Don't Want No @#$%^&! Googlemail

♠ Posted by Emmanuel in , at 2/28/2007 12:49:00 AM
The international political economy of domain names is an interesting subject--especially when obscure entities sue recognized Internet firms for names they claim to have rights to. As a longtime user of GMail, Google's e-mail service, I have a stake in the outcome of the cases against Google. Detractors call what the others have done cybersquatting, but the litigants here may have legitimate grievances. First we have German venture capitalist Daniel Giersch, who registered the name G-mail as a faster alternative to Deutsche Post in 2004. The Office for Harmonization in the Internal Market (OHIM) in Switzerland has decided recently in his favor and has effectively told Google to beat it. Now, the OHIM is no kangaroo court as its decisions have EU-wide force. Score a big one against Google; it will be compelled to use the yucky Googlemail name in the EU. In a twist on Google's slogan of "don't be evil," Giersch claims the Internet giant was "very evil" in how it reacted to the case.

Next we have the British firm Independent International Investment Research (IIIR), which has successfully obtained rights to the GMail name for its financial analytics software in the UK. Apparently not content, IIIR is now suing Google for the Gmail name in the US. Google has been using the Googlemail name in Europe where litigants have been successful. For now, European GMail users have a workaround to getting an address. But, if IIIR wins its case in the US, then Gmail will be no more. We will all have to use the lengthier and unsexy What a difference five letters make!

China Sparks Stock Downward Spiral

♠ Posted by Emmanuel in , at 2/27/2007 06:37:00 PM
Today, a massive drop in the Shanghai Stock Exchange (SSE) sparked off a global sell-off in stock markets worldwide. At last count, the SSE was off 8.8% and over $100B in equity had disappeared. As always, the reasons why this speculative craze suddenly cratered are not necessarily clear. The first set of reasons concern investors getting spooked by the Chinese government's efforts to cool a speculative craze. The People's Bank of China raised the bank reserve requirement to 10.0% from 9.5% effective February 25. However, the SSE index reached a record high yesterday in the first trading day of the Lunar New Year. The Chinese Securities Regulatory Commission has also been working to stop insider trading and to increase broker transparency. The latter effort was just announced today. Another set of reasons deal with geopolitical events such as rising oil prices, Iran making the usual noises, US Vice-President Dick Cheney almost getting blown up in Afghanistan, and former US Federal Reserve chairman Alan Greenspan's comment that America may be headed for a recession later in the year. In our highly interconnected world, regional decoupling from global trends has become difficult to imagine.

Obviously, this laundry list of reasons for the sudden cratering is a long one. I'll cop out here and simply say that it was a confluence of various events that sent bourses the world over cascading downwards. Nevertheless, what is undeniable is that the run-up in stock prices has been overdone in Shanghai. Via Safe Haven:
Among companies listed in both Shanghai and Hong Kong, the spread in valuations has increased widely since 2005. The Price/Earnings (P/E) ratio for companies listed on the Hong Kong market is close to 18, but the P/E ratio for the same companies in Shanghai is 33. The Chinese stock market has now become the most expensive in Asia, trading at 40 times 2005 earnings, compared to 16 in Hong Kong. The high P/E ratio is supported by expectations of 25% earnings growth for 2007.

This is in stark contrast to several years ago when the Shanghai Composite was the third-worst performing global benchmark after losing over half of its value from 2001 to 2005 amidst scandal, secrecy, corruption, and poor earnings. At the start of 2004, a man attempted to light himself on fire in front of the offices of China's stock market regulator in Beijing to protest about the collapse in share prices.

The euphemism for stock market plunges is called "correction." I've always wondered: If these speculative bubbles need "correction," then were stock markets "wrong" to go up so quickly in the first place? The next few days will test how solid the foundations are of this latest stock bonanza. Let's just say that I have my doubts. It's Chinese New Year; I doubt whether it will be Happy.

ASEAN's love/hate China relationship

♠ Posted by Emmanuel in ,, at 2/27/2007 12:21:00 AM
This op-ed from the Asia Times poses the question: How should ASEAN react to China's growing clout? As with a lot of matters nowadays, it's more of economics shaping how ASEAN reacts to China. China has been both friend and foe to ASEAN. On the positive side:
  1. ASEAN agreed in principle to establish a free-trade agreement with China, which by 2010 should represent the world's largest free-trade area, eclipsing both the European Union and the North American Free Trade Area.
  2. China's total investment in ASEAN last year reached US$1.3 billion, including $200 million in new capital outlays in 2006, according to Chinese Ministry of Commerce official statistics.
  3. Sino-ASEAN trade hit a record high of $160.8 billion last year, up 23% year on year, and is projected to rise to about $170 billion this year. China is now on pace to become the region's largest trade partner, surpassing the United States, by year's end.
On the negative side:
  1. Beijing's proven track record of luring away big foreign investments once destined for Southeast Asia is slowly but surely pushing the region down the value-added ladder as a mere raw-materials and commodity-providing link in China's emerging global manufacturing supply chain.
  2. China's huge unified market has provided multinational manufacturers the economies-of-scale benefits with which ASEAN's still-fragmented markets cannot compete.
  3. Another point I'd raise is China's quarrel with various ASEAN members over who has territorial jurisdiction over the strategically located and resource-rich Spratly Islands.
China may see an opening for enhancing its regional influence while the US is busy dealing with the Middle East. Whether ASEAN can obtain tangible benefits in exchange for greater cooperation with China is yet to be decided. Don't leave more established Japan out of the picture, either. Also, the election of a less hawkish American president in 2008 may return the American focus to Asia again.

How NOT to Defend Globalization

♠ Posted by Emmanuel in , at 2/26/2007 02:27:00 AM
I've just added an RSS feed to the blog's sidebar that collects recent news on globalization. Something that recently caught my eye is this interview of conservative American pundit P.J. O'Rourke. Even when I don't agree with him, I find his writing wryly amusing. Here he claims to represent Adam Smith's viewpoint in trumpeting two articles of the uber-globalizer's faith. First up is "deficits don't matter":
PAUL SOLMAN: Well, what, though, would Adam Smith make of the current globalization debate?

P.J. O'ROURKE: Well, there are two things that he would immediately say about current globalization debate, is that some of it is morally reasonable and some of it is practically ridiculous.

The practically ridiculous part would be about balancing trade. Any trade that is voluntarily made is mutually beneficial, by definition, and, indeed, is balanced, by definition.

It doesn't matter how many televisions and computers and pieces of stereo equipment the Chinese send to us, even if they're sending them to us only in return for some funny, little, green pieces of paper. That is a balanced trade. They got what they wanted: the green pieces of paper. We got what we wanted: the plush toys, the computers, the stereo components.

PAUL SOLMAN: But wait a second. But we're running a trade deficit.

P.J. O'ROURKE: No, there is no such thing. There's no such thing as a trade deficit. We've merely traded our currency, which is a sort of government IOU, for their goods...

I call this strategy the Weimarica method: Just print more money a la post-WWI Germany and see what happens. Next up is his viewpoint on how things are in America in the aftermath of globalization. His argument is--I kid you not--"things aren't yet as bad as invasion-era Lebanon":

PAUL SOLMAN: But it's not the last 40 or 50 years that people who worry about globalization are referring to. It's the last 20 years, say. It's Toledo today versus Toledo in '85, I guess. It's the stagnation that has occurred as globalization has speeded up.

P.J. O'ROURKE: I don't see evidence of America being a poorer country than it was 20 years ago. I've seen impoverished devastation. I've seen places where things had been good and now they were very bad. I covered the Lebanese civil war, for instance. I could see a place that had once been prosperous and now was impoverished. I'm not seeing that in America.

