Introduction to International Political Economy

Preface

. . . the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

John Maynard Keynes

The ideas, questions, issues, and problems that we study in International Political Economy (IPE) are increasingly important. It is hard to make sense of a newspaper, a business investment, or a government policy without an understanding of the theories, institutions, and relationships found in IPE. It is difficult, in other words, to understand our everyday lives without some understanding of IPE, so deeply are we now touched by international relations and global events.

We believe that IPE is so important that all college students need to understand it in a fundamental way. Our conviction is that it is possible to present this material in simple ways that retain the complexity of the global issues and intellectual problems we address, but without making the discussion fit only for graduate students. Our aim is to provide educational materials that will allow "beginners" (college freshmen and sophomores) to go from 0 to 60 in IPE in a single semester. Our hope is that these students will get excited about IPE as an element of lifelong learning and become better citizens and more knowledgeableindividuals in the process.

OUTLINE OF THE BOOK

The book begins with flue chapters designed to set out some basic tools for studying IPE. Chapter 1 introduces the fundamental elements of IPE. We will begin with relatively simple tools and ideas, then add layers and detail to make IPE real. Chapters 2, 3, and 4 explore three ways of looking at IPE that have been powerful forces in history and remain influential in today's world: mercantilism, liberalism, and marxism or structuralism. Chapter 5 introduces four theories (rational choice, feminist, green, and postmodern) that challenge our understanding some IPE questions and events.

The second section of the text examines the web of relationships or structures that tie nations and their citizens together. As a student sitting at your desk, you are linked to people and places around the world in a number of ways which you need to understand if you are to make good personal, business, and social choices. Chapter 6 looks at production and international trade. Chapter 7 looks at the monetary linkages that bind us together. Chapters 8, 9, and 10 examine, respectively, the debt connections, the security structure, and the ties created by knowledge and technology.

At the end of the first ten chapters, then, you should be able to imagine yourself as part of the international political economy and how you are linked to states and markets around the globe. You should have a fundamental understanding of what these linkages are, and an appreciation of the theories and perspectives that interpret these structures and guide our understanding of them.

The second half of the book looks at specific topics and problems in IPE that are essential to a sound understanding of the world today. Chapters 11 to 14 look at issues and events that are usually associated with the industrial nations of the North. We examine the European Union, the controversy over NAFTA, the IPE of Japan, and the problems of the formerly Communist countries making the transition to another form of political economy.

Problems and issues generally associated with the less developed countries of the South are discussed in chapters 15 to 17. These chapters look at the dilemma of Less Developed Countries (LDCs) and Newly Industrialized Countries (NICs), the nature of the multinational corporation, and the IPE of OPEC and oil.

Finally, the last three chapters examine global problems. The global environment and the food crisis are discussed. The very last chapter asks, "Where do we go from here?" After reviewing basic concepts and examining the fundamental tensions that shape today's world, we consider four scenarios for the future of IPE.

At the University of Puget Sound, where we teach, all of our students take a course in IPE, or something similar, in their sophomore year. We have written this text to help our students and to help ourselves serve their needs. We hope you find it a valuable educational resource.

WHAT'S NEW IN THE SECOND EDITION?

The world has changed a lot since the first edition of this textbook appeared in 1996 and the second edition has been thoroughly revised to reflect the dynamic environment of IPE. We have retained the basic format that has proved so successful: a survey of theoretical perspectives followed by an analysis of structural connections, leading to sections that explore state-market tensions, North-South relations, and global problems. Within this structure, each chapter has been carefully revised. A few chapters have received major overhauls; all of them have been updated. Here is a list of the most significant changes.

• Chapter 1 has been revised to make it a more user-friendly introduction to IPE for beginners (but not, as the popular how-to book series has it, for "dummies"). The U.S.-China case study has been retained and deepened somewhat. The notion of Waltz's three levels of analysis is introduced in this chapter to provide a basis for discussion in later chapters.
• Chapter 5 has been broadened significantly. In place of a chapter on rational choice theory, Michael Veseth has written a new chapter that surveys four theories that, depending upon your viewpoint either challenge or enrich the traditional study of IPE: rational choice, feminist, green, and postmodern theories. We want this chapter to serve as a point of entry for professors who want their students to study one or all of these theoretical perspectives without fundamentally changing the format and focus of the book. We hope that professors who wanted to be able to teach these theories as part of IPE will find this chapter's summaries useful and will supplement them with other readings and assignments.
• Dave Balaam has written an entirely new chapter 9 on the global security structure, uprooting the discussion from the previous focus on the Cold War and asking students to consider security as a dynamic and many-layered problem.
• Chapter 13's analysis of state-market tensions in Japan has been thoroughly revised by Karl Fields and Michael Veseth to reflect more clearly the political and economic crises that Japan has confronted in the 1990s. The focus of this chapter is now the model of the developmental state and the question of whether this system of state-market relations is still valid.
• The analysis of the transition from state to market by former communist countries has been strengthened through a revision authored by Patrick O'Neil, our colleague at Puget Sound, who joins the textbook team in the second edition. Professor O'Neil's revision adds detailed substance to the basic outline established in the first edition.
• Chapter 17's discussion of the IPE of energy and oil has also come in for a major revision. The focus of the chapter is now clearly on oil and the recent issues in the IPE of oil. Much of the historical analysis of the first edition chapter has been cut to make room for more recent events.
• "Where do we go from here?" We have revised chapter 20 to make it less U.S.-centric and to address more directly the questions and concerns that students have when they reach the end of a textbook like this.
• All the chapters have been revised to take into account a number of important IPE events, especially the growing discussion of and concern about economic globalization, the financial crises in Asia and elsewhere, and the advent of a single currency in Europe, the euro.

ACKNOWLEDGMENTS

This textbook is truly a cooperative effort. We have benefited from the contributions and support of many persons, students, colleagues, family, and friends. We are especially grateful, however, to our colleagues in the International Political Economy program who have contributed directly to this work by writing chapters in their fields of expertise: David Sousa, Karl Fields, Ross Singleton, Leon Grunberg, Patrick O'Neil, and Sunil Kukreja.

The second edition of this text has especially benefited from the work of our colleagues who have taught IPE at the University of Puget Sound: Richard Anderson-Connolly, Matt Warning, Jan van der Veen, Elizabeth Norville, Lisa Nunn, Martyn Kingston, Arpad Kadarkay, Peter Loedell, and Nick Kontogeorgopoulos.

Finally, we owe debts we can never repay to our families and to our mentors. We love you.

We dedicate the second edition to the memory of Susan Strange, who taught IPE to all of us.

David N. Balaam and Michael Veseth
Tacoma, Washington