Global Political Economy Theory and Practice Seventh Edition THEODORE H. COM IM R Routledge Taylor & Francis Grou P NEW YORK

Global Political Economy

Theory and Practice

Seventh Edition

THEODORE H. COM IM

Routledge R Taylor & Francis Grou p NEW YORK AND LONDON DETAILED CONTENTS

Preface xiii Acknowledgments xvii Acronyms and Abbreviations xix

PART I Introduction and Overview 1

CHARTER 1 Introduction 2 What is International Political Economy? 3 The IPE Theoretical Perspectives 4 Purposes and Themes ofThis Book 6 Globalization 6 • North-North Relations 8 • North-South Relations 10 Focus of this Book 12 Questions 13 * Key Terms 14 • Further Reading 14 • Notes 14

CHARTER 2 Managing the Global Economy Since World War II: The Institutional Framework 17 Global Economic Relations Before World War II 18 The Mercantilist Period 18 • The Industrial Revolution and British Hegemony 29 • The Decline of British Hegemony and World War I 20 • The Interwar Period 20 • The Institutional Framework Before World War II 21 The Functions of the IM F, World Bank, and GATT 21 The KIEOs and the United Nations 22 The Postwar Economic Institutions and Changing North-South Relations 23 The IMF, World Bank, and WTO 26 • The OECD 28 •The G5, G7, G8, andG20 29 The Postwar Economic Institutions and International Development 31 The KIEOs and the Centrally Planned Economies 39 IMonstate Actors 42 The 2008 Global Financial Crisis: A Turning Point? 43 Questions 44 • Key Terms 45 • Further Reading 45 • Notes 46

vi DETAILED CONTENTS VÜ

PART II Theoretical Perspectives 51

CHARTERS Neomercantilism 55 BasicTenets of Neomercantilism 55 The Role of the Individual, the State, and Societal Groups 55 • The Nature and Purpose of International Economic Relations 56 • The Relationship Between Politics and Economics 56 • The Causes and Effects of Globalization 57 The Mercantilists 57 Neomercantilism and the Industrial Revolution 58 Neomercantilism in the Interwar Period 59 Neomercantilism After World War II 60 The Revival of Neomercantilist IRE 60 Hegemonie Stability Theory and U.S. Hegemony 61 What Is Hegemony? 62 • What Are the Strategies and Motives of Hegemonie States? 62 • Is Hegemony Necessary and/or Sufficient to Produce an Open, Stable Economic System? 64 • What Is the Status of U.S. Hegemony? 65 Neomercantilism and North-South Relations 67 Present-Day Neomercantilism 68 Critique of the Neomercantilist Perspective 70 Questions 71 • Key Terms 71 • Further Reading 71 * Notes 72

CHARTER 4 Liberalism 77 Basic Tenets of the Liberal Perspective 77 The Role ofthe Individual, the State, and Societal Groups 78 • The Nature and Purpose of International Economic Relations 78 • The Relationship Between Politics and Economics 79 • The Causes and Effects of Globalization 79 The Development of Liberal IPE: Adam Smith and David Ricardo 80 The Influence of John Maynard Keynes 81 Liberalism in the Postwar Period 83 A Return to Orthodox Liberalism 83 Liberalism and Institutions 85 Interdependence Theory 85 • The Liberal Approach to Cooperation 86 • Regime Theory 88 Liberalism, Global Governance, and Regimes 89 Liberalism and Domestic-International Interactions 90 Viii DETAILED CONTENTS

Liberalism and North-South Relations 92 Orthodox Liberais and North-South Relations 93 • Interventionist Liberais and North-South Relations 93 Present-Day Liberalism 94 Critique of the Liberal Perspective 95 Questions 97 » Key Terms 97 • Further Reading 97 • Notes 98