Let's just say P.J. O'Rourke's work will not be on IPE reading lists anytime soon and leave it there! (PS: Here's the Human League's "Lebanon" for 80's fans.)

Is Indonesian Secularism Waning?

♠ Posted by Emmanuel in , at 2/24/2007 08:59:00 PM
A recent article in TIME asks why stricter forms of Islam are taking hold in Indonesia, a state which used to be referred to as a proponent of moderate Islam. In the past, the state practiced the principle of pancasila, for
In contrast to Muslim nationalists who insisted on an Islamic identity for the new state, the framers of the Pancasila insisted on a culturally neutral identity, compatible with democratic or Marxist ideologies, and overarching the vast cultural differences of the heterogeneous population. Like the national language-- Bahasa Indonesia --which Sukarno also promoted, the Pancasila did not come from any particular ethnic group and was intended to define the basic values for an "Indonesian" political culture.
Reasons given for the resurgence of Islamic identification include:

1. Economic hardships which continue in the wake of the Asian financial crisis;
2. Widening inequality;
3. Perceived government ineptitude in dealing with drugs, prostitution, and corruption;
4. President Susilo Bambang Yudhoyono's reluctance to offend the Islamic movement;
5. Large funding for religious institutions by Middle East states.

Indonesia is the fourth most populous country in the world. It maintains separation of mosque and state. If it tilts towards a less tolerant kind of Islam, Samuel "Clash of Civilizations" Huntington may be further venerated as he has been by the outcome of the Iraq invasion.

17K Filipino Nurses Banned by US

♠ Posted by Emmanuel in , at 2/24/2007 08:10:00 PM
Globalization means different things to people in different countries. Because finance and trade get a lot of attention, migration sometimes gets forgotten--but not in the Philippines. It represents an interesting case for about ten percent of its population is working abroad. The Philippine political economy is rather unique in that the government is reliant on overseas workers' remittances to finance its balance of payments. Remittances from some 8 million Filipinos working abroad are equivalent to ten percent of Philippine GDP.

Filipino workers who are in much demand overseas are nurses, especially in the US. Far larger wages can be found abroad because a developed-world scarcity of nurses has made this occupation attractive to enter. Recently, a brouhaha has occurred over alleged cheating among many of the 17,000 Filipino nurses who passed the nursing exam last year. Though only 40% of test takers who took the local exaqmination necessary to obtain Commission on Graduates of Foreign Nursing Schools (CGFNS) certification passed it, the testing center that administered the exam has admitted to giving out some answers in advance. Consequently, the United States issued a ban on the issuance of requisite VisaScreen certificates, insisting that Filipino nurses retake sections of the 2006 examination where cheating took place. Many of the families of the nurses are distraught over this ruling as the examination fee of $350 is no small amount for them. Stories in the local media claim that poor families have pawned their belongings in order to raise this fee. An appeal was made, but the ruling stands: the test must be taken again.

Germany's Fiscal Gap Falls to -1.7%

♠ Posted by Emmanuel in at 2/23/2007 12:10:00 AM
Deutschland has endured criticism over continuously violating the Stability and Growth Pact that requires countries adopting the euro to have an annual budget deficit below 3% of GDP. After all, they're the ones who thought it up in the first place. For four consecutive years from 2002 to 2005, Germany violated this stipulation with impunity. But, wonders never cease. Germany has now crawled above this floor. In 2006, it recorded a budget deficit that was -1.7% of GDP. Along with her recent leadership on climate change and successful hosting of the 2006 World Cup, Angela Merkel's record continues to please: this news plus higher-than-expected GDP growth of 2.7% in 2006 and the lowest unemployment rate in five years at 9.5% in January are glad economic tidings, indeed. Compared to the ineffectual Gerhard Schroeder, Merkel is a woman of action. As Claudia Schiffer suggests, perhaps it's time to invest in Germany.

Negotiating with North Korea and Iran

♠ Posted by Emmanuel in at 2/22/2007 05:29:00 PM
The political theater of negotiations where nothing of significance ever happens with North Korea and Iran is readily explained. My cynical and cyclical take on the matter goes like this: First, Kim Jong-il or Mahmoud Ahmadinejad delivers a speech on his country's right to develop nukes, typically peppered with statements about "Western warmongers" or "Satanic imperialists." Second, the international community, often led by the American "Globocop," roundly condemns these statements and presses for discontinuance. At this point, negotiators are sent offering carrots (food, aid, energy) and wielding sticks (sanctions, hints of armed conflict). After a period of being rebuffed, they get to talk to Pyongyang or Tehran. Usually, a tentative agreement is made that is trumpeted far and wide. In a short while, though, any hint of a deal reached is broken off as inspectors find these countries in breach of their obligations or as they are found to be negotiating in bad faith. Meanwhile, China and Russia are always there to ensure that possible UN sanctions are watered down That's all there is to it. At this time, the US is already overstretched by its commitments in Iraq and Afghanistan, neither of which is going particularly well. North Korea developed this delay-and-distract cycle; Iran is merely copying it. Stick with what works by loading Uncle Sam on the treadmill to nowhere. After all, what's America going to do? Invade?

Save the Patagonian Toothfish!

♠ Posted by Emmanuel in , at 2/22/2007 05:19:00 PM
Here's a perfectly depressing tale of greed, overfishing, piracy, and near-extinction. You may have seen the "Chilean Sea Bass" on the menu at a local eatery. It turns out that this exotic-sounding fish has a far more prosaic name: it's properly called the "Patagonian Toothfish." Given its popularity among diners, this fish is swimming (not running) for its life. First, here's a backgrounder on the fate of the Patagonian Toothfish:
For years, fisheries tried unsuccessfully to market the Patagonian Toothfish, but the name was highly unappetizing to the public. It seemed as though the toothfish was doomed to quick condemnation in the United States, as consumers relied upon the safe familiarity with other fish to base their purchasing decisions on, unwilling to experiment with this new contender.

A lot has changed in ten years. The Patagonian Toothfish, once plentiful in southern oceans, now suffers immensely from overfishing, and is coming dangerously close to commercial extinction. Its popularity has increased tenfold, and can easily be found on many menus, and is purchased extensively at supermarkets and fisheries.

So how did it get so popular? Some quick thinkers were of the opinion that a more attractive name might hold considerable sway over the masses, and promptly began marketing the Patagonian Toothfish under its new and improved moniker, Chilean Sea Bass.

It was nearly an overnight success. The pairing of the subtle exoticism of Chile and familiar characteristic of bass propelled the fish into the limelight. The supple white meat suddenly exhibited new clarity under this new label, and lo and behold, it also tasted good. The Chilean Sea Bass was a rising, shining star in the seafood world. It's celebrity status was the talk of the culinary town. But, unfortunately, no one could predict that there was a dark side to its sudden stardom.
Next up are more alarming factoids:
In fact, there are so many vessels fishing the Southern Ocean that it is estimated that for every pound of legally caught Patagonia toothfish, an estimated five pounds are hooked illegally. And a dramatic increase in the wholesale price of the fish has pushed poachers to redouble their efforts on a relative of the Patagonia toothfish, the Antarctic toothfish. Now these stocks are believed to have begun to diminish...

The impact of overfishing to the fish stocks is already clear: In 1996, vessels operating off Africa’s Cape Horn reported an average “catch per- hook” (the total weight of all Chilean Sea Bass caught divided by the number of hooks on the line) of roughly 1.4 kilograms (3 pounds). By 1998, overfishing had brought the catch-per-hook to less than 0.1 kilograms (1/3 pound).

Hopefully, this post will make some diners think twice before dining on the Chilean Sea Bass. Until its stocks are replenished, it should be off the menu.

Is There a Beijing Consensus?

♠ Posted by Emmanuel in , at 2/21/2007 09:59:00 PM
The short answer is no--or at least not yet. The inability of many developing countries that have adopted the Washington Consensus to improve their situations has led to a search for new solutions. Recently, Joshua Cooper Ramo coined the term "Beijing Consensus" to describe an alternative to the "Washington Consensus." According to him, this newer consensus involves:

1. Innovation and constant experimentation;
2. Rejection of GDP growth above all in favor of sustainability and equality;
3. Self-determination (take that, nasty World Bank/IMF conditionalities!)

Critics of this version of the Beijing Consensus rightly point out that China's environmental woes include having 16 out of 20 of the world's most polluted cities, and that inequality there is high and rising. According to Salon, unsuccessful development coupled with a growing distaste for American paternalism is responsible for the notion of a Beijing Consensus--and not because there is such a thing:
But Ramo's assertion that the Beijing Consensus represents opposition to the status quo, to U.S. hegemony and U.S. power, is undoubtedly on the money, and explains why China is gaining face worldwide at the expense of the United States. Scores of developing nations want to imitate China's economic growth, and at the same time, chafe at the paternalism and stipulations that come with American advice and aid. No one seems to be comfortable with a world with just one superpower. So there doesn't have to be any there there, in the Beijing Consensus.
For another version of the Beijing Consensus, Wu Shuqing makes the following comment in China Daily, an official Party publication . He could be on the money; after all, the second-fastest growing economy in the world after China is yet another market-socialist state, Vietnam.
As far as China is concerned our Socialist system is always affirmed as a system of superiority. The question is to give full scope to its inherent superiority. For this reason the nature of the reform is the self-improvement and development of the Socialist system. Its goal is to tap the inherent superiority consistently and effectively. Obviously, the guiding theory of the reform is Marxism, Deng Xiaoping Theory that integrates Marxism with the practice of contemporary China.
UPDATE: John Williamson, the guy who coined the "Washington Consensus," believes there is no such thing insofar as it's mostly non-Chinese who keep bandying the term about.

25/11/2010 UPDATE: Also see John Williamson of Washington Consensus fame arguing that there isn't really such a thing as a Beijing Consensus since the Chinese have never really identified one.

Anti-Globalization Toons

♠ Posted by Emmanuel in at 2/21/2007 09:25:00 PM
I had barely survived reading the (in)famous Road to Serfdom comics when I came across this series of cartoons dealing with neoliberalism, or at least a caricaturized version of it. They're none too subtle, but these cartoons do get the main criticisms of neoliberalism across. From Subcomandante Marcos of the Zapatista rebels to genetically-modified seeds in India, they've got the bases covered.

Particular favorites are "Armed Privatization" and "Neoliberalism Vs. History." The former targets contracts given to American firms in the aftermath of the invasion of Iraq, while that latter aims to disabuse its readers of TINA--There Is No Alternative [to neoliberalism].

Japan Joins US in China WTO Case

♠ Posted by Emmanuel in ,, at 2/18/2007 06:55:00 PM
Japan has joined the US as a third party in the latter's case against Chinese subsidies. The US has asked the EU to join as well, though the EU hasn't yet. At first I was kind of surprised as I assumed that many of the foreign-invested enterprises (FIEs) operating in China with Japanese involvement would be hurt. At least that's what I thought before reviewing Whalley and Xin's recent research paper on FIEs in China. American and Japanese FDI is more horizontal in terms of their production that is sold in China; 80% of American and 45% of Japanese production there is destined for the local market. In contrast, FDI from Hong Kong, Taiwan, and South Korea is more vertical and geared towards production destined for overseas markets.

I have written more about this case on Roubini Global Economics Monitor. Here too is a link to the WTO dispute settlement consultation filing (DS 358). Why the WTO provides documents in Word and not PDF format is a mystery to me.

IPE of the Sad Childhood

♠ Posted by Emmanuel in , at 2/18/2007 06:46:00 PM
The United Kingdom has the market cornered in entertainment dealing with crappy childhoods. I've always thought it an oddly British predilection to fetishistically catalog childhood traumas as a form of catharsis. In the seventies, Pink Floyd asked teachers to "leave them kids alone" for "all in all, you're just another brick in the wall." In the eighties, Tears for Fears built an entire career singing about their awful formative years. Similarly, Marillion composed an entire album about "Misplaced Childhood." The Adrian Mole diaries express similar themes in literary form.

All this brings me to the current brouhaha over UNICEF's recent judgment that the UK comes dead last in a league table of children's well-being in 21 developed countries. In the categories of "family and peer relationships," and "behaviors and risks," it ranks last while coming in second to the last in "subjective well-being" (here's the entire report). If you're a fan of eighties music, this finding should come as no surprise, though we might need to investigate further.Already, New Labour spinmeisters are out in force claiming UNICEF is working with dated data, small sample sizes, and what else have you. Left-leaning pundits chime in that neoliberal policies are to blame. It's a definite possibility; after all, the US places second-worst. You can fill in the rest of their story: the demise of social safety nets have caused children to suffer disproportionately; the dog-eat-dog social milieu is spreading misery among youngsters; the government overlooks children; and so forth.

Findings like these belie Paul Krugman's head-scratching assertion about helping the poor, the British way.From my perspective, it'd be better if critics of British social policy can catalog a progressive deterioration in the quality of formative years to prove their point. Maybe it's no coincidence that "The Wall" was released in Thatcher's first year as PM, or that albums by Tears for Fears and Marillion were released as neoliberal policies took hold in the eighties. Ditto for Adrian Mole. Additionally, a longitudinal comparison of childhood cohorts in these 21 countries can provide insight as to whether miserable childhoods lead to miserable adulthoods. After all, Roger Waters, Roland Orzabal, and Fish turned out alright in the end, didn't they?

Update (March 9): The International Herald Tribune has an article on alienated youth in Britain that is worth reading.

Went to school and I was very nervous
No one knew me
- no one knew me
Hello teacher tell me what's my lesson
Look right through me - look right through me

Neoliberalism in British Academia?

♠ Posted by Emmanuel in , at 2/18/2007 06:01:00 PM
I have a secondary interest in the workings of academia. Therefore, I was interested in what David Harvie of Leicester University had to say about neoliberalism in higher education. Harvie adopts a critical perspective and argues that research-assessment exercises are changing the academic paradigm into a less collegial, competition-driven one. Further, this kind of "ownership" might prevent collaborative work in the future among various institutions.

In this matter, I am more sympathetic to reforms in British higher education that move it in the direction of the American model. British universities rely on government funding to a greater extent than do American ones. As scholars give lip service to the notion of academic independence, funding sought from non-government sources such as through building endowments helps move British academia in this direction. UK government finances are hardly in the best shape, either. Thus, the RAE and its like help determine where national research funds should go. It's nothing sinister. Importantly, the market for instructors and students is now an international one. Though there are pockets of immobility, British higher education supply and demand will likely come to reflect more international factors. The University of Nottingham, for instance, has already opened a campus in China. Benchmarking performance will be key in determining the standard of British higher education. Do well and the funding should follow. Make no mistake: Ivory towers come at a price.

Power of Choice Meets Walden Bello

♠ Posted by Emmanuel in at 2/17/2007 06:07:00 PM

This clip paints a very favorable image of Milton Friedman. He is, in effect, credited for the demise of the Soviet bloc, the spread of globalization, and the economic rise of China and India. Too, you've got to love that lovey-dovey background music.

For an entirely different take on Friedman, read the opinion of anti-globalization activist Walden Bello on his passing: "...people in the [Global] South will remember the University of Chicago professor as the eye of a human hurricane that cut a swath of destruction through their economies." Further, he charges that Friedman was the ideological father of "structural adjustment policies (SAPs), which set the stage for the accelerated globalization of developing country economies during the 1990’s, created the same poverty, inequality, and environmental crisis in most countries that free-market policies did in Chile, minus the moderate growth of the post-Friedman-Pinochet phase."

concludes that because of his continued negative influence, Friedman's gravestone should, after Shakespeare, read "The evil that men do lives after them, the good is oft interred with their bones." Ouch! Even after his passing, Friedman remains a most controversial figure.

Mia Doi Todd's IPE Music

♠ Posted by Emmanuel in at 2/17/2007 05:57:00 PM

OK, so this video is weird in an artsy, over-acted way. But, you can rest assured that Mia Doi Todd makes top-notch IPE tunes. Here are some hard-hitting lyrics from this song, "The Way":

We all know they've got it fixed
In politico-economics
We're junking bonds; we're dropping
Bombs we've made by guzzling gasoline
Public confidence is shaken
Like the apple from the tree

Music is a soundtrack to human endeavor. Let Mia Doi Todd show us "The Way."

Frequently Asked Questions

♠ Posted by Emmanuel in , at 2/16/2007 11:37:00 PM
Welcome! Through timely (and witty) commentary, the IPE Zone aims to be the world's premier outlet for blogging on the subject matter of international political economy. Its content has been referred to by media outlets such as Bloomberg, the Economist, the Financial Times, Forbes, Roubini Global Economics, Salon, Slate, the Times of India, the International Herald Tribune, National Public Radio, and the OECD among others. The IPE Zone has recently been made available on Amazon Kindle in addition to the LexisNexis database. This FAQ has notes about the field of IPE followed by those on this blog's modus operandi.

What is IPE? Read Michael Veseth’s primer. Or, for Andrew Walter and Gautam Sen, it is concerned with the way in which political and economic factors interact at the global level.

What are the main theoretical perspectives in IPE?
Basically, there are three main perspectives in IPE which borrow heavily from International Relations (IR) theory: Liberalism, Realism, and Marxism. Here’s a meat-and-potatoes summary of these perspectives:

Main Actors
Main Goal
View of Relationships
Classic Authors
Individual Liberty
Adam Smith,
David Ricardo

National Security
Thomas Hobbes,
Friedrich List
Karl Marx, Friedrich Engels

* Realism applied to the economic realm is more commonly known as mercantilism

How does political economy differ from economics?

I'll make a few quotations here from the Gilpin book I mention somewhere below. You may be surprised that political economy as a term preceded economics...

For Adam Smith in the Wealth of Nations (1776), political economy was a “branch of science of both the statesman or legislator” and a guide to the prudent management of the national economy, or as John Stuart Mill, the last major [political] economist, commented, political economy was the science that teaches a nation how to become rich. These thinkers emphasized the wealth of nations, and the term “political” was as significant as the term “economy.”

In the late nineteenth century, this broad definition of what economists study was narrowed considerably. Alfred Marshall, the father of modern economics, turned his back on the earlier emphasis on the nation as a whole and on the political as important. In his highly influential Principles of Economics (1890), Marshall substituted the present-day term “economics” for “political economy” and greatly restricted the domain of economic science. Following Marshall’s precept that economics was an empirical and value-free science, his disciple Lionel Robbins in The Nature and Significance of Economic Science provided the definition which most present-day economists subscribe: “Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” In more modern terminology, economics is defined by economists as a universal science of decision-making under conditions of constraint and scarcity (pp. 25-6).

The scope of economic science, however, is too limited and its theories much too abstract for the purposes of international political economy. The strength of political science lies in its broad emphasis on the “realities” of the universal struggle among human beings, groups, and states for power and position. Its weakness lies in the intuitive nature of its methods and limited theoretical foundations (p. 40).

In the 1955 edition of his influential textbook Economics, Nobel Laureate Paul Samuelson coined the term “neoclassical synthesis” to characterize the theoretical consensus of professional economists. Samuelson was referring to the consensus that professional economists had achieved through integration of microeconomics (associated with Alfred Marshall and other leading economists of the late nineteenth century) with the new macroeconomics set forth by John Maynard Keynes in his General Theory of Employment, Interest, and Money (1936; p. 46).

For many economists, economics is better defined by its methodological approach than by its precise subject matter. As [Paul] Krugman has noted, the tools define the subject for the economist, and the domain of economics is determined by the range and applicability of its methods. Gary Becker, an influential proponent of this view, sets forth in his book, The Economic Approach to Human Behavior (1976), the basic assumptions underlying economics methodology and, thus, the economic approach to the study of social, political and all other forms of behavior. The assumptions he discusses are:

Economics assumes rational ends/means calculations or “maximizing behavior more extensively and explicitly” than do other social sciences.

Rational or maximizing behavior guides efforts to obtain or maintain “stable preferences.” These preferences are not for specific items such as oranges versus apples, but for such basic aspects of life such as food, honor, prestige, health, benevolence, and especially wealth. Economics assumes that people everywhere, regardless of their social condition, differ little on these basics. Economics is therefore considered to be a universal science of human behavior, and its methods and assumptions are believed applicable to all times and all places, whether fifth-century Greece or contemporary industrial Japan. [Economics as ahistorical and culturally "neutral"].

Markets develop naturally in order to coordinate, with varying degrees of efficiency, the actions of different participants (p. 51).

For students of political economy, the ceteris paribus (other things being equal) caveat offered by economists is exceptionally significant because political factors and social institutions do affect the outcome of economic activities and are rarely equal in their consequences. For this reason alone, the problem of the validity of the assumptions on which economics is based cannot be as easily dismissed as [Milton] Friedman and other economists would like (p. 63).

This IPE stuff sounds interesting. Where can I read more about it?

With a few minor caveats, the best overview of IPE is still Robert Gilpin’s Global Political Economy. If you’d like something in more of a “textbook” format, Theodore Cohn’s Global Political Economy is a fine choice, as is Robert O’Brien and Marc William’s book entitled—you guessed it—Global Political Economy. At the risk of sounding repetitive, another (edited) work which contains a lot of articles covering the themes Veseth talks about is John Ravenhill’s Global Political Economy.

What sort of journals cover IPE?

All sorts of mainstream and specialized geography, political science, sociology, and economics journals cover IPE-related material. However, there are three particular journals that cover this field more closely--in name at least. The Review of Political Economy (based at Johns Hopkins University), New Political Economy (Sheffield), and Global Governance (Warwick) are usually considered as the main scholarly publications for IPE. Again, however, the interdisciplinary nature of the field means that you will find all sorts of IPE-related articles in sociology, business, and other social science journals.

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Why is there no comments section in your blog?

I used to have one when blogging was new as it was a novelty to invite reader feedback. Nowadays, however, every mainstream media site incorporates reader comments, so the novelty factor is long gone. You can now comment on the Economist, WSJ, the FT...or even USA Today and Yahoo! News. Been there, done that, saw the movie, bought the T-shirt. If you really have a lot to say, you will get better attribution building a blog of your own (which is free and takes less than five minutes on Blogger) than slumming in someone else's comments section.

