IPE Theories

1. IPE Theories

2. The Realist Perspective Time-tested School of Thought • Thucydides (471-400 b.c.) • the first IR/realist work The History of the Peloponnesian War • on wars between the Greek city-states Popularity among world powers (influencing foreign policy decisions) • US: a hegemonic power for much of the 20th century • USSR: military weakness invites aggresion • PRC: China must have nuclear capability to deter aggression from the West & the USSR

3. The Realist Perspective Time-tested School of Thought Popularity among world powers Weakness of Realism in the subfield of IPE • Realist theory was based more on politics & history rather than on economics. • Realist theory focuses too much attention on security matters rather than on economic issues. Two strains of realism • Machiavelli realism • Expanding military power is more important to the Prince than the acquisition of wealth. • Military strength can bring wealth.

4. The Realist Perspective Two strains of realism • Machiavelli realism • Thucydides/Mercantilist realism • Thucydides: the Greek city-state wars are attributable to economic changes, trade growth and rise of new commercial powers Wealth is an important source of military power. “War is a matter not so much of arms as of money, which makes arms of use.” • Mercantilists: Wealth expansion should be the goal of the states that intend to enlarge their military capabilities.

5. The Realist Perspective Basic Tenets of Realism • International system • Anarchy, lack of a centralized power exercising authority over states • Self-help, each state taking care of own survival and well-being • Nation-states • the principal/unitary/rational actors of international system • Obsessed with the challenge of national survival and security • Obsessed with the need to enlarge national power to defend sovereignty and independence

6. The Realist Perspective Basic Tenets of Realism • International system • Nation-states • Societal groups • Non-state actors operate within the rubrics of state politics • Limited influence over the actions of the states. • International Economic Relations & Power Politics • A state’s power position in the international system determines its foreign policy • Aggressive states may use the international economy to pursue imperialist expansion or extend their power • A hegemonic state with dominant power & influence is likely to defend the status quo of the system

7. The Realist Perspective Basic Tenets of Realism • International Economic Relations & Power Politics • Other arguments • Powerful states can structure economic relations at the international level • Globalization is a myth; if globalization does exist, states remain the dominant actors and allow such a process to happen. • Major powers can close or open world markets and they can use globalization to improve their power positions vis-à-vis smaller & weaker states • A hegemonic state has the ability to create an open and stable economic order that can further the globalization process.

8. The Realist Perspective Mercantilists & Economic Nationalism When: 1500-1750 Main arguments: • state power based on size of national wealth • Acquisition of wealth is a means of gaining power Post-mercantilist economic nationalism When:1750-1850 Main arguments: • Industrialization was a central requirement for countries seeking to gain national security, military power & economic self-sufficiency

9. The Realist Perspective Post-mercantilist economic nationalism Main arguments: • National security and independence requires economic growth that gives priority to industrial development, economic self-sufficiency, state intervention and trade protectionism • Manufacturing was more essential for diversifying the US economy and decreasing its vulnerability to external forces. (Alexander Hamilton (1755-1804) and his Report on the Subject of Manufactures) • Imposition of trade barriers, promotion of national unity, and development of ‘human capital’ are key to a national rise in wealth and power.(Friedrich List, The National System of Political Economy)

10. The Realist Perspective The Rise of Realist IPE When: 1970s-1980s What triggered the realist IPE: • Decline of Cold War, disarray in the global economy forced many realists to look beyond security issues • Realists could not remain silent to the liberal and Marxist economic analysis of IPE. • Major changes in the post-war economic system such as the rise of the OPEC, relative decline of the US economic hegemony, increasing friction & competition between US & other DCs; and the onset of the debt crisis

11. The Realist Perspective Hegemonic Stability Theory When: 1970s-1980s Central arguments: • A global hegemon contributes to economic openness and world stability • International economic system (IES) is most likely to be open and stable when there is a single dominant or hegemonic state • A hegemonic power is one that: • Has a sufficiently large share of resources that it is able to provide leadership • Is willing to pursue policies necessary to create and maintain a liberal economic order • Whose decline in power is likely to undercut economic openness

12. The Realist Perspective Hegemonic Stability Theory When: 1970s-1980s Central arguments: • A global hegemonic power helps maintain an open and stable economic system by: • Creating and maintaining liberal international regimes • Sets of implicit or explicit principles, norms, rules and decision-making procedures • Providing public goods and rewards and the use of coercion to encourage compliance and punish rule-breaking behaviors.

13. The Realist Perspective Hegemonic Stability Theory (HST) Critics of the HST • Can generalizations be drawn about hegemonic behavior based on the experiences of two global hegemons during limited historical perioods? • What constitute a hegemonic power and how to measure its power? • On what ground can HST claim that a hegemon contributes to economic openness and global stability?

14. The Realist Perspective Defining a hegemonic power • Robert Gilpin’s realist definitiona hegemonic power is one that is capable of controlling or dominating the lesser states in the international system. • Immanuel Wallerstein's definitiona hegemon is one that possesses such a predominant power that enables it to impose its rules and wishes (or by using veto power) in the economic, political, military, diplomatic and even cultural arenas. • Gramscian definitionHegemony is viewed as a complex web of ideas that social groups use to assert their legitimacy and authority • hegemony of ideas such as capitalism

15. The Realist Perspective Three Types of Hegemon • A benevolent hegemon • The hegemon is benovolent in both goals and means. • It is more concerned about promoting generalized benefits than its self-interest. • It uses rewards rather than threats to ensure compliance. • A coercive hegemon • is exploitative • exerts leadership out of self-interest • is more inclined to use coercion to extract compliance • A third hegemon • Pursues general as well as self interest • More inclined than the benevolent hegemon to use coercion • More inclined than the coercive hegemon to use rewards.

