International Political Economy

International Political EconomyDeepak Prakash Bhatt, PhDPolitics refers to achieving and exercising positions ofgovernance - organized control over a human communityPolitics is the practice and theory of influencing other people on a civic or individual level Politics is exercised on a wide range of social levelsClans andtribes of traditional societiesLocal governments and up tosovereign states, tointernational levelMethodsPromoting own political views among peopleNegotiation with other political entitiesMakinglawsExercisingforcePoliticsAneconomyoreconomic system consists of theproduction,distribution ortrade, andconsumption of limitedgoods andservices by different agents in a given geographical locationThe economic agents can be individuals, businesses, organizations, or governmentsTransactions occur in a certaincurrency EconomyA given economy is the result of a set of processes that involves its- Culture ValuesEducation Technological evolution, history, social organization, political structure and legal systemsGeography, natural resource endowment, and ecologyThese factors give context, content, and set the conditions and parameters in which an economy functionsSome cultures create more productive economies and function better than others, creating higher value, or GDP

.The original term used for studying production, buying, and selling, and their relations with law,custom, and government, as well as with thedistribution ofnational income andwealthPolitical economyoriginated inmoral philosophy Developed in the 18th century as the study of the economies of statesIntroduced in France in 1615 with the well-known book byAntoine de MontchrtieTrait de leconomie politiqueThe world's first professorship was established in 1754 at theUniversity of Naples, ItalyIn the late 19th century, the term economicscame to replacepolitical economy Political EconomyPolitical Economy refer to very different things- Chicago schoolMarxian analysisVirginia schoolAdvice given by economists to the governmentPublic on generaleconomic policy or on specific proposalA rapidly growing mainstream literature from the 1970s has expanded beyond the model of economic policy in which planners maximize utility of a representative individual toward examining how political forces affect the choice ofeconomic policiesIt is available as an area of study in colleges and universities

TodayIPE is an interdisciplinary field comprising approaches to the actions of various actorsRapidly developing social science field of study that attempts to understand international and global problems using an eclectic interdisciplinary array of analytical tools and theoretical perspectivesThe growing prominence of IPE as a field of study is in part a result of the continuing breakdown of disciplinary boundaries between economics and politics in particular and among the social sciences generallyIncreasingly, the most pressing and interesting problems are those that can best be understood from a multidisciplinary, interdisciplinary, or transdisciplinary point of view

International Political EconomyAnthropologists, sociologists, and geographers usepolitical economyin referring to the regimes of politics or economic valuesThis emerge primarily at the level of states or regional governance, but also within smaller social groups and social network-Micro finance in Bangladesh Because these regimes influence and are influenced by the organization of both social and economic capitalThe analysis of dimensions lacking a standard economic value e.g., the political economy of language, of gender, or of religion.Global political economy (GPE), is an academic discipline within the social sciences that analyzes IR in combination with political economyIPE scholars are at the center of the debate and research surrounding globalization both in the popular and academic spheresOther topics that command substantial attention among IPE scholars are international trade and developmentThe relationship between democracy and markets, international finance, global markets, multi-state cooperation in solving trans-border economic problems, and the structural balance of power between and among states and institutionsUnlike conventional international relations, power is understood to be both economic and political, which are interrelated in a complex manner

New dimension Liberal believes in freedom for private powers at the expense of public power (government)It asserts that markets, free from the distortions caused by government controls and regulation, naturally will harmonize demand and supply of scarce resources resulting in the best possible world for populations at largeDavid Ricardo whose theory of comparative advantage suggested that trade between different nationsAdam Smiths formulation that nations could benefit both parties even in circumstances where one would feel intuitively that one nation would benefit from trade at the expense of the other

Liberal View The 'realist'view, also known as nationalist accepts the power of free markets to deliver favorable outcomesWhile it holds that optimum conditions generally are obtained with moderately strong public power exerting some regulatory controlRealist View The 'Marxist'view believes that only robust application of strong public power can check innate tendencies for private power to benefit elites at the expense of populations at large

Marxist View Constructivists assumes that the domain of international economic interactions is not value-free, and that economic and political identities, in addition to material interests, are significant determinants of economic action

Constructivist View The Americans are positivist and attempt to develop intermediate level theories that are supported by some form of quantitative evidenceBritish IPE is more "interpretivist" and looks for "grand theories They use very different standards of empirical workThis characterization of IPE has been hotly debatedForum was the -2008 Warwick RIPE Debate: American versus British IPE

