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The Globalizationof World Politics

AN INTRODUCTION TOINTERNATIONAL RELATIONS

EDITED BYJohn Baylis and Steve Smith A

OXFORD UNIvERsITY PRESS

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Library of Congress Cataloging in Publication DataThe globalization of world politics : an introduction to internationalrelations / edited by j'ohn Baylis and Steve Smith.Includes bibliographical references

-"-L.-.-1. International relations. I. Baylis,j'ohn. II. Smith, Steve. 1952-]XI395.G585 I997 32.1'01dc2I 96-24110ISBN 0I9-8 78108-3ISBN 0I9-8781094 (pbk)

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lnternational Political Economyin an Age of Globalization

Roger TOOze

O O I I I I I I 0 I I O I 0 0 l U Q I I 0 0 I I Q 0 O I Q Q 0 Q I I 0 I I Q Q 0 I U q Q c 0 Q O I 0 a Q I 0 Q 0 Q 0 l I I I I Q Q 0 I 0 I I Q I I I I I I 1 I I I I U O O Q I O O I I O I I I I I I I O I I I I I I I I I I O I I I I I O I I I O O I I I I I I I I I I O O O I O I O I O O O I O I I I 0 I I O I I Q 0 I I O O D I G I I l O I 0 I Q I I I l I 0 IO

' Introduction 214~ What is IPE? 214~ Words and Politics 217 Thinking about IPE, IR, and Globalization 219~ What Kind of World have We Made? 222~ Conclusions: So what? 227I I U O I C Q 0 I Q Q I I I I Q 0 O O I I O I I I I I I I l u I O I I I I O I O I I 0 O O O I 0 I Q O I I n 0 0 U O Q Q I O I I 0 0 0 I I 0 I J I I 0 I Q 0 0 0 U I 0 0 Q I n I Q I J 0 Q n 0 Q I I Q n Q 0 I 0 I O n O O n I I Q I 0 0 I 0 O Q 0 Q Q Q I I Q I I I I Q J 0 Q I O Q Q l 0 O I l I I I Q O O O O I I O O I U O I I I I I O I O 0 I O Q I O O I O I ll

READERS cu AThis chapter identifie. ional political economy (IPE) as one of the most import-ant elements of the SlIl'UCtUr~. ._ i international politics and a central issue area for a glob-alizing International Relations. It characterizes IPE as the issues created by the blurring ofthe boundaries between what is considered politics and economics, and between whatwas considered national and international. The chapter argues that IPE is constructedthrough social interaction and does not represent a given external realitythereforeclaims and debates about IPE in both academic debate and in formal and informal pol-itics are an integral part of the political process.

The key problem for IPE is a structural onea system of political units based on terri-tory is now overlaid by a global economy that takes power away from individual statesand groups of states. This structural problem acts as a context for all the other issues ofIPE because it frames them-the problems of trade, finance, and investment and theirpolitical resolution are different in a globalized economy. The chapterfocuses on the con-cepts and ideas that underpin this, and explores the consequences for our understand-ing of and policy for this structural problem by analysing the nature of the traditionalinternational economy and its implications for International Relations, and contrastingthis with the nature and consequences of a global economy. A number of develop-ments in the world economy are identified and discussed and an assessment made oftheir implications for the key issue of IPE: the concentration of world economic activityin the countries of the Triad (North America, European Union, japan/Asia ); capital flows;

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International Political Economy

global firms and international production; domestic/international blurring; and theideological basis of the global political economy.

The chapter ends by briefly reviewing the changes and bringing a number of the argu-ments together to conclude that the essential tension between the territorial state andthe forces of globalization will dominate IPE for the foreseeable future.

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RogerTooze

Introduction: The Significance of IPE for GlobalizedInternational RelationsInternational political economy (IPE) isboth anarea of study-a range of issues and problems-anda way of thinking about world politics and eco-nomics. It is particularly appropriate in the contextof this book that we should now consider the arenaof international political economy in a globalizedworld as the international economy is widelyregarded as the principal focus of the forces ofglobalization and the main way in which global-ization is transmitted throughout the world. Inother words, what happens in the internationaleconomy (as a result of a variety of factors, inu-ences, and forces, but crucially including what isproduced and how, the nature and extent of tech-nology, advances in the speed, reliability, and costof transport and communications) is a reection ofthe changes brought about by globalization. Thesechanges are wide-ranging but include changes inthe nature and extent of production and trade, thegrowth of very large worldwide corporations, theinternationalization of nance, and the linking ofpeople and businesses through world communica-tion networks. However, what happens in the inter-national economy also, and at the same time, hasthe potential to cause and deepen globalization andtherefore has a signicant actual and potentialimpact upon the nature of world politics. Hence, ifwe do now live in a globalized world, then thenature and structure of international economicrelations will immediately show this because of thefact that it is these relations that rst change inresponse to the new forms of production, invest-ment, nance, and trade that are key elements ofthe condition of globalization. And any changes inthese relations will have a very signicant effectupon national governments (and their interna-tional relations), firms, and us as individuals,

What is IPE?Terms, Labels, and Interpretations

International political economy is a label for a cer-tain way of thinking about and analysing interna-

214

because of the extent to which national politics andnational economics are changed and inuenced bywhat happens in the international political econ-omy.

This chapter will concentrate on the ideas, con-cepts, and assumptions behind the argument onglobalization and builds upon the centrality of IPEin a globalizing world. We consider the nature andproblems of IPE, how it is dened and interpreted,and what principal difficulties this presents for ourunderstanding of the contemporary world. Thechapter then considers how we begin to under-stand and evaluate these problems, arguing that theway we use words and ideas to describe and argueand hence construct an understanding of the worldis itself part of the political process and must betaken into consideration in trying to understandIPE. In the section on Thinking about IPE, IR, andGlobalization the fundamental issue for IPE isidentied and discussed--the problem of an inter-national political system based on territorial statesincreasingly overlaid by an economic system basedon world markets and production, and the basicconstituents of an international economy and aglobal political economy are laid out. On the basisof this we can identify the broad contours of WhatKind of World have we Made? and conclude that itis a complex one which not only includes the issuesarising from challenges to state power and legiti-macy, but also includes deeper analysis of thechanges taking place at global levels and the linksbetween global and local levels. The Conclusion tothe chapter argues that there are no neat and easilyaccessible solutions to the problems of global gov-ernance and that these problems will intensify overthe next ten years.

tional relations. It has a number of distinct mean-ings generally linked to competing perspectives,but there is no one generally agreed denition ofthe term or any accepted perspective because, as we

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shall see, any denition will reect certain valuesand preferences, and we simply do not all agree onthose values and preferences. The process of resolv-ing differences in values and preferences is theprocess of politics itself, and different views of IPEreect different political positions and politicaljudgements.

