Week 2 Hebron International or Global Political Economy

11.
International (global) political economy

Lui Hebron
INTRODUCTION
State (Politics) and Markets (Economics)
International political economy (IPE) is a field of study that focuses on the complex interde-
pendence between and among the borderless world of global markets and territorial sovereign
states. In its most basic form, IPE centers on a sovereign state’s policies concerning economic
activity in the national and international marketplace. In like manner, IPE is also about main-
taining a stable global economic system by reducing conflict (tempering a state’s international
ambition) via increased cooperation (enhancing a country’s economic engagement and inter-
dependence, and global governance). Since its investigation transcends state borders, IPE’s
inquiry is driven by the belief that a comprehensive analytical study of the global economic
relations of states (that is, the exchange of goods, services, money, people, and ideas across
borders) requires an interactive examination of both the political and economic spheres within
individual states and the international system. At its core, the international political economy
is founded on the understanding that the political arena (state-centered actions and goals) is
intricately intertwined with economic processes (market-driven forces and enterprises) to
bring about desired economic, political, societal, and security outcomes.
By demolishing and then connecting the disciplinary silos between economics and politics,
IPE has in the process eliminated the artificial distinction between the so-called “high politics”
of international relations (war and diplomacy) and the “low politics” of international econom-
ics (commerce and finance). Indeed, the rise of international political economy for explaining
the behavior (cooperative/engaged versus conflictual/detached) of actors in global economic
affairs is at once a recognition of the continuing breakdown of the disciplinary boundaries
between international politics and international economics, as well as the increasing reality
that the most pressing problems confronting this dynamic intersection between states and
markets that characterizes global economic relations are those that can best be understood
from an interdisciplinary and multidimensional orientation. Relevant also is an array of theo-
retical perspectives that straddle, guide, and influence economic processes, political actions,
and targeted outcomes.
Areas of Inquiry
At its most fundamental level, the theoretical research and applied policy analysis of inter-
national political economy center on global commerce and can be categorized along six
interrelated thematic areas: international trade (open/free versus closed/protected), interna-
tional finance (portfolio investment, foreign direct investment, exchange rates, debt, deficits),
international production (transnational corporations, global supply chains, global value
chains), international labor (migration), the environment (pollution, global warming), and
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International (global) political economy 199
global governance regulatory agencies via international intergovernmental institutions—the

General Agreement on Tariffs and Trade (GATT), the World Trade Organization (WTO), the
International Monetary Fund (IMF), the World Bank (WB)—as well as non-governmental
organizations (epistemic communities, social movements, and individuals).
In studying the politics of international economic relationships, IPE scholars aspire to
describe, understand, explain, predict, and perhaps prescribe how political, economic, cultural,
and societal preferences, strategies, opportunities, constraints, and desired outcomes guide and
influence the ultimate policy choices selected and implemented by governments. This inves-
tigative process entails an understanding of both the workings and the processes of markets
and states. By searching for and identifying the presence of a causal relationship between state
authority and market forces on one hand and outcome on the other, researchers can determine
to what extent the chosen policies have brought forth the desired political-economic benefits
(that is, greater fortification of state security, increasing economic growth and development,
raising societal well-being).
Scholars and policy-makers are also particularly interested in examining the delicate
balance of maximizing cooperative opportunities for mutual benefits while minimizing the
threat of conflicts over the distribution of the gains. In the process, they hope to identify the
winners and losers from an economic foreign policy and prescribe a remedy to address for any
shortcomings.
Successes and failures of policy choices are measured via a sundry collection of economic,
statistical, and social data. These would include:
● Growth and share of global trade in goods and services:

