The
IPE approach that offers the most compelling explanation of overall global
dynamics
Id Number: 0244775
A defining characteristic of the post-WWII
era has been the dramatic increase in economic integration among the liberal
capitalist countries, an increasing number of developing countries, and during
the past decade or so, a number of former communist nations that are
undertaking a transition to more open markets. This integration has taken place
under the auspices of the U.S. as the world leader since the Second World War
ended.
While it is
difficult to offer one approach of the main IPE ideologies as the best overall
explanation of global dynamics, the best way to begin may be to discount the
one that fails to explain it. This is Marxism. It is firmly held that “the
structure and operation of the international economic system are to a great
extent determined by the structure and operation of the international political
system. Production, distribution, and consumption have throughout modern
history been affected by diplomatic and strategic factors.”1 Marxism, however,
while offering a comprehensive theory of social change, fails to appreciate the
role of political and strategic factors in international relations. Economic
policy can be a tool of strategic importance (i.e. economic sanctions) and can
be heavily influenced by political goals, yet Marxism seems to view all foreign
policy in terms of market factors. For this reason, it is a severely flawed
ideology, in terms of explaining the current global picture.
The global
economy overall could be termed liberal and open. This however does not mean
that IPE can be seen as solely liberalist. This is because the state and the
international state-system still remain a dominant factor in international
relations (this being a mercantilist/realist goal). The difficulty in picking
one of these two is that we have an anarchical international system and a
trans-national economy. Therefore, this paper will argue that the best
explanation of overall global dynamics is one that combines both liberalist and
realist notions. This can be seen in the Hegemonic Stability Theory (HST).
Ideologically
liberalism “embodies a set of analytical tools and policy prescriptions that
enable a society to maximise its return from scarce resources; its commitment
to efficiency and the maximisation of total wealth provides much of its
strength”.2 The proponents of HST believe that a liberal hegemonic power is
needed to control and develop the economy on a global scale. The theory itself
can be termed ‘neo-realist’ and takes aboard the essence of liberalism
(international free market) and realism (central role of the state). It sets
out to provide a political framework for the market despite the anarchic nature
of international relations.
To date
there has only been two instances of a hegemon shaping the global picture, Pax
Britannica (Great Britain’s world rule from mid-nineteenth century to WWI which
brought about the era of free trade) and the USA today (from post-WWII to
present, which has significantly reduced trade barriers around the world). HST
was first put forward by Charles Kindleberger, but the term itself was coined
by Robert Keohane (himself an opponent of the system). The theory holds that
“hegemonic structures of power, dominated by a single country, are most
conducive to the development of strong international regimes, whose rules are
relatively precise and well obeyed”.3
For it to work three prerequisites are required, Hegemony, liberal
ideology and common interests. The hegemon is accepted because of its prestige
and status on the international plain. The growth and strength of the hegemon
serve as a clear example of the benefits of the market system and it becomes
the engine of economic growth of the international community; its imports
stimulate the growth of other economies and its investments provide developing
countries with the financing needed for growth. Through technology transfer and
knowledge sharing it provides developing nations with the technical expertise
and the technology required for development.
The role of
the hegemonic power is to use its influence to create international regimes
where ‘actor’ expectations converge in a given issue. It proscribes what is
legitimate and illegitimate behaviour on the part of states. This should
include discouraging tendencies towards mercantilist economies (although the
U.S. has been guilty of that itself, i.e. in the protection of its steel
industry recently).
For the
hegemon to sustain its dominant position it has to gain access to natural
resources through direct control (as Britain did) or through proxy governments
(as U.S. does, i.e. Kuwait and possibly Iraq) and it must set up the
international system according to its needs. This is seen in the U.S. policy of
pushing for trade barriers to be reduced all across the globe so that it can
continue and expand its international trade more easily. The currency of the
hegemon must be central to international trade and the Dollar is. One other
aspect of dominance of the hegemon is its setting up and control of global
institutions. However, it must endure the cost of maintaining these
institutions (in return for a veto or majority share of the voting). After WWII
the U.S. set up and funded the World Bank and IMF. It is also the main benefactor to the United Nations. Through
control of these institutions the hegemon can provide loans and credit to
developing nations and can also, very importantly, provide military assistance.
While this
method may well best describe the overall picture of global dynamics, it does
not mean it is without its flaws and failings. The main weakness of this method
is that it assumes the hegemonic power will act in the interests of the
international system at all times. This, as we know, has not always been the
case. One of the strategic economic tools of political economy is economic
sanctions and the U.S. has used these, it has been argued, largely for their
own purpose, against its perceived enemies, i.e. Cuba. The system itself is
open to exploitation by interest groups within the hegemon, who may have
influence over government policies. In the U.S. it has been argued that energy
companies have a large say in foreign policy issues. This has led to the belief
that American foreign policy goes beyond national security objectives to become
more a tool that protects investments abroad. Another flaw has been the policy
(by IMF largely) of pushing developing countries into opening their borders to
international trade in the belief that, although they will lose out initially,
in the long term the system would provide real gains. One need not look long to
recognise that this has not happened. What we see is ever increasing disparity
between North-South economies and countries are paying more out in debt
repayments than they are receiving in aid. Therefore it has been argued that
“despite Washington’s (HQ of World Bank and IMF) rhetoric regarding the virtues
of free trade, it instituted protectionist policies and never completely opened
its own market to foreign imports.”4
To argue,
however, that all American foreign policy has suspect motives would be naïve,
e.g. the Marshall Plan after WWII helped rebuild a decimated Europe, and the
U.S. government has just pledged billions of dollars in the fight against AIDS
in Africa.
The HST
system can be described as unstable as the dominance of the hegemon is bound to
weaken over time (as happened in the case of Great Britain), and other
economies are bound to flourish within the liberal economic system. Therefore,
it could be described as self-defeating as the liberal economy will eventually
undermine itself. But when the system works it does organise and manage the
world economy, (although the equity of these benefits can be and are disputed).
The main
‘threat’ to HST may be the process of globalisation. Globalisation Theory is
more concerned with “economic interconnectedness” (production, management,
communication and transportation). It has been argued that the massive
expansion of multi-national corporations (MNC’s) have begun to erode the
dominance of the nation-state, as companies can set-up operations all over the
globe with states having little constraint over the trans-national activities
of these MNC’s.
However, it
is the view of this author that globalisation, as we know it today, has not
been a significant factor for long enough on the international arena for it to
be described as the best overall explanation of global dynamics. The
nation-state and the international state-system have managed (so far) to
incorporate the MNC’s into their realm and rather than becoming redundant, the
state continues to manage its economy and bolster its national security.
Therefore, for this reason an open liberal economy (most of the time) and a
strong international state-system can best describe the overall picture of
international political and economic dynamics.
1. Spero, J.E. The Politics
of International Economic Relations. (3rd Edition) Pg. 5
2.
Gilpin, Robert. The Political Economy of International Relations. Pg. 17
3.
Ibid, Pg. 72
4. Pearson, F. & Payaslian, S. International
Political Economy: Conflict & Cooperation in the Global System. Pg.47
Taylor, Lance, Globalisation, Liberalisation, Distribution, and Growth: Developing
And Transition Economies http://www.rrojasdatabank.org/global-taylor.htm