Within the study of international relations, IPE isprimarily a way of thinking about the world thatasserts two major interconnections. One intercon-nection is that politics and economics are insepara-ble-politics can only be understood if economicsis taken into account and, vice versa, economicscan only be understood if politics is taken intoaccount. Politics constructs economics at the sametime as economics constructs politics. This meansthat IPE does not accept the idea that the processeswhich have brought about forms of globalizationhave politicized (made political) a previously non-political international economy organized on apurely rational economic basis. For IPE the inter-national economy has always been political in thatit concerns the processes of who gets what, whenand how--and this is politics. As Paul Hirst andGrahame Thompson argue in an important newanalysis, the term international economy hasalways been shorthand for what is actually theproduct of the complex interaction of economicrelations and politics, shaped and reshaped by thestruggles of the Great Powers (1996: 14).

The other assertion of an interconnection comesfrom the observation that for international polit-ical economy the distinction between what isinternational (i.e. outside of the state) and what isnational (i.e. inside the state) is no longer valid.The argument is that the extent and depth ofinterdependence (mutual dependence but not nec-essarily equal)created through transnational eco-nomic processes that cut across state boundaries,increased trade, membership of regional economicgroupings, and the processes ofg1Obalizationhaseffectively joined national societies and economiestogether to the extent that no national policy canbe purely domestic any more (see Case Study 1,Box 1 1.1).

The condition leading to the blurring of theboundaries between politics/economics andnational/international is principally the creation ofhigh levels of interdependence between nationalpolitical economies. High levels of interdepen-dence effectively connect national economies, sothat each national economy becomes more sensit-

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International Political Economy

Box 11.1. Case Study 1: International andNational A

ideas of national and international, of domestic andforeign, of exterior and interior, and of frontier limitsthat used to define the existence of an internationaleconomy, are losing their validity. The outline ofnation-states is becoming blurred and the power ofthe state over economic activity is lessened.

(Charles-Albert Michalet I982)

For developed economies, the distinction betweenthe domestic and the international economy hasceased to be a reality, however much poIiticaI,cuIturalor psychological strength remains in the idea.

I (Drucker I 993; I04)

ive, and sometimes highly vulnerable, to changesin other national economies. For example, a changein monetary interest rates in the US (a US nationaldecision) can have far-reaching effects on othernational nancial conditions and policies (whichare supposed to be controlled by the government ofthat country), and this brings changes both todomestic policies and conditions in other states,by forcing a lower interest rate, and to internationalrelations as other countries respond,either directlyor through existing international institutions. Or,in the extreme, because of the extent to which theindustrialized economies are linked together (inter-dependent) the disruption of world-traded oil sup-plies would have immediate and serious effects ona number of energy-dependent economies and onthe world economy as a whole, and would bringabout an instant and major intervention fromthose with the power to respond--as did the pre-sumed threat both to world oil supplies and toglobal nancial stability posed by the Iraqi invasionof Kuwait. c

Interdependence then, acts as a transmission beltfor these kinds of inuences, and a key issue associ-ated with the process of globalization is that thistransmission belt between national (political)economies is transmitting more and more eco-nomic inuences into and away from the nationalpolitical economy, with greater potential effect.However, because national governments every-where now take responsibility for managingtheir national economies, the changes transmittedby interdependence/globalization have signicantpolitical implications: governments nd it

2154

RogerTooze

increasingly difcult to achieve their national pol-icies if changes generated from outside the bound-aries of the state alter the conditions of economic(and hence, political) activity inside the boundariesof the state. Partly in response to this problem,states have over the past hundred years attemptedto construct ways of managing industrial changewithin the context of the international economythat help them to achieve their national policies(Murphy 94). This has involved creating a largenumber of international institutions and agree-ments for the collective management of the inter-national economy. In this way what could be seenpreviously as national economics becomesrapidly translated into national politics, andnational politics and economics become the con-cern of international actions and a major focus ofinternational relations.

Hence, the combination of these two claimedinterconnections means that IPE looks at what hap-pens when the boundaries between politics and eco-nomics, and between the international and the nationalare broken down (see Box 1 1.2)-and it is one of thekey claims of those who argue that globalizationhas had important consequences that these bound-aries are now almost irrelevant to our understand-ing of IPE.

Different perspectives of IPE put the cells of Box11.2 in different driving positions in order to pro-vide explanations, judgements and prescriptions.For instance, the liberal theory of IPE identies theeconomic logic of the market as the proper drivingforce of IPE, whilst realist theory puts the state andpolitics in that position. Other explanations startfrom the international level, either politics or eco-nomics, or the national level, and argue that this

Box 11.2. What is Included in IPE?1* ' ' ' j

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0 Il national I nationalI politics p economics j

international international ,_L politics , economics 3A , I Al . I

IPE argues that the boundaries between politics andeconomics and what is national and what is interna-tional are dissolving.I

216

level is the starting point for explaining the IPE.However, it is clear that the dominant world view ofthe moment throughout the industrialized world isthat of neo-liberalism which asserts the values andpreferences of the market above other ways of orga-nizing society. ln Box 11.2 this puts a particularkind of national economy-one in which marketforces are dominant and limitations on market-based economic activity are minimal--as the dri-ving idea and objective. It is this view which hasbecome the basis of the changes in the world econ-omy that we have come to call globalization.Because ideas are used to bring about and justifyparticular distributions of economic and politicalpower we cannot separate neo-liberalism from thebroad interests of those who wield economic/polit-ical power in a globalized economy.

A You could usefully at this stage check back toChapters 6 and 8 on Realism and Liberalism toconrm your understanding of the claims of thesetwo theories and think about how they relate to theissues of IPE.

IPE and the Issues of IR AThere are many who think and write about IPE whoargue that what we know as international rela-tions-that is political and (now) economic rela-tions between states--are ultimately part of a largerset of relations and structures, and this larger set iswhat is described by the term international polit-ical economy (Rupert 1995; Strange 1994): i.e. tra-ditional political relations between states can onlybe understood and explained as part of IPE. At theother end of the spectrum many see the term IPEas indicating a subset of relations within the total-ity made up of international relations. This secondview means that IPE considers a number of issues,such as money, nance, trade, and investment, thatare not looked at by other parts of the discipline ofInternational Relations (IR). For example, JoshuaGoldstein sees IR as made up of two main sub-elds--international security studies and IPE,where IPE studies trade, monetary relations, andmultinational corporations, the economic integra-tion of Europe, the international politics of theglobal environment, the economic gap betweenNorth and South, and the issues of development(Goldstein 1994). The book this chapter is in,because it starts with the system of states as the basis

for international relations, identies IPE as a keypart of the structure and process of contemporaryinternational politics. This allows for other non-state actors to have signicance and meaning,whilst retaining an initial focus on the state and theinter-state system. Hence IPE is both a core elementof the structure of international politics and a set ofinternational issues within the context of a global-izing international relations.