● World Trade Organization: Database (https://www.wto.org/english/res_e/statis_e/
trade_datasets_e.htm).
● World Bank: Trade Data (https://data.worldbank.org/topic/trade).
● United Nations: Comtrade Database (https://comtrade.un.org/data/).
● International Trade Center: International trade statistics 2001‒2020 (https://www
.intracen.org/itc/market-info-tools/trade-statistics/).
● Expansion of share of global exports:
● Statista (https://www.statista.com/statistics/264682/worldwide-export-volume-in-the
-trade-since-1950/).
● World Bank (https://wits.worldbank.org/CountryProfile/en/country/by-country/
startyear/LTST/endyear/LTST/tradeFlow/Export/partner/WLD/indicator/XPRT-SHR
-TTL-PRDCT).
● Our World in Data: Trade and Globalization (https://ourworldindata.org/trade-and
-globalization).
● United Nations Conference on Trade and Development (https://unctad.org/press
-material/facts-figures-0).
● Decline of tariffs, non-tariff barriers, and subsidies:
● World Trade Organization (http://tariffdata.wto.org/).
● Increases in capital (foreign direct) investments:
● Organisation for Economic Co-operation and Development Foreign Direct
Investment Statistics: Data, Analysis and Forecasts (https://www.oecd.org/daf/inv/
mne/statistics.htm).
● World Investment Report (https://unctad.org/topic/investment/world-investment
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200 Handbook of research methods in international relations
-report).
● World Bank: Foreign direct investment, net inflows (BoP, current US$) (https://data
.worldbank.org/indicator/BX.KLT.DINV.CD.WD?locations=ET&name_desc=false).
● International Monetary Fund: Data (https://www.imf.org/en/Data).
● Reduction in poverty:
● World Bank: Poverty and Equity Data (https://data.worldbank.org/topic/poverty).
● Our World in Data: Extreme Poverty (https://ourworldindata.org/extreme-poverty).
● Decrease in infant mortality:
● World Bank: Mortality rate, infant (per 1000 live births) (https://data.worldbank.org/
indicator/SP.DYN.IMRT.IN).
● Organisation for Economic Co-operation and Development: Infant Mortality Rates
(https://data.oecd.org/healthstat/infant-mortality-rates.htm).
● Our World in Data: Child and Infant Mortality (https://ourworldindata.org/child
-mortality).
In terms of research design, dependent variables include: market share, economic integration,
de-globalization, regional market regimes, global market regimes, state’s economic develop-
ment and growth, citizens’ well-being, and poverty reduction. Independent variables include:
(1) economic nationalist policies such as neomercantilism (encourages exports and restricts
imports in order to increase employment and income), strategic trade policy (market share
expansion), industrial policy (state-directed development and growth), infant industry (trade
protection of nascent industry), import substitution (replacement of foreign imports with
domestically produced goods), developmental state (extensive state planning and regulation),
command economy (state control of investment, production, prices), Beijing Consensus
(state-led capitalist development and growth), and (2) economic internationalist policies such
as neoliberalism (open markets, competition, deregulation), free trade/laissez-faire (minimal
to no barriers—tariffs, quotas—to trade), supply/demand (interaction between demand and
supply determines prices of goods and services), Washington Consensus (economic growth
via market-led development strategies).
Road Map
The primary task of this chapter is to provide students with the basic tools that they will need to
develop a comprehensive understanding of the international political economy. The remainder
of this chapter is organized as follows: “State of the Field” takes a brief historical overview of
the evolution of the international political economy. “Theoretical Orientation” examines the
two major contending schools of thought in IPE: economic nationalism and economic interna-
tionalism. “Global Political Economy and Globalization” discusses the impact of globalization
as well as the expansion of actors in the global political economic system. The chapter con-
cludes with “Future Areas of Research,” namely global governance and social welfare.
STATE OF THE FIELD
As an outgrowth and eventual subdiscipline of international relations, international political

