International Political Economy in Context Individual Choices Global Effects 1st editon by Andrew Sobel ISBN 1452289875 9781452289878

PART I. BUILDING BLOCKS TO EXAMINE GLOBAL POLITICAL ECONOMY AND CONFLICT

1. Introduction: Political Economy, Rationality, and Social Science

Similarities across Domestic and International Politics

Globalization and Global Capitalism: Connecting Markets and Communities

The Past as Prologue

What Is Political Economy?

Three Core Assumptions within the Micro Political Economy Approach

Scarcity

Political Survival

Rationality

Rationality, Preferences, and Self-Interest Explored

Ordering Preferences

Rationality under Scarcity and Political Survival

Two Properties of Preference Ordering: Completeness and Transitivity

Context and the Interdependence of Choices: Opportunity for Strategic Behavior

Game Theory: Modeling Context and Interdependent Choices

Outcomes versus Choice: Using the Rationality Assumption

Backward Induction

An Example of Backward Induction

The Purpose and Process of Social Science

Social Analysis as Social Science

Tasks of Inquiry: Describing and Explaining What Happened and Why

Two Examples of Theoretical Failures: Liberalism and Realism

Liberalism: The Mutually Beneficial Exchange of Trade and Globalization

Realism: The Nation-State System and the Distribution of Power

Conclusion and Some Other Pitfalls

Appendix: Examples of Complete and Intransitive Preferences

Key Concepts

Exercises

Further Reading

2. Structure, Nation-States, Power, and Order in an International Context

The Context of International versus Domestic Political Arenas

Nation-States: Influential Political Organizations in the Global Arena

States and Their Defining Characteristics

Functional Equality and Specialization: What Every State Does, but Some Better than Others

Nation: Development of Collective Identity and Social Cooperation

Origins of the State System: Empire and Fragmentation

The Treaty of Westphalia and Sovereignty: Redrawing the Lines of Political Authority

The Principle and the Practice of Sovereignty

Common Violations of the Principle of Sovereignty

Anarchy: Conflict, Competition, and Cooperation in the Global Arena

Self-Help Dispute Resolution under Anarchy

Hierarchy: Looking for Order and Predictability

Power Defined as a Relative Concept

Using the Tools of Statecraft and Diplomacy to Influence Behavior

Persuasion

Offer of Rewards

Granting of Rewards

Threat of Punishment

Nonviolent Punishment

Force

Analyzing Political Behavior: Weighing the Costs and Benefits of the Tools of Statecraft

Finding Order in Anarchy: Power Capabilities and Attributes

Motivation versus Capability in the Hierarchy of Influence

Tangible Attributes That Contribute to Power

Intangible Attributes That Contribute to Power

Conclusion

Key Concepts

Exercises

Further Reading

3. Economic Liberalism and Market Exchange in the Global Arena

Economic Liberalism: Competitive Markets and Social Outcomes

The Price Mechanism Coordinating Supply and Demand

Factors of Production: The Allocation of Land, Labor, and Capital

The Normative Appeal of Economic Liberalism: Individual Choice, Liberty, and Efficiency

Market Exchange as the Basis of International Trade: Mechanisms at the Core of Modern Globalization

Absolute Advantage: An Early Principle of International Trade

Comparative Advantage: A Revolution in Thought

Revisiting Factors of Production: Labor Theory of Value to Factor Endowment

The Balance of Payments: Regulating Trade and Capital Flows in the Global Political Economy

The Role of Financial Invention and Integration in Expanding Global Capitalism

Money: A Functional Approach

Expanding Access to a Larger Pool of Capital

Labor Mobility: Creating Linkages across State Borders

Conclusion

Key Concepts

Exercises

Further Reading

PART II. MICRO TOOLS

4. The Micro Approach to Political and Economic Markets in Theory and Practice

Individual Preferences, Social Outcomes

Economic and Political Market Exchange

Market Exchange in the Political Arena: Rational Consumers and Producers

The Mechanism of Political Exchange

Voluntary versus Nonvoluntary Exchange

Social Choice and Voting Rules

Theoretical Prerequisites of Efficient and Competitive Markets

Clear Property Rights and Low Transaction Costs

Competition and Manipulation of Market Exchange

Externalities

Complete Information

An Example of Political Market Exchange: Elections, the Median Voter, and Selection of Policy

International Affairs If the Conditions for Efficient Economic and Political Exchange Hold

Market Failure and Suboptimal Social Outcomes

Understanding Market Failure

Incomplete Property Rights and Nonnegligible Transaction Costs

Manipulation of Supply and Demand

Third-Party Negative and Positive Externalities

Threats of Incomplete and Asymmetric Information

Context and Social Traps: Cycling, Coordination, and Cooperation Problems

Conclusion

Appendix: Using Game Theory to Explore Cycling and Coordination Problems

Key Concepts

Exercises

Further Reading

5. The Dilemma of Collective Action: Who Organizes, Who Does Not, and Why

A Paradox of Collective Action

Dismantling the Social Trap: Self-Interest and Collective Outcomes

What Is a Collective Good?

Initial Expectations about Provision of Collective Goods

Positive Externalities and Incentives to Free Ride

The Unraveling of Collective Good Provision

Another Paradox: Collective Action despite the Social Trap

Mechanisms for Overcoming Barriers to Collective Action

Compulsion

Selective Incentives

Entrepreneurship

Piggybacking

Group Size

Some Other Collective Action Considerations

Conclusion

Key Concepts

Exercises

Further Reading

6. The Role of Hegemonic Leadership and Its Micro Foundations

Growing Global Exchange under a Liberal Hegemon

Hegemonic Leadership and Global Stability

Liberal Hegemons and Important Collective Goods

Open Market for Distress Goods

Countercyclical Lending

Stable Exchange-Rate System

Macroeconomic Policy Coordination

Lender of Last Resort: Managing Liquidity in the Global System

Sources of Hegemonic Capacity: Arising from Challenges to Political Survival

Public Finance and Hegemonic Provision of Collective Goods

Rule of Law

Taxation

Public Debt

Lender of Last Resort

National Currency as an International Reserve Currency

Private Finance and Hegemonic Provision of Collective Goods

Capital Market Size

Capital Market Diversification

Capital Market Depth and Liquidity

Market Transparency and Clearinghouse Mechanisms

Openness and Absence of National Bias

Change and Development of Hegemonic Capacity in a Global Financial Network

Credibility of Public and Private Financial Arrangements in the Global Political Economy

Increasing Returns and Network Externalities Necessary to Become a Global Capital Financial Center

Alternative Explanations of the Source of Hegemonic Leadership

Conclusion

Important Caveat

Key Concepts

Exercises

Further Reading

7. Interest Groups and International Economic Foundations of Political Cleavage

A Puzzle: How to Anticipate Possible Cleavages and Coalitions in Political Economies

Explanations Grounded in Micro Political Economy

Interest Groups: Fragmenting Monolithic Perceptions of Society

Biological and Social Foundations of Cleavage

International Economic Sources of Cleavage

Factor Endowment: A Source of Preferences, Cleavage, and Coalition

A Critique of the Factor Endowment Framework

Industrial Sector as an Alternative Means of Interest Aggregation

Asset Characteristics as an Alternative Means of Interest Aggregation

Conclusion

Key Concepts

Exercises

Further Reading

8. The Role of Institutions in Political and Economic Market Failure

Constraining Social Traps and Market Failure

Institutions as Rules of the Game: Influencing Actions and Outcomes

Difference between Formal and Informal Institutions

Institutions as Social Bargains and Ex Ante Agreements

Institutions as Equilibria

Institutions as Incentives and Path Dependence

A Normative Caveat: Are Institutions Inherently Good?

Institutional Effectiveness and Durability: Lasting Consequences

Distributional Implications of Institutions

The Social Origins of Institutions: Intentional and Unintentional Design

Institutions as Devices to Overcome the Time-Inconsistency Dilemma

Important Institutional Considerations in Domestic and Global Affairs

Regime Type: Democratic and Authoritarian Regimes and the Rules of the Game

Electoral Systems: Influencing the Nature of Politics and Policies

Structure of Government: Domestic and Global Implications

Social Institutions: Influencing Uncertainty and Risk through Social Bargains

Veto Points: Institutional Checks and Balances in a Political Economy

Conclusion

Key Concepts

Exercises

Further Reading

PART III. CONTEXT

9. Around the World in Eighty Days: A Stage of Modern Globalization

Globalization Is Nothing New

Intellectual Change: Comparative Advantage and Efficiency Improve Social Welfare

Shifts in Public Policy Affect International Exchange

Mercantilism and Protectionism as the Legacy of War

The Rise of British Protrade Political and Policy Pressures

Bilateral Trade Treaties and Most-Favored-Nation Status

Other Liberalizing Policy Shifts and a Caveat

The Influences of Risk and Uncertainty on International Trade

Managing Risk and Uncertainty: Incomplete Contracting, Default Risk, and Banker’s Acceptances

Managing the Problems of Currency Risk: Monetary Regimes

The Gold Standard and Stable Exchange Rates

Debate over Alternatives to the Gold Standard

Why Converge on a Gold Standard?

Convertibility as a Collective Good

Why Would a Government Renege on a Commitment to Its Currency Price?

British Contributions to Other Collective Goods

Liquidity: Fuel for a Global Economy

Lender of Last Resort: Managing Economic Crises

Market Access under Duress

Technology’s Role in the Growth of Globalization

Transportation Leads to Greater Efficiency and Market Integration

The Industrial Revolution and Migration Transform Political Economies

Technological Advances in Communication Promote Globalization

The Dark Side of Globalization in the 1800s

Creative Destruction and Dislocation

The Dominance of Colonialism and Imperialism

Conclusion

Key Concepts

Exercises

Further Reading

10. The World between the Wars: A Breakdown in Globalization

Why the Reversal in Globalization and Economic Advance?

