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About this book

The landscape of the world economy has been significantly reshaped in recent years. The global economic crisis revealed the fragile foundations of the international financial system, and, in its wake, dynamics of economic power have considerably adjusted. In the fifth edition of this best-selling text, these developments are incorporated into a comprehensive introduction to the global political economy. It takes full account of the emergence of China as a contender to the predominance of the US, of the changing role of the BRICS economies more generally, and of the on-going problems of the European Union, and especially the eurozone.
While incorporating the latest developments, Global Political Economy continues to provide a historically-grounded account. It traces the evolution of the global economy, from its roots in the 15th century, through the Industrial Revolution, to the post-1945 world order. It then explores in detail the dynamics of global political economy in the 21st century, providing systematic coverage of the key spheres of activity – trade, production, finance, labour, gender, development, the environment, ideas, security and governance.

Lucid, engaging and authoritative, Global Political Economy introduces an unusually wide range of theoretical approaches, moving beyond a traditional three-paradigm perspective to show how these theories can be applied and how useful they are for understanding key issues and developments.

Table of Contents

Introduction

Abstract
The aim of this textbook is to provide an accessible introduction to the study of international political economy (IPE). In pursuit of this aim, it follows two strategies that distinguish it from many other IPE textbooks. First, it adopts a historical approach to the study of IPE and offers students, the interested public and scholars a broad overview of how the modern global political economy has come into being. Instead of beginning with an analysis of contemporary global political and economic structures, the book seeks to provide an easily accessible but brief history that draws out important factors in the creation of our present situation. In our teaching, we have found that the best way for students to appreciate the nuances of the present is to expose them to the origins of political economy practices of the past. This is even more vital as we move from a world dominated by the US and Europe to a more multilateral future. Second, the book seeks to move beyond the repetition of the three dominant theoretical perspectives (economic nationalism, liberalism, Marxism) on IPE as a framework of analysis. It seeks to reflect both the developments in IPE scholarship in the past 30 years and the main debates between orthodox and heterodox scholars through attention to a broad range of themes, issues and perspectives in IPE. Unorthodox or heterodox approaches to IPE have become much more developed since the first wave of IPE texts in the 1980s by Spero (1981), Gilpin (1987), Strange (1988) and Gill and Law (1988). Ecological, feminist, neo-Gramscian and poststructural approaches now compete with traditional perspectives and shed new light on old problems. Central to our strategy is a framework that integrates material and ideational aspects of IPE.
Robert O’Brien, Marc Williams

Theoretical Perspectives

Frontmatter

Chapter 1. Theories of Global Political Economy

Abstract
In its present form, the field of international political economy (IPE) or global political economy (GPE) is a relatively new undertaking at universities. This chapter introduces readers to three of its main theories. Chapter 2 gives readers an overview of the relationship of IPE to other fields, considers some of the methods used to study IPE and examines the future directions of GPE theory. During 1996 and into 1997, a small number of investors and currency traders began to have doubts about whether Thailand’s economy would be able to continue its record of remarkable growth. Fearing a reduction in economic prosperity and profit, some of these investors began to withdraw their money and investments. The outflow of money forced the Thai central bank to devalue its currency, the baht. This began a process which was later called the 1997
Robert O’Brien, Marc Williams

Chapter 2. Simple Regression

Abstract
This chapter takes a step back from the three usual approaches to IPE (economic nationalist, liberal, critical) to consider how IPE fits with other fields of study, what kinds of methods can be used in IPE and where the field is going in theoretical terms. We also outline the approach we have taken in writing the book. A review of the teaching and study of IPE in the 1990s identified both continuities and change in the issues considered important by scholars (Denemark and O’Brien, 1997). Some issues, such as the impact of TNCs, international finance and international trade, have remained central to the core issues covered in IPE courses. The centrality given to issues such as Third World development or North-South conflict has varied considerably over the past three decades. Meanwhile, issues such as East-West relations, energy and the impact of producer cartels have vanished to be replaced by a focus on environmental concerns and gender. In terms of a broad overview of the international political economy, analysis has shifted from a concern with interdependence to an obsession with globalization. To situate the study of IPE among other subjects, it is useful to make some preliminary comments about the organization of knowledge in the social sciences. Although Western knowledge and universities are separated into distinct subjects, fields and departments, this was not always the case. Before 1900, intellectuals often worked in a number of different fields that would not fit into today’s compartments.
Robert O’Brien, Marc Williams

