IRs, Diplomacy and EFP

Part I
International Relations
Chapter Four
International Political Economy
Mussie Mezgebo G. (Assistant Professor of Law)
Ethiopian Civil Service University
School of Law, 2023/2024
 What is IPE?
• IPE refers to the interplay between states and
markets in global affairs.
• IPE shows to the fact that:
1. The distinction made between ‘states’ and
‘markets’ is largely a false one.
2. There is no such thing as a truly free
market.
3. Economic outcome do not just happen in
the absence of the involvement and
collaboration by states and international
organizations.
 IPE Activities
• Trade and the exchange of goods and services
across borders.
• Regulation/restriction of goods and services.
• Labour and the global workforce.
• Production, investment and “global
community chains.”
• International finance and banking.
• Intellectual property rights.
• Economic development and poverty
alleviation.
 Perspectives of IPE
• There are three kinds of IPE perspectives:
• Realism (Mercantilism).
• Liberalism (Capitalism).
• Structuralism (Marxism).
 Mercantilism
• Theory of economic organization.
• Way to organize a nation’s economy.
• Focus: states.
• Nature of economic relations: conflictual
(zero-sum game).
• Relationship between economics and
politics: politics drives economics.
• Goal: make Mother Country wealthy.
• Dominant approach until 1800s.
Pictorial Description of Mercantilism
 Conducts of Mercantilism
• Establish colonies.
• Control/regulate trade.
• Export raw materials & resources from colony
to Mother Country
• Export finished products from Mother Country
to colony
• Favorable Trade Balance for Mother Country.
 Capitalism
• Focus: individuals, households, enterprises.
• Nature of economic relations: harmonious;
interests reconcilable.
• Relationship between economics and politics:
economics drives politics.
• Became popular in 1800s.
• Economics is a positive-sum game.
• Market competition and profitability.
• Focus on personal responsibility.
 Criticisms of Capitalism
• Uneven distribution of wealth.
• Poor people live in squalor: slums, bad
sanitation, etc.
• Working conditions are miserable.
 Marxism
• Focus: classes, social forces.
• Nature of economic relations: conflictual (zero-
sum game).
• Relationship between economics and politics:
economics drives politics.
• Prominent perspective in the 20th century
(particularly after the Bolshevik Revolution in
1917), but popularity has declined since fall of
communism in USSR/Eastern Europe and
apparent success of market model among
“Asian tigers,” etc.
 Marxism...
• Communism: extreme form of socialism in
which “all people” own the means of
production as the state “withers away” and
produces a classless society.
• Idea: that History is shaped by economic forces
(the way goods are produced and distributed)
• Class struggle has always existed between the
“haves” and the “have nots”
• In industrial times the “haves” are the
bourgeoisie/middle class capitalists; the “have
nots” are the wage earning laborers
 Realizing Communism
• Poverty and desperation drive masses of
workers (proletariat) to:
• Seize control of the government and the
means of production
• Destroy the capitalist system
• Wage a violent revolution.
• Establish a “dictatorship of the proletariat”
 Realizing Communism…
• After the “dictatorship of the proletariat”
occurs, then
• All property and the means of production are
owned by “the people”.
• All goods and services are “shared equally”.
• A “classless society” emerges.
• The “state withers away”.
 Economic Globalization as Policy
• Globalized economy a product of policy decisions at
the domestic and international level.
• Strategic government investment in technology,
communications, shipping.
• Collaboration between government to draw down
barriers to trade (tariffs and restrictions on the
movement of goods across borders).
• The creation of a truly global finance system that
enables the easy flow of money around the world in
banking and investment.
• International regimes on virtually every area of
international economic activity.
 How Global Economy Come to Be?
• At close of WWII major powers converged
upon Bretton Woods, NH to discuss global
economy.
• The Bretton Woods Conference establishes
basic principles (and organizations) for the post-
war economy.
• The starting point for globalized economy
today.
 Core Objectives of the Bretton Woods
Conference
• Draw down tariffs and other barriers to
international trade that had emerged during
Great Depression and WWII.
• Establish stable global currency system to
facilitate international trade.
• Figure out a plan for dealing with extensive
reconstruction that would need to take place in
the aftermath of WWII.
 Steps Taken at Bretton Woods
Conference
Entity Function

International Monetary Oversee international monetary system; ensure there is a

Fund (IMF) stable “reserve currency”

International Bank for Provide assistance rebuilding areas destroyed in WWII,

Reconstruction & fostering development in underdeveloped regions of the
Development (WB) world.

Global Agreement on Agreement to enable “trade liberalization” through

Tariffs and Trade (WTO) cooperation and multilateral negotiation to gradually
draw down tariffs and non-tariff barriers to trade.
 Long-Term Impacts of the Bretton Woods
System
• Europe rebuilt quickly with IBRD support and
Marshall Plan. IBRD morphs into WB with a
mandate for global development and poverty
alleviation.
• IMF provides international currency stability
with US dollar as backing. This system collapses
in 1973, replaced by “floating exchange rate
system.” IMF morphs into “lender of last resort”
for countries in financial crisis.
• GATT has incredible impacts driving down
barriers to global trade. Becomes WTO in 1995.
 Why the WTO and IMF so controversial?
• In negotiations, world’s most wealthy economies
have significantly more power than lesser
developed countries.
• Negotiations tend to be secretive and critics have
accused such organization of ignoring issues like
the environmental, women’s right, worker and
indigenous people’s rights.
• Conditionality of IMF lending can lead to very
sudden and painful cuts in core aspects of domestic
policy, public pensions, education, social service,
healthcare.
• Current challenges?
Analysis: the Emergence of the Global Economy

• Realists: Bretton Woods reflects power politics

pure and simple.
• Liberals: the promise of international
cooperation.
• Constructivists: a setting in which meaning
created, and norms generated.
• Marxists: an arrangement that reflects the
interests of the wealthy powers.
 Reading Assignment
• R-6IRs Part V, Chapter 14 ‘Introduction to Global
Politics’
Richard W. Mansbach & Kirsten L. Taylor
• R-3IRs Chapter 9 ‘Essentials of International
Relations’
Karen Mingst and Ivan M.
• R-9IRs Part 2 Chapter 6 ‘Introduction to
International Relations: Theories and
Approaches’
Robert Jackson & Georg Sørensen