economy has historically, traditionally, and naturally been much more strongly connected
to political science than economics as an area of study. As the “political economy of global
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affairs,” the reasons for this bond are threefold: (1) the state’s primacy in world affairs; (2) the
state’s coercive powers; and (3) the state’s role as an economic actor.
First, in the modern state (city, nation, imperial) system, these sovereign political entities
remain the primary and final authority regarding international market relations; that is, the ulti-
mate decision-makers and arbiters of policies chosen and implemented. The state is afforded
this exalted position due to the continuing fact that it remains as the most efficient basic bloc
of political organization. The behavior of individual states in terms of international economics,
therefore, is a central focus of inquiry. Gilpin’s (2001: 18) observation that “national govern-
ments still make the primary decisions regarding economic matters; they continue to set the
rules within which other actors’ function, and they use their considerable power to influence
economic outcomes,” still holds true today. The anarchical nature of the global system further
dictates that the economic security concerns and interests of the dominant economic powers
will have a large voice and role in determining the structure of the global economy.
A case in point is China. Accompanying the rise of the People’s Republic as a global
economic power is its insistence on a larger voice and role in the global economy. When its
demands were met with resistance from the Group of Eight (G-8)—the highly industrialized
states of Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United
States—however, it decided to establish alternative intergovernmental institutions (the
Shanghai Cooperation Organization, the Belt and Road Initiative, and the Asian Infrastructure
Investment Bank) to govern international economic cooperation that are reflective of its
stature as the fastest-growing and most dynamic economy in the world, and perhaps just as
importantly are more friendly to its aspirations and goals. And while China’s growing political
power is clearly having a profound effect on the global economy, it must be remembered that
its current status as one of the leading actors in international affairs is founded, driven, and
financed by having the second-largest economy in the world at its disposal as a policy tool.
Second, a solid and reliable political environment is required for an economy to flourish and
prosper. For while the market is a potent force in its own right, Lim (2014: 29) correctly notes
that an “economy cannot exist, much less operate, without some kind of political order.” The
responsibility of fulfilling this requirement for order and stability falls on the national govern-
ment as part of its function to provide for the economic well-being and security of its citizens
and the country. To that end, governments are uniquely endowed with monopolistic coercive
powers that allow them to legitimately use physical force within a given territory so that it is
able to: (1) maintain order by establishing and enacting a well-functioning legal system; (2)
monitor (and if need be, regulate) the economy via providing a stable currency, promoting
competition, and encouraging innovation; and (3) deliver public goods and services: building
infrastructure, distributing healthcare, and furnishing education. These laws, regulations,
and services provided by the government, in turn, give economic actors peace of mind; for
example, that private property rights will be enforced, or competition in the marketplace will
be fair, or the country’s transportation network will be maintained.
It should be further noted that the government’s ability to fulfill its roles and obligations is
financed through its other unique power, that of taxation. History has repeatedly shown that
“[w]ithout stable political foundations, markets collapse” (Doremus et al. 1998: 3). This state-
ment is never more true than with the tragic plight of refugees fleeing from their homelands
in Africa, the Middle East, Asia, and Latin America. The main reason driving this massive,
forced migration is due to the political unrest and instability in these countries resulting in the
market failure of their economy. As a consequence, the vast majority of these people seeking
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asylum in Europe and the United States do so not to escape from political persecution but to
flee from poverty and to improve their economic welfare.
Third, as a rational, goal-oriented, utility-maximizing economic actor, the government in
effect fulfills the dual role of policy-making as well as managing the national economy. As
the principal regulators and legitimate political authorities over their economy, states alone
ultimately determine the policies that are enacted; for example, they decide whether or not
to engage in the global economy by opening or closing their national market. Whether the
purpose of economic activity is to maximize national security, increase economic growth and
development, or increase social welfare, a crucial function performed by the government is to
engage in the discussion, debate, and determination of the values, interests, goals, objectives,
and desired outcomes. This role entails that the government takes into account the preferences
and desires of the other economic actors; that is, businesses, labor unions, interest groups, and
so on. In this conception, the policy represents a condensation and amalgamation (compro-
mise) of the wants and needs among the various power players (governing politico-economic
elites, powerful special interest groups, influential individuals) in a state. As such, the “func-
tions and benefits” of an economy are defined by the “political interests of society” (Higgott
2002). The economic feasibility constraints under which policy-makers operate also helps to
determine and explain why some policies are adopted and not others.
In terms of governance of the economy, ideally the policies chosen will result in outcomes
that are both fair and mutually beneficial to all parties involved. Japan, the “East Asian Tigers”
or newly industrialized countries (NICs) of Hong Kong, South Korea, Taiwan, and Singapore
are states that were able to effectively exploit the opportunities of the global economy to
increase a country’s well-being while minimizing the detrimental effects. Based on the success
of these NICs other industrializing states have tried to emulate and follow suit such as the
BRICS countries (Brazil, Russia, India, China, and South Africa).
THEORETICAL ORIENTATION
While there is currently no definitive perspective or theory of international political economy,

there are various, fairly diverse, well-developed, coherent, and insightful foundational schools
of thought, theoretical approaches, and “political-economic strategies” for understanding and
studying IPE that span the political spectrum and incorporate economic factors around which
the field as a whole revolves. Moreover, these foundational orientations and theoretical vari-
ants can all be broadly categorized as being in either the economic nationalist or the economic
internationalist camp. As an analytical instrument and placed within a theoretical context, IPE
(at its core and in its current permutation) is a dialogue (debate) between economic nationalism
(neomercantilists) and economic internationalism (neoliberalists) over policy on how best to
balance the relationship between state sovereignty and market forces that enhances a country’s
security (power and wealth). This section provides an overview of how these two schools
have conceptualized important concepts, relationships, and causal understandings; that is, the
identification of each perspective’s main goals and the means to achieve them.
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Economic Nationalism
Economic nationalism (mercantilism, neomercantilism) is the oldest approach to the study