16. The Liberal Perspective Main ArgumentsIndividual Freedom • Individuals have natural rights that cannot be infringed upon by groups or state • Individual freedom is vital for the pursuit of political and economic interest • Individual endeavor benefits the society as a wholeState or social groups should stay out of individual decision-making Int’l Economic Relations • Int’l groups such as IMF and World Bank are politically neutral • If states conform to their rules, they will all grow

17. The Liberal Perspective Main Arguments Int’l Economic Relations • The int’l economic system benefits all as long as states are willing to pursue rational liberal economic policies. • The roadblock to development is low efficiency and lack of freedom, not distributional disparity between the North and South. • Today’s LDCs have advantages the DCs did not have when the latter were taking off • LDCs have access to capital and technology from DCs • Globalization contributes to growth of LDCs if they follow open and liberal policies.

18. The Liberal Perspective Main Arguments Politics & Economy • Politics and economics are two separate & autonomous realms • Government should not interfere with domestic & int’l economic transaction • Government’s role should be limited to • Creating a favorable business environment • Providing public goods • National defense

19. The Liberal Perspective Adam Smith & Orthodox Liberalism • Adam Smith (1723-1790) • Advocated laissez-faire economics • Opposed mercantilist policies • Advocated freely operating markets based on a division of labor • Free market with division of labor maximizes efficiency & prosperity • Called for eliminating barriers of mercantilist states so that goods can be exchanged across national borders • Free trade is important because nations are interdependent on one another.

20. The Liberal Perspective John Maynard Keynes & Keynesian Liberalism • John Maynard Keynes (1883-1946) • Advocated state intervention at times of economic downturn spiral • Opposed extreme levels of economic nationalism • Argued that self-interest and public interest do not always converge as Adam Smith suggested • Argued that market did not tend inherently toward a socially beneficial equilibrium. • Argued for government intervention to create demand at time of sluggish economy • Placed less emphasis on specialization and int’l trade • Argued that import restrictions may be necessary to bolster domestic employment

21. The Liberal Perspective Interdependence Theory Main Arguments: • Advances in transportation, communications & technology are negating distinction between internal & external policies • States are losing some autonomy in managing their own affairs because of growing economic interdependence • Cooperation among states is the best response to the new situation Richard Cooper: The Economics of Interdependence (1968) • Interdependence can be asymmetrical • A less dependent state has more power in the relationship • Interdependence can be complex Robert Keohane and Joseph Nye

22. The Liberal Perspective Interdependence Theory Main Assumptions • States are not unitary actors • States are not the only important actors in IR • Military means are not always useful for promoting national interests • IR includes both inter-state and domestic issues, intermestic The Prisoners’ Dilemma & Int’l Cooperation • The Prisoners’ Dilemma • Each is motivated to defect rather than cooperate • Each strives for sub-optiomal outcome rather than best collective outcome Cheating by states is prevalent and hinders cooperation.

23. The Liberal Perspective The Prisoners’ Dilemma & Int’l Cooperation • The Prisoners’ Dilemma Cheating by states is prevalent and hinders cooperation. • A hegemon or international orgazations can solve the defection problem. How? • A hegemon prevents cheating by rewards or coercions • Int’l organizations prevent cheating by enforcing rules, punishing cheaters, and making public state policies • A state in the global economy is less likely to cheat because of the inevitability of retaliation

24. The Historical Structuralist Perspective • Basic Tenets of the Perspective • The concept of class and class dichotomy • The oppressing class v the oppressed class • State=agent of the dominant class • State reflecting and serving the interests of the dominant class • State to be eliminated as a tool of class exploitation only through proletarian revolution by eliminating private ownership & class distinctions • Inter-state economic ties • Zero-sum game • Conflictual • Between the advanced contries & LDCs • Among the advanced countries

25. The Historical Structuralist Perspective Dependency Theory A theory to explain development of Latin American countries Main Arguments • On the source of LDC underdevelopmentExternal factors hinder development in the South • On domestic elites (compradores) • Served as intermediatories between capitalist int’l order and the subjected local people • Allied with the elites in the capitalist states to maintain the pattern of LDC dependency • On potential of LDC development • Little potential because development of the capitalist economies in the core required the underdevelopment of the periphery

26. The Historical Structuralist Perspective Dependency Theory A theory to explain development of Latin American countries Main Arguments • On potential of LDC development • LDCs cannot develop as long as they have links with the core. Dependent Development Theory A theory to explain away development in East Asia Main Arguments • Some LDCs can develop when a particularly favorable alliance forms between foreign capital, domestic capital, and the LDC. • The alliance allows some development in LDCs. • Yet, LDCs and NICs are fundamentally dependent • Their development is conditioned by the needs in the core. • Workers in NICs are low paid; NIC produce low end goods

27. The Historical Structuralist Perspective World System Theory Main Arguments • Modern world system (the main unit of analysis) • It is a world economic system • Components of the world system • Core states • Periphery states • Semi-periphery states • Mobility of states is possible • Countries have moved from periphery up to core • USA, Japan • Countries have moved from periphery to semi-periphery • Mainland China, Taiwan, Singapore, South Korea… • Yet, upward mobility is rare • The unique role of semi-periphery • Unity of the periphery is undermined

28. The Historical Structuralist Perspective World System Theory Main Arguments • The unique role of semi-periphery • Unity of the periphery is undermined • Semi-peripheral states tend to think they are better off than the peripheral states rather than worse off than the core states • Semi-peripheral states are both exploiters and exploited • Core-dominated system is thus stabilized • The core states dominate the system • They set market rules for transnational transactions • They use force to enforce the rules when peripheral states challenge the rules • They impose unequal exchange relations on weaker states • They appropriate surplus of the whole world economy