Evolution

Frontmatter

Chapter 3. Forging a World Economy: 1400–1800

Abstract
Why do we inhabit a world where there are such great inequalities of wealth and life chances between regions? Why do some countries seem to be caught in a trap of producing products whose value declines over time, such as sugar or coffee? What accounts for the racial hierarchies in countries such as the US and South Africa? Why do some societies and countries seem suspicious of the foreign and economic policies of Western states, corporations and civic associations? The answers to these questions are partially rooted in the origins of the global economy. Indeed, a full understanding of today’s global economy requires a familiarity with patterns that were initiated hundreds of years ago. New histories often tell us as much about the times in which they were written as they do about the historical events themselves.
Robert O’Brien, Marc Williams

Chapter 4. Industry, Empire and War: 1800–1945

Abstract
This chapter examines the emergence of a liberal and imperialist international economy in the 19th century and its destruction in the early 20th century. The first part of the chapter investigates the origins of the Industrial Revolution in Britain and the factors that facilitated it. The second section focuses on the international system that was created as a result of the advantages the revolution gave to Great Britain and other Western powers (Pax Britannica). The third section examines one of the consequences of the increased power flowing from the Industrial Revolution - the era of renewed imperialism. The fourth section examines the breakdown of the liberal system during the First World War and the futile attempt to re-establish it during the 1930s. There are several points we can take from this historical overview of the 19th and early 20th century. First, both wealth and power flowed to the elites of states who were able to harness innovation in production technologies. The Industrial Revolution increased British power and wealth to such an extent that some scholars describe the mid-1800s as a period of British hegemony or Pax Britannica.
Robert O’Brien, Marc Williams

Chapter 5. Growing a Global Economy: 1945–2015

Abstract
This chapter examines the transformation of the international political economy from the middle of the 20th century into a global political economy in the first decade and a half of the 21st century. The first section examines the period 1945–89 when international relations were marked by Cold War divisions and distinct political economies. The second section highlights developments that have taken on increasing significance since the end of the Cold War. These include competing capitalisms and state transformation, the information revolution, and developments in international organization and global governance. It is common to refer to the Cold War system of 1945–89 as being composed of three worlds. The First World comprised the US and its allies in western Europe, Canada, Australia, New Zealand and later Japan. The Second World comprised the communist states of Eastern Europe and the Soviet Union.
Robert O’Brien, Marc Williams

Dynamics

Frontmatter

Chapter 6. International Trade

Abstract
Trade across borders inflames passions and creates controversies that are absent in discussions of trade within countries. Early chapters of this book demonstrated the importance of trade in the evolution of the contemporary global economic system. This chapter provides an introduction to understanding the political economy of the modern global trading system. One striking feature of the contemporary international trading system arises from the conflict between the continuing political importance of the national border and its declining economic relevance. Political conflicts over trade exist simultaneously with the growth of transnational production (see Chapter 7), wherein production by firms is less restricted by national frontiers than at any time in history. This chapter provides an introduction to international trade through an examination of the material and normative structures that constitute the international trading system. It begins with a brief definition of some key terms, and an introduction to the importance of the means of exchange.
Robert O’Brien, Marc Williams

Chapter 7. Transnational Production

Abstract
Hundreds of books, theses, government reports and thousands of papers in academic and professional journals have been written on the subject of transnational production, the causes of foreign direct investment (FDI) and the costs and benefits of inbound foreign investment for a host country. Scarcely a day goes by without a newspaper or magazine article praising or blaming what is now often referred to as the globalization of business activity. Despite, or perhaps because of, the extensive literature on transnational production, no consensus exists on either the causes or impact of this phenomenon, although it is widely agreed that the growth of transnational production has profoundly shaped the evolution of the global economy. For example, the current rhetoric of globalization assigns a crucial role to changes in the global production structure. However, it should also be noted that attention to the role of large international firms first arose in the 1960s. Prior to the current interest in globalization, students of the global political economy had developed an awareness of the impact of the changing production structure on international relations. The global production system is a complex process, with millions of workers and workplaces integrated into diverse local, national, regional and global systems. The relationship between discrete centres of production and the global economy cannot be captured through any simple model.
Robert O’Brien, Marc Williams

Chapter 8. The Global Financial System

Abstract
This chapter considers the global financial system by focusing on its two most significant parts. Although they will be treated separately for analytical purposes, they have evolved in tandem and influence each other. We will look at the international monetary system (IMS), which governs how one national currency is exchanged for another, and the global credit system, which determines who gets to borrow money and on what terms. Both systems have undergone dramatic changes since they were established in the mid-1940s. The IMS has evolved from a system of fixed exchange rates to using floating exchange rates. Recently, a number of states have abandoned their national currencies in favour of regional currencies, for example the euro. In the global credit system, the creation and supply of credit has moved from being the responsibility of public authorities (governments) to being provided by corporations. In addition, advances in IT and the deregulation of financial flows have resulted in much more rapid transfer of capital across state boundaries. The consequence of these developments is that many states, even the most powerful, are increasingly sensitive to market fluctuations.
Robert O’Brien, Marc Williams