of IPE, and historically acknowledged as the dominant school of economic thought from the
15th century onward. If historians are to be believed, however, mercantilism’s origins may go
back even earlier. Economic historians have postulated that not only did the mythical story
of the Trojan War (1194‒1184 bc) actually take place, but that the outbreak of the legendary
militarized interstate dispute between Troy and the Greek City-States was not over the return
of Helen to Sparta, but was fought for economic reasons: namely, control over trade routes
in the Aegean Sea (Maury 1917). Mercantilism’s origin can also arguably be traced back to
the second Peloponnesian War (431‒403 bc). A central bone of contention that ultimately
led to the breakdown of the uneasy peace between Athens and Sparta was the issuance of the
Megarian Decree by the Athenian government, imposing stringent trade sanctions on Megara,
an ally of Sparta (Thucydides 431 bc). A key takeaway from the war is that a vital source of
the military strength of Athens was the wealth it derived from its de facto empire, the Delian
League, in the form of tribute. Modern history witnessed the Age of Discovery in the 15th and
16th centuries in which European powers sought to conquer Africa, Asia, and the Americas for
“God, Glory, and Gold,” thereby formally articulating and ushering in the economic ideology
and strategic policy of mercantilism. Hamilton (1791) was a strong proponent of government
intervention (regulation and planning) and protecting infant industries to allow new firms the
time to “grow and mature” until they are internationally competitive. List (1841) advocated for
the imposition of trade barriers, support for local producers, and the development of “human
capital.” And when those colonies regained their independence in the 20th century, a central
component of their growth and development strategy was the policies of trade protection and
strategic industrial policy (Lauridsen 2010; Reich 1982). In the current, contemporary period,
the developmental state model (Woo-Cummings 1999), strategic trade policy (Krugman
1986), and the Beijing Consensus (Ramo 2004) are the latest manifestations of economic
nationalist policies.
Economic nationalists are the counterpart to political realists in that both espouse to the
world view that the anarchic, self-help structure of the international system dictates that
a major purpose of a government’s economic activity is to maximize its national power in
order to enhance the state’s security (Waltz 1979). Moreover, the very competitive, zero-sum
nature of international economic relations means that the potential for conflict is always
a possibility, and states must therefore rely on their political and economic power to protect
their economy; for example, to minimize the damage to their industry, maintain economic
self-sufficiency, and exploit important spillover effects onto other parts of the economy or
military applications.
But in a departure from political realists, economic nationalists do not differentiate between
the geopolitics of international relations and the geoeconomics of economic affairs between
and among nation-states. Rather, the pursuit of power and the quest for wealth are seen as being
complementary, with economic forces increasingly playing a larger role in political decisions,
including the means to greater security. For economic nationalists, a state’s economic strength
and industrial competitiveness are integral components of its security capabilities and ability
to maintain its sovereignty. In like manner, a state’s military power is vital to the acquisition,
accumulation, and preservation of wealth. Since economic power is vital to political sover-
eignty, and hence a country’s national security, the state’s dominance over economic policy
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and governmental intervention in the economy is warranted and justified. Luttwak (1990)
described this evolving state of relations, in which the forces of war/diplomacy and econom-
ics/finance are both taken into consideration in policy-making, as using the “grammar of
commerce” but guided by the “logic of conflict.” Hence, for economic nationalists, the benefit
of commerce is in the production of goods and services, for it contributes to the augmentation
of wealth—translated as power, influence, self-sufficiency, and security—for the state.
Economic nationalism asserts that the most important task and central function of govern-
ment is to provide for the physical (ensure the survival of the state) and economic (welfare and
well-being) security of the population to retain the loyalty of its citizens (Mansfield 1994). No
other domestic actor can relieve the state of this responsibility. To realize this goal, national
governments are expected to take a hands-on, heavily involved role in the management of
a country’s economic affairs. In addition to regulating the economy and enforcing rules that
other economic actors must follow to ensure fair competition domestically and internationally,
the state also has an active, sophisticated, comprehensive, and interventionist role in economic
policy-making and implementation to ensure that economic forces are favorable and advanta-
geous to its interests, and thereby achieve its objectives from its international economic activi-
ties. In an inherently unequal, power-driven, self-help world order, a government’s single most
important responsibility and obligation to its citizens is the promotion and protection of the
country’s interests against actual and potential external threats to the state’s political independ-
ence and economic autonomy. Hence, in a carry-over from international relations regarding
the continuous competition for power between and among states, a central focal point of this
state-centric system examines how governments can best exploit the global economy through
selective governmental interventions to increase the country’s accumulation of wealth, power,
and influence. In short, since markets cannot exist outside the geopolitical context, economic
policy and activity are driven by political goals.
Economic nationalists’ economic policies are ultimately chosen for state power-building
purposes and desired ends; namely, sustained economic development and growth that leads
to increased security. For economic nationalists, states must pursue strategic national devel-
opment economic policies designed to maximize a country’s wealth. An inherent component
of this orientation is the belief that comparative advantage is not static and solely determined
by a country’s natural endowments, but dynamic, and can be created by supporting targeted
industrial sectors. In this regard, economic policy-makers are charged with recognizing and
nurturing those strategic sectors (national champions) which have been deemed vital to
a state’s long-term economic development and growth.
From an economic standpoint, well-designed policies are those that can best contribute to
the country’s industrialization. This manipulation of economic activity can range from closed
to open markets, depending on what is best for the state. For those industries in which a state
has a comparative advantage, a free trade policy is favored. Conversely, for those industries
in which a state is not yet competitive in the global marketplace, then the protectionist, infant
industry policy would be implemented. In this instance, “[g]lobal institutions have no business
telling these countries to open up” (Rodrik 2018: 28). In short, a state’s commitment to an open
(cooperative) or closed (disengaged) trading system is based on its stage of development, as
well as its policy-makers’ understanding that a free or protectionist market policy benefits the
national interest.
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Economic Internationalism
Economic internationalism (classical liberalism, neoliberalism) initially originated as a cri-

