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Global Political EconomyLecture 1: Introduction
What is Global Political Economy and what can you expect in this course?
Example: extreme poverty is rising, while also the incomes of the billionaires are rising; growing global
inequality due to covid
Subjects:
-> Inequality
-> Relationship state, government vs. economy
-> Power
-> Interaction of economic and political changes
What is international political economy?
International political economy/global political economy = object of study
-> International political economy = primacy of states/interstate
-> Global political economy = global system in which states are no longer only factors -> also
private/transnational actors (era of globalization)
International Political Economy = conventional name of field & method of inquiry
-> Often seen as sub-field of IR (Political Science)
-> Also: aspiration of multi-disciplinary > pre- and post-disciplinary
Other actors:
-> Cartels: agreements on the price (OPEC)
-> Big companies/big tech, Multinational Corporations
-> NGO’s, TNGO’s, GONGO’s
-> WHO, World bank, IMF (International Monetary Fund)
-> Social Movements
What is international political economy?
Defining the substance of the field: political economy is about the relationship between production &
power
-> Interaction and interrelations between states & markets
-> Between hoe we organize our economy, how we produce, distribute and consume goods & services,
allocate scarce resources - and our system of political rule
IPE studies the interaction of “the economic” and “the political” within the international/global system
States & markets in capitalism
Capitalism: an economic system based on private ownership of the means of production, wage labour
and market competition
Market: concrete place or social institution in which goods & services (“commodities”) are bought & sold
(exchanged via money)
State(s): a system of political rule (set of institutions) in which exclusive authority (incl. the monopoly of
the legitimate use of violence) is exercised over a defined territory
How are states & markets dependent on each other?
-> State police defends private property
-> Influence/interference or no-interference in the market
-> Laws that define ownership titles
-> States create money
-> Taxes
-> States enforce competition, preventing monopolies
-> “Markets are created by states, by creating private property rights”
-> States supporting markets (by instance: during pandemics)
-> States in capitalism need the market economy to produce economic prosperity for citizens
,Global Political Economy
Enduring questions
-> How do global capitalism and the states system interrelate?
-> How have the capitalist world-economy and the states system co-evolved?
-> What are the effects of the dynamics and processes of the world economy on the national and
international politics and policies of states?
-> What are the effects of the politics and policies of states on the world economy?
-> What is the relationship between economic power and political power between and across states?
-> How is power distributed within the global political economy? What power structures can we discern?
-> Cui Bono? = who benefits
Rival perspectives in IPE
Contemporary questions on GPE
-> How powerful are organizations like IMF or the WTO?
-> Are Transnational Corporations more powerful than some states?
-> What is the relationship between globalization and inequality?
-> What caused the global financial crisis?
-> What have been the political effects on the crisis?
-> Is there a shift towards the East and if so, what are the causes and effects of this shift?
-> What are the implications of the US-Chinese trade war?
-> What is the relationship between globalization and populism?
-> Will globalization go in reverse?
-> What is the impact of the corona crisis on the global political economy and how can we understand
contemporary capitalism through the prism of this pandemic?
4 levels of analysis & four structures
4 inter-related levels:
1. Global
2. Interstate
3. State-societal
4. Individual
4 inter-related structures (Susan Strange):
1. Production & trade
2. Money & finance
3. Knowledge & technology
4. Security
,Global Political Economy
Lecture 2: Liberalism
History: liberalism emerged after the industrial revolution, during times of the Enlightenment (made
possible because of capitalism; you need a market for economic liberalism)
In the book, a distinction is made between orthodox and heterodox liberalism?
