International Political Economy:

Hegemonic Leadership and Global Economy

How did it start? ^_-

Realist Perspective Liberalist Perspective

STATES GOVERNMENTS, ECONOMIC ACTORS

Wealth & Independence Free trade & Free movement of capital

HEGEMONY & Balance of POWER

Invisible Hand of Competition

REALISTS give priority to politics over economics and believe that changes in the distribution of political power have a major effect on the nature of international economic relations

Relative gains than Absolute gains…

Timeline of Realism

Interwar Period- Liberal free trade ideas lost some of their

appeal- Realist ideas gained more influence Post-World War II Period- Security issues- Consensus at Bretton Woods - Overshadowed by liberalism and marxismRevival Period- Many realists broaden their focus (Cold War,

Global Economy, Instability)- Interdependence v. the distribution of power

among states

The Entry of HegemonyFor REALISTS, THE DISTRIBUTION OF POWER AMONG STATES…

Is the most important factor determining whether international economic relations will flourish.

A major factor to consider in power distribution is whether there is a global hegemonic state with predominant power willing and able to provide LEADERSHIP.

The newer Realists…Strong advocates of HEGEMONIC STABILITY THEORY

The theory…• HST is closely tied with the realist

perspective but it is also a hybrid theory that draws on the liberal and structuralist perspectives

HEGEMON

Definition

- Power distribution is extremely unequal

- State-centric concept for Realists

One state can largely impose its rules and wishes (at the very least by veto power) in the economic, political, military, diplomatic and cultural arenas.

• STATE-CENTRIC CONCEPT• Gramscians

- Uses hegemony in a cultural sense to connote the complex ideas social groups use to assert their authority.

- They refer to the hegemony of ideas such as capitalism and to the global predominance of American culture.

Antonio Gramsci, former leader of Italian Communist Party

Types of Hegemony1. Monetary hegemony is an economic and

political phenomenon in which a single state has decisive influence over the functions of the international monetary system.

2. In Marxist philosophy, the term Cultural hegemony describes the domination of a culturally diverse society by the ruling class, who manipulate the culture of that society — the beliefs, explanations, perceptions, values, and mores

3. Posthegemony or post-hegemony is a concept which designates a period or a situation in which hegemony is no longer said to function as the organizing principle of a national or post-national social order, or of the relationships between and amongst nation-states within the global order.

4. In international relations, regional hegemony is the influence exercised over neighboring countries by an independently powerful nation, the regional hegemon. The relationship between regional hegemons and the other states within their spheres of influence is analogous to the relationship between a global hegemon and the other states in the international system.

Hegemony, in short…is the geopolitical method of indirect imperial dominance, with which the hegemon (leader state) rules subordinate states, by the threat of intervention, an implied means of power, rather than by direct military force — that is, invasion, occupation, and annexation.

The Hegemons (International Political Economy:Beyond Hegemonic Stability Theory- Helen Milner 1998)

Britain U.S

The Schema

Smoot-Hawley

Tariff

Isolationismthe belief that a country

should not be involved with other countries

Lesson learned

Leadership Role (GATT &

BWS)

Hegemony after Brits

But Power isn’t EVERYTHING…WHY?

INSTITUTIONS

MULTILATERAL INSTITUTIONS

Does Hegemony breed Stability?

The theory claims that the presence of a single, strongly dominant actor in international politics leads to a collectively desirable outcomes for all states in international system. Conversely, the absence of hegemon is associated with disorder in world system and undesirable outcomes for individual states.

(The Limits of Hegemonic Stability Theory- Duncan Sindal 1985) The theory of Hegemonic Stability is not a single theory, but a

research program composed of two, analytically distinct theories: Leadership theory & Hegemony Theory

(Leadership, Hegemony, and the International Economy: Naked Emperor or Tattered Monarch with Potential?- David Lake 1993)

Hegemonic Stability Theory

Theories under HST LEADERSHIP THEORY-based upon the theory of public goods and seeks to explain the provision of international stability, reconceptualized as the production of an international economic infrastracture.-States are rational egoists who seek to maximize their own welfare, implicitly defined in materialist terms.