USA Vs the UKGlobalizationis the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture Advances in transportation and telecommunications infrastructure, including the rise of telegraph and the internet are major factors in globalizationGlobalization is interdependence of economic and cultural activities

Globalization and Theories about the Global Economy Two views are pertinent Age old or Modern processSeveral scholars place the origins of globalization before the European age of discovery and voyage to the New WorldOthers trace the origins to third millennium BCBut in the late 19th century and early 20th century, the connectedness of the world's economies and cultures grew very quickly

TimeTheSilk Road is a series of trade and cultural transmission routes that were central to cultural interaction through regions of the Asian continent connecting the east and west by linking traders, merchants, pilgrims, monks, soldiers, nomads and urban dwellers from China to the Mediterranean seaExtending 6,437 km., silk trade begun during Han Dynasty (206 BC to 22- AD) They took great interest in the safety of their products being traded and extended the Great Wall (21,196km.) to ensure the protection of the trade route

Silk Road or Route

Proto-globalizationis a period of the history of globalization roughly spanning the years between 1600 and 1800the phase of increasing trade links and cultural exchange that characterized the period immediately preceding the advent of so-called 'modern globalization' in the 19th centuryProto-globalization was characterized by the rise of maritime European empires- Portuguese, Spanish, Dutch and British empire. Proto-globalization distinguished itself from modern globalization on the basis of expansionism, the method of managing global trade, and the level of information exchangeProto-globalization trade and communications involved a vast group including European, Muslim, Indian, Southeast Asian and Chinese merchants, particularly in the Indian ocean region

Proto age The term globalization has been in increasing use since the mid-1980s and especially since the mid-1990sIn 2000, the International Monetary Fund identified four basic aspects of globalization-Trade and TransactionsCapital and investment movements Migration and movement of peopleThe dissemination of knowledgeFurther, environmental challenges-climate change, pollution, cross boundary issues Globalizing processes affect and are affected by business, economic-cultural resources and natural envireonmetNew ageRonald Robertson, professor of sociology at University of Aberdeen, defined globalization in 1992 as-the compression of the world and the intensification of the consciousness of the world as a wholeSociologists Martin Albrow and Elizabeth King define globalization as-all those processes by which the peoples of the world are incorporated into a single world societyInThe Consequences of Modernity, Anthony Giddensuses the following definition- Globalization can be defined as the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa.After WW II, work by politicians led to the BWI, an agreement by major governments to lay down the framework for international monetary policy, commerce and finance, and the founding of several international institutions intended to facilitate economic growth multiple rounds of trade opening simplified and lowered trade barriersGATT, led to a series of agreements to remove trade restrictions. GATT's successor was theWTO, which created an institution to manage the trading systemExports nearly doubled from 8.5% of total gross world product in 1970 to 16.2% in 2001The approach of using global agreements to advance trade stumbled with the failure of the Doha Roundof trade-negotiationIMF,

InstitutionsInternational TourismInternational SportsDrug TradeHuman smuggling and traffickingEducationEconomic-capital flight Inter-banking system .World-systems theoryis a multidisciplinary, macro-scale approach to world history and social changethat stresses that the world system should be primary unit of social analysisWorld-system refers to the inter-regional and transnational division of labor, which divides the world into Core Countries Semi-periphery countriesPeriphery countries

Theories HeckscherOhlin model the pattern of international trade is determined by differences in many factorsIt predicts that countries will export those goods that make intensive use of locally abundant factorsThese countries will import goods that make intensive use of factors that are locally scarce

Trade theoryNTT is a collection of economic models in international trade which focuses on the role of increasing network effects, which were developed in the late 1970s and early 1980sNew trade theorists relaxed the assumption of constant returns to scale, and some argue that using protectionist measures to build up a huge industrial base in certain industries will then allow those sectors to dominate the world marketThe value of protecting "infant industries" has been defended

New Trade theoryApter, David E. Rethinking Development: Modernization, Dependency and Post Modern Politics, NewburyPark, Calif: Sage, 1987

Gilpin, Robert, Three Ideologies of Political Economy, The Political Economy of International Relations, Princeton University Press, 1987Gilpin, Robert. The Insecure Trading System The Challenge of Global Capitalism, Princeton University Press, 2000.Goldstein, Joshua S. International Relations, 6th edition (Ed.), Pearson Education: Delhi, 2006.

