1.

IPE Concepts

1. What is IPE?
- The study of the intersection of politics and economics (states and markets) that illuminates the
reasons why changes occur in the distribution of states wealth and power
- 3 main concepts – Structuralism, Mercantilism and Dependency Theory

2. Structuralism
i. This theory emerged in 1950s as response to the perceived failures of Classical Liberalism
ii. Structuralism attempt to identify inflexibilities and intervals of the structure of developing
economies that affect economic changes and the choice of development policy
iii. Also serve as way to explain failure of free market to address issue – e.g. uneven distribution of
income & balance payment disequilibrium in developing countries
iv. Dual economy idea → stems from observation – development operates unevenly both between
and within different sector of economy- due to inherent structural inefficiencies
v. +ally, S argue – differences between developing and developed nation will not disappear
overnight, instead the structural differences call for entirely new analytical approach rather that
offered proponents of alternate theories
vi. Example: South Korea
 1997, SK experience severe downturn – as a result of shortage of foreign currency
 Added to financial crisis, SK taken step to restore economic confidence and reform its
previously lax regulatory structure
 The eco exp. of SK – can be used to evaluate strength and weakness of Structuralism
 E.g. – Structuralism promote belief – state must play significant role in fostering
development and economic growth
 Strength: as result of govt. intervention in eco, SK economy skyrocketed – emerge as
one of the strongest economies in Asia
 Weakness: the fact that SK political leaders failed to note the warnings that lead to
1997 financial crisis
 Highlight that S theory may inadequate to address issues (market failure) – not the best
way to explain market failure

3. Mercantilism
i. Main econ system of trade utilized from 16th to 18th century – M theorist believed the amount
of wealth in world was static and the goal to increase nation’s wealth is by imposing govt.
regulation that oversaw all the nation’s commercial interests
ii. It Is believed that national strength could be maximise by limit import (via tariffs) and
maximise export
iii. The idea of M – strong nation states had the opportunity to create world eco by using state’s
military power to ensure local markets and supply sources protected
iv. Notion behind M – economic health of nation can be accessed by amount of metal, gold and
silver owned. The system encouraged each nation to be economically self-sufficient, meant
that nation would ↑ domestic production and build new industries.
v. M supporters saw agriculture as important and should be promoted – so that nation can
reduce import food. They suggest strong nation-state needed colonies and merchant fleet,
because both could provide +inal markets for goods and raw material
vi. Example: England Navigation Act 1651
 o The act prohibited foreign vessels engaged in coastal trade – where all colonial
Exports to Europe need to pass through England first, then be re-exported to Europe
o Under British empire, India was restricted in buying domestic industries and was
forced to import salt from UK (has salt tax) – led protest of ‘Salt Tax Revolt’ by Gandhi
o 17th cent. – France promoted controlled eco with strict regulation on economy and
labour market

4. Dependency theory
i. Become popular in 1960s as response to research by Raul Prebisch – he found increased wealth
of richer nations took toll (bagi kesan) to poorer nations
ii. In extreme form, DT based on Marxist view of world – see globalisation as medium to spread
market capitalism and exploitation of cheap labour and resources in turn for outdated
technologies in West
iii. Dominant view of DT by theorist, there is a dominant world capitalist system that relies on
division of labour between rich ‘core’ countries and poor ‘peripheral’ countries
iv. Over time, the core countries will exploit and dominate over peripheral countries
v. DT advocated an inward looking approach to development and increased role for the state in
terms of impose the trade barrier, make inward investment difficult and promote
nationalisation of key industries
vi. Example:
US and Mexico
o US has always seek Mexico for the source of raw materials
o E.g. US bought copper from Mexican mines and while sell finished good to Mexico
o Nowadays, Mexico also source of cheap labours
o That’s why many factories in esp. in border areas of Mexico to provide cheap goods for
US market
o At same time Mexico not able develop its own industries because Mexican firm cannot
compete with foreign firm in term of price because foreign firm already set lower prices
than Mexican can offer at first
 - 2. US Economic Freedom - (Democracy & Capitalist) - whether this effect performance
1. What is Economic Freedom (EF)?
- EF is the fundamental right of every human to control his own labour and property – is also the
ability of people to engage in economic pursuits which is producing, selling and buying goods,
services and labour
- In economically free society;
o Individuals free to work, produce, consume and invest as they please
o Governments allow labour, capital and good to move freely and avoid constraint of
liberty beyond the extent necessary to protect and maintain liberty itself
- We will be looking into U.S and N.K economic freedom

2. United States
2.1 Intro
 US population in 2017 = 327 million
 Where they practice democracy and capitalism
 Has the most technologically powerful economy in the world
 World’s richest and most diversified economies
2.2 Economic freedom
 US economic freedom index = 75.7 – the 18th freest economy in 2018 index
 US ranked 2nd among 32 countries in America region where overall score is above regional and
world averages

3. How US EF affect performance in the aspect of law of

3.1 Intellectual property right
- Score 79.3 - ↓ compared last year
- However, property rights are guaranteed because it has been improved by the rolling back of
various acts of federal regulatory overreach in areas such as environmental protection,
education, and health care that had infringed upon them
3.2 Judicial effectiveness
- Score 76.9 - ↑ compared last year
- Due to judiciary is functioning independently and in predictable fashion – without interference
from politics and government
3.3 Government integrity
- Score 71.9 - ↓ compared last year
- The continue decline reflects growing perception of cronyism, elite privilege and corruption
- Nevertheless, American society has a tradition of intolerance toward government corruption
and media is reporting aggressively

4 North Korea
4.1 Intro
 NK population in 2017 = 25 million
 Is a single party state where the official state ideology is JUCHE (national self-reliance) – social
economy or structuralism
 One of world’s most centrally directed – least open economies
4.2 Economic freedom
 NK Economic freedom index = 5.8 – the 180th freest in 2018 index
 NK ranked last among 43 countries in Asia Pacific region
5 How NK EF affect performance in the aspect of law of
5.1 Intellectual property right
- Score 29.8 - ↓ compared last year
- Almost all property belongs to state
- Government control extends even to chattel property (domestically produced goods and all
imports and exports)
5.2 Judicial effectiveness
- Score 5.0 – remain the same
- A functioning, modern, and independent judiciary does not exist
5.3 Government integrity
- Score 25.2 - ↑ compared last year
- Although increased, the score still significantly low
- Bribery is pervasive and corruption is endemic at every level of state and economy

Conclusion
- US and NK economic freedom total opposite with each other
- Their economic freedom affect their performance in rule of law in different way
4. Discuss strategies that can assist development for less developed countries

1. Economic Liberalism
- EL perspective require less developed countries (LDC) become integrated into global market
economy – Esp. through trade
- By emphasize their comparatives advantages, LDC can capitalize on the benefits of int. trade
and build robust economy
- Trade enable poor economies to export their natural resources and agricultural commodities
– at same time afford access to manufactured goods from abroad
- As the eco grow from earning, progressively they’ll able to acquire more foreign technology
and knowledge to promote new investment in manufacturing

2. Structuralism
- Marxist and early structuralist critique the development problem – it begin with assertion of
CORE COUNTRIES dominate PERIPHERAL COUNTRIES and foster a relationship of dependency.
- Acc. to this, Western industrial model is not suitable for LDSs because developed nations “non-
imperial” connection to periphery via trade, aid and FDI often resulted dual economies:
o One part – wealthy economies who are well connected to transnational elite in the
core
o The other part – full of masses, whose features remain bleak and rooted to local
custom and value
- Today, many not cynical about LDCs economic linkage to core nation – more open to idea that
export-oriented growth and aggressive trade posture help developing nation gain benefit

3. Mercantilism
- Mercantilism on LDC view int. trade as essential to national development but they are not
generally keen about laissez-faire and limited govt. doctrine that usually associated with
liberal perspective.
- Believe that each state has critical role to play in coordinating a trade strategy
- Several developing countries adopted strategies that is quite diverse but also termed export-
oriented growth
- This mercantilist-oriented strategy encouraged state to emphasise comparative advantage in
selected sectors and promote export in those sectors
- But, instead depend on non-interventionist state and free trade policies, East Asians Newly
Industrialized Countries aggressive in pursue specific national and international policies that
change the basic structure and function of economy
- The state active in setting export-oriented development policies → maximise benefits of
industrialisation
Constructivism

 This theory focus on idea of norms, the development of structure, relationship between actors
and said structures, as well as how identity influences actions and behavior amongst and
between actors (Reus-Smit)
 Constructivists also focus on the idea of anarchy, but they depart from prior positions on the
anarchical system. Specifically, constructivists disagree with the realist position that anarchy
inherently leads to competition and war.
 Thus, to constructivists, the anarchical system is whatever the actors want it to be.
 Thus, there is no reason that anarchy brings about war, or peace
 The actors play a major role in how they interpret the system.
 Furthermore, their positions can evolve and shift over time.
 Thus, unlike realists and liberals, constructivists allow for attention regarding the “making” of
the conditions (Ruggie, 1998); actors do not respond to “given” conditions, they create them.
 states often act differently based on the identity, interests, culture, and relationship that the
states may have with one another.
 Even constructivist are good at describing change but they are weak on the material and
institutional circumstances necessary to support the emergence of consensus about new
values and ideas.