tique and rebuke to mercantilism, and ultimately evolved into a formidable countervailing
school of thought. Indeed, since the 1990s, neoliberalism has been the dominant economic
model throughout the world. Its origin can be traced back to the Enlightenment period of
18th-century Europe. A core component of this Age of Reason lies in its understanding of
the universe as being governed by “natural laws” such as market forces for exchange, the
law of supply and demand in determining price, and comparative advantage in stimulating
international trade. Theorists believe that a market (domestic and international) spontaneously
emerges in response to fulfilling human wants and needs, and develops according to its own
internal logical rule to bring about the maximization of economic benefits (Smith 1776;
Ricardo 1817). As is evident from the market-driven foundation of these “laws,” this orienta-
tion clearly has its roots in the economic sphere.
Economic internationalists’ economic-based foundation examines global economic activity
between and among states basically as exchanges between economic parties with different
endowments. These scholars generally do not address the implications of these interac-
tions regarding issues pertaining to national defense and security. This market mechanism
orientation views international political economy largely as a voluntary, free-functioning,
self-correcting, mutually beneficial system of production and exchange, that operates at
maximum efficiency through self-regulation, and results in positive-sum outcomes. This win‒
win situation is achieved through greater worldwide cooperation and interdependency based
on the specialization of production (division of labor). So rather than focusing on and fighting
over the portion size of the existing “economic pie,” economic internationalists contend that
a better strategy would be to increase the size of the pie through greater productivity.
Moreover, competition is understood to be a positive force for maximizing economic
efficiency. First, competition forces firms to continually improve their goods or services,
either by producing a better product via innovation or by lowering costs (labor, material, trans-
portation, energy, core competency). Second, competition eliminates those non-competitive
firms through acquisitions or mergers. Third, the resources of those non-competitive firms
are redirected to other ventures where they are reassigned to where they can best be used, and
thereby maximize national and global welfare. Lastly, for economic liberals, the benefit of
commerce is in the consumption of goods and services, which in turn will temper the outbreak
of international disputes and wars, because economic and military conflicts disrupt manufac-
turing and trade flows.
Economic internationalism takes a laissez-faire approach to the management of a country’s
economic affairs, based on the theory of the “invisible hand.” This perspective is manifested
on the notion that governmental activity in the economy should be limited to promoting open
markets; that is, championing the non-interference with the market-based principles and
mechanism of unrestricted free trade. The state, however, is also expected to provide a stable
marketplace, to prevent a crisis by monitoring economic activities. Based on these two criteria,
a government’s involvement is narrowly defined to that of regulating the economy through
enforcing rules that other economic actors must follow to ensure a level, fair, competitive
playing field domestically and internationally. It should be noted, however, that economic
internationalists periodically review and modify the appropriate role of the state in the
economy. Specifically, during times of an economic downturn, direct government intervention
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in markets is necessary to correct for imperfections, encourage economic growth and make the
economy function better: Keynesian economics (Keynes 1936).
Economic internationalists maintain that the purpose of economic activity is not to increase
state power, but rather to maximize the efficient utilization of the factors of production so as to
produce the best, mutually beneficial results for the greatest number of people. This focus on
the maximization of economic efficiency has at least two policy implications.
First, the voluntary exchanges (good, capital, labor) of the free market mechanism system
have proven it to be the most effective, resilient, and adaptable means of ensuring the prosper-
ity and security of the state and society. In this regard, government intervention is restricted
to ensuring that the self-regulatory capacity of the market is fair and provides equal access
opportunities to all participants, and if necessary to restore competition.
Second, every country already has a comparative advantage in one industry or another, as
determined by its natural factor endowments. Hence, for economic internationalists, there is
no need for the state to engage in strategic economic policy via government championing of
industrial sectors and corporations. The market will decide which industries and firms are
successful, based on consumption. Those firms and industries that produce in-demand goods
and services resulting from innovation, quality, price, and/or consumer taste, will capture
greater market share and be competitive domestically and internationally. In this positive-sum,
win‒win system, however, the “losers” are free to pivot and redirect their assets (financial,
factory, labor) into other revenue-generating enterprises. By eliminating inefficient producers
and unwanted products, competition allocates resources where they will bring about the great-
est return. Not surprisingly, countries that have the most to gain from a more open economic
system are the strongest advocates and defenders of free trade.
GLOBAL POLITICAL ECONOMY AND GLOBALIZATION
In recent years, the term “global political economy” has been used interchangeably with
“international political economy” to more accurately describe the increase in complexity of
the globalizing economy and global governance. Tooze (1997: 221) perhaps best summed up
this development when he observed: “The structure of global political economy contains the
‘old’ international economy within a new framework which is based in the territory of states,
but not necessarily ‘national’ in terms of purpose, organization, and benefit.” Hence, the
adaption of the more expansive and inclusive “global” term is: (1) a reflection of the profound
effect that globalization is having on the political economy of global affairs; as well as (2) an
acknowledgment of the globalizing process’s continuing evolution, wider scope, and greater
intricacy of political economy on the world stage that now includes many different kinds of
actors beyond just that of states. Let us examine each of these developments in turn.
Globalization
The implications of globalization on the dynamics of the global political economy are
immense. In the current, contemporary era, globalization has become the defining characteris-
tic and driving force of domestic and international economic affairs. And given that scarcely
any state, corporation, organization, or individual has not in one way or another been impacted
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by globalization, it should come as no surprise that most of the research agenda about global
political economy revolves around its power and influence (Hebron and Stack 2017).
In economic discourse, globalization refers to the progressive “networking” of national
market economies into a single, tightly interconnected global political economy (via advances
in telecommunications and information technology, and falling transportation costs) whose
accumulation and distribution of resources are increasingly governed by neoliberal principles:
emphasizing the role of the market while minimizing governmental involvement in economic
matters (Thomas and Reader 2001; Henderson 1999; Martin and Schumann 1998). This net-
working occurs through the transnational decentralization of production factors and services
by which the markets of different countries are integrated into the global economy, enabling
the farther, faster, cheaper, and more efficient flow of goods, services, capital, information,
and people across national borders than ever before (Katzenstein et al. 1998: 669). This process
is fueled by augmenting methods and systems of international transportation, by conceiving
revolutionary and innovative information technologies and ideas, and by onrushing economic
and ecological forces that demand integration and uniformity, as well as by governmental
policies of deregulation and liberalization (Kurdle 1999; Rao 1998; Bryan and Farrell 1996).
In the area of trade, globalization can be seen in the growing openness of markets for goods
and services, and an ever-increasing dependence on international commerce as a source of
income and domestic prosperity. According to Mittelman (2000: 21), “Today all countries
trade internationally and, with the odd exception like North Korea, they trade significant pro-
portions of their national income.” Indeed, “[t]rade has now reached unprecedented level, both
absolutely and proportionate to world output.” The Economist (1997) reported a sixteenfold
increase in the value of world trade between 1950 and 1995, and the doubling of the ratio of
world exports to world gross domestic product over the same period. Ellwood (2003) projects
that the continued expansion of trade will lead to an increase in global income to $500 billion
early in the 21st century.