BooksRobertson, Justin. Power and Politics after Financial Crisis: Rethinking Foreign Opportunism in Emerging Markets(ed.), Palgrave McMilan: New York, 2008.Stiglitz, Joseph, What I learnt at the World Economic Crisis: the Insider The New Republic, April 17 2000.

Sachs, Jeffrey D., The End of Poverty: Economic Possibilities for our Time, The Penguin Press: New York, 2005.

Wilber, C. K Ed.The Political Economy of Development ad Underdevelopment, 2nd Ed., New Random House, 1979.

.The Ricardian theory of comparative advantage seen as a basic constituent of neoclassical trade theoryThe Ricardian trade theory includes a presentation of Ricardo's example of a two-commodity, two-country modelA common representation of this model is made using an Edgeworth BoxThis model has been expanded to many-country and many-commodity casesRecardian Theory Fragmentation and International Trade Theory widens the scope for application of Ricardian comparative advantageAccording to this theory-producers in different countries are allocated a specialized slice or segment of the value chain of the global productionAllocations are determined based on on "technical feasibility" and the ability to keep the lowest final price possible for each productInternational Production Fragmentation Trade Theory Domestic or international trade depends uponCapitalGoodsServices In economics, capital goods, real capital, or capital assets are already-produced durable goods or any non-financial asset that is used in production of goods or services International tradeFinancial capital which represents obligations, and is liquidated as money for trade, and owned by legal entitiesIt is in the form of capital assets, traded in financial marketsIts market value is not based on the historical accumulation of money invested but on the perception by the market of its expected revenues and of the risk entailedNatural capital which is inherent in ecologies and protected by communities to support life, e.g., a river that provides farms with water.Social capital which in private enterprise is partly captured as goodwill or brand value but is a more general concept of inter-relationships between human beings having money-like value that motivates actions in a similar fashion to paid compensation.Instructional capital defined originally in academia as that aspect of teaching and knowledge transfer that is not inherent in individuals or social relationships but transferrable-knowledge or intellectual capital Human capital a broad term that generally includes social, instructional and individual human talent in combinationIt is used in technical economics to define balanced growth which is the goal of improving human capital as much as economic capital

.In IPE or economics a good is a material that satisfies human wants and provides utility for example, to a consumer making a purchaseA common distinction is made between 'goods' that are tangible property and services which are non-physical Commodities may be used as a synonym for economic goods but often refer to marketable raw materials and primary products

GoodsAlthough in economic theory, all goods are considered tangible in reality certain classes of goods, such as information only are in intangible formsAmong other goods an apple is a tangible object, while news belongs to an intangible class of goodsCan be perceived only by means of an instrument such as print broadcast or computer

.In economics a service is an intangible commodityService provision is often an economic activity where the buyer does not generally, except by exclusive contract, obtain exclusive ownership of the thing purchasedThe benefits of such a service, if priced, are held to be self-evident in the buyer's willingness to pay for itPublic services are those, that society-nation state, fiscal union, regional, as a whole pays for, through taxes and other means

ServiceBy composing and orchestrating the appropriate level of resources, skill, ingenuity and experience for effecting specific benefits for service consumersInvestment in expertise does require consistent service marketing and upgrading in the face of competition

.International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of GDPInternational trade has been present throughout much of history-Silk Road and Amber Road Its economic, social, and political importance has been on the rise in recent centuries

.Factors influencing internationalIndustrializationAdvancement in technologyTransportationGlobalizationMultinational corporationsOutsourcingIncreasing international trade is crucial to the continuance of globalizationWithout international trade, nations would be limited to the goods and services produced within their own borders

ImpactFinancial Relations is a strategic management responsibility that integrates finance, communication, marketing and securities law complianceTo enable the most effective two-way communication between a company, the financial community, and other constituenciesFinancial Relations Regime- is a form of government, the set of rules, cultural or social norms, that regulate the operation of government and its interactions with societyPolitical use of the word regime is commonly applied to any government that is most of the time-Not democratically elected, imposes strict and often arbitrary rules and laws on the people that are, because of the undemocratic nature of the governmentModern usage often gives the term a negative connotation, implying an authoritarian government or dictatorship International Monetary Regime Democracy is a form of government in which all eligible citizens participate equallyeither directly or through elected representativesin the proposal, development, and creation of lawsIt encompasses social, economic and cultural conditions that enable the free and equal practice of political self-determinationDemocratic regime- Robert A Dahl, Democracy and Its Critics (1989), tests them against the questions raised by its critics, and recasts the theory of democracy into a new and coherent whole