Key Points

~ The international economy is both a reectionand a transmitter of globalization and is there-fore central to the analysis of and debate on

Words and PoliticsPart of the problem of thinking about and under-standing politics and particularly the phenomenaof globalization is that words matter. By this I meanthat politics (or political economy) does not exist assomething out there, ready formed and waitingfor us to discover and analyse (like, perhaps, coal inthe ground that we discover and mine). This is sobecause we, as human beings, are not separate frompolitics. Our actions are part of politics and becauseour words both frame and give meaning and pur-pose to those actions they are thus part of politicsitself--the contest of words and ideas. The wordswe use both reect and construct our reality in gen-eral and politics in particular. Moreover, we shareour reality through our language and shared mean-ings. Our reality is also an intersubjective reality.This is an important statement, because it meansthat we see words and ideas not as reecting politicsor commentating on politics, but as an integral partof politics itself.

The way in which we see the world derives largelyfrom our historical experience of the world (Cox1992). This knowledge is codied into theory--everyone has a theory of the world, a world view,but for most people and most of.the time this is hid-den or not acknowledged. Often, our world viewpresents itself as common sense and because ofthis we do not question the assumptions built intoour common sense, but it is important to under-

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International Political Economy

globalization and its impact on internationalrelations. ,

e The international economy has always beenpolitical and hence the most appropriate label isthe international political economy.

~ International political economy as an area ofstudy refers to the issues created when theboundaries between economics and politics,and international and national are brokendown and become blurred.

v Different perspectives view each of the fourdomains as being the principal force for change,but the dominant view of neo-liberalism seeksto construct the international economy on thesame basis as the free market domestic economywith a minimum of political regulation.

stand that what we take as common sense is bothvariable through time and society and is con-structed politically, that is it brings benets to a par-ticular group. World views are very durable andform a way of us connecting to our past, present,and future. Theory (derived from history) forms thecontext of what we think we can do, what we can-not do, and what we are required to do. Theory, inthe form of a world view, gives us meaning and pur-pose. Because we act on the basis of our world views,our theories, we translate our understanding ofthe world into our realitywhat we think (what is

Box 11.3. Case Study 2: Words and Reality:The State and InternationalEconomy

What is subjective in understanding becomes objec-tive through action. This is the only way, for instance,in which we can understand the state as an objectivereality. The state has no physical existence, like abuilding or a lamp-post; but it is nevertheless a realentity. It is a real entity because everyone acts asthough it were; because we know that real people withguns and batons will enforce decisions attributed tothis non-physical reality.

(emphasis added; Cox I992: 1 33)

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RogerTooze

subjective in understanding) becomes real (objec-tive) through our actions (see Case Study 2, Box1 1.3).

This argument about the connection betweenwords and politics has two main consequences forthis chapter and for the study of IPE. The rst is thatthe words (labels) we use to describe the world (e.g.international political economy, internationalpolitics, etc.) carry with them a specic view ofwhat the world is-what are the basic units (states,companies, cities, etc.) and how they interact (war,trade, production, etc.), and what kind of order(structure) is constituted by these units and rela-tionships. So the choice of the label is very import-ant because it is shorthand for a whole way ofdescribing the worldinternational politicsdescribes a world that is very different from inter-national political economy. And the worlddescribed by international political economy isdifferent from the world described by global polit-ical economy.

The second consequence, equally important, isthat the words people use to describe the world arepart of the political process of constructing politics.Therefore we need to look very carefully at what issaid by whom, as this is itself part of politics and notonly sets up the framework for discussion in whichsome ideas are accepted as legitimate and some arenot, but also forms the content of our intersubjec-tive reality (see Box 1 1 .3). Hence, some views of theway world politics works and how it is constructedbecome more acceptable than others-the legiti-macy of different views of the world is an importantpart of political struggle. And what is legitimatethen becomes the view that denes what the worldactually is. This is particularly important when wetry to reach an understanding of the impact ofglobalization on the issues of IPE. The process ofglobalization (however denedsee Ch. 1) andthe changes it brings about tend to serve particularinterestsfavouring basically those with capital oraccess to capital via credit above those who dependupon selling their labour, and historically thosewith some form of technological training or generaladvanced education above those that have none

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(Reich 1991; Kanter 1995). This does not mean thatothers have not beneted and do not benet now,but that some groups in society benet more. As aresult some favour the changes brought about byglobalization and act accordingly to bring aboutfurther globalizationboth in words and deeds.

If we took at face value the clamour of debate anddiscussion by those involved in state and inter-statepolitics and the descriptions and claims of thoseinvolved in the transnational political economy wecould be forgiven for thinking that we and govern-ments already live in a fully globalized society(Hirst and Thompson 1996; Hutton 1995). MostOECD member governments already seem to bebasing their policy discussions and formulatingtheir policies on the assumption of a globalizedpolitical economy. On the most basic of politicallevels, if policy-makers believe we are existingwithin a global political economy they will con-struct political programmes appropriate to the real-ity of a global political economy, rather than anyother version of international political economicreality, and this will favour some groups in societymore than others. Who benets? is thus a keyquestion for IPE to ask of any situation, idea, or pol-icy proposal.

Key Points 9

~ Words matter--the IPE is constructed throughour intersubjective understanding, which is thenreproduced and/or modied through our wordsand actions.

Globalization brings differentbenets to differ-ent people, but clearly benets some more thanothers.

' The argument for and about globalization isitself part of politics, and is already changing theway that governments frame and implement pol-icy. 1 -

~ Who benets? is the key question that IPE asksof the world.

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Thinking about IPE, IR, and GlobalizationStates and the International Economy

From the point of view of IPE, the relationship ofstates to the international economy has alwaysbeen problematic because, according to realisttheory, the international system is anarchic. Andthe anarchic is difcult to manageeven witheffective regimes (see Ch. 12). Hence, if the inter-national economy is important to the wealth ofstates (and their populations) it immediatelybecomes a signicant domestic political issue.

In more general terms, the t of a national econ-omy into international structures--production,trade, resources, nance, etc.-will produce a rangeofpolitical economy issues, the resolution of whichwill vary according to the specic circumstances ofthe industries and sectors of the national economy.For example, protecting domestic industriesthrough trade restrictions, principally tariffs (tradetaxes) and quotas (limits on the amount or numberimported), has been a conventional way of ensur-ing that domestic production is not swamped bycheaper imports. But, if an industry is successful ininternational trade or depends itself on imports, sayof semi-nished goods or key components, thenthat industrys interests may not necessarily beserved by protection, partly because it may put upthe cost of essential components and partly becauseof the fear of retaliation. So it is perfectly possible tohave some parts of an economy (sectors) that wantand support protection, e.g. steel or agriculture, andat the same time other sectors, that depend to agreater extent on an internationalized economy, tobe against any policy that adds to their costs, e.g.automobile manufacturers. Hence, it is often dif-cult to generalize about the appropriate mix of pol-icies that may resolve the issues resulting fromnational interaction with the international econ-omy.

