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POLTITICAL SCIENCE ASSIGNMENT - 4
3rd Semester, July – December 2007
“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY”
Project assignment submitted by Nishit Gupta (06D3422)
II Year, B.A. LL.B., On
29th October 2007
25th October 2007
Table Of Contents Introduction...........................................................................................1 Chapter 1 – Post World War Scenario - Economic and Political..................3 Europe Immediately after Post World War...............................................................3 Economic Recovery of Europe.................................................................................5 Chapter 2 –Change in World Economic Framework...................................7 The Relationship Between Politics And Economics: US Hegemonic Stability ..........8 Chapter 3 - Introduction Of Concept of International Political Economy (IPE) – Study of IPE in International Relations........................................10 International Political Economy (IPE).....................................................................10 International relations (IR).....................................................................................12 IR and International Political Economy (IPE)..........................................................13 Chapter 4 – Dominance of Globalization In Political Economies..................9 Conclusions..........................................................................................13 Bibliography........................................................................................14
mainly rebuilding of the wartorn nations and to check the great depression. 4 (2004). 1(3) Manchester J. The beginning of the cold war postponed the functioning of the organizations as the United States stepped into the rebuilding the European nations and the monetary system became based on the Dollar.1 Immediately after the end of the second world war US and European economies faced serious economic challenges. and The Global Legal order . the distances have reduced. is making the domestic economies adapted to the exigencies of the world economy.. Int’l Econ. the world is now like a global village with borderless states. which means blending of literal political views with an emphasis on economic growth. Maniruzzaman.M.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” INTRODUCTION Over last two decades or so the world has developed to a very large extent.2 US became a hegemon. The concept of International political economy (IPE) which is the interaction of economics and politics in world affairs emerged as a result of increase in 1 A. which led to the creation of many international institutions like the International Bank for Reconstruction and Rebuilding (now known as the World Bank). L. with emergence of many strong players. trade and commerce. The rapid growth and development of technology.F.The Challenge Ahead.2006) . 2 JOHN BAYLIS & STEVE SMITH GLOBALIZATION OF WORLD POLITICS 327 (3rd ed. Apparently the sovereign power is shifting to the market forces in the new globalized world giving rise to new standard of rules and regulations. as a result the markets are now becoming free from the national boundaries and are getting global. it helped in rebuilding Europe and Japan which enhanced trade and commerce all over the world. International Political Economy. Neoliberalism. the International Monetary Fund for facilitating stable economic order within the states. Global Governance. It rebuilt Europe by the time US itself started facing economic problem.
IR and Globalization to the reader. Mainly the study of International Political Economy became important after the US failure in Vietnam and decline in US economic prevalence. chapter 3 will illustrate the rise of IPE and the concept of IR. how Europe got destroyed and how later it recovered. The project is entitled to give a comprehensive knowledge of IPE. The research paper has been chapterised accordingly for the ease of the reader to get through.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” global trade. chapter 2 will discuss about the changes in economic framework all around the world. Thirdly. The rise in oil price and many other new economic problems made the study of the International Political Economy more important. Then secondly. Initially chapter 1 describes the post war scene. Finally chapter 4 will explain the phenomenon of Globalization. There are various concepts regarding the study of International Political Economy (IPE) and International Relations (IR) which gives a complete understanding of the concepts. . This concept was earlier neglected but in early 1970s when international relations began to change when the policy makes and the scholars where forced to think about the economic relations.
Europe used to be one the major powers before the Second World War. the scholars and the law-makers assembled at Bretten Woods. when all of the governments tried to protect themselves. It had completely ruined Europe both economically and politically. United States. the International Bank for Reconstruction and Rebuilding (IBRD now known as the World Bank) and finally the General Agreement on Tariff and Trade (GATT) was signed3. they started imposing trade barriers and devaluing their currencies. The Second World War had badly hit Europe. Italy had been liberated from the fascist regime.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” CHAPTER 1 – POST WORLD WAR SCENARIO .ECONOMIC POLITICAL AND A fter the end of the world war the first mottos was the rebuilding of the war torn nations and revive the economies. Accordingly at Bretten Woods itself three major institutions were planned to be brought up i. at 326 .e. After six years of the war completely different image of Europe emerged. The great depression had ruined all the economies. it lost all its powers and dominance after the Second World War. the International Monetary Fund (IMF). and secondly to rebuild the war torn states of Europe. In the year 1944. They met to firstly solve two major problems – firstly to revive from the Great Depression in late 1920s and 1930s. even though it was constantly struggling 3 Id. EUROPE IMMEDIATELY AFTER POST WORLD WAR Till the 19th Century all the big powers were European but the 20th century marked basic shifts in European power in respect to the world.