In the realm of finance, globalization is manifested in a rising level of capital flow and in
an unprecedented integration of international financial markets; that is, ever-higher volumes
of foreign (private) lending and investment across national frontiers, and an increase in the
number of joint ventures. According to Schaeffer (2003: 2), “The growth and spread of
investment, capital, money, and financial services are advantageous developments caused by
globalization.” Along with the flow of information (electronic commerce), these networked
national markets enjoy an openness and “freedom” that allow them to operate beyond national
governmental oversight. Giddens (2003: 9) cautions:
In the new global electronic economy, fund managers, banks, corporations, as well as millions of indi-
vidual investors, can transfer vast amounts of capital from one side of the world to another at the click
of a mouse. As they do so, they can destabilize what might have seemed rock-solid economies—as
happened in the events in Asia.
The most notable feature of this process involves the changing nature of global production: the
increasing consolidation of global production and trade under the direction and supervision
of a few hundred transnational corporations and a handful of intergovernmental institutions
such as the World Trade Organization, the International Monetary Fund, and the World Bank
(Abraham 1996; Barber 1998; Rothkopf 1997). Hence, many of the traditional instruments of
economic policy (that is, exchange rates, interest rates, and research and development financ-
ing) are increasingly no longer under the jurisdiction of national governments.
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Economic globalization, therefore, has many facets: from the explosion in worldwide
commerce, to the surging flows of transnational capital, the continued dismantling of national
markets (via the proliferation of new high-technology innovation in conjunction with plum-
meting communication and transportation costs), as well as the march toward the establish-
ment of a truly global marketplace. Despite these mainly positive effects, globalization gives
rise to profound misgivings about the consequences of these processes, bringing out more fully
globalized economies. The very processes of globalization create anxieties about where those
processes may lead. The shift from national or state-centered economic priorities brings with
it the specter of a loss of control. Thus, embedded in the concepts and processes of economic
globalization is a normative perspective, indeed a fear, that the process will forever alter the
structure and dynamics of international political–economic relations. The power of these fears,
real or imagined, understated or exaggerated, forms part and parcel of how globalization is
defined and how it is viewed as a process of economic change.
Global Actors
The rise in power and influence of societal, non-state, and transnational actors in the conver-
sation of governance beyond the activities, concerns, and control of states is the new reality
of a much larger, more complex, greatly integrated global political economy brought about by
globalization. Though states continue to be the dominant actors and the interactions between
them remain the central focal point of the global economic affairs theater, the cast of charac-
ters wielding power and influence in policy-making now encompasses a plethora of non-state
“co-stars.” Hence, in the currently globalizing world order, intergovernmental organizations
(IGOs), transnational corporations (TNCs), non-governmental organizations (NGOs), inter-
national institutions, episodic communities, social movements and networks, and individuals,
have all shown themselves to have carved out key and significant roles in the global political
economy vis-à-vis the ability of states to maintain freedom of policy. The inclusion of these
economic forces and entities on the stage provides for a more in-depth, comprehensive, and
enriching inquiry and understanding of the new global political economy.
With the conclusion of the Cold War, and with it the end of the artificial division of the
world economy into separate and competing East‒West economic blocs, the political economy
of globalization has ushered in a new era of greater market openness, integration, and inter-
dependence. Since 1990 the movement in goods and services (trade), capital and investments
(finance), and labor (migration) have truly become global.
In terms of production, globalization has accelerated transnational corporations’ ability to
globalize their supply chains and value chains to areas that will result in the largest rate of
return on their investment. TNCs generally set up factories where governmental regulations
on labor (salary and safety) and the environment (pollution, global warming) are lowest and
weakest. In these “race to the bottom” instances, it is the TNC and not the host government
dictating the terms of the agreement. Globalization has also increased the power and voice of
epistemic communities via boycotts. Nike (in 1997) and Apple (in 2021) have been the targets
of anti-sweatshop campaigns to change their business practices over worker abuses (long
shifts, unhealthy working conditions, few labor rights) in their factories in Vietnam and China,
respectively. In the case of Nike, it raised salaries, improved oversight of labor practices, and
improved the air quality in its factories as a result of the global grassroots social movements
exposing its less than stellar labor record. Apple’s situation is currently fluid.
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In terms of finance, financial institutions and individuals have had a profound effect on
the stability of the financial markets by their actions. The 2008 global financial crisis was
triggered by investment banks engaged in hedge funds with derivatives. The resulting tight-
ening of credit and decline of international trade led to the stock market crash and the Great
Recession. At the individual level, George Soros became infamous for triggering currency
crises with his short-selling investment strategy. In 1992, his speculative trading of the British
pound sterling led to the Black Wednesday currency crisis. The collapse of the pound forced
the United Kingdom (UK) to withdraw from the European Union exchange rate mechanism
(ERM) (Ferguson and Schlefer 2009).
In terms of the environment, several environmentalists have emerged to become “rock
stars” as a leading voice on environmental issues. Two examples follow.
Dr Bjorn Lomborg is a Danish author and president of Copenhagen Consensus Center,
a think tank. He has been named one of TIME’s 100 most influential people in the world, one
of Foreign Policy’s top 100 global thinkers, one of Esquire magazine’s 75 most influential
people of the 21st century, and one of the UK Guardian’s 50 people who could save the
planet. Lomborg is a frequent commentator in print and broadcast media, for the New York
Times, Wall Street Journal, The Guardian, CNN, FOX, and the BBC; and his monthly column
is published in multiple languages by dozens of influential newspapers across all continents.
Greta Thunberg is a Swedish teenager climate and environmental activist. She has become
a global leader for environmental issues and led protests against global warming. She has
addressed world leaders in the United Nations. As a global ambassador for the environmental
movement she is considered a youth icon, with over 8 million Instagram followers.
As for institutions: the World Wide Fund for Nature / World Wildlife Fund (WWF) works
to preserve nature and its creatures, and has 5 million members internationally. Greenpeace
has helped to stop whaling, nuclear testing, as well as leading efforts to protect Antarctica; and
has over 2.5 million members worldwide.
In terms of labor, the surge in illegal migration—from the Global South (Africa, the
Middle East, Asia, Latin America) to the Global North (Europe, the United States)—is
largely being driven and controlled by the proliferation of human trafficking cartels. In many
cases, these illegal immigrants become indentured servants, child laborers, sex workers, or
condemned to low-paying farm or factory jobs. In response to these inhuman enterprises,
anti-trafficking non-governmental organizations have been established to combat this crisis.
The Global Alliance Against Trafficking in Women (GAATW) is comprised of more than
80 non-governmental organizations from around the world including Africa, Asia, Europe,
Latin America and the Caribbean, and North America, and works to alleviate situations where
slavery-like conditions and practices exist (https://gaatw.org/). Stop the Traffik is an organ-
ization that calls itself a pioneer in fighting human trafficking through education. It has also
headed initiatives such as creating the Stop App, which lets users report human trafficking
(https://www.stopthetraffik.org/who-we-are/about-us/). The Sex Workers Project by the
Urban Justice Center works to support sex workers and victims of human trafficking. It mainly
does this by providing policy-makers with the necessary information about sex work to help
them make informed decisions when it comes to legislation (https://swp.urbanjustice.org/
about/). The United Nations Children’s Fund (UNICEF) works to combat child trafficking
by helping adults to attain a livable wage, to encourage children to stay in school instead of
providing for their families, and also lobbies for stronger child protection laws (https://www
.unicefusa.org/mission/protect/trafficking).
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Sobel (2016: 5) observed: “This increasing globalization of human interactions [economic,