The Core Question

Prom the perspective of this book the key questionand issue for IPE in a globalizing or globalized IR isnot derived from the problems of internationalinvestment, production, trade, or even nance,althopgh all these are important. And unfortu-

nately the fundamental issue is not and has notbeen the alleviation of worldwide poverty andinequality either (see Ch. 23). The problem for IPEis one of the actual or potential structural mismatchbetween a formal state system based on territory(i.e. nation states) and an economic system that isincreasingly non-territorial and globalized (see,among others, Agnew and Corbridge 1995). This isa problem at a much deeper level than, say, thepolitical economy of trade, because it addresses thebasic, underlying framework of IPE and thereforesets the context for the consideration of all contempo-rary issues. Consider the issue of trade as an import-ant and live policy issue in many national politicaleconomies and international forums. Trade gener-ates much political controversy, for example theUS-Japan trade balance has been a major feature ofboth US domestic politics and US-Japan interna-tional relations for some time, but its explanationand resolution as an issue for politics depends onidentifying and understanding the underlyingframework of the international economy (and theway in which national economic activity ts intothe international) within which trade takes place.Different frameworks produce different explana-tions and different policies according to our polit-ical objectives. Given the importance of thisstructural question and the fact that this wholebook could be taken up with a discussion of themyriad problems and complexities of IPE, the restof this chapter will focus principally on this coreproblem.

The material in Case Study 3 (Box 11.4) iden-ties, describes, and conrms the central problemfor IPE as the tension between the national, territo-rial nature of the state (as the prime political unit inInternational Relations) and the world economy,increasingly transnational (across national bound-aries) in character and global in extent and nature.This tension has been in evidence for some time, inthat as a greater part of a state's economic activityhas become either international or has been linkedto international activities it becomes more complexto manage in order to achieve the political objec-tives of the government of that state. Of course,given the historical conditions of the emergence ofmodern states it is doubtful whether the physicalboundaries of the state ever contained the total ofeconomic activity, so managing the economy

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Box 11.4. Case Study 3: The Core Problemfor IPE in a Globalizing World

The new reality is that the system of states is overlaidby a highly integrated, incompletely regulated,rapidly growing--but consequently somewhat unsta-bleworld economy. There is a tension between theprinciple of national self-determination and the prin-ciple of openness in the world economy which is thecore problematic of international political economy.(Strange 19940: 212)The most important tension of late capitalism . . . isthe national political constitution of states and theglobal character of accumulation.

(Burnham 1994: 229)

The evidence of the past four decades does showconvincingly that participation in the world economyhas become the controlling factor in the domesticeconomic performance of developed countries.

(Drucker 1993: 105)

outside of the territory of the state is an old prob-lem.

It is signicant that the three quotes in CaseStudy 3 (Box 1 1 .4) are also drawn from three differ-ent approaches to IPE--so there is no question ofthis problem simply being one derived from a par-ticular point of view and hence allowing that pointof view to set the agenda for politics. This is knownas privileging a perspective and the issues identi-ed as important by the perspective, and is animportant aspect of the political function of domi-nant ideas-what viewpoints and issues are privi-leged and what issues are ignored or silenced?

What is International and what isGlobal

The most common starting point is with the precisenature and form of the set of relationships that isconventionally labelled the international econ-omy. Let us now look at what is meant by the terminternational economy and what it represents inreality. We have already discussed how interna-tional economy is shorthand for a complex andnegotiated mix of politics and economics, andtherefore should be called the international polit-ical economy, but (as also discussed) it also signi-

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es a particular arrangement of entities and a spe-cic set of relationships that is reproduced andmodied by our actions. At its most straightfor-ward, the international economy is the sum totalof economic relations between and among nationstates. The basic units are national economies andthe activities that are signicant are initially trade(with international payments for trade) and thenfollowed by investment.

national 4---"-Peconomy

Trade and investment

Fig. 11 .1. The international economyThe basic unit of the international economy is the nationaleconomy, bounded by the physical limits of the state, inwhich national governments mediate between the interna-tional and the national.

A This simple model of international economy isthe extension into international economics andpolitical economy of the core assumptions of real-ism and neo-realism--the dominant world views ofinternational relations based on the state (see Ch.6). It is this model of the world which is the implicitbasis for much international economic policy andfor most media reporting on and discussion ofinternational economy. It is this -model which isthe basis of most sets of statistics which claim todescribe and measure international economicactivity, that is, they are based on ows acrossnational political boundaries. And, it is this modelthat has become the common-sense basis to ourday-to-day understanding of IPE-hence, in termsof the argument above, privileging its denition ofeconomic reality. lt is,of course-a gross simplica-tion, but it clearly identies the dening character-istics of the international economy as owsbetween national economies, where nationaleconomies are dened by territory (see Agnew andCorbridge 1995).

lf we do live in a world where this model--Ofinternational economy-accurately describes theway that economic relationships between states are

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structured, then our approach to understandingand explaining the problems that are created wouldlead us to emphasize the competencies and author-ity of national governments and international gov-ernmental organizations, and the construction andoperation of international regimes to regulate inter-national economic activity. We would be con-cerned above all with problems of trade andinvestment. We would acknowledge that the con-tinuing increase in and importance of the volumeof world trade and the extent and signicance ofglobal investment produces problems for the statesability to achieve its political goals, but, given thestructure of the international economy, we wouldconclude that the state (and its international insti-tutions) still has the fundamental capacity to con-trol, modify, and benet from the consequences ofan internationalized economy. This conclusionwould assert the primacy of continuity overchange, and conrm that we would be working in aworld that is essentially unchanged since the for-malization of the modern state system over twohundred years ago.

However, there are many in business, politics,and academic life who now argue that we no longerhave a simple and straightforward internationaleconomy based on trade and investment relationsbetween separate national economies and con-trolled by national governments. In their view whatwe now have is much more complex, and as a resultthis simple model of international economy needsto be either modied and extended or discarded infavour of a world or global political economy.The essence of such a global economy is that wenow have a structure that is more than and addi-tional to the international economy, and is madeup of rms and other entities that operate transna-tionally over the whole globe. The activities of theserms are based upon and geared towards global pro-duction and services for a global market, with muchof their economic activity taking place outside ofthe market within their own global structures.Together these activities constitute a fundamentalchange in the overall structure of internationalpolitical economy. The structure of global politicaleconomy contains the old international economywithin a new framework which is based in the terri-tory of states, but not necessarily national in termsof purpose, organization, and benet. Perhaps thebest way to demonstrate this is to use and extendthe illustration for the international economy:

The relationships and structures of the interna-

International Political Economy

Global politicalj economynational economy . ,[territorial state] 4-> national economy 1 =

I jlnternationaleconomyj +

[Integrated production]it T i I 1 service economy]

Integrated productionlservice economy

T;; _i*_ m r _ _ 7 _ J

Fig. 1 1.2. The basis of the global political economy

tional economy continue to exist but they onlydescribe a part of the total of world economic activ-ity (around 55 per cent in 1990). So in order todescribe the total of political economic activity wemust include a consideration of what is called theintegrated production and service economy(Michalet 1982). Hence, a full picture of the totalityof world activitythe global political economy- isa complex multi-level structure and is composed ofthe international economy plus the integratedproduction and service economy. The activities ofthis economy are the aggregation of the activities ofa large number of transnational rms and entities(shown in Fig. 1 1.2 by the lines linking the nationaleconomies and the integrated economy) and theyare linked organically to the national and interna-tional economy by both being located within theterritory of states and within the jurisdiction ofstate legal/economic regimes, and having eco-nomic relations with specically national eco-nomic entities, such as purely national suppliers ofcomponents or goods. But, and crucially, the strate-gies and purposes of these global entities are notnecessarily congruent with or supportive of thestrategies and purposes of the separate nationalgovernments of the states within which they arelocated. This means that in analytical and politicaleconomy terms this economy is distinct from theactivities that constitute the international econ-omy, although clearly there are many linkagesbetween the two.