HEGEMONY THEORY-focuses on different structurally derived trade policy preferences of states and attempts to explain international economics openness.-States are presumed to possess different trade policy preferences derived from their varying positions within the international economic structure.

HST: how dominance may be reflected in ‘leadership’ rather than exploitation

The Global Economy

Agnė Vaičiulytė, BN10B

What is The Global Economy? A global economy is characterized as a world economy with

an unified market for all goods produced across the world. It gives domestic producers an opportunity to expand and raise capacity according to global demands likewise it also provides an opportunity to domestic consumers to choose from a vast array of imported goods. The concept of a global economy cannot be understood in isolation. For this globalization needs to be defined first.

Globalisation may be defined as the integration of production and consumption in all markets across the world.

Impact of Globalisation: The emergence of Trans National Companies or Multi National Companies has been due to the direct impact of globalization. Globalisation has boosted productivity and capacity of these companies to astronomical highs because of the stiff competition at the international level.

Global Economy Advantages & Disadvantages

Advantages:1.Raise of world productivity and incomes;2.Improvement of the standards of living at a global level;

3.The industrial sector attain cheap labour, capital and technology.

4.Promotion of peace and cooperation.5.Wide customer base (pro for small companies).

6.Outsourcing.

Disadvantages: 1.Wide divide between have-nots and have-lots in less developed economy countries.

2.Different wage standards.3.Loss of domestic jobs.4.Differences in the legal environment.5.The difficulty of competition.

ECONOMIC INDICATORSMARKET ECONOMY - An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses and there is little government intervention or central planning. This is the opposite of a centrally planned economy, in which government decisions drive most aspects of a country's economic activity. 

POLITICAL ECONOMY- originally was the term for studying production, buying and selling, and their relations with law, custom, and government, as well as with a distribution of national wealth including through the budget process. 

Mixed Economy-  can be defined as a form of organization where the elements of both capitalist economy and socialist economy are found.

Simply in such type of economy there is the presence of private economic freedom with centralized planning with a common goal of avoiding the problems associated with both capitalism as well as socialism.

US MARKET ECONOMY - has been deemed one of the most efficient economies with the lowest inflation rates and rates of unemployment in the world. The essential feature of a market economy is the total freedom of individuals and businesses to choose from between an array of goods and services according to their tastes and preferences. The decisions of what to produce, whom to produce for in a world of limited resources, are addressed by the forces of the market, namely the supply and demand of a particular commodity in question. 

CAPITALIST ECONOMY - An economic system based upon the principle of "supply and demand." People produce goods that others want in order to sell or exchange for a profit - the goal being to accumulate wealth.

TRADITIONAL ECONOMY-An underdeveloped economy in which communities use primitive tools and methods to harvest and hunt for food, often resulting in little economic growth. Traditional economies are often found in rural regions with high levels of subsistence farming. Countries that evolve their economies past the traditional level often develop into market economies or command economies.

Command Economy, both state-owned and private enterprises receive guidance and directives from the government regarding production capacity, volume, modes of production and course of their actions. Planned economic system is broadly segregated into two groups – Centralized and Decentralized. The centralized or centrally Planned Economy, as prevalent in former Soviet Union, is a more familiar concept between the two. The decentralized Command Economy, on the other hand, is more theoretical in nature with little or no application in the actual economic sphere

FREE MARKET ECONOMY-  primarily means a system where the buyers and sellers are solely responsible for the choices they make. In a way, free market gives the absolute power to prices to determine the allocation and distribution of goods and services

REGIONAL ECONOMY US AND LATIN AMERICA-    In April 2000, the U.S.

economy entered its 10th year of expansion. Although prices have been stable amid fast economic expansion, concerns about acceleration inflation remain, as exemplified by tight labor market and a sharp rise in crude oil prices.

   In Latin America, the Mexican economy continued its expansion buoyed by the brisk U.S. economy and strong domestic demand. The Brazilian economy recovered at a pace faster than had been expected.

EUROPE   Economic activities in the euro area began expanding as a pickup in

the world economy and the depreciation of the euro boosted exports, and fixed investment and private consumption have been increasing from the summer of 1999 onward.