5 The hopes for rehabilitation and recovery of Europe also declined. In other words United States took a far direct role in the reconstruction of Europe and managing the world-economy. which directed heavy financial aid to Europe for its rehabilitation.4 Economically speaking the restorative powers of the continent was not at all sufficient for recovery of the war–torn Europe. The division clearly divided the communist and the non-communist. This plan replaced the ‘gold standard system’ by the ‘dollar standard system’ which was directly controlled by US itself. at 399 . Basically the war was not the reason for Europe’s decline. The 4 5 NORMAN D. the problem of security of the nation against foreign aggression again became a problem.2007) Id. France was almost in the same situation compared to Italy.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY ” both economically and politically. United States announced the Marshall plan. These developments had seriously decelerated the economic rehabilitation. The destroyed continent. Europe was suffering from massive capital loss and its earning from the capital investments had gone to zero. it just accelerated its decline as it was suffering from many political and economical issues. in 1947. The same old problem again started to recur. There were no shipping as neither well as tourism neither trade nor there imports. Having the fear of rise of communism in Europe which was completely wartorn. the dictates of cold war took over more priority than the rehabilitation of Europe. was divided into two parts the Eastern Europe and the Western Europe. PERKINS INTERNATIONAL RELATIONS 398 (3rd Revised ed.. which largely hit Europe’s earning. The future of Europe was endangered by the influences of the cold war. It was defeated by the Nazi’s and was humiliated by the defeat and the collaborationism. which needed to utilize its resources efficiently for its recovery. It was complete failure of state of Europe. which ran from Stettin on the Baltic to Trieste on the Adriatic. PALMER & HOWARD C.
The Western Europe had made many programmes for its development. The funding and aid from the US helped to rebuild the war-torn Europe. The Western Europe took up its rehabilitation task in a regional basis rather than in a continental basis. Fearless of 6 7 Id. but all the efforts were made with respect to the Marshall Plan. which later made US suffer with losses and Europe itself becoming stronger. Countries turned back to the gold system from the dollar system ECONOMIC RECOVERY OF EUROPE The great powers collaborated and pledged on the Moscow Declaration of 1943.7 The United State’s support to rebuild Europe and Japan also helped Europe to gain pace in its development process. Id. But the major problem related to political. The refusal of the Marshall Plan gave a clear indication that the recovery of Europe was no more could be considered to be in continental scale6. spiritual and moral issues. The US goods and services started loosing it competitiveness and subsequently the dollar system also lost its confidence.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY ” International Monetary Fund and the GATT which started functioning were completely dependent on the US. This US support didn’t last long when the US economy started to dwindle. in the United Nation Charter. Consequently the US economy started to degrade. distribution of goods. At this stage the US started spending more money on education and infrastructural developments programmes in the United States itself that too without raising taxes. The basic problems faced by the Western Europe were inflation. rebuilding of factories and other basic economic problems. for having peace. The Soviet Union refused to take part in the Marshall Plan which was earlier laid down by the US and also didn’t allow the nations in its orbit to participate in it. at 410-411 .
1947). Volume I contains general report and Volume II contains technical reports. .“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY ” Russia’s action.: Government Printing Office. 8 Committee of European Economic Cooperation Report. Department of State Publication. the foreign ministers of the West European nations framed the European Economic Cooperation (EEC).C. As cited in Supra note 4. European Series 28 (Washington D. 1930. The report was the result of the Europe Recovery Programme. at 412. The EEC in 1947 prepared a two volume report8 which gave the four-year programme sketch which was equivalent to what the US achieved in the years 1940 to 1944.
