WWI
Modern World economy anno 14C/15C (dominance of mercantilism)
No IFI’s whatsoever (not for trade nor for finance)
Transport revolutions were the key for international markets’ integration →
investments and migration booms
Gold standard provided certainty for international transactions (because risk of
foreign exchange losses was minimalized)
III. World Economy Interbellum
Economic interdependence is clearly insufficient to provide world peace
Misalignment of exchange rates (because there was no gold standard anymore)
contributed to problems of economic adjustments in 1920s
, World Economy was in recession even before tariffs started rising in 1930s (although
this did hampered international trade even more)
Again, no IFI’s or even bilateral organisations were created
IV. World Economy post-1945: a major tipping point
Commitment to multilateralism: organizations on the international and regional level
Trade and foreign investments rose immensely (faster than production)
o Transnational Corporations (TNC’s) and Foreign Direct Investments (FDI) became
key agents of internationalization
o Intra-industry trade is most common form
Number of international trading actors increased as well
V. Study of Global Political Economy (GPE)
PART II: INTERNATIONAL TRADE
A. COMMERCE & COALITIONS
Two approaches to trade politics: factor endowments vs. sector specificity
II. Rogowski (’89): Factors and Production
Link: existing political cleavages within country - shifts in commercial activity in
opening to free trade
I. Why changing exposure to trade should affect political cleavages
The Stolper-Samuelson Theorem (SST)
o Endowment: countries trade products using factors they are (relatively) endowed
with in abundance
» Countries with different factor endowments will engage in trade with each
other (e.g. France: wine for Turkey: textiles)
» Comparative Advantage (Ricardo): a country exports goods that it can
produce with the abundant factor, and imports those goods that it produces
with its scarce factor.
o SST = trade liberalization benefits owners of factors in which a society is
generously provided with (because society is specialized in this which creates
foreign demand), as well as producers who use that factor intensively (because it
will become cheaper)
o Obviously: it hurts owners and users of scarce factors
o Thus, in a society rich in labour but poor in capital (extra factor is land)
» Protection: benefits capital and harms labour
» Liberalization: benefits labour and harms capital
Political implications of SST
, o Distributional effects of trade: beneficiaries of a policy will try to continue and
accelerate it, while victims will endeavor to retard or halt it
» Importance of Rogowski: in both directions (!) [defensiveness ≠ protectionist]
o Political mobilization: those who enjoy an increase in wealth income will be
enabled to expand political influence (while political influence of ‘losers’ declines)
o Influence: as the desire and means for a particular political preference increase
the likelihood grows that collective action obstacles will be overcome
Simple models of the polity and the economy: beneficiaries of safer/cheaper trade
will support greater openness, while gainers from dearer/riskier trade will pursue
greater self-sufficiency
Political effects of expanding trade
o Stolper-Samuelson applied to the model above implies that increasing exposure
to trade must result in: urban-rural conflict in 2 types of economies + class
conflict in the other 2
o Empirical evidence late 19th
» Radicalism: UK (liberal party asking for expanded suffrage and curtailment of
aristocratic power) + Belgium
» Populism: US: populist movement (agrarians taking a free trade role and
labor/capitalists in protectionist coalition)
» Socialism: Germany (socialist movement) + Italy
[→ only class cleavage]
Historically interesting because can be seen as a cause (repression of
socialists) for the rise of authoritarianism in both countries