The evolution of the Liberal Perspective
-> Orthodox and heterodox liberalism (some forms of heterodox liberalism are rather close to
mercantilist or structuralist perspectives
-> Different phases in different historical contexts
-> Orthodox I: classic liberalism in the context of the British industrial revolution
-> Orthodox II: Neoclassical economics developing in late 19th, early 20th century
-> Heterodox I: Keynesianism after the Great Depression and in the postwar era
-> Orthodox III: Neoliberalism from the 1980s onwards in context of contemporary globalization
-> Heterodox II: new critiques (within broad liberal paradigm) of ultra-free market economics and
neoliberal globalization after 2008 (GFC
Neoliberalism: market knows best: all trust in the market: laissez faire
Core ideas of (orthodox) economic liberalism
-> Reason, progress
-> Liberty (from the state - but with property rights); laissez faire
-> (Rational) individual choice
-> “Man” selfish but pursuit of self-interest promotes collective good (maximizes welfare / utility) under
conditions of economic freedom
-> Market efficiency: the price mechanism
(Example: slavery, child labour)
-> These ideas developed in the 18th and 19th century Britain; the birthplace of capitalism & industrial
revolution - by political economist such as Smith and Ricardo promoting the cause of the further
development of capitalism
Adam Smith (1723-1790)
-> The Wealth of Nations
-> “Invisible hand”
David Ricardo (1722-1823)
-> Comparative advantage & benefits of free trade (context British hegemony)
-> Comparative advantage: the relative cost within a particular country
John Stuart Mill (1806-1873)
-> Need for market-correcting role of the state
-> Social liberal
The dominance of the orthodox liberal perspective in modern economics: “The market is always right”
-> With the aid of mathematics and new ideas about “micro-economics” classical laissez faire political
economy was transformed into more formal neoclassical economics in 20th century (still dominant in
economics departments)
-> Rational preferences: maximisation of utility & profit; complete information
-> Law of supply & demand: price mechanism
-> The reach of a market equilibrium
-> Efficient market hypothesis
, Global Political Economy
-> Critique of behavioural & institutional economics
Neoliberalism
-> Roots in economics: champions of ultra-liberal capitalism
Friedrich von Hayek (1899-1992) The road to serfdom
-> Minimal state, maximum freedom capital (anti trade unions)
-> Economic freedom trumps democracy
Milton Friedman (1912-2006) -> Video on Canvas
-> Monetarism (controlling money supply to control inflation)
-> Anti-welfare state: economic (property) rights against social rights
Margareth Thatcher
Neoliberalism as a political project; neoliberal reforms
-> Context: economic crisis of 1970s & breakdown of Keynesian consensus (Keynes: governments can
consent their way out of recession. In crisis, this did not work and began to break down)
-> First generation politicians: Reagan & Thatcher: “there is no such as a society”
-> Neoliberal reform was also pushed by business elites & transnational business elites
Core policy program
-> Freedom of enterprise: anti-unionism (Thatcher’s breaking of the unions; as unions interfered with the
labour market)
-> Deregulation & privatization
-> Welfare state retrenchment (austerity)
-> Labour market flexibilization (“reform discourse”)
-> Global marketization; neoliberal globalization
--> Rise in the 1980s, consolidation in 90s, crisis in 2010s (after 2008 crisis)
-> Argument: only a free market can be efficient
John Maynard Keynes (1833-1946): leading economist of heterodox version of liberalism
-> The General Theory of Employment, Interest and Money (1936)
-> He wrote this book during the Great Depression
-> Saving capitalism
-> “In the long run we are all dead”: need for macro-economic intervention
-> Paradox of Thrift: in an economic crisis, people will be scared and will save money. This is rational from
the individual, but not from the whole economy. If everyone saves money, less will be spent. This is when
the government takes over and makes the spendings that privates and consumers are not going to make.
(Aggregate demand: totale vraag: the most crises start from a low aggregate demand; this is where the
government comes in), Then: multiplier effect: government money into business, business into people,
people into business, etc
-> “The euthanasia of the rentier”
-> Keynesian economic theory: increase demand to boost growth
Contemporary (Post-)Keynesianism
-> > cf austerity regime in Eurozone (3% norm)
-> > cf. current response to Coronavirus pandemic
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