Italy and Canada which were called the ‘group seven’. Japan. In the 70s the policies of reducing the import tariffs were reversed. at 326-329 . for New International Economic Order (NIEO). in 1970. UK. It also imposed a 10% surcharge on its imports. This newprotectionism charged anger among the developing nations who in turn launched a campaign in the United Nations General Assembly (UNGA). The Second World War left all the economies with very high inflation which was very difficult to manage. As the economies faced the challenges of inflation and low growth rate. This weakening of US economy and making this new policy made the Bretten Woods system come to end. Germany. they first had their meeting in the year 1975. Supra note 2. which clearly violated the GATT principles. the US started to change its rules regarding the international monetary system in the year 1971.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY ” CHAPTER 2 –CHANGE IN WORLD ECONOMIC FRAMEWORK W ith the upcoming pressures over the US economy. The agenda of NIEO were trade. These polices were referred as ‘newprotectionism’. major industrialized nations failed to coordinate their exchange rate policies. US made its policy that it will not convert dollars to gold at 35$ per ounce9. France. The IMF collapsed with the break down of the Bretten Woods System. oil crisis started to hit the economies. investment. international monetary and financial system and 9 BAYLIS & SMITH. the nation’s framed new trade polices which mainly aimed to keep out the new competitive goods fro the developing economies. 1970 experienced many economic changes all around the world. collapse of the Bretten Wood System was one. the industrialised nations comprised of the US. Instead the industrialised nations started to frame and discuss monetary issues among themselves. Then in the year 1973. The world-economy faced very low growth rate and which in turn increased the inflation level.
which was made for better enforcement of the trade rules. The IMF collapsed with the break down of Bretten Woods but was later called back with a new role of debt crisis management in 1980s. In the absence of such a hegemon. The World Bank is now a developing agency who provides loans for the developing nations. It enables a uniform liberal rule everywhere in the world. This dominant power not just manipulates economic affairs for its own profit but also helps to create an open world economy which is based on free trade which in turn benefits all competing partners. The work of the institutions changed. The NIEO campaign wasn’t a success as UNGA had no power for implementing any such agendas. There were two major hegemon’s in the past i. the Great Britain in early 20th century and the US after the Second World War.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY ” institutional reforms. US being the largest economic and political player never wanted to take up the responsibility of being the hegemon for creating a liberal world economic . The GATT failed to be at par with the aspirations of the developing nations but the trade negotiations of 1980 created a new body. THE RELATIONSHIP BETWEEN POLITICS AND ECONOMICS: US HEGEMONIC STABILITY A hegemon which means a dominant military and economic power and stability is very important in having full development in the present liberal world economic market. Earlier in 1970s there were government who were sympathetic for the developing nations but later by 1980s the new governments were less sympathetic and hence were least interested in acting on the agenda.e. The US then took over the responsibility of maintaining the liberal world economy. Britain was powerful and was interest in maintaining open world economy in early 20th century but its power declined when other nations gained power especially Germany and United States. the World Trade Organization (WTO). it would be more difficult to sustain on open world economy.
10 10 ROBERT JACKSON & GEORG SORENSEN INTRODUCTION (3rd ed. By late 1950s and 1960s Japan and Western Europe were built and started to catch up very fast when US started to loose its dominance. deficits started to rise. The US in this position gave more access to the world economy.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY ” order. The American politicians thought other than US there was no other post-war nation who could take up the responsibility of being a hegemon. This was the first time in post-war era when US economy became unstable. In 1945 more than sustaining world liberal market. US economy started facing problems of Balance of Payments. maintaining its own economy became US’s main motto.. The US provided military support to the Western Europe for its security against Soviet threats which in turn helped the US to gain trade influence over that region. when US dominance declined and no more played a role of a hegemon. A new era of monetary instability and economic crisis emerged. US started making policies for its own national interest. The Marshall Plan helped the US in reconstruction of Europe and Japan.2007) TO INTERNATIONAL RELATIONS THEORIES AND APPROACHES 196 . US had another motto in helping the reconstruction was to its security against Cold War Struggle with the Soviet Union. Japan and Britain. The willingness among the Americans only came after abrupt end of the Second World War when US became exceptionally strong after the decline of the powerful nations like Europe.
The powerful nation will be 11 See also. There were two main approaches to the study of the IPE – the traditional approach and the modern approach.INTRODUCTION OF CONCEPT OF INTERNATIONAL POLITICAL ECONOMY (IPE) – STUDY OF IPE IN INTERNATIONAL RELATIONS INTERNATIONAL POLITICAL ECONOMY (IPE) In our daily practical life. Supra note 10. Today the modern market is based on political rules without which a market would be a ‘mafia market’ i.e.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” CHAPTER 3 . which is the core of International Political Economy. we need food to survive. . markets based on bribes and thefts. it will shape the policies and the laws of the government. TRADITIONAL APPROACH THE LIBERAL TRADITION – the world economy has the power to be seamless global market place where the market forces will determine the political system i. at 179.e. We buy food from the market after paying a specified amount of price. it is the complex interplay in the international context between politics and economics. Hence International Political Economy is an academic study of social sciences which analyses the international relations in relation to the political economy11. The economics which is the study of wealth and the politics which is the study of power interact in a very complicated way as both of them are inter-related to each other. Hence the market functions in the political rules framework. We cannot buy anything without paying money. between states and markets.
governments and the institutions have the soul power and the driving forces are the power gained from the cooperation. The world economy is believed to be a sphere where inter-state competitions13. BAYLIS & SMITH. MODERN APPROACH THE INSTITUTIONALIST APPROACH – the world economy is a field of inter-state cooperation. THE MARXIST TRADITION – the world economy can be divided into class i. The economy progresses with the increase in competition14. The political economy is only applicable to the rational choices of the bureaucrats. The political economists are not concerned with the hypothesizing of the conditions which are necessary for the international order. THE POLITICAL ECONOMIST APPROACH – the world economy is categorized by the level of competition between the states. the interest groups and the coalitions16. the capitalists and the workers and social groups. THE MERCANTILIST TRADITION – the world economy is a place where everyone tried to increase their power and wealth with respect to other nations. Supra note 2. Marx says the world economy is an arena of capitalist competition.e. The Institutionalist approach is applicable to the interaction of the states with other states in order to define the states foreign policy in economic affairs15. . 12 13 14 15 16 BAYLIS & SMITH.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” decided with the kind of competence it has in respect to other economies12. at 337 Id. Supra note 2. at 333 Id. Id.
IR is the study of such relationship. at 2 Id. Environmental degradation has always been a problem. International terrorism poses a threat to public security and needs to be taken into consideration seriously. This form of state system is the main subject of study of IR. INTERNATIONAL RELATIONS (IR) The world is divided into various political economies and independent states. The states are embedded in international markets which affect the policies and the laws made by their respective governments which are for welfare of their citizen for which there should be a relationship between each other. sovereignty and the theory of changing statehood19.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” THE NEO-GRAMSCIANS APPROACH – the world economy is central structure of knowledge. JACKSON & SORENSEN. environment. according to which people derive their identity.18 There were five main issues regarding the study of the International Relations which were international terrorism. gender. at 276 . Gender issue speaks about the inequalities between the men and 17 18 19 Id. All together these states form an international state system. institutions and ideas of the dominant players within which the competition takes place. Supra note 10. the modernists say that with the increase in the knowledge of the humans and the technological advancement will help in saving the environment for the future generations. This structure according to the Neo-Gramscians gives the identity of the players17. nature and consequence of such relationship.
was the period of decolonialization when many new states came up and old colonial powers gave up the control and new states became politically independent. Those new states were comparatively both economically and politically weak. in Therefore the IPE is about which state gets international economical affairs and the international political system20. since early 1970s the concept of international relations started to change as the law-makers where forced to look into the economic affairs of the their economies. The concept of the International Political Economies was hidden and neglected till 1970s but later on.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” the women in the world. it helps to illustrate hoe the international political and economic system helps to revive the women from their deprived positions. The theory of changing statehood relates to the problems of two types of states i. the International basically Political Economy (IPE). In 1970s these ‘third world’ states started developing and started coming into a stronger position.e. at 50 .e. Sovereignty as an issue speaks about the changes in sovereignty i. the postmodern states and the ‘third world’ states IR AND INTERNATIONAL POLITICAL ECONOMY (IPE) The period after the Second World War. new form of conflict between the weak nations in the south and the new forms of cooperation between the developed nations in the north.e. The power and the predominance of the US power remained unquestioned after 20 Id. which constituted the ‘third world’. This proposed a major debate in study of IR about the international wealth and international poverty – i.
In the late 1960s the economic strains started to wear away US political system and the economic relations started to give problems and restrictions into both domestic and international policies. End of cold war also decreased the dominance of the west and many other geo-strategic articulations.21 The study of international relations showed the growing economic inter-dependence of countries especially on United States. It was believed that the international relations could no longer be taken as just competitions between the states. 21 BAYLIS & SMITH. Since 1970s the study of International Political Economy started to increase and became a crucial topic in the study of international relations. Supra note 2. at 327 . new channels of development and communication gave rise to a new world politics in which International Political Economy (IPE) and the international institutions will play an important role.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” the end of the Second World War till the decline of US power in Vietnam. Globalization and its effects on the nations not only on its economic relations but also on its political relations started defining the future of international relations. Various economic issues.