Chapter 9. Global Division of Labour

Abstract
When studying international economics or global political economy, it is easy to concentrate attention on the activity of corporations or states and lose sight of the fate of particular people or groups of people. This chapter focuses on how people are caught up in a division of labour created by the global political economy. Where a person fits in this division of labour has a significant role in determining how long they will live and what their quality of life will be. The focus on the division of labour reveals gross inequalities and great injustices that may not be as visible when examining other aspects of the global political economy. The chapter begins by outlining some of the variations in terms surrounding the division of labour such as the international, global, gendered and racial division of labour. In the next section, we consider the liberal theory of division of labour and objections to this from economic nationalist and critical perspectives.
Robert O’Brien, Marc Williams

Chapter 10. Gender

Abstract
This book has already alluded to the gendered nature of the global political economy. Distinctions between men and women have played an important role in the history of the development of the global political economy (Part 2) and in all the key structures already examined in Part 3, namely, trade, production, finance and labour. Gender considerations are also relevant to the succeeding chapters, particularly those on development, the environment and security. The aim of this chapter is to take a systematic look at the gender dimension of the global political economy. We begin by providing some definitions and background about gender and feminist approaches to IR and IPE. The next section outlines how and why attention to the relationship between men, women and the global economy is important for the study of political economy. The third section examines the integration of women into the world economy through a discussion of female employment trends. It follows this survey with an exploration of the internationalization of global gender policy through a focus on the evolution of global concern with the role of women in the world economy. The final section discusses three key gender issues in the contemporary economy: the feminization of poverty, the globalization of reproductive work and the impact of restructuring and globalization
Robert O’Brien, Marc Williams

Chapter 11. Economic Development

Abstract
Attention to economic growth and development springs from a number of different motives. These include the eradication of global poverty, a reduction in inequalities in living standards and a lessening in global disparities of power and influence. A commitment to the pursuit of economic development as a means to eliminate poverty signals an aspiration that has been widely accepted by peoples and their governments worldwide. The World Banks Voices of the Poor (Narayan et al., 2000) provides an excellent introduction to the reality of poverty in its various manifestations as experienced by poor people from many countries. Although some agreement exists on these objectives, there is no consensus on the methods and strategies necessary for the achievement of these goals. This chapter is centrally concerned with the global pursuit of economic development since the end of the Second World War. It provides an introduction to a central issue in the contemporary global political economy through an assessment of the ways in which states and other actors have engaged with the challenge of aspirations for material improvement in the context of persistent global inequality. Despite universal acceptance of, and support for, economic development, it nevertheless remains a profoundly controversial concept.
Robert O’Brien, Marc Williams

Chapter 12. Global Environmental Change

Abstract
In summarizing the significance of climate change for social and political affairs, activist and author Naomi Klein (2014) declares This Changes Everything. She argues that the global capitalist system must give way to a new way of organizing intellectual, economic, social and political life or the consequences will be dire for the worlds human population. Has everything changed, or should it? In this chapter we examine how the issue of the environment has been incorporated into IPE and the degree to which it poses a challenge to previous modes of thinking and acting. Is it simply another issue area or does it have the potential to change the very way we think about IPE? The study of international political economy did not embrace the environment as a subject of study in its early years or incorporate insights from thinkers concerned with green issues (Helleiner, 1996). There are two principal aspects to the integration of environmental concerns into IPE. First, a number of environmental problems have an impact on the global political economy, and some form of international agreement is necessary to cope with these problems
Robert O’Brien, Marc Williams

Chapter 13. Ideas

Abstract
This chapter focuses on what Susan Strange called the knowledge structure. She defined the knowledge structure as determining what knowledge is discovered, how it is stored, and who communicates it, by what means, to whom and on what terms (Strange, 1988, p. 117). Our approach replaces the term knowledge with that of ideas, which is a broader term that includes mental images about how the world operates. We are interested in the framework of ideas and knowledge that shape, and are shaped by, activity in the global political economy. Ideas and knowledge play a significant role in influencing actors behaviour and in outlining the limits of the possible for states, corporations and individuals. Previous chapters have highlighted the role of ideas in the global political economy. For example, in the 19th century, the age of imperialism was justified by acist ideas concerning the superiority of Europeans over non-Europeans. The material power of Western states at this time was the result of ideas that took concrete form in the technology of the Industrial Revolution. Today, ideas about free trade inspire and justify regional trade agreements and the WTO, while technