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POLI 212 - MARCH 21.docx

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Political Science
POLI 212
Hudson Meadwell

MARCH 21, 2012:  Koehane: he treats post war settlements (“imbedded liberalism”), as more than a domestic bargaining- he is interested in consequences of the changes in the international economy. He is arguing about how things began to change in the late 1960s and early 1970s. He is arguing that there is a tension built into post-war settlements, a tension which comes to be exposed in the late 1960s and early 1970s. Imbedded liberalism a combination in domestic intervention in the economy, in the form of some sort of welfare regime, and second, imbedded liberalism also includes a particular type of foreign economic policy. If they adopt a welfare regime, they develop a laissez-faire attitude to trade.  Koehane argues that there is tension between domestic intervention and laissez fair internationally. The potential contradiction is papered over in the heyday of European economic reconstruction (from the 1950s to the 1970s), and it is contained because this is a period of relatively easy economic growth in European political economies.  From the 1970s on, the tension is exposed. The question for Koehane is how states will respond to this change in economic conjuncture:  In the late 1960s and early 1970s, imbedded liberalism was underwritten by American economic and military hegemony, but after this period it enters a period of decline. American support for economic reconstruction in European and their support for international economic institutions also beings to decline.  By the mid-1970s, newly industrializing economies in the peripheries are beginning to offer competition to European economies in the international trading system, so America is beginning to lose its comparative competitive advantage.  The cost of raw materials begins to increase dramatically in the early 1970s (in particular, the production of oil due to the cartelization of oil supply in the Middle East).  Low growth and relatively high inflation begins to characterize European economies, and during the easy growth period there was low unemployment, high growth, and low inflation. They then begin to go through stagflation. How well will states and domestic political economies respond to the new conjuncture and this tension?  He highlights the importance of the size of the ratio of domestic activity to world activity. There are small economies and large economies. It is the variable of size that he uses to account for countries responding differently to changes in the international economy.  He talks about Type A- political economies lie Britain and France, which are relatively large, and Type B-political economies, such as Austria and Sweden, which are relatively small economies. Given the economic problems, how will type A states respond and how will type B states respond? He argues that Type A states will respond via the introduction of protectionist measures in international trade- this shows that imbedded liberalism is fragile.  Why would size matter? The larger your domestic economy is, the less likely you are to depend on international trade to maintain a certain standard of living. It is to imply that larger states might be able to afford protection in ways that smaller states cannot. It also suggests that large states have less of an incentive to support international institutions put in place to encourage states to maintain a commitment to economic openness. Type B states (Austria, Sweden) with small economies are much more likely to try to maintain a commitment to international openness. They are relatively small, so trade is very important to their welfare and well-being. These are also economies that are relatively efficient in comparative terms. If these economies are open and expose themselves to trade, they have to be able to maintain international economic competitiveness. You have to be efficient enough to compete successfully, so this efficiency that is needed has consequence. Contact with the international economy encourages countries to regulate wage labour, because wages that are too high/low threaten economic competitiveness. That is why you see fairly fully developed welfare regimes (Sweden is the classic case). Voluntary wage restraint is a response to incentives created by exposure to international trade.  Koehane wrote this in 1984, and this prediction in 1984 is that there would be much more economic protection as a consequence of the recurring stagflation. This is a predication that is not validated by events. He pays no attention to the incentives for European economies to solve their problems with co-ordination and regional economic integration. He did not expect the deepening of the ties using the European union- he is looking for separate state led responses.  Esping-Anderson is interested in “new politics.” He is interested in the transition from an industrial economy to a post-industrial ec
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