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Gilpin, Global Political Economy (2001)

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Gilpin, Global Political Economy. (2001) Chapters 1, 2, 8, 9, 10Edit

Context:

Economist famous for his prior work on post cold war economics. Considers this book complementary and more focused on theory and international political economy. Attempts to overcome previous book’s weakness in underplaying domestic dimension. Written pre-2003 invasion of Iraq, but after China joined WTO (99) - China’s GDP has since doubled. Book takes an acknowledged realist approach with a state level of analysis (p4). He is an advocate for free trade.


Thesis:

Economy can’t be examined in isolation, but along with political analysis in “Political Economy.” National policies and domestic economies remain the most critical determinants of economic affairs (the state remains ultimate arbitrator). Globalization, economic regionalism, multinational corporations (MNC), foreign direct investment (FDI) are growing influences. Note MNC & FDI chapters were not assigned.


Terms:

Economics – a universal science of decision making under conditions of constraint and scarcity

Economic regionalism – individual states in a geographic region collectively promoting vital Nat’l interest


Argument:

Gilpin pits alternative approaches to int’l economy against each other throughout the book.

1. The behavior of a nation’s trading partner doesn’t affect our deficit/surplus –it’s domestically defined (203)

2. Trade relations are a prisoner’s dilemma & require unambiguous rules to forestall conflict (219)

2.1. These rules were provided by GATT, now WTO – lower barriers, provide reciprocity

3. Purpose of int’l economy requires agreement and governance – there is none in an anarchic state system

3.1. Monetary system (234) – facilitate transactions in “real” economy (trade, manufacturing)
3.2. Financial system (234) – provide investment capital required for economic activities
3.3. Purpose was to strengthen anti-soviet economies and enforce political unity of US and allies
3.4. Purpose is now debated and undefined (think large group dynamics from Olson reading)


Free Market – policy of strong

Protectionism – policy of weak/vulnerable

Optimize usage of scarce resources

Inefficient or inappropriate usage of resources

Increased competition/innovation

Protects stagnant non-competitive industries

Increased national & global wealth

Slower increase of national & global wealth

Low prices, profit, higher standard of living

Higher prices, less profit, lower standard of living

Stunts or kills emerging businesses

Protects infant industries

State vulnerable to international market changes

Protect norms/values, social & political system

Threatens jobs, wages, social welfare

Protects jobs, wages, social welfare

Implications for Strategy (How does political economy effect security?)

1. Build interdependencies to reduce chance of war (too costly – may have opposite effect due to dependency)

1.1. Think China - can we afford to go to war with primary trading partner & buyer of US debt?

2. Politically sensitive matters are introduced into economics & spark conflict: labor standards, human rights

3. Four themes (Pg22/3):

3.1. Int’l policy & security sets framework – economy operates within it
3.2. Domestic and int’l economies generate wealth, which is distributed unevenly
3.3. Int’l imbalance causes states to redefine state interests and foreign policies
3.4. Changes may undermine stability of framework and/or lead to international conflict

Economic sanctions lie somewhere between war and appeasement in terms of a continuum of "toughness"-and hence are open to attack from both "hardliners" and "soft liners-he notes prescriptively that "techniques that enable policy makers to demonstrate firmness while reassuring others of their sense of proportion and restraint can be highly useful, especially to nuclear powers" (p. 105). In addition, in citing the desirability of using economic statecraft as a means of registering approval or disapproval, Baldwin notes that "economic techniques usually cost more than propaganda or diplomacy and thus tend to have more inherent credibility. Military techniques, of course, usually entail higher costs and even more credibility, but their costs may be too high" (p. 107) Baldwin concludes that "compared to other techniques of statecraft, economic measures are likely to exert more pressure than either diplomacy or propaganda and are less likely to evoke a violent response than military instruments." Hence, "they are not merely inferior substitutes for force but first-best policy alternatives" (p. 110).

Understanding political economy is critical because the United States typically uses either military forces or economic statecraft to achieve foreign policy objectives.

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