political, social, and cultural] across national boundaries presents national policymakers,
public and private, with tremendous opportunities to enhance the well-being of their societies
and communities, but it also creates pitfalls and challenges that, if poorly addressed, could
damage and undermine that well-being.” Globalization’s hegemonic power and influence
on the world economy is such that two key areas of consideration revolve around the role of
government (active or passive) in the economic affairs of a state, and its level of engagement
(integration and interdependence) in the global economy. In like manner, the globalizing
process’s progressively complex and ever-expanding intricate relationships between states,
non-state actors, and market forces behooves us to enlarge our analytical lenses beyond the
increasingly apparent limited scope of established, orthodox, state-centered international
political economy, by taking into consideration the goals, demands, and concerns of regu-
latory agencies, transnational corporations, non-governmental organizations, international
institutions, episodic communities, social movements and networks, and individuals. The
implications and effects of these two developments must be acknowledged and implemented
in our analysis as part of our endeavor to paint a more textured and nuanced portrait of the
global political economy.
CONCLUSION AND FUTURE AREAS OF RESEARCH
In addition to the continued examination of the traditional areas of study (for example, trade,
finance, labor, and so on), two topic areas within the global political-economic discipline have
taken center stage: global economic governance and social welfare (inequality). As the global
economic system enters its 30th year under globalization, states and the system are at once
becoming more integrated and fragmented; “fragmegration” is the term coined by Rosenau
(2003) to describe this phenomenon whereby localization and globalization are occurring
simultaneously.
Concerning governance, states are increasingly under pressure to provide for the political
stability of the global economic system, and thereby maintain the overall worldwide benefits
of open markets and free trade while minimizing the detrimental effects of the globalizing
process at the local level. As Veseth (2011) assessed: “The nation-state, it is argued, is increas-
ingly too small to deal effectively with global issues, and too large and removed to deal with
local ones. The state exists in the ‘missing middle’ of the emerging global/local geometry of
human society.” Complicating the situation, the current institutions (WTO, IMF, WB) and
instruments (sanctions and embargoes) charged with overseeing the functioning structures of
global governance are either being challenged by rising states (for example, BRICS) and the
establishment of regional blocs (for example, China’s Silk Road Development Area; Russia’s
Eurasian Economic Union; Mexico, Colombia, Chile, and Peru—the Pacific Alliance) or are
not as effective previously (that is, hurting friends and allies more than adversaries).
When evaluating government policy and international agreements, the discussion has
increasingly focused more and more on the effects of the interconnected/interdependent world
economy on social welfare: To what extent has globalization delivered on the “promise”
to fully exploit mutual gains, fairly distribute those gains, and reduce the gap between the
“haves” and “have-nots”? Thus far, the global economic system has increasingly revealed
itself to be uneven and unequal regarding the distribution of benefits.
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As a result of these developments, calls for de-globalization are becoming louder and
more frequent. Whether the global economic system evolves into globalization 2.0/3.0, or
pivots back to a multipolar order, will depend to a large extent on the ability of scholars and
policy-makers to successfully address the centuries-old question of finding the ideal balance
(solution) in the complex, complicated, and contested relationship between political author-
ity (global cooperation) and market forces (economic prosperity for all). Until a successful
response to this dilemma is found, whatever system is currently in place will be fleeting and
transitory at best, for it will contain within it the seeds (uneven distribution of benefits) of its
own destruction.
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Week 2 Hebron International or Global Political Economy