at 338 . where it enables firms to deal and 22 BAYLIS & SMITH. the technological evolution. The process of this cross border trade has been constantly increasing and is constanltly being facilitated by states. When it’s the study of globalization there are four aspects or processes which are followed in the world economy. investment and the capital. Supra note 2. the evolution of the internet.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” CHAPTER 4 – DOMINANCE OF GLOBALIZATION IN POLITICAL ECONOMIES T The he globalization has always been in debate with the study of International Political Economy. four aspects are the internationalization. INTERNATIONALIZATION – it explains the continous increase in cross border economic transaction which started long back in twentieth century and is now going on increasing in a very fast pace when we see the present situation. the deterritorailization and the liberalization22. The rules are being framed accordingly for more inflow of capital. There has been a drastic increase in the flow of trade. It the effect communication. TECHNOLOGICAL describes REVOLUTION – it basically signifies the technological of new means of electronic change which has taken a big leap since last few decades. satellite communication etc.
.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” function globally without having any place or time restriction. Now the state has become some like a global village. DETERRITORAILIZATION – the impact of the technological revolution speeds up deterritorailization which means it reduces the territorial influence form which people derive a political recognition.
For study of International Political Economy one takes the economic aspect of globalization into account. at 211-215 Id. they say the economies fail to correspond to the challenges on economic globalization23. reducing taxes polices which are made investor friendly and privatisation of state organization. They say that economic globalization is an uneven and hierarchical process where the economic power and interdependence mainly rests with the developed and the industrialized countries24. The Mercantilist position in the globalization is very crucial as it takes both content and the consequences of globalization on the state.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY ” LIBERALIZATION – it illustrates the polices made by the states which enables easy global trade. Globalization is driven by factors like technological advancement and constant competition among economies. Supra note 10. The various approaches of IPE are in coherence with the economic globalization but they disagree with the actual content and the future consequences of globalization for the economies. The Neo-Marxist believes that the globalization is the combination of ‘economic interdependence’ and creation of global economy. like reducing the trade tarrif. Economic aspect is the most important aspect of globalization as it is related to interdependence of political economies. Thus the mercantilists disapprove the fact that the economies are being pressured and loosing the pace. 23 24 JACKSON & SORENSEN. . In modern days the interdependence is rather considered to be ‘intensified interdependence’.
“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY ” Globalization poses a common threat to all the nations both the developed and the developing nations that they need to frame their policies regarding the exchange rate and the interest rate policies very carefully. The weaker nations need to abide with the rules laid down by the major player. Supra note 2. they even have minimum role to play in the world-economy25. at 342 . 25 BAYLIS & SMITH.
“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” CONCLUSIONS The poverty and wealth issues which were raised by IPE are of main importance in the World-politics. This problem highlights the new problems which may arise i. ‘micro and macro – economics’. Unaware of the future consequences US framed policies for its own profit. US economy started to face economic problems like balance of payments. conflict related to development and under-development which is one of the major issue in the study of IPE. which later on hindered US’s progress itself. The IPE also discusses sovereignty statehood. Study of IPE is not only limited to the study of globalization. ‘international finance and banking’ and ‘economic geography’ also becomes a part of the study of IPE. the states might be expected to change significantly. When the national economies and the international economies are integrated in the course of economic globalization. The traditional study of International Relations concerned only with war and peace but now-a-days the problem is conflict between within the small developing states. Second World War left US to be the most dominant player in the world and left Europe completely ruined. Some other aspects such as ‘international business’.. Second World War led to creation of the concept of IPE to an extent. inflation etc.e. the problem of relationship between the states and its ability to make policies relating to the economic globalization. Taking advantage of the situation US took over the responsibility of being hegemon. when US gave up the position of the hegemon and concentrated on its .
By this time Europe and Japan were rebuilt and gave strong competition to US itself.. With globalization being an integral part of nation’s progress concepts like International relation and International Political Economy came into existence. which is the only way where one can expect to develop an intense and well established International Political Economy. PALMER & HOWARD D.2007) . BIBLIOGRAPHY BOOKS • JOHN BAYLIS & STEVE (3 ed. (2007).2006) RD SMITH THE GLOBALIZATION OF WORLD POLITICS. PERKINS. • • • POLTICS AMONG THE NATIONS – THE STRUGGLE FOR POWER AND NORMAN D. PEACE.. DELHI.“POST WAR EVOLUTION OF THE GLOBAL POLITICAL ECONOMY” own economy. INTERNATIONAL RELATIONS. All this led to increase in trade and commerce and consequently globalization came into existence. It's not a single theory rather a combination of insights of many other theories. ROBERT JACKSON & GEORG SORENSEN INTRODUCTION RELATIONS THEORIS AND APPROACHES RD TO INTERNATIONAL (3 ed.