Q If we now have a global economy alongside andsuperseding the international economy the abilityof the state to achieve its objectives is, at the veryleast, challenged and, depending on the extent ofglobalization, may be severely reduced. If this isthe case, then the possibility of any democratic

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Roger Tooze

control or accountability is also severely reduced,even from the low levels that executive govern-ments have already placed it. This situation givesrise to a number of fundamental questions andproblems, to which we shall now turn.

Key Points

v The way that any national economy ts into theinternational economy produces distinct polit-ical problems--for the state and internationalrelations-depending on the nature of thatstates economic activity and the power it has tostructure the system.

e The fundamental problem for IPE is the actual orpotential mismatch between an internationalpolitical system based on territorial states and aneconomic system increasingly non-territorialand globalized.

What Kind of World haveInternational or Global?Our rst task is to establish exactly what kind ofworld we live inis it more like our traditionalinternational economy or is it closer to a globaleconomy? (See Figs. 11.2 and 11.3.) In either casewe can safely conclude at a minimum that it is apolitical economy we are investigating, ratherthan a pure economy. However, the extent andimplications of globalization are perhaps the mosthotly debated questions in IPE (see Boyer andDrache 1996; Hirst and Thompson 1996). It is prob-ably fair to say that for most commentators and forsome policy-makers the jury is still out on whetheror not we have a globalized political economy thathas made the state increasingly redundant and willcontinue to do so, although some regard capitalismas necessarily global in extent and clearly domi-nant as a form of political economy (see, in particu-lar, Gill and Law 1988).

Of course, any international activity or eventexternal to the territorial space of the nation stateis more of a problem in terms of governmental con-trol than a similar activity or event within the terri-

222

v The international economy is the sum total ofthe economic relations between nationaleconomies, mediated and controlled by thenational governments and their internationalorganizations and regimes.

e A global economy is the international econ-omy plus the activities of the integrated pro-duction and service economy operating as atotal system, with much of the dynamic providedby the lattercrucially the objectives and inter-ests of global economic actors may not be thesame as or in support of individual governmentsor the system as a whole.

~ The greater the degree of globalization the morecomplex the IPE becomes, the greater the prob-lems of control for states and international gov-ernmental organizations, the more difcult it isto achieve any democratic control of nationaleconomic life and historically the greater the gapbetween rich and poor in the global politicaleconomy.

We made?torial space. This is one of the bases of the claim topolitical sovereignty and economic autonomymade by national governments. And national gov-ernments have responded to growing internationallinkages through trade, investment, and techno-logy for the past 250 years and have also initiatedforms of political organization designed to enablethe collective management of the internationaleconomy (see Murphy 1994). So even within armly traditional international economy, withthe added complication for Western Europe of theEU, the level of complexity of policy and collectivedecision-making is very high, and the conse-quences of failure can be catastrophic. Hence, evenif we decide that the fundamental basis of IPEremains the national/international economy, thepolicy problems are still immensely difcult.

Whatever our eventual judgement on the natureof our international/global world, it is relativelyclear that some important aspects of the interna-tional system of political economic relations havechanged and contribute centrally to the world wehave made. We shall briey consider ve: the con-centration of economic activity within the Triad

of North America, the European Union, andJapan/Asia; the vast increase in capital ows in theworld economy; the growth of global rms as inter-national actors and the nature of internationalproduction; the further blurring of boundariesbetween domestic and international realms; andthe ideological basis of international economicrelations.

Uneven globalization

More and more advanced economic activity takesplace amongst the three most developed regions ofthe world: the process of technological, economicand socio-cultural integration amongst the threemost developed regions of the world (Iapan plus theNICs from South-East Asia, Western Europe andNorth America) is more diffused, intensive and sig-nicant than integration between these threeregions and the less-developed countries, or betweenthe less-developed themselves (Petrella 1996: 77).Thus, national economies outside of the Triad areincreasingly marginalized from the processes ofwealth creation whilst the levels of economic inter-dependence within the Triad are increasing. Withthis development comes an intensication of theknowledge content of advanced production and ade-linking of production to raw material resources.Both these developments further disadvantagethose outside of the Triad. Moreover, with thisprocess of economic concentration comes also thepolitical domination of the management of theworld political economy, brought into stark relief bythe admission of Russia to the group of richest coun-tries that collectively manage the world economy.Of course, this begs the question as to where Chinats and will t within the global political economy,and no simple answer is possible given the uniqueconstellation of forces and ideas that characterizesthe current situation.

Hence, globalization is partial in spatial termsand selective in its impact--this conclusion is sup-ported by a number of indicators (see Petrella1996v Triad countries in 1980 accounted for 55 per cent

of total world exports of manufactured goods; in1990 the gure was 64 per cent. Imports are sim-ilarly distributed: in 1980 Triad countriesaccounted for 60 per cent of all imports of manu-factured goods, in 1990 64 per cent.

F

International Political Economy

Box 11.5. Global Capital Flows

Three main categories of capital flows:~ money and financelinked to trade in goods and

services (e.g. imports, airline tickets)e foreign direct investmentfinancial capital trans-

fers, also physical, human, and technological capi-tal

~ portfolio investments (investing in a range ofinstruments for financial gain, rather than controlover an enterprise) and various other forms oftransactions (including speculation)

Source: (after Petrella1996)

~ the poorest countries (102 countries) gures areas follows: exports of manufactured goods:19807.9 per cent, 1990-1.4 per cent; importsof manufactured goods: 19809.0 per cent,1990-4.9 per cent.

~ capital owseach of the three components ofcapital ows (see Box 11.5) has demonstratedconcentration within the Triad countries. In the1980s the Triad accounted for approximately 80per cent of all international capital ows.

~ in knowledge and technology rms-where agrowing and highly signicant percentage ofwealth is createdco-operation between rmson strategic technology is becoming the bestindicator of economic success. Of the 4,000+inter-rm agreements made in the period 1980-9over 90 per cent were between Triad rms.