Your blog seems very eclectic. Is its subject matter really about international political economy?

Yes. IPE has been described by Anthony Payne as a "notoriously diverse field of study," which is what you'd expect from the vast range of possible topics and interpretations at the intersection of international politics and international economics. The late IPE pioneer Susan Strange believed that IPE "is still unfenced, still open to all comers" and that the study of IPE "would do well to stay an open range, like the old Wild West, literate people to all walks of life." That kind of thinking animates this blog.

While the American School of IPE may be more emblematic of the disciplinary compartmentalization prevalent Stateside, the British School of IPE which I adhere to is more tolerant of multidisciplinary work. Accordingly, I am wary of pretentious folks who believe their approach or ideology has a monopoly on the truth. To paraphrase Deng Xiaoping, to me it doesn't matter if the approach is black or white, as long as it helps shed light on contemporary problematiques in a logically cohesive fashion.

What is this "subprime globalization" mentioned in your subtitle?

This term I came up with refers most to global economic imbalances currently roiling the world economy. Basically, greater global financial integration has allowed rich countries to pile their wasteful, unproductive government and household spending on the backs of poor countries. The current crisis roiling the world economy demonstrates that this situation is not only unsustainable but also unjust. It is a goal of this blog to point out subprime globalization's pitfalls and offer potential solutions. For a clear example of subprime globalization, see a post on the US-China relationship as Exhibit A1.

In a more general sense, subprime globalization refers to vexing international political economy problematiques which require attention to make them, well, prime examples of globalization.

Who are you?

See the profile of yours truly, Emmanuel Yujuico, on ResearchGate.

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What is International Political Economy?

♠ Posted by Emmanuel in at 2/16/2007 09:55:00 PM
What is IPE? by Michael Veseth

International Political Economy (IPE) is the rapidly developing social science field of study that attempts to understand international and global problems using an eclectic interdisciplinary array of analytical tools and theoretical perspectives. IPE is a field that thrives on the process that Joseph Schumpeter called "creative destruction." The growing prominence of IPE as a field of study is in part a result of the continuing breakdown of disciplinary boundaries between economics and politics in particular and among the social sciences generally. Increasingly, the most pressing and interesting problems are those that can best be understood from a multidisciplinary, interdisciplinary, or transdisciplinary point of view. If there is an "IPE Project" its objective is to pull down the fences that restrict intellectual inquiry in the social sciences so that important questions and problems can be examined without reference to disciplinary borders.

IPE is the study of a problématique, or set of related problems. The traditional IPE problématique includes analysis of the political economy of (1) international trade, (2) international finance, (3) hegemony, (4) North-South relations, and (5) multinational corporations [my emphasis; these are all discussed below together with (6) globalization]. This problématique has been broadened in recent years as many scholars have sought to establish a New IPE that is less centered on International Politics and the problems of the nation-state and less focused on economic policy issues. These scholars seek to create a new discipline of IPE that would transcend the perceived limits of International Politics and International Economics as fields of study and research.

International Economics and International Politics
It is hard to imagine a world without International Political Economy because the mutual interaction of International Politics (or International Relations) and International Economics is today widely appreciated and the subject of much theoretical research and applied policy analysis. The political actions of nation-states clearly affect international trade and monetary flows, which in turn affect the environment in which nation-states make political choices and entrepreneurs make economic choices. It seems impossible to consider important questions of International Politics or International Economics without taking these mutual influences and effects into account.

And yet scholars and policy-makers often do seem to think about International Economics without much attention to International Politics and vice versa. Economists often assume away state interests while political scientists sometimes fail to look beyond the nation-state; both miss the dynamic interaction of state and market that characterizes political economy. It is sometimes argued that the wall between International Economics and International Politics was especially formidable during the Cold War. Two noteworthy Cold War era exceptions to this rule stand out: economist Charles P. Kindleberger's work on hegemony and political scientist Kenneth N. Waltz's attempt to integrate economics into politics in his path-breaking book Man, the State, and War.

The mutual astigmatism that hid International Politics and International Economics from each other cleared in the 1970s as a number of dramatic international events made plain how tightly the two fields were intertwined. The oil embargoes of the 1970s and the breakdown of the Bretton Woods monetary system are frequently cited as key events in IPE's development as a field of study. These events posed practical and theoretical problems that necessarily forced scholars and policy-makers to consider economics and politics together.

The rise of the Organization of Petroleum Exporting Countries (OPEC) and the Arab oil embargo of 1973-74 illustrated dramatically at least five key dimensions of IPE.

- First, it showed the power and influence of economic tools in foreign policy. After OPEC no state could dare make political policy without taking into account potential foreign economic retaliation or reaction.

- Second, the oil embargo showed that East-West issues were not always the state's most important concerns -- North-South political and economic problems could no longer be ignored or dealt with as ancillary to Cold War strategy. To the extent that economic issues were closer to the surface in North-South relations, this reinforced the notion that politics was really political economy.

- Third, the oil embargo revealed the complex interdependence between and among domestic politics, domestic economics, international politics, and international economics.

- Fourth, the oil embargo raised questions about the role of multinational corporations (MNCs) in international economics and politics. MNCs had previously been viewed by many scholars as agents of influence of their home country governments (this was especially true of US-based MNCs), but now their political allegiance appeared to be more ambiguous. Were the oil MNCs tools of their western home governments, agents of their OPEC host governments, or were they acting as pure economic actors independent of home or host political ties?

- Finally, the shifting international payments flows that the oil embargo stimulated were the start of the movement towards a global financial system and, with it, economic globalization generally. Increasingly, economic and political problems would be seen as global, not just international, and beyond the control of individual nation-states.
The breakdown of the Bretton Woods system in the 1970s also contributed to the emergency of International Political Economy as a distinct field of study. The Bretton Woods system is generally interpreted as a system of economic governance constructed to support U.S. hegemony in the postwar era. Each of the main Bretton Woods institutions, the World Bank, the IMF, and the GATT, depended upon the United States to play a central leadership role.

On August 15, 1971, however, US President Richard Nixon suspended the link between the US dollar and gold, which was the critical element of the Bretton Woods monetary system. Nixon's action changed everything. The fixed exchange rate system that had defined world money in the postwar era soon collapsed. More importantly, Nixon's policy was seen as a sign that the US had put its domestic political and economic problems ahead of its international responsibilities. The decline of US hegemony was both political and economic in both cause and consequence. Scholars found it necessary repeatedly to cross the border between economics and politics to make sense of the situation. David P. Calleo's book on The Imperious Economy is a classic study from this period of the political economy of hegemony.

The rise of OPEC and the decline of US hegemony were just two events that broke down the artificial division of International Economics and International Politics that had in some respects characterized the Bretton Woods era. Other events such as the Third World debt crisis, the fall of communist regimes, the rise of the East Asian Newly Industrialized Countries (NICS), the expansion of the European Union, and the financial crises in Mexico, Russia, and East Asia all provided impetus for the growth and development of IPE studies. The simple divisions between state and market, domestic and international, and politics and economics were no longer applicable to a wide range of issues. An increasingly complex world required a complex approach to analysis, which IPE provided.

The IPE Problématique.
IPE is thus perhaps best defined as a problématique, a set of problems that bear some relationship to one another. The IPE problématique is the set of international and global problems that cannot usefully be understood or analyzed as just International politics or just International economics. These problems fall necessarily in the expanding domain of International Political Economy.

