International Political Economy
This article will focus on how globalization influences the international political economy. International political economy (IPE) evolved into an international studies approach as the result of the 1973 oil crisis and the breakdown of the Bretton Woods system. Many IPE researchers have highlighted the significance of the relationship between the economic and political factors in regards to international relations. The international economic system and the international political system work in unison. IPE is composed of a range of theoretical frameworks, and the foundations are established based on ideologies between states and markets.
Keywords Berlin Wall; Bretton Woods system; Capitalism; Cold War; Colonialism; Imperialism; International political economy; Liberalism; Marxism; Mercantilism
Management: International Political Economy
"Globalization has become a particularly fashionable way to analyze the changes in the international economy and in world politics. Advances in technology and modern communications are said to have unleashed new contacts and relationships among people, social movements, transnational corporations, and governments" (Woods, 2000, p.1).
The term, "political economy" is used to describe different events and situations in political science and international relations. Sometimes, the term is used to explain the "relationship between political systems and economic forces" (Devetak & Higgott, 1999).
Within the trend towards globalization, there are two aspects of change. The quantitative position has been around for a while, but the qualitative approach is fairly new. When referencing quantitative globalization, one is referring to an increase in trade, capital movement, investments, and interdependence. These concepts have been buzzwords since the 19th century. The most recent changes in globalization have occurred as a result of qualitative changes in international politics. These changes have occurred (1) in the way people think and identify themselves and (2) in the way states and firms perceive and pursue their goals.
There are three elements of globalization and they are interconnected. All three theories work together to provide different perspectives of globalization. The three elements are (1) the expansion of markets, (2) the transformation of politics, and (3) the emergence of new social and political movements (Woods, 2000).
- The expansion of markets. This element highlights the "transformation of global economic activity. Technological change and government deregulation have encouraged the growth of transnational networks in production, trade, and finance" (Woods, 2000). Production refers to organizations such as multinational corporations who use advanced technology and new production techniques to promote their products across the world. Trade refers to an organization's ability to increase the quantity and speed of goods and services that are distributed around the world, increase the impact trade has on domestic economic arrangements, and strengthen a firm's ability to facilitate trade. Finance refers to the creation of a global financial system where a broad range of goods and services can be sold across the world in a timely manner.
- The transformation of politics. This element highlights a global political economy in which a country's borders become less important. If one were to compare the old system with the new system, the old system would be defined as the process of sovereign states working together based on the rules that they agreed upon. The new system is based on how political power and political activity work together across sovereign states (Held, McGraw, Goldblatt & Perraton, 1999). Global issues require sovereign states to make policies at levels above the individual level. Some of the issues that require a joint effort among nations are human rights, environment degradation and nuclear safety. Global warming and the armed weapons race are two such issues(Clapp & Helleiner, 2012; Wangler, Altamirano-Cabrera & Weikard, 2013).
With every good deed, some type of turmoil may be created. While the technological advances and cooperation of nations has been hailed as a positive step towards world harmony and growth, there are some negative aspects as such as transnational crime, weapons, drugs and illegal immigrants. Therefore, globalization requires new forms of regulation since individual states cannot overcome these issues on their own.
- The emergence of new social and political movement. Globalization not only affects the markets and states. It also affects people's lives. The new communication systems have produced a global culture. However, the effort to bring everyone together has not always been welcomed. For example, there are citizens in Russia and the Middle East who have rejected Westernization.
International political economy (IPE) evolved into an international studies approach as the result of the 1973 oil crisis and the breakdown of the Bretton Woods system. During the 1970s, scholars started to understand the importance and weaknesses of the economic base for the world order. Many IPE researchers have highlighted the significance of the relationship between the economic and political factors with regards to international relations.
Many scholars have made contributions to the field of International Political Economy (IPE). Highlights of their contributions include:
The international economic system and the international political system work in unison. Economic partnerships are determined by political and diplomatic relationships and vice-a-versa. According to Spero (1990), political factors affect economic outcomes in three ways, and they are:
1. The political system shapes the economic system because the structure and operation of the economic system is determined by the structure and operation of the international political system.
One could see the influence of the international political system on the international economic system by reviewing the political developments during three periods of time in history. The three periods are (a) nineteenth-century imperialism, (b) post-World War II era of cold war between the Soviet Union and the Western free world led by the United States, and (c) the post-Berlin Wall demolition and demise of the Soviet Empire era (Phatak, Bhagat, & Kashlak, 2005).
Period 1: Nineteenth-century imperialism and mercantilism were driven by two major political factors: (1) the powerful nation-states in Europe (i.e. the United Kingdom, France, Germany and Holland) who had equal military power and (2) nationalism practiced by these nation-states. These countries encouraged their citizens to practice and participate in activities which enhanced national pride, national identity, self-sufficiency, wealth and economic power. Cooperative relations between nations were not popular. Each country wanted to promote itself. Both of these two factors led these nation-states to pursue empire building, which encouraged colonialism in Asia, Africa and Latin America. The objectives of the nation-states were to obtain raw material and minerals from the colonies, process the goods into finished products in their home countries, and market the products in the colony markets. The nation-states sought to accumulate wealth and power so that their citizens could have full employment at the expense of colonized countries whose markets and production were controlled by the nation-states. The European nation-states divided the world into parts that each controlled. The British controlled most of western and southern Asia and parts of Africa. The French controlled Southeast Asia and northwest Africa. The Dutch controlled Indonesia and parts of Central and South America, and the Germans controlled parts of Western Africa. Wars broke out between the different nation-states as each attempted to take control of the other's territory. The British and French fought for control of India, and the British and Dutch fought for control over parts of Africa. European imperialism determined trade and investments. As a result, the political system was controlled by colonialism and empire building. Period 2: As the imperialist system ended after World War II, the United Kingdom's dominance in the West came to an end. However, two other superpowers emerged — the United States and the Soviet Union. A new political and economic system developed as the result of the rivalry between these two countries. The new political system was bipolar and hierarchical. The United States led the West and Japan. The Soviet Union led the Soviet bloc in the East, which comprised of countries behind the Iron Curtain. The developing countries in the third world remained politically subordinate to their colonial mother countries. The United States and the Soviet Union battled in what...
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