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11.

International (global) political economy

State (Politics) and Markets (Economics)

Lui Hebron - 9781839101014

global governance regulatory agencies via international intergovernmental institutions—the

● Growth and share of global trade in goods and services:

Lui Hebron - 9781839101014

STATE OF THE FIELD

As an outgrowth and eventual subdiscipline of international relations, international political

Lui Hebron - 9781839101014

Lui Hebron - 9781839101014

While there is currently no definitive perspective or theory of international political economy,

Lui Hebron - 9781839101014

Economic nationalism (mercantilism, neomercantilism) is the oldest approach to the study

Lui Hebron - 9781839101014

Lui Hebron - 9781839101014

Economic internationalism (classical liberalism, neoliberalism) initially originated as a cri-

Lui Hebron - 9781839101014

GLOBAL POLITICAL ECONOMY AND GLOBALIZATION

Lui Hebron - 9781839101014

Lui Hebron - 9781839101014

Lui Hebron - 9781839101014

Lui Hebron - 9781839101014

Sobel (2016: 5) observed: “This increasing globalization of human interactions [economic,

CONCLUSION AND FUTURE AREAS OF RESEARCH

Lui Hebron - 9781839101014

Lui Hebron - 9781839101014

Lui Hebron - 9781839101014

Lui Hebron - 9781839101014

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