countries begin to discuss monetary issues and coordinating exchange rates among themselves =
Group of Seven (US, Japan, Germany, UK, France, Italy and Canada) in 1975.
•Protectionism emerged in trade (especially in industrialized countries); trade barriers, violating
principles of GATT of non-discrimination i.e. Multifiber Arrangement of 1973.
•Relationship between north and south; highlights dependency theory/structuralist theories that
emerged in 1970s about the negative aspecets of interdependence. Impeding development
possibilities in the south. Brandt Report 1980; high-level-policy makers findings on why the
international community should respond to these challenges of development.
•1980 shift in US economic policy, 1979 saw US Federal Reserve raised interest rates to stem
inflation and contract economic activity in the states. This had impact on world-economy. 1960s-
70s saw facilitated global capital markets and financial flows yet the rise of interest rates in 1979
was a wake up call to investors and creditors who realize many loans cannot be repaid.
•Debt crisis means IMF role in economy expands significantly; SAPS imposed as immediate
measures to decreases inflation, govt expenditure and it’s role in economy – trade liberalization,
deregulation, privatization = neoliberal policies of 1980s vs. Kensyians belief of govt intervention
in economy. By late 1980s Washington Consensus as a neoliberal policy was being used to reflect
•1990s end of cold war faces challenge of how to integrate Central and Eastern European
countries. IMF and WB was not broad enough and thus NGOs and governments were given roles
too. Broadened more than just international trade, but intellectual property rights… food safety
standards. Emerging economies such as China and India played important role in trade, finance
and development assistance negotiations by 2007.
Traditional and new approaches to IPE
1.Liberal tradition: free market reigns morally and efficiently speaking. Free trade enables
countries to effectively benefit from their comparative advantages. Invisible hand guides the
economy and ensures efficient and equitable distribution. Govt and institutions must ensure
openness and operation of markets; decision-makers must not be corrupt or ignorant of economic
choices in pursuit of successful economic policies.
Order achieved through invisible hand.
2.Mercantilist tradition: same presumption as realists in IR; no focus on individual policy
makers or their choice but assume that world-economy is an arena of competition among states
seeking to maximize their relative gains – survival. States do so by ensuring self-sufficiency in key
strategic industries and commodities and by using trade protectionism, subsidies, selective
investments in the domestic economy. Most powerful states define rules and limits of system
through hegemony, alliances, balances of power and thus stability achieved (when one state
plays role of hegemon through their basic rules or there’s a balance of power).