Global Capital Flows

Over the past twenty years global capital ows (seeBox 11.5) have been one of the principal areas ofchange and growth and many argue that it is in thisarea that the main developments in globalizationhave taken place (Strange 1994). Two aspects aremost pertinent: the volume and the nature of theseows and their spatial distribution. With regard tothe rst aspect, there has been an explosion in the Mvolume of nancial transactionsdealing in cur-rencies and other forms of risk minimizationtothe extent that the amounts now traded dwarf thevalue of world trade (i.e. the transactions necessaryto pay for international trade in goods and ser-vices). This has brought about a fundamental shift

, 223

Iloger Tooze

to what has been called the symbol economy ofcapital movements, exchange rates, and creditows (see Case Study 4, Box 11.6). The conse-quences of this change can sometimes be severe asnational currencies are devalued and revalued bythe activities and concerns of the market ratherthan by the actions of governmentsalthough thisneed not necessarily be bad, most national politi-clans regard it as bad in times of crisis! Much of thevolume of transactions of capital ows is thus dis-embedded from the needs of the real economy,and this can cause chaos at times:we do now live in a global economy that is thoroughlyinternationalised in its expanding core areas of commod-ity trade and production capital, and which is globalizingapace in the case of money flows and nancial capital. Wealso live in a world in which the markets can defeat eventhe most concerted efforts by a government, or evengroups of governments, to defend particular nationalexchange rates and interest rates. (Agnew andCorbridge 1995: 177-8)

The second aspect of capital ows that is import-ant is their distribution. The 1970s saw a very largegrowth in foreign direct investment (see Box 1 1.5),partly nanced by the increase in oil prices, but bythe 1980s most of the capital ows were focused onthe Triad economies-by 1989 more than 80 percent of the world's Foreign Direct Investment camefrom and went to the Triad regions. The less-devel-oped and poor countries together accounted foronly 3 per cent of the total of world ows between1986-91. As Petrella (1996: 70) points out, Less-developed countries have been abandoned as sitesfor investment. This is a startling developmentwhich will surely have major political conse-quences in future international politics, represent-ing as it does the triumph of private values,emphasizing short-term returns on investmentover public ows of capital towards longer terminfrastructural development (clean water, trans-port, roads, power, etc.). This development isentirely predictable given the political dominationof the values of neo-liberalism, but what is surpris-ing is how quickly it has come about.

International Production and theTransnational Corporation

Conventional IR theory recognizes the emergenceof transnational corporations (TNCs) as new and

224

Box 11.6. Case Study 4: The SymbolEconomy

The third major change that has occurred in theworld economy is the emergence of the symboleconomy-capital movements, exchange rates andcredit flowsas the flywheel of the world economy, inplace of the real economy-the flow of goods andservlces . . .

World trade in goods is larger, much larger, than ithas ever been before. And so is the invisible trade,the trade in services. Together, the two amount toaround $2.5 trillion to $3 trillion a year. But theLondon Eurodollar market, in which the world's finan-cial institutions borrow from and lend to each other,turns over $300 billion each working day, or $75 tril-lion a year, a volume at least 25 times that of worldtrade.

In addition, there are the foreign exchange trans-actions in the world's main money centers, in whichone currency is traded against another. These runaround S150 billion a day, or about S35 trillion ayear1 2 times the worldwide trade in goods and ser-vices.

(Drucker 1986: 781 -2: figures arefor 1985/6)

signicant actors in international relations andinternational political economy. TNCs, often withturnovers as large as many states, are indeed signif-icant actors, but what is most signicant is theunderlying changes that TNCs both represent andare bringing about. The importance of TNCs in thesystem of international production cannot be over-estimatedso much so that some observers haveargued that a new form of diplomacy is necessary,that between state and rm -(Stopford andStrange 1991). However, others argue that interna-tional production is over-emphasized (Hirst andThompson 1996).

The problem is how do we know? and theanswer is with difcultyl And this is because theinformation that we have about the internationaleconomy is just thatinformation about the inter-national economy, based on_tl?fre-traditional modelof trade and investment between national politicaleconomies (See Fig. 11.1). These gures do notreect the rise of international production--pro-duction by rms outside of their home countries-because they are based on a model that takes noaccount of this development (see Case Study 5, Box11.7). International production began to exceedtotal world trade ows in the middle of the 19805-

1....

Box 11.7. Case Study S: TakingInternational ProductionSeriously

A recent US Department of Commerce study soughtto measure what the US position in world marketswould look like if the standard balance-of-trade meas-ure were combined with the net effects of sales by US-owned companies abroad, and by foreign-ownedcompanies in the United States. It found that, on thismore inclusive indicator of net global sales and pur-chases, the United States has consistently been earn-ing a surplus, rising from $8 billion in 1981 to $24billion in 1991, even as its trade deficit deterioratedduring the same period from $16 billion to $28 bil-lion. -

(Ruggie 1995: 518)

how does this change our understanding of theworld economy?

First, and referring to Case Study 5 (Box 11.7),measures based on the model of the internationaleconomy distort the overall picture of the worldeconomythey only measure certain aspects andignore the rest. And this has direct politicalconsequencesconsider the political problemsgenerated by the conclusion based solely on con-ventional trade balance gures that the US has beenrunning a massive balance of payments decit, par-ticularly for the US-Japan relationship.

Second, and this point is emphasized by Ruggieand others, international production has led tomore and more of the world's goods being pro-duced and marketed through rms own organiza-tional structures (administrative hierarchies)rather than markets (Ruggie 1995; Stopford 8rStrange 1991). Rather than national rms tradinginternationally, with prices and quantities being setby the operation of national/international markets(as in almost all economic theory), TNCs set up pro-duction and set prices within their subsidiariesand co-owned rms, across territories, on the basisof their own internal needs and priorities, ratherthan working within prices and production set bythe market. This has fundamentally changed boththe nature of production and the possibilities ofgovernment inuence on and control of produc-tion. We can see this in the growth of intra-rmtrade: trade among the different divisions of thesame TNC, or trade with other companies linked bya strategic technology agreement. We know that

t

International Political Economy

this is very important, and it is growing, but wehave no real way of measuring it:Once this system of international production, orga-nized, managed andplanned by rms, takes over and comesto dominate the system of production for local nationalmarkets under rules laid down by national governments,there is a fundamental change in the economic base of theworld of states, in the power and even possibly the legiti-macy of the state (Strange 19-94a: 210; emphasis added).

Domestic and InternationalWe have already briey discussed the blurring ofthe boundaries between the domestic and inter-national realms that is brought about by theprocesses of interdependence, but a number ofrecent developments take this process even further.Over the past fty years international trade hasincreasingly expanded and the framework for thistrade has been the subject of intense internationalnegotiation, with the result that more trade is nownominally free of tariff and quota restraint. Butmore trade, with the changes in production wehave discussed, has led to greater openness of thetrading economies. This means that domestic pol-icy is increasingly the subject of trade dispute:when is an environmental health regulation con-cerning automobile exhaust emissions a barrier totrade? When is a labour regulation an improperconstraint on trade, or unfair? It seems that almostevery aspect of national economic activity is nowsubject to international supervision (see Case Study6, Box 1 1.8). John Ruggie (1995) calls this the issueof contested domestic domains and argues thatthis is a consequence of other far-reaching changesin political economy, and that it is a major problemof dening politically where external ends anddomestic begins, but that there are no simple solu-tions. The global is increasingly part of the localand this often produces direct links that by-passcentral government, adding to the sense that gov-ernments are either impotent or increasingly irrele-vant (Horsman and Marshall 1995).

