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Chapter 4

Detailed Textbook Notes Chapter 4

Political Science
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Chapter 4: Political Perspectives on the World Economy
Introduction to International Political Economy
Development of modern capitalism in Europe and its subsequent global expansion
established European dominance in global economy by 17th century
U.S. became dominant state actor in world economy after world wars & decline of
European imperial power
Today capitalism remains primary socioeconomic system
Principles of liberal economics guide theory behind institutions (IFIs) and banks, and
For advocates of livery economics spread of capitalism is seen as positive phenomenon
Bring greater wealth and quality of life to worlds population
Reducing prospects for war as trade & investment promote international
interdependence and cooperation
World economy is unfair, unstable, & unsustainable
Rich vs. poor
Polarizing of wealth seen as inevitable outcome of evolution of global capitalism
Economic Politics Ascendant
Focus: interaction between political and economic forces
Politics drives economics or economics drives politics
Ie. U.N. is a political institution YET through work of development agencies
(World Bank & International Monetary Funds), it is also an economic factor
Economic matters can transcend political matter and VICE VERSA
Example of separation of commerce from politics occurred in Crimean War (1854-56)
London banks floated loans for Russian government WHILE England was at war
with Russia

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*For realists, international economic economy in the postwar period was defined by
American economic power, which offered a stable market for world production and
provided foundation for a system of international institutions, regimes, rules, and norms
International economic issues began to increase; by 1990s economic issues were leading
priority for most states
FACTORS for ascendance of political economy issues in global politics:
Increasing global interdependence
oInterdependence reflected in increased importance of economic
institutions, organizations, & agreements designed to promote economic
transactions across states
Decline of the U.S. economy
oLatter half of Cold War, U,S. economy entered period of what some
describe as decline
The rise of other state economies
oAfter WWII, economies of Western Europe & Japan emerged as economic
centres of power & several countries in East Asia experienced high levels
of economic growth
The rise of multinational corporations (MNCs)
oThere are over 60,000 MNCs in the world economy, accounting for
approximately 1/3 of world trade
oAs size & resources of MNCs grew, so did debated about their impact on
global trade & their role in economic development of poor countries
The oil shock
oOrganization of the Petroleum Exporting Countries (OPEC)
objective was to resist pressure from consuming countries for lower prices
and to ensure steady oil revenues for producers
oOil important in global politics, with any increases in oil prices affecting
all aspects of global economy
European Integration

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oEuropean Coal & Steel Community (ECSC) established European
Economic Community (EEC) to reinforce cooperation to prevent Franco-
German conflict and to strengthen Western Europe against Soviet threat
oIn 1993, an expanded community of 15 states renamed itself European
Union (EU), and in 2004, 10 new states joined EU, continuing process that
remains the leading example of economic & political integration
Growing Awareness of global disparities
oHigh levels of poverty, poor infrastructure, economies dislocated by
colonialism, lack of modern technology, and political instability caused
newly independent countries to be at a disadvantage in world economy
othe North (industrialized countries) vs. the South (less-developed
The collapse of the Soviet Union
oFall illustrated importance of economics as foundation for state power
oU.S.S.R.s decline & eventual collapse due largely to failure of its economic
system (Chapter 3)
oFall of U.S.S.R. removed military and ideological threat to West,
resulting, economic issues became more prominent in global stage
IPE scholars focus on relationship between economics, politics, society, and power
Realist approached to IPE: Mercantilism & Economic Nationalism
State = most important actor in international economic affair; states act to secure &
advance economic interests defined in terms of economic power
Argue that states are concerned with relative gains in economic strength across states
See world economy as zero-sum competition
International economic organizations are built and managed by states, and as such are
primarily forums for state action and arenas for state competition
Why do states cooperate on trade & financial matters?
For realists, states cooperate because of the need for self-help: when interests of
states converge, cooperation is possible
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