.International regimes often form in response to a need to coordinate behavior among countries around an issue International political use of regime concerns international regulatory agencies which lie outside of the control of national governmentsIn the absence of an overarching regime- trade between countries would have to be governed by numerous bilateral agreements, which would become impossibly complex to administer worldwide

International Regime International monetary regimes or systems are sets of internationally agreed rules, conventions and supporting institutions, that facilitate- International tradeCross border investmentReallocation of capital between nation statesProvide means of payment acceptable between buyers and sellers of different nationality, including deferred paymentInternational Monetary Regime To operate successfully, they need to inspire confidence, to provide sufficient liquidity for fluctuating levels of trade and to provide means by which global imbalances can be correctedThe systems can grow organically as the collective result of numerous individual agreements between international economic factors spread over several decadesAlternatively, they can arise from a single architectural vision as happened at Bretton Woods in 1944

.400 BC in Indian subcontinent Greek city-states 4th century Until the 19th century the global monetary system was loosely linked with Europe, the Americas, India and China were separate economies, and monetary systems were regionalBretton Woods Agreement-that established the postWW II monetary order, with fixed exchange rates of currencies to the dollar, and convertibility of the dollar into gold

Use of system and ages Two international institutions, the International Monetary Fund and the World Bank were createdA key part of their function was to replace private finance as more reliable source of lending for investment projects in developing statesNixon shock of 1971, ending convertibility, the US dollar has remained the de facto basis of the world monetary systemThe Euro has gained use as a reserve currency and a unit of transactions

.Members-188Nepal became member - September 6, 1961Working to-Foster global monetary cooperationSecure financial stabilityFacilitate international tradePromote high employmentSustainable economic growthReduce poverty around the world IMFThe IMF is mandated to oversee-the international monetary and financial system and monitor the economic and financial policiesThe Fund typically analyses the appropriateness of each member countrys economic and financial policiesFor achieving Economic growthAssesses the consequences of these policies for other countries and for the global economySurveillance Members 186Nepal became member in 1961Provides loans to developing countries for capital programs Official goal is the reduction of povertyAll its decisions must be guided by a commitment to the promotion of foreign investment and international trade and to the facilitation of capital investment

WBThe adoption of theMDGs in 2000 solidified an historic global partnership to focus on reaching seven specific targets to reduce poverty, hunger, disease and illiteracyThe World Bank comprises two institutions-International Bank for Reconstruction and Development (IBRD)International Development Association (IDA)

.1 January 1995Impact of Globalization Nepal became member - 23 April 2004The organization deals-regulation of trade between participating countriesIt provides a framework for negotiating and formalizing trade agreementsAnd a dispute resolution process aimed at enforcing participant's adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliamentsWTODoha Development Round which was focused on addressing the needs of developing countriesThe conflict between free trade on industrial goods and services but retention of protectionism on farm subsidies to domestic agricultural sector products

.Globalizationis the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture Advances in transportation and telecommunications infrastructure, including the rise of telegraph and the internet are major factors in globalizationGlobalization is interdependence of economic and cultural activitiesGlobalization Discontent and Global Financial Crisis Dominant theoretical political and intellectual discourseRaising crucial questions Defining set of radically transforming social and economic relations Human Development as defined by UNDP-well defined ideological divide within the field of development Inevitability-of-globalization: Keith Griffin

Globalization.Multiplicity of senseThe global interdependence of nations The growth of world systemAccumulation on a world scale The global village Cross national flows of goods, investment, production and technology have created a NEW WORLD ORDER

.Three routes of flows of finance and commodity tradeImperialist and colonial conquest Trade and investment among advanced economies Exchange among third world economies .Growth of corporate monopoliesThe export of capital Worldwide extension of the market based on a division of labor between specialized production and raw materials and commodities New World OrderStructural Adjustment Programs (SAPs)Multilateral Agreement on Investment (MAI) Critics Decentralization of government that for the most part-from above and withinLack of control by local authorities over the allocation of funds and design of macroeconomic policyUnderlying system-transnational capitalists in their collective or individual interests

.Privatization is always associated with denationalization of economyHegemonize civil society Privatization is reversing social welfareAge of capitalist democracyNGOs and INGOsConditions of popular revolutions The Role of state in building socialism

Privatization