The problem is made more difcult by thegrowth in trade in services (one of the key areas tobe considered in the last major round of trade nego-tiations-The Uruguay Round). Services include:transport, insurance, tourism, information ser-vices, construction, intellectual property rights,and many others, and their value is now around a

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Roger Tooze

Box 11.8. Case Study 6: Financial Times, 3 April 1996: Labour standards must be included inHIgrowth strategy

The Group of Seven leading industrialised nations yes-terday agreed that the enhancement of core labour stan-dards was necessary in any global strategy for economicgrowth.

The G7 comprises the US, japan, Germany, France,Italy, the UK and Canada.

The agreed communique ending the G7 economyand labour ministers two-day conference in Lille innorthern France was only reached after many hours ofintense behind-the-scenes discussion and was seen as asetback for the views of several participants, notablyjapan, Germany, the UK and Canada.

They had expressed opposition to any reference tolabour standards in the document emerging from theconference.

But the UK government said last night the outcomecould have been much worse from its point of view.Initially France and the US had wanted the communiqueto say G7 should insist the labour standards issue shouldbe on the agenda at the December meeting in Singaporeof the World Trade Organization. But this proposal wasremoved over yesterday's lunch after the UK and othershad expressed strong opposition to it.

France, which had called the conference, put thelabour standards issue at the forefront of the meetingand, along with the US, insisted on a clear commitment.

Mr Robert Reich, US labour secretary, made clear yes-terday that the US intends to press hard on the issue inthe WTO. He said it was a proper forum for a discussionof labour standards that cover trade union freedoms,prevent the employment of children and ban forcedlaboun

The communique said: We note the importance ofenhancing core labour standards around the world and

examining the links between these standards and inter-national trade in appropriate fora.

Ministers awaited with interest the completion ofstudies currently under way at the Organization forEconomic Co-operation and Development and theInternational Labour Organization on the social dimen-sions of international trade.

However, there was also a strong commitment,backed unanimously by all the governments at the con-ference, to fiscal discipline in the running of their eco-nomic policies.

The G7 countries must endeavour to control publicspending more effectively in order to reduce theirdeficits, said the communique. Reducing deficits willhelp to create a more favourable climate for privateinvestment and income growth against a background ofmoderate interest rates.

Other proposals which won general agreementincluded:~ A modernisation of the regulatory framework in

goods and services.- The active encouragement of smal|- and medium-

sized enterprises with venture capital to help in newtechnologies.

~ The need to promote policies to ensure the security ofemployability over individuals working lives.

~ Changes in the tax and benefits system to make workpay particularly for the least well-off; in addition, cutsin non-wage labour costs where appropriate.

~ Policies targeted on helping the long-term unem-ployed and to integrate young job-seekers into regu-larjobs.

quarter of total world trade, perhaps more, as wehave the familiar problem of how we measurethings like the value-added element of design (e.g.in cars and clothes) (Ruggie 1995: 513-16). TheUruguay Round did produce a General Agreementon Trade in Services (GATS), but this promises toproduce many more political problems before aclear framework emerges. However, what is clear isthat GATS means that more hitherto domesticactivities than ever before will be brought underinternational surveillance and attempted inuenceand control, particularly in the area of intellectualproperty (copyright, patents, licensing, etc.).

226

The Ideological Basis of the'WorIdEconomyThe fth aspect of change that is signicant for ourconsideration of IPE is the ideological basis of inter-national/global economic relations. The ending ofthe cold war and the internal collapse of most of thecentrally planned economies has led to the tri-umph and spread of one form of political-social-economic organization: modern capitalism.Capitalism has a number of different forms,depending on the cultural and political balancewithin particular national economies, but, since1989 at least, has been the only game in town as faras the arrangement of economic and political lifeare concerned. If we move away from the tri-

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umphalism of the immediate post-1989 phase,what we see is that the ideological basis of capital-ism has been further reinforced and legitimated.This base is economic liberalism (see Ch. 8) and ithas been the fundamental ideology of the interna-tional economy since the reconstruction of theinternational economic order at Bretton Woods in1944.

Liberalism separates economic life from pol-itics and privileges economics, based on individ-ual market rationality, above all other forms ofsocial organization. Neo-liberalism has now takenthis to the level of the international system in theargument for unfettered global markets and a con-sumer-based individualist ethic which transcendsnational communities. It represents the triumph ofthe interests of capital over labour at this point ofworld history. This view has become the new com-mon sense, the unconscious basis from whichjudgement is made and the basis of institutional-ized power in the world economy. It forms the(often unspoken) framework for international eco-nomic policy, although the precise questions ofwho benets create much political dispute (seeCase Study 6, Box 11.8). What is often not ques-tioned is the neo-liberal framework itself-itsassumptions, concepts, and institutions.

Neo-liberalism is not a neutral description whichgenerates a prescription for actionit is an ideo-logy which serves particular interests and groups ofpeople--and should be evaluated as such. As anideology it serves to help determine who gets whatin the world economy, by legitimating certainstructures, processes, and behaviour, by reproduc-

Conclusions: So what?What does all this mean? And what are we able tosay about the core problem of IPE-the actual orpotential structural mismatch between a formalstate-system based on territory (i.e. nation states)and an economic system that is increasingly non-territorial and globalized? As we have already dis-_covered, the meaning and implications of thedevelopments traced in the last section are far fromagreed-the interpretation ofwhether we are still inan essentially international economy or whetherwe now have a global economy is a highly con-tentious matter. What is clear is that these changes

International Political Economy

ing a certain distribution of power and by layingout a framework for action based on a particularintersubjective view of the world (see Case Study 2,Box 11.3). Hence, neo-liberalism should be seen aspart of the political process of globalization, ratherthan as an academic theory purporting to offer aform of neutral, objective knowledge.

Key Points

~ The processes of globalization have beenuneven, and most of the poor countries are noweffectively left out of the global political econ-omy, whilst in the Triad regions the process hasquickened and deepenedthis has created a newand different structure of international politics.

Vast increases in global capital ows have pro-duced a symbol economy separated from thereal economy, and, again this has largelybypassed the poorest countries.

v International production has become the mostdynamic aspect of world production and tradeand has changed the structure of the IPE.

