GPE: Theoretical Perspectives Notes

Political Economy: Meanings

  • Originally synonymous with economics, as seen in John Stuart Mill's Principles of Political Economy (1848).

  • Now generally refers to the study of interactions between economic and political processes.

  • Focuses on how the pursuit of wealth intersects with the pursuit of power.

  • Common assumptions include materialism and rational choice.This framework is crucial for analyzing policy-making, electoral behavior, and governance structures, allowing scholars to understand how economic interests shape political outcomes.

Global Poverty Trends (1820-2015)

  • Extreme poverty is defined as living on less than \1.90 international-$ per day.

  • International-$ are adjusted for price differences between countries and for inflation.

  • Graph shows the number of people living in extreme poverty versus those not in extreme poverty from 1820 to 2015.

Global Trade Trends

  • Value of exported goods as a share of GDP.

  • Calculated as total value of merchandise exports divided by gross domestic product, expressed as a percentage.

  • Data from Fouquin and Hugot (CEPII 2016).

  • The first graph illustrates the world's trend.

  • The second graph illustrates the world, Netherlands, Germany, United Kingdom, United States export trends.

Global Wealth Distribution (2020)

  • Over \1M: 45.8%45.8\% of world wealth, held by 1.1%1.1\% of the global population.

  • $100K\$100K - $1M\$1M: 39.1%39.1\%.

  • $10K\$10K - $100K\$100K: 11.1%11.1\%.

  • Less than $10K\$10K: 1.3%1.3\%, held by 32.8%32.8\% of the population.

  • Source: Credit Suisse Global Wealth Databook 2021

GDP per Capita (1950-2019)

  • Data adjusted for inflation and differences in living costs between countries.

  • Expressed in international-$ at 2017 prices.

  • Illustrates GDP per capita trends for Singapore, United States, Netherlands, United Kingdom, France, Malaysia, Indonesia, Philippines, Vietnam and Myanmar.

Theories of Global Political Economy

  • Table 1.1: Interpretations of the Asian financial crisis

    • Liberal Perspective

      • Causes: Crony capitalism, lack of transparency.

      • Key issues: Corruption, lack of liberal economic practices.

      • Lessons: Increase transparency and good practice in developing countries.

    • State Power Perspective

      • Causes: Over-rapid liberalization, reduced state capacity to regulate.

      • Key issues: Clash of Anglo-American versus Asian models.

      • Lessons: Limit financial speculation through state policies.

    • Critical Perspective

      • Causes: Predatory liberalism, power of financial interests, systemic flaws.

      • Key issues: Human suffering caused by financial collapse.

      • Lessons: Reform international financial system, defend national system.

Theoretical Perspectives Compared (Table 1.2)

  • Economic Nationalist

    • Historical Origins: Fifteenth century.

    • Major Figures: Hamilton, List, Krasner, Gilpin, Strange.

    • Variants: Mercantilism, realism.

    • Human Nature: Aggressive.

    • Units: States.

    • View of the State: Unitary actor.

    • View of TNCs: Beneficial/harmful.

    • State as power-seeking rational actor.

    • Behavioral dynamic: Potentially negative.

    • Market relations: Anarchy/conflictual.

    • System structure: Zero sum.

    • Importance of a dominant state: Hegemony.

    • International cooperation: Not very significant.

  • Liberal

    • Historical Origins: Nineteenth century.

    • Major Figures: Smith, Ricardo, Kant, Wilson, Keynes, Hayek, Keohane, Nye.

    • Variants: Free trade, interdependence.

    • Human Nature: Cooperative.

    • Units: Firms, states, NGOs, IGOs, individuals.

    • View of the State: Pluralist state: diverse interest.

    • View of TNCs: Beneficial.

    • Individual as rational actor but outcomes not always optimal.

    • Behavioral dynamic: Positive.

    • Market relations: Cooperative/interdependence.

    • System structure: Positive sum.

    • Importance of a dominant state: Post-hegemonic.

    • International cooperation: Important.

    • Game metaphor: International.

  • Critical

    • Historical Origins: Nineteenth century.

    • Major Figures: Marx, Lenin, Frank, Cox.

    • Variants: Marxism, feminism, environmentalism.

    • Human Nature: Malleable.

    • Units: Class, gender, planet, global capitalism.

    • View of the State: Representative of class interest groups.

    • View of TNCs: Exploitative.

    • Dominance and exploitation within and between societies.

    • Behavioral dynamic: Exploitative.

    • Market relations: Hierarchy/conflictual.

    • System structure: Zero sum.

    • Importance of a dominant state: Hegemony in state and society.

    • International cooperation: Serve interests of wealthy (states, firms and classes).

Key Thinkers

  • Adam Smith (1723-1790): Ancestor of the liberal school

    • "The statesman who should attempt to direct private people…"

    • "There is no art which one government sooner learns…"

    • "In general, if any branch of trade…"

  • Karl Marx (1818-1883): Ancestor of the critical school

    • "We have seen what sort of fraternity Free Trade begets…"

  • Friedrich List (1789-1846): Ancestor of the economic nationalist school

    • "The system of protection, inasmuch as it forms the only means…"

Ricardian Model of Comparative Advantage

  • The equations are:
    Slope=−P<em>RP</em>MSlope = -\frac{P<em>R}{P</em>M}