Oatley Chapter 1: International Political Economy

International Political Economy (IPE)

Studies how politics shape developments in the global economy and how the global economy shapes politics. This also studies the political battle between the winners and losers of global economic exchange.

World Trade Organization (WTO)

The international organization with responsibility for trade disputes.

Four issue areas of the global economy

The international trade system, the international monetary system, multinational corporations (or MNCs), and economic development.

International Monetary System

Enables people living in different countries to conduct economic transactions with each other. This focus on how political battles between the winners and losers of global economic exchange shape the creation, operation, and consequences of this system.

Multinational Corporations

Firm that controls production facilities in at least two countries.

Two abstract and considerably broader questions typically shape IPE scholarship

(1) How exactly does politics shape the decisions that societies make about how to use the resources that are available to them? (2) What are the consequences of these decisions?

Complicated by two considerations.

(1) All resources are finite. (2) In every society, groups will disagree about how available resources should be used.

Welfare Consequences

They determine the level of societal well-being.

Distributional Consequences

They influence how income is distributed between groups within countries and between nations in the international system.

Evaluative Studies

Oriented toward assessing policy outcomes, making judgments about them, and proposing alternatives when the judgment made about a particular policy is a negative one.

Welfare Evaluation

Interested primarily in whether a particular policy choice raises or lowers social welfare.

Three traditional schools of political economy

The mercantilist school, the liberal school, and the Marxist school.

Mercantilism

Relationship between economic activity and state power.

Liberalism

Challenge the dominance of mercantilism in government circles.

Market Failures

Instances in which voluntary market-based transactions between individuals fail to allocate

resources to socially desirable activities.

Marxism

Originated in the work of Karl Marx as a critique of capitalism.

Capitalism is characterized by two central conditions

The private ownership of the means of production (or capital) and wage labor.

Mercantilists

Focus on the consequences of resource allocation for national power.

Liberals

Rely heavily upon economic theory to focus principally upon the welfare consequences of resource allocation.

Marxists

Rely heavily upon theories of class conflict to focus on the distributional consequences of resource allocation.

Interests

The goals or policy objectives that the central actors in the political system and in the economy.

Material Interests

Arise from their position in the global economy.

Ideas

Mental models that provide a coherent set of beliefs about cause-and-effect relationships.

Political Institutions

Establish the rules governing the political process.

Bretton Woods system

Provide the institutional structure at the center of the global economy.