The main line of development of IPE in the 1970s and 1980s was centered in the International Relations community and took the form of the analysis of what was called in book titles and course catalogues "The Politics of International Economic Relations" or "The Political Economy of International Relations." By either name, the goal was to analyze the interaction of economics and politics in the international affairs of nation-states or, more narrowly, how economic factors influenced International relations. Although IPE research took many directions in this period, five sets of questions dominated the agenda: international trade, international finance, the problem of hegemony, North-South relations, and MNCs. A sixth concern -- globalization -- was soon added to the list.

(1) International Trade
Politics and Economics approach international trade from completely different points of view using completely different analytical frameworks. The problem is that states think in terms of geography and population, which are the relatively stable factors that define its domain while markets are defined by exchange and the extent of the forward and backward linkages that derive therefrom. The borders of markets are dynamic, transparent, and porous; they rarely coincide exactly with the borders of states and a few markets today are even global in their reach. When trade within a market involves buyers and sellers in different nation-states, it becomes international trade and the object of political scrutiny.

The political analysis of this subject treats international trade as fundamentally different from domestic economic activity (while economic theory sees no important distinction between the two). The international exchange of goods, services, or resources with another country raises many political questions of national interest, especially questions concerning the economic and military security of the nation.

Although it is easy to oversimplify these security concerns (exports are desirable because they increase a nation's monetary reserves and create jobs whereas imports should be avoided because they create dependency, reduce national reserves, and threaten domestic business and labor interests) in practice the political analysis of international trade is far more complex. Exports create jobs, but their full impact on national security depends upon what is exported to whom and on what terms. An export of technology that has critical military or economic applications tends to weaken national security, not strengthen it. Nations have frequently imposed export controls for both economic and military reasons. Exports of primary products at unfavorable terms of trade with respect to manufactured goods and technology can create fears of economic dependency. And, although a trade surplus does increase reserves, an excessively large bilateral surplus of exports over imports can create political problems, such as those that Japan has experienced with respect to the United States. High export penetration is sometimes seen as an aggressive policy by the target nation, which may react to defend its perceived security interests. A nation-state therefore has an interest in managing the nature of its exports to other countries and in monitoring its trade relationships with other countries.

Imports also raise complex security issues. Although imports may reduce or threaten domestic employment, create the potential for external dependency, and reduce domestic monetary reserves, there is more to the IPE of trade policy than simple protectionism. Imports may be vital to domestic military and economic security, for example, so that national interest requires secure sources of specific imports, not necessarily fewer of them. This is especially true regarding high-technology military hardware, which may be assembled in one country but use parts and services from a number of other countries. It may be impossible or impractical to avoid some foreign sourcing, so attention shifts from eliminating imports to establishing secure supply chains.

Willingness to permit imports from foreign nations can also be used as a foreign policy tool. During the Cold War, for example, the United States frequently used access to its domestic market as a bargaining chip in negotiations with other countries. Linking imports with political policies has continued since the Cold War, too, as illustrated by the US and European Union negotiations with China regarding entrance to the World Trade Organization.

Trade embargoes are another economic tool of foreign policy and a great deal of IPE research has focused upon the political economy of trade policies. The multilateral economic embargo on South Africa, for example, linked that nation's policy of racial apartheid with international trade. The logic of an embargo is to shut off imports of many vital items and reduce export earning, thereby reducing domestic welfare and providing the state with an incentive to change its policies. The South Africa embargo was relatively successful in this respect, although ending the embargo was obviously not the only reason why that government ended apartheid. The U.S. trade embargo against Cuba, on the other hand, has been ineffective is bringing down the Castro government. The conditions for the effective use of trade and trade embargoes in foreign policy is a productive area of IPE research.

Much of the work on the IPE of international trade has been, as seen above, an attempt to bring economic factors into the study of International Relations by taking economic security concerns and economic foreign policy tools into consideration. This process has also produced a counter flow -- bringing political factors into the analysis of International economics. Adding politics to economics is not a straightforward process. The conventional economic analysis of international trade is based upon the Heckscher-Ohlin-Samuelson factor proportions theory, which provides a neoclassical analytical framework for the study of comparative advantage. This theory is essentially stateless and therefore apolitical. What the factor proportions theory has to say about trade between two nations is not fundamentally different from the analysis of trade between two regions (Northern England and Southern England, for example), or trade between two cities or tribes.

What should the state's policy be towards international trade? Interestingly, this is the one question on which economists agree. Except in certain special cases, free trade results in an efficient allocation of resources and therefore maximizes the value of those resources globally. Basically free trade eliminates the waste that occurs when goods and services are produced inefficiently. The key to this economic analysis is that it is unconcerned with where production takes place (at home or abroad) and only concerned with maximizing the value of the resources used in production and minimizing the waste of inefficient local production.

In short, the economic theory of comparative advantage does not care where the wheat in your bread was grown, or who baked the loaf, but only that the production of the bread is not inefficient or wasteful. Nation-states define themselves by population and geography. States, therefore, do care about the where and the who and this creates a tension between the economic and the political analysis of trade.

The design of the postwar international trade institutions was heavily conditioned both by the free trade views of economists and by the interwar experience of beggar-thy-neighbor trade policies that created an environment of destructive competition and retaliation. Thus the mission of the WTO, and before that the General Agreement on Tariffs and Trade (the GATT), is to progressively reduce the barriers to free trade through multilateral negotiations. This movement towards global free trade, however, has not stopped states from using trade tools to further their own foreign policy goals when they can. Thus we live in an environment where the political and the economic viewpoints of international trade compete for attention.

The advent of free trade areas such as the North American Free Trade Area (NAFTA) and customs unions like the European Union (EU) provides a good example of the political economy of international trade. Regional trade agreements like NAFTA and the EU frequently use economic tools to achieve political goals. One of the political goals of European economic integration, for example, was to strengthen the western Cold War alliance. One of the political goals of NAFTA was to stabilize and strengthen Mexico's democratic system. The economic benefits of regional free trade are intended to compensate states and their citizens for the loss of sovereignty and other political costs they may bear in forming a regional bloc. Thus, in theory, regional blocs create both political and economic benefits.

At the same time, however, there are political and economic costs. Politically there is the problem of the democracy deficit. As more and more policy decisions are made at a level above that of the nation-state, the link between citizens and policy is necessarily weakened, which may weaken the legitimacy of government generally. Economically there is the problem that regional free trade is not always consistent with global free trade. Regional trade blocs may experience trade diversion where production shifts from a more efficient producer outside the regional bloc to a less efficient producer within the bloc. This inefficiency wastes scarce resources and reduces global welfare, according to the economic analysis. Thus freer trade is not necessarily the road to free trade.

International trade has always been at the center of IPE analysis and is likely to remain so in the future. This is not so much because of the economic and political importance of international trade itself as due to of the fact that trade is a mirror that reflects each era's most important state-market tensions. In the Cold War, for example, international trade was simultaneously a structure of US hegemony and a tool of East-West strategy. In the 1980s and 1990s trade, through regional economic integration, was a tool to consolidate regional interests. With the advent of globalization and the creative economy powered by advanced information technologies, trade in intellectual property rights has become a controversial IPE issue. International trade will remain a central focus of IPE even as the specific trade problems continue to evolve.

(2) International Finance
International Finance presents the second set of problems that have traditionally defined International Political Economy. The IPE of International Finance includes analysis of exchange rate policies, foreign exchange systems, international capital movements, particularly portfolio capital and debt flows, and the international and domestic institutions and political structures to which they relate. Three examples illustrate the types of issues that this problématique includes.