Allocating Costs of Adjustment

The Legacy of Rapid Change in the 1800s

Agriculture and Costs of Adjustment

Retrenchment of Trade Barriers

The Unsettling Legacy of World War I in the Interwar Years

Post–World War I Population Loss as a Barrier to Economic Activity

The Exchange-Rate Mechanism: Currency Instability and Convertibility

Beggar-Thy-Neighbor Policies and Currency Devaluation

Breakdown in Liquidity and Lender-of-Last-Resort Collective Goods

The Effects of War Debts and Reparations on Liquidity

German Hyperinflation Threatens Monetary and Political Stability

The Rise of Political Extremism in Germany

U.S. Financial Market Speculation and the Crash

Crisis in the Credit Mechanism

The Breakdown in Trade Erodes the Benefits of Global Exchange

Tit-for-Tat Retaliation Beggars International Trading Partners and Hinders Recovery

The Absence of Hegemonic Leadership in the International System

Conclusion

Key Concepts

Exercises

Further Reading

11. The Bretton Woods System: The Rebuilding of Globalization

Past Mistakes and a New Framework for International Cooperation

Policy Making and Time Inconsistency: Lessons from the Interwar Years and the Postwar Dilemma

Using Monetary and Fiscal Policies to Manage Economies: Postwar Domestic Strategy and Mechanism Design

Supporting Hegemonic Leadership with IGOs: Postwar International Strategy and Mechanism Design

Promoting Freer Trade: The GATT

Monetary Arrangements and the International Monetary Fund

Development and the World Bank: Encouraging Economic Expansion

Active Engagement and the Truman Doctrine

Economic and Military Containment

The Marshall Plan’s Strategy to Promote Economic Growth

Breakdown in the Bretton Woods Monetary Arrangements

Suspension of Convertibility and Imposition of Capital Controls

The Leading Currency Problem and the Triffin Dilemma

Growing Pressures on the Dollar-Gold Relationship Threaten the Bretton Woods Monetary System

U.S. Financial Constraints and International Reactions Challenge U.S. Leadership

Suspension of Dollar-Gold Convertibility

Conclusion

Key Concepts

Exercises

Further Reading

12. The World Post–Bretton Woods: Globalization Advances

Fundamental Shifts in Global Finance

Post–Bretton Woods Monetary Arrangements

Seeking a Stable System of Exchange Rates amid a Variety of Exchange-Rate Mechanisms

Strategies to Limit Exchange-Rate Volatility: Currency Pegs, Currency Control Boards, and Limited Monetary Policy Flexibility

A Collective-Currency Peg to Limit Exchange-Rate Volatility: The European Snake

Balancing Strong- and Weak-Currency States: The European Monetary System

The European Monetary Union: Balancing Greater Monetary Integration with Fiscal Autonomy

Financial Globalization and Liberalization: Unleashing National Financial Markets and Reviving Global Finance

Explanations for Globalization: Technology, Competition, Politics, and Policy

Challenging the Emerging Global Financial Infrastructure: Petrodollars and a Debt Crisis

Implications of Financial Globalization: Does Mobile Capital Gain Disproportionate Advantage and Erode National Policy Autonomy?

The Capital Mobility Hypothesis: The Use or Fear of Bargaining Leverage

The Unholy Trinity: Three Policy Tools and an Inherent Tension

Going Forward: The IMF and the Washington Consensus

Conclusion

Key Concepts

Exercises

Further Reading

13. Détente and the End of the Cold War: Globalization during Transition

Cold War to Post–Cold War Transformation

The Command Economies Gradually Join the Global Economy

Détente and Shifts in the International Political-Military Context Lead to Improved Economic Relations

The Cuban Crisis and a U.S.-Soviet Strategic Gap Lead to Greater Cooperation

The Two Germanys and Political Settlement in Europe Transform the Global Context

The Vietnam War’s Resolution Contributes to Improved East-West Relations

Global Implications of Discord within the Sino-Soviet Alliance

Domestic Shifts in the Eastern Bloc and China Generate Greater International Exchange

Access to Western Markets, Technology, and Capital Encourages Development

Second Thoughts, Overleveraged Political Economies, and International Lending

Renewal of Political-Military Tensions Interrupts the Eastern Bloc’s Global Economic Integration

China Takes Steps toward Liberalization

Arms Control, Perestroika, and Glasnost Change the Political Economic Landscape

Conclusion

Key Concepts

Exercises

Further Reading

14. Into the Future: Political and Economic Market Failures and Threats to Globalization

Regional and Financial Instability Grow into a Systemic Threat

The Future of U.S. Leadership in the Twenty-First Century

A Network of Financial Relations Creates Self-Sustaining, but Not Stable, Leadership

Public and Private Domestic Financial Practices Threaten U.S. Hegemony

Challenging the Health and Efficacy of U.S. Global Economic Leadership

Potential Hegemonic Successors to Stabilize the System and Promote Cooperation

Considering the Microfoundations of Hegemonic Capacity for China, India, and the European Union

Conclusion

Key Concepts

Exercises

Further Reading

Index