CHARTER 5 Critical Perspectives 103 Basic Tenets of Historical Materialism 103 The Role of the Individual, the State, and Societal Groups 103 • The Nature and Purpose of International Economic Relations 104 • The Relationship Between Politics and Economics 104 • The Causes and Effects of Globalization 105 Early Forms of Historical Materialism 106 Karl Marx 106 • Vladimir Lenin: The Study of Imperialism 107 • Dependency Theory 108 Whitherthe Historical Materialist Perspective? 110 World-Systems Theory 111 • Neo-Gramscian Analysis 112 Constructivism 114 Feminism 116 Environmentalism 118 Critique of the Critical Perspectives 121 Questions 122 • Key Terms 123 • Further Reading 123 • Notes 124

PART III The Issue Areas 129

CHARTER 6 International Monetary Relations 131 The Balance of Payments 132 Government Response to a Balance-of-Payments Deficit 135 Adjustment Measures 136 • Financing 136 • Adjustment, Financing, and the Theoretical Perspectives 139 The Functions and Valuation of Money 139 International Monetary Relations Before Bretton Woods 140 The Classical Gold Standard (1870s to 1914) 140 • The Interwar Period (1918- 1944) 141 The Formation of the Bretton Woods Monetary Regime 142 The International Monetary Fund 142 DETAILED CONTENTS ix

The Functioning of the Bretton Woods Monetary Regime 145 The Central Role ofthe U.S. Dollar 146 • A Shift Toward Multilateralism 148 • The Demise of the Bretton Woods Monetary Regime 151 The Regime of Floating Cor Flexible) Exchange Rates 151 The Plaza-Louvre Accords 153 Alternatives to the Current Monetary Regime 153 European Monetary Relations 154 What Is the Future of the U.S. Dollar as the Key Currency? 157 The Dollar Versus the Yen 158 • The Dollar Versus the Euro 159 • The Dollar Versus the Renminbi 161 • The Future of the Dollar: Other Possible Scenarios 162 Considering IPE Theory and Practice 164 Questions 165 • Key Terms 166 • Further Reading 166 • Notes 167

CHARTER 7 Financial Crises 172 Some Definitions and Terminology 173 The Origins of the 1980s Foreign Debt Crisis 174 Unexpected Changes in the Global Economy 174 • Irresponsible Behavior of Lenders 175 • Irresponsible Behavior of Borrowers 175 • The South's Dependence on the North 177 The Foreign Debt Regime 178 The IMF, World Bank, and Transition Economies 181 • The Paris and London Clubs 184 Strategies to Deal with the 1980s Debt Crisis 185 Emergency Measures and Involuntary Lending: 1982-1985 186 • The Baker Plan: 1986-1988 187 • The Brady Plan: 1989-1997 188 • Initiatives for the Poorest LDCs 189 • Assessing the Effectiveness ofthe Debt Strategies 189 Transition Economies and Foreign Debt 190 The IMF, the World Bank, and the Debt Crisis 192 The 1990s Asian Financial Crisis 194 Causes of the Asian Financial Crisis and Strategies to Deal with It 195 • The International Financial Architecture 196 The 2008 Global Financial Crisis 198 The European Debt Crisis 202 The European Debt Crisis and the Changing Relationship Between the E U and IMF 204 Considering IPE Theory and Practice 205 Questions 207 • Key Terms 207 • Further Reading 208 • Notes 209 X DETAILED CONTENTS

CHARTER 8 Global Trade Relations 215 Trade Theory 216 Global Trade Relations Before World War II 220 GATT and the Postwar Global Trade Regime 221 Principles of the Global Trade Regime 222 Trade Liberalization 223 • Nondiscrimination 225 • Reciprocity 225 • Safeguards 228 • Development 229 Formation of the WTO 229 The WTO and the Global Trade Regime 232 The Transition Economies and Global Trade Relations 234 The South and Global Trade Issues 236 1940s to Early 1960s: Limited LDC Involvement 237 • 1960s to Early 1970s: Growing Pressures for Special Treatment 237 • 1970s to 1980: Increased North-South Confrontation 238 • 1980s to 1995: More LDC Partie!pation in GATT 238 • 1995 to the Present: LDC Disillusionment with the Uruguay Round and Demands in the Doha Round 239 • The Emerging Economies: China, India, and Brazil 240 Civil Society and Global Trade Relations 242 Trade and the Environment 244 Considering IPE Theory and Practice 246 Questions 247 • Key Terms 248 * Further Reading 248 • Notes 249