The first example concerns the political implications of seemingly technical matters such as international economic institutions. The architects of the Bretton Woods agreements designed an international monetary system built upon a dollar-gold standard. The values of international currencies were fixed in terms of the US dollar, which was then defined as a fixed quantity of gold. The responsibility for managing the international monetary system fell on the United States for the most part since its dollar was the key reserve currency. The International Monetary Fund provided a multilateral institution to manage the system and facilitate international payments.

Regardless of the theoretical advantages or disadvantages of such a system, the Bretton Woods system presented a very practical dilemma for the United States. As the one nation that could undertake virtually any amount of expenditure without consequence because of the dollar's central position in the international monetary system (the US could have "deficits without tears"), the US was confronted with an inevitable choice between its domestic needs and its international responsibilities. The problem is this: at some point, the US was likely to feel the need to put its domestic political concerns ahead of its responsibility to the international monetary system. At this point it would become the Imperious Economy, in David P. Calleo's famous phrase, and the system would begin to break down. The Bretton Woods monetary system did in fact finally fail on August 15, 1971, as noted above, when the U.S. formally removed the fixed link between the dollar and gold.

One lesson to be learned from the collapse of the Bretton Woods monetary system. is that economic arrangements create political obligations and are subject to political manipulation. The combination of political and economic arrangements must be "incentive compatible" if it is to succeed in the long run. That is, the political and economic incentives that individual members of the system perceive must be consistent with the behaviors necessary for the continued existence of the system. The US faced incentives that were ultimately destructive to the Bretton Woods system.

The second example is the IPE of the euro, the single currency adopted by many members of the European Union. It is clear that the euro is both political and it is economic and that the two sides cannot be separated.

The principal goal in creating the single currency was political: the euro would bind Germany forever to its European Union partners and prevent its focus from shifting towards Central and Eastern European relations. In a sense, the economic ties of the euro were meant to replace the political ties of Cold War alliance. A secondary goal was economic: to create a region of relative currency stability to encourage regional economic growth in a world of increasing financial instability (see next example). Globalization might eventually be limited by the instability of international currency markets, but Europe could effectively pursue regional economic initiatives if all nations in the region (or nearly so) had the same currency.

Nobel Prize winning economist Robert Mundell's theory of the "optimal currency area" predicted that the adoption of a single currency would have more political consequences than simply keeping Germany focused on European integration. Adopting a single currency would in effect remove important economic tools (exchange rate adjustment, monetary policy adjustment) from the policy menus of euro states. Faced with high unemployment rates, for example, a nation with a flexible exchange rate regime is free to lower interest rates to stimulate economic activity. The lower interest would drive down the value of the currency, making domestic products more attractive and stimulating job creation.

Having fixed its exchange rate, however, a euro nation is not permitted an independent monetary policy. The traditional tools of macroeconomic policies are useless in this situation, so the state must either tolerate joblessness or engage in microeconomic reforms that improve the job creation environment by lowering employment costs and removing social welfare programs that discourage unemployed workers from accepting job offers.

Thus Mundell's theory predicted that euro states may be forced to make previously unforeseen domestic political choices because of their inability to implement external exchange rate adjustments. The euro therefore illustrates how complex is the political economy of international money. Political goals dictate economic structures, which can have unexpected political and economic consequences. The relatively simple world of Cold War relations has been replaced by a more complex set of international political and economic relationships.

The third example concerns the IPE of international financial crises. The breakdown of the Bretton Woods system was part of a process that, by the 1990s, had created a global financial system. Technological change, financial deregulation, the end Cold War divisions, and the emergence of new economic centers all contributed to or accelerated the transformation of finance from an international economic structure, subject to regulation by national governments, to a global structure beyond the regulatory authority of any nation-state.

The problem with global financial markets is that they are not matched by any corresponding global structure of state authority. That is, there is no political authority that corresponds to the market. In theory the International Monetary Fund could serve this role, but in practice this institution's power is intentionally restricted to limit its ability to undermine state autonomy.

One result of this asymmetry between political and economic structures has been the sequence of international financial crises that includes the Mexican peso crisis of 1994-5, the East Asian financial crisis of 1997, and the Russia crisis of 1999 among others. Many scholars suggest that a new international financial architecture is needed to deal with the imbalance between markets and their underlying governance structures. The argument is that the range of financial markets has expanded beyond the reach of the regulatory structures that support them. Global markets require global systems of governance to match.

One reason why it is so difficult to agree to a new monetary system is that political and economy systems are complex so that economic changes can have unexpected political consequences (see euro example above). Another reason is that international agreements require that states sometimes sacrifice their domestic needs to honor their international responsibilities. It is difficult to design a system that creates an environment where states consistently honor international agreements (see the Bretton Woods example above). Finally, the strengthening of international or global authority threatens domestic autonomy -- the ability of the state to take action in the national interest. The increasing frequency of financial crises, however, suggests that states can either cede some authority through international agreements or have that authority taken away by chaotic global market forces.

International finance is viewed by some as less political and more purely economic than international trade, but these three examples give evidence to the contrary. Political scholars may hesitate to engage in this analysis because of the necessity to master difficult theories and arcane terminology, but there is no riper area for IPE analysis. As financial globalization has progressed, the IPE of International Finance has risen in importance as an IPE problématique.

(3) Hegemony
The theory of hegemonic stability was arguably IPE's most important contribution to Cold War international relations theory. As developed by Charles P. Kindleberger in the early postwar era, this theory focuses on the motives and behavior of a hegemonic state. The hegemon is a rich and powerful state that undertakes to supply public goods to the international system. These public goods include stable money, security (such as freedom of the seas), and a system of free trade that can be shared by all and that, in fact, work best when widely shared. Providing these public goods is costly, of course, but the hegemon gains even if it disproportionately bears the expense alone because of its dominant position in the world system. If the world system prospers, the hegemon necessarily prospers as well. In fact, this provision of public goods may be a strategy to secure or extend the hegemon's dominant position.

The theory of hegemonic stability holds that the world system is most prosperous when a hegemon exists to organize the international political and economic system and coordinate the provision of international public goods. Periods of Dutch (1620-72), British (1815-73), and U.S. hegemony (1945-71) are commonly cited as evidence of this link between hegemony and prosperity (although there is disagreement about specific dates). When hegemony breaks down, however, the international system falls into disorder and conflict, with the resulting decline in peace and prosperity. The theory of hegemonic stability puts great weight on the existence of the hegemon and the maintenance of effective hegemonic policies. U.S. policies from Bretton Woods through the end of the Cold War were frequently analyzed in these terms. Indeed, one can think of the theory of hegemonic stability as a theory of US Cold War economic statecraft, with the Bretton Woods system and the Marshall Plan its clearest manifestations.

The theory of hegemonic stability is a grand IPE theory of history which, as told by Paul Kennedy and others, evolved into a theory of hegemonic fatigue or decline. This theory argues that hegemony is a self-limiting, self-defeating, and therefore temporary condition. The argument is that while the hegemonic state bears the burdens of organizing the international system and supplying public goods, free-rider states prosper, expand, and increase the burdens on the hegemon. At some point the hegemon finds itself over-committed and unable to bear the costs of the system it has created. Either the hegemon begins to put domestic interests over its international obligations or it becomes too weak to honors its widespread commitments. Either way hegemony collapses in on itself, the story goes, and chaos reigns until another hegemonic state arises to restore (temporary) order. Britain's decline in the 19th century (followed by World War I) is frequently cited as an example of hegemonic decline as is the collapse of the Bretton Woods system (viewed as the mechanism of US hegemony). The Iron Curtain's fall in 1989 can also be seen as the implosion of Soviet hegemony over Central and Eastern Europe.