I~ Domestic economic activity is now interna-tional--almost impossible to think of a domes-tic economic activity that is not, in some way,international . . .

e Neo-liberalism provides the ideological basis forglobalization and has become the unquestionedcommon sense of the world economy.

have affected different people in different situa-tions and in different countries in different ways. Itis not sufcient to generalize on the basis of whichcountry we live inthe gap between rich and poorhas been widened not only across the world butwithin nation states as well, and wealth hasbecome even more concentrated in the hands of asmall percentage of the population. This is world-wide and also within the countries of the Triadregionsin the US around 1 7 per cent of the popu-lation control over 85 per cent of the total wealth,and these gures broadly represent the global

227

Roger Tooze

distribution of wealth also. It also matters what sec-tor of economic activity we are in. Some sectors, likenance, have become global, operating in a real-time global market, but others are predominantlyinter-national or sub-national. Finally, it matterswhat rm or organization we are insomerms/organizations are built on the basis of a worldmarket and international production, others not.

The net result is that it is no longer sufcient(even if it ever was) to analyse political economy atjust the two levels of international and national.Apart from anything else this sets up the state as theuniversal basis of economic life in space and time,and this ahistorical view is not only wrong, but hasthe important political consequence of disqualify-ing any other forms of political economy fromlegitimate consideration. We should consider atleast four levels and the interactions between them(and note that within the EU this should be velevels with the addition of regional). These are:global, international, national, and local. And thekey to the developments we have discussed is thatthe global links directly to the local.

To what extent, then, has the national state lostcontrol of the economic (and political) activitywithin its territorial boundaries? Well, it is clearthat the state is having a hard time-the very com-plexity of the world system means that policy is dif-cult to make and to implement. And the pace oftechnological change, particularly in the sectors ofcommunications and computer technology, ismaking the policy context even more complex.Moreover, a whole new range of issues is emergingas a result of the focus on traded services and thiswill make the problems of managing the domesticeconomies of the Triad countries even more thebasis of international negotiation. Amongst all thisactivity, the state is facing a growing threat to itslegitimacy (Horsman and Marshall 1995). Citizensare realizing that national governments are not ableto deliver their election promises in the face of theplethora of changes we have described. And thisrealization is linked into a questioning of the

228

nation state as the natural unit of political com-munity and the given unit of international rela-tions. It might be that a more globalized economywill allow smaller political communities to exist interms of local-global links: that is it may make pos-sible the economic independence of, say, Quebec.Certainly, the importance of knowledge in theglobal technological economy effectively de-linksany territorial state from the necessity to depend onnatural resourcesalthough it is questionable as tohow many Singapores the world economy couldsupport.

The key to understanding these changes is tounderstand the changed nature of the world polit-ical economic system as a whole. This does notmean that states are no longer important or thatnational governments are no longer relevant orcompetent. This point has been well made by oneof the rst researchers to identify the changes tak-ing place in the world economy and it is moreimportant today in the context of the currentdebate:Afrming the greater importance of the world economicsystem over that of the nation-states should not be inter-preted as showing that the latter are eclipsed: they con-tinue to exist but their structure and their relations are

. _.,_

determined by the whole of which they are a part.(Michalet 1982: 50).

Whatever our conclusions, it is clear that thereare fundamental changes taking place which willhave signicant long-term implications for thenature and substance of intemational politics.Change in the IPE does not mean smoothly movingfrom one stable situation to another as conven-tional economics indicateschange will involvedisruption and gains and losses. Who benets?remains the key question of IPE at a time when thedominance of neo-liberalism, institutionalized inthe global economy of the Triad regions and theTNCs, has already begun to bring about counter-responses. The resolution of these growingtensions will be the focus of IPE for the twenty-rstcentury.

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International Political Economy

QUESTIONS

1. What is IPE and why is it central to understanding the debate on globalization? i

2. What processes have led to the blurring of the distinctions between politics and eco-nomics?

3. What processes have led to the blurring of the distinctions between what is consideredinternational policy and what is considered domestic or national policy?

4. How and why do words matter in the debate on a globalized IPE?

5. Identify and explain the core problem for IPE in a globalized system.6. What is the basis of an international economy?7. What is the basis of a global economy?

8. What evidence is there to substantiate the claim that we now have a global politicaleconomy?

9. What are the principal changes that have occurred in the world economy over the pastfifteen years? 5

10. To what extent can nation states now achieve their economic policy objectives?

11 . What is the role of the ideology of neo-liberalism?

12. What forms of international co-operation are appropriate for the world economy?

GUIDE TO FURTHER READING u

Agnew, J., and Corbridge, S., Mastering Space: Hegemony, Territory and International Political Economy(New York: Routledge, 1995)political geography meets IPE and the result is excellent, containsthe denitive chapter on IR and territory.

Axford, B., The Global System: Economics, Politics and Culture (Cambridge: Polity Press, 1 995)a goodintroduction to thinking about the global system with some thoughtful methodological mater-ial.

Boyer, R., and Drache, D., (eds.), States against Markets: The Limits of Globalization (New York:Routledge, 1996)-interesting and original collection of essays, mainly by Canadian writers.

Drucker, P., The Changed World Economy, in Foreign Affairs, 64: 4 (1986), 768-91-a short and sig-nicant introduction to the framework of the world economy, clearly written in non-technicallanguage.

Hirst, P., and Thompson, G., Globalization in Question: The Intemational Economy and the PossibilitiesofGlobal Governance (Cambridge: Polity Press, 1996)perhaps the denitive examination of theglobalization thesis-so far. Well written, with some impressive new information.

Horsman, M., and Marshall, A., After the Nation-State: Citizens, Tribalism and the New World Disorder(New York: Harper Collins, 1994)written by two journalists, provocative and excellent accountof the problems facing the nation-state. A must read.

Kanter, R. M., World Class: Thriving Locally in the Global Economy (New York: Simon and Schuster,1995)best-selling manual of how to excel in the global economy, -much analysis ofglobal-local dynamics. 6

Murphy, C. N., International Organization and Industrial Change: Global Governance since 1850

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(Cambridge Polity Press, 1994)an analysis of international organizations as expressions ofsocial forces, essential reading for those wishing to understand the world we live in.

Pettman, R., Understanding International Political Economy-with Readings for the Fatigued (StLeonards: Allen and Unwin, 1996)-a terric book, clear and thoughtful. Unorthodox readingswhich really work-highly recommended. _

Stopford, 1., and Strange, S., Rival States, Rival Firms: Competition for World Market Shares (Cambridge:Cambridge University Press, 1991)identies the importance of international production andthe rm as a key actor in IPE. Sets out the basis of a new structure of IPE. Clear and accessible.

Strange, S., States and Markets, 2nd edn. (London: Pinter, 1994b)iconoc1astic analysis of IPE, emi-nently readable and provocative-well worth reading if only for its Prologue which is the bestdemonstration of the nature of political economy I have ever read.

Stubbs, R., and Underhill, G., (eds.), Political Economy and the Changing Global Order (Basingstoke:Macmillan, 1994)--wide ranging collection, excellent introduction to IPE and global order.

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