CHARTER 9 Regionalism and the Global Trade Regime 255 Regionalism and the IPE Theoretical Perspectives 257 Regionalism and Globalization 258 A Historical Overview of RTAs 258 The First Wave of Regionalism 259 • The Second Wave of Regionalism 259 Explanations for the Rise of Regional Integration 261 Neomercantiiist Explanations 261 • Liberal Explanations 262 • Historical Materialist Explanations 263 The GATT/WTO and RTAs 263 Trade Diversion 264 • Trade Creation 264 • GATT Article 24 and RTAs 265 • The Effectiveness of GATT Article 24 265 • Special Treatment for LDCs 266 The European Union 268 The Deepening of European Integration 269 • The Widening of European Integration 270 * Theoretical Perspectives and the EU 272 The North American Free Trade Agreement 275 The Formation of NAFTA 275 • NAFTA asa Free Trade Agreement 27b DETAILED CONTENTS xi

Mercosur 280 TheTrans-Pacific Partnership 281 Considering IPE Theory and Practice 283 Questions 285 • Key Terms 285 • Further Reading 286 • Notes 287

CHARTER 10 Multinational Corporations and Global Production 293 Definitions andTerminology 294 Why Do Firms Become MNCs? 295 The Historical Development of FDI 297 The Pre-Worid War II Period 297 • The Mid-1940s to Mid-1980s 298 • 1990 to the Present 301 MNC-Host Country Relations: Determinants and Effects of FDI 304 Host Country PoliciesToward MNCs 307 The South 307 • The North 309 MIMC-Home Country Relations 312 Home Country Policies Toward MNCs 312 • The Effects of MNCs on Labor Groups in Home Countries 315 • Competitiveness and Home Country-MNC Relations 316 A Regime for FDI: What Is to Be Regulated? 318 Bilateral Investment Treaties 319 The United Nations 320 Regional Approaches:The EU and NAFTA 321 The GATT/WTO to the OECD and Back to the WTO 323 Private Actors 325 Considering IPE Theory and Practice 326 Questions 328 • Key Terms 329 • Further Reading 329 • Notes 330

CHARTER 11 International Development 337 IPE Perspectives and North-South Relations 339 Official Development Assistance 340 The World Bank Group 344 LDC Development Strategies 350 Import Substitution Industrialization 350 Socialist Development Strategies 353 xii DETAILED CONTENTS

Export-Led Growth 354 IPE Perspectives and the East Asian Experience 355 • The Asian Financial J57 The Revival of Orthodox Liberalism 359 Structural Adjustment and the Theoretical Perspectives 360 • Structural Adjustment and Questions About Orthodox Liberalism 361 • Structural Adjustment and Sub- Saharan Africa 361 • Structural Adjustment and LDC INomen 362 Another Shift in Development Strategy? 363 The Late 1980s to 1994 364 • The Wolfensohn Period: 1995 to 2005 366 * 2005 to the Present 368 « China's Development Strategy 369 • A Diversity of Views on the UN's Development Goals 370 Considering IPE Theory and Practice 371 Questions 373 * Key Terms 373 * Further Reading 374 • Notes 374

PART IV Concluding Comments 383

CHARTER 12 CutrentTrends in the Global Political Economy 384 Globalization 384 Globalization and Triadization 385 • Globalization and the State 386 • Globalization, Inequality, and Poverty 387 • Globalization and Democracy 389 * Globalization and Civil Society 390 • Globalization and Neglected IPE Issues: Energy, the Environment, and Migration 391 North-North Relations 395 The Current State of U.S. Hegemony 395 • Is There a Candidate to Replace the United States as Global Hegemon? 397 • The Role of International Institutions 399 North-South Relations 401 Changing Concepts of Development 402 • Is There a "Best" Development Strategy? 403 A Final Word on IPE Theory and Practice 405 Notes 406

Glossary 410

Index 420