Theories of hegemony are the epitome of IPE as a sub-discipline of International Relations. Indeed, for some International relations scholars, IPE is hegemony theory, more or less, and the analytical framework of Regime Analysis (see later discussion) that best studies it. This follows from the many shared characteristics of International Relations and hegemony theory. Hegemony is a state-centered concept that includes security as a critical element, but that draws upon the analysis of international trade and international finance to provide a richer and more complex explanation of the rise and fall of great powers.

If IPE were nothing more than the study of hegemony in all its forms and variations, it would be an interesting discipline. But IPE quickly expanded beyond hegemonic theories and, in doing so, moved beyond the traditional borders of International Relations, too.

(4) North-South Relations
Once the effects of international trade and international finance had been introduced into the study of international relations, the IPE "genie" was out of its bottle. That is, the IPE problématique began to develop according to its own logic and was no longer limited by the "traditional" questions and concerns of International Relations. During the Cold War, for example, the geography of International Relations was East-West. But the geography of IPE, shaped by international trade and capital movements, was also North-South, where North is shorthand for industrialized countries and South represents less developed countries, regardless of where they are situated on a world map.

The Cold War analysis of less-developed countries (LDCs) was naturally focused on the East-West bipolar alliances and the place of LDCs in geopolitical strategy, which New York Times writer Thomas Friedman has memorably termed the strategy of the "checkbook and the chessboard." The US and the Soviet Union, Friedman proposes, used aid (the checkbook) and other economic strategies to form alliances with LDCs that advanced their Cold War position (the chessboard). LDCs were strategic pawns in the Big Power Cold War game

As international trade and international finance were increasingly used to expand and strengthen the Cold War alliances (especially but not exclusively on the western side), IPE scholars pursued the impact of economic relations generally on LDCs. Or, in the terms associated with Immanuel Wallerstein, they probed the relationship between Core and Periphery.

The IPE problématique therefore expanded to encompass a critique of economic development, an analysis of neo-colonialism and Lenin's theory of imperialism, and a general study of Core-Periphery relations. Security and geopolitical issues were not excluded from this North-South analysis, they merely lost the privileged position that they enjoyed in traditional International Relations research. The checkbook and the chessboard were considered just one of the many sets of unequal and asymmetrical relationships linking core and periphery.

As this discussion suggests, another effect of this problématique was to bring Marxist and structuralist theories explicitly into the study of IPE alongside the realist orthodoxy of International Relations and the liberal ideology of economics.

Three theories stand out as milestones on the road to an IPE of North-South relations.

- Immanuel Wallerstein's Modern World Systems theory, which looks at the interaction of the industrial and technological Core with the less developed Periphery and the intermediate Semi-Periphery, which corresponds to the Newly Industrialized Countries. Core and Periphery have become integral elements of the IPE vocabulary.
- Dependency Theory, which is most often associated with the name Theotonio Dos Santos, examines the web of North-South relations and highlights the elements that keep the South dependent upon the North, to the North's systematic advantage.
- Finally, Andre Gunder Frank has written powerfully on a theory of Underdevelopment. It is argued that capitalism does not produce economic development in the South along the same lines experienced in the North. Rather, underdevelopment is produced, a situation where the structures of technology and industry do not achieve an independent existence but rather remain subservient to the North.

(5) Multinational Corporations
Multinational corporations (MNCs) and Transnational Enterprises (TNEs) have always been objects of interest to IPE scholars and practitioners. MNCs and TNEs were initially viewed as an essential element of western Cold War strategy. The essence of the argument that was often made was this: US and western-based international businesses were linked with their governments by an "invisible handshake." The home country governments used their influence to create opportunities and open markets abroad (in "host countries") for these businesses. The businesses, in turn, acted in the economic and sometimes political interests of the home country. During the Cold War MNCs were often viewed as economic agents of their home country governments and political agents of influence abroad.

With the end of the Cold War, analysis of MNC behavior quickly spread to issues well beyond their role in Cold War geopolitics. The rise of the Asian NICs and the increasing globalization of production and finance spurred research on the role of MNCs in the allocation of capital and the control of technology. The presumed close links between MNCs and their home country governments were increasingly called into question as MNCs undertook business strategies that were not obviously in host country national interest. The distinction between home country and host country also grew less clear. All countries are now host countries in the sense that all countries compete for capital, technology, and jobs in the global market for multinational investment.

As the locus of economic activity becomes less and less identified with the borders of nation-states, research is being directed towards developing an IPE of Global Commodity Chains (GCCs). GCCs are complex webs of global business that link independent businesses into a coordinated production and distribution process. The expansion of GCCs has been accelerated by the growth of the information economy, which allows independent firms to communicate and coordinate their activities to an extent that was previously possible only within a large enterprise. The Nike Corporation, for example, coordinates a vast GCC; it actually manufactures few of the products it sells and focuses on design and marketing, not production. The Ford Motor Company has expressed a vision of the future where it too is transformed into a marketing firm, selling products that are mostly manufactured, assembled, and distributed by independent competitive firms.

The analysis of global commodity chains represents another shift in IPE away from the traditional concerns of International Relations. MNCs during the Cold War were seen as extensions of the power of the home country. MNCs in the post Cold War period were often analyzed in terms of their own power (especially financial and technological power) versus the power that host country governments could bring to bear in negotiations with them. Susan Strange, for example, encouraged IPE scholars to think of MNCs as states and explicitly to consider MNC-state and MNC-MNC bargains and relations in their analysis.

GCCs introduce a new element of complexity into this analysis. GCCs gain and exercise power through their ability to mobilize and coordinate global market forces. They are not, therefore, distinct centers of power, as MNCs are sometimes considered, comparable to a state if different from it. And yet it is difficult to resist the impulse that power is there. The developing IPE of global commodity chains challenges our understanding of both markets and of states and represents an advancing frontier of IPE research.

(6) Globalization
Currently the research agenda in IPE is being driven by a number of factors and forces that are often collectively labeled globalization. The globalization problématique has little to do with the traditional state-centered concerns of International Relations, which is one reason some IPE scholars have now begun to think of IPE as distinct academic discipline, not just a sub-field of International Relations.

The globalization problématique begins with the global expansion of production and finance and asks questions about the causes and effects of increasingly global market structures. These questions concern politics, business, culture, technology, the environment, global migration, gender relations, and tourism, to name only the most obvious areas.

At the heart of the globalization problématique is the question of the state. International Relations theory puts the state at the center, but many scholars argue that a combination of events has weakened the state, either absolutely or through the relative strengthening of other forces and players. The nation-state, it is argued, is increasingly too small to deal effectively with global issues, and too large and removed to deal with local ones. The state exists in the "missing middle" of the emerging global/local geometry of human society. Since the state is central to our "modern" vision of society, what are the implications of the declining state for IPE analysis generally?

If the question of the state were the only element of the globalization problématique, it would be enough to keep scholars working for years. But it is only the first of many issues that globalization raises. Essentially, it is argued, globalization is an example of Schumpeter's famous creative destruction. It creates opportunities for new forms of economic and social relations, but in so doing it destroys what came before.

Globalization, a process that seems to defy easy definition, breaks down barriers whether these barriers separate nation-states, cultures, labor markets, or national economies. Globalization breaks down these barriers the same way that IPE has seemingly beat down the barriers between and among various academic disciplines. In so doing, IPE has perhaps carved out for itself an unexpected role: the academic discipline that studies the results of the creative destruction of modern society and the modern disciplinary structure.