   The Russian economy is expanding thanks to the recovery in exports due to higher crude oil prices on the international market.

ASIA-    East Asian economies are in a transition from a rapid post-crisis recovery to a sustainable growth, on the strength of a sharp increase in exports buoyed by worldwide demand for IT-related equipment and an increase in private consumption.

THE EVOLVING GLOBAL ECONOMYThe evolving global economy is based on a number of factors (Herr 1990): decreasing transportation and communications costs, new political structures and economic alliances (such as the European Community, North American Free Trade Agreement), and homogenization of tastes influenced by media and travel. The most important influence is the emergence of flexible, information-based technologies (Carnevale 1991). Profound economic and social changes are creating new market standards (productivity, quality, variety, customization, convenience, timeliness) and integrating producers and consumers into networks for delivering goods and services globally or locally. Meeting these standards requires great changes in organizational structures, skill needs, and jobs.

The global economy will influence people's lives whether or not they are employed in international firms. In the new economy, nations compete not only with each other's economic systems, but also with each other's research and development and educational systems. Global events affect domestic economies.

SKILLS FOR THE NEW ECONOMYThe new competitive framework requires a broader set of skills; "hard" (technical) and "soft" (interpersonal and communication) skills are equally important (Carnevale 1991). The skills identified by a number of authors (Carnevale 1991; Herr 1990; Rhinesmith 1991a,b, 1992) include managing information, resources, and relationships with people as well as self-management. The starting point, of course, is basic skills: reading, writing, computation, and, most important, ability to learn continuously throughout life. In addition, "global" workers need flexibility, problem-solving and decision-making ability, adaptability, creative thinking, self-motivation, and the capacity for reflection.

The Changing Demographics of Global Economy

In the 1960’s , the U.S economy was dominant in the world trade picture, U.S firms accounted for most of the foreign direct investment in the world, U.S dominance of large, multinational U.S firms on the international business scene and half of the globe-centrally planned economies of the Communist world, were off-limits to Western international business.

By the mid-1990s, the U.S share the world output had been cut in half and Western European and Southeast Asian economies accounted for major shares. The U.S share of worldwide foreign direct investment had also fallen , by about two thirds.

U.S multinationals were now facing competition from a large number of Japanese and European multinationals. Also there are mini-multinationals that emerged.

In the past 20 years the communism has been collapsed in Eastern Europe, which has created enormous long-run opportunities for international businesses. In addition, the move toward free market economies in China and Latin America is creating opportunities (and threats) for Western international business

FACTORS THAT INFLUENCE GLOBAL ECONOMY

World Trade A key economic principle since the 19th century has been that trade benefits all parties involved. Since the 1990s, trade pacts such as the North American Free Trade Agreement (NAFTA) and organizations such as the World Trade Organization have done much to facilitate global trade in goods and services. Among the world's industrialized nations, most tariffs and other trade barriers have fallen, increasing consumer access to other nations' goods. Developing nations have more of a mixed record on trade barriers, but the trend appears to be moving away from protectionist measures. Most remaining trade barriers, even in the industrialized nations, exist in agriculture.

TECHNOLOGY Advances in transportation and information

technology have helped speed the availability of goods and services around the world. The Internet age, for example, has made it possible for American consumers to access products from Europe, Asia and other places with the use of a computer and an Internet connection. Some pundits have quipped that the world is becoming smaller. Communication technology is a major reason for this.

LABOR AND CAPITAL MIGRATION Increased global trade has made products more mobile. Factors of production have become more mobile, as well. As transportation costs have declined over the decades, more workers have migrated to other countries for education and work opportunities. Examples include the migration of workers from Mexico and South America to the United States, and the migration of Africans and Eastern Europeans to Western Europe.

Capital migration is another key factor in the global economy. Multinational firms, in a continued drive to expand into new markets, have opened branches and production facilities around the world, going beyond the borders of the nations in which they started. One especially significant factor is the globalization of financial services.

ENVIRONMENTAL DEGRADATION The environmental impact of increased economic activity is a major challenge facing the global economy. Pollution is a byproduct of increased economic production and growth, and because environmental problems do not respect national borders, addressing issues such as climate change requires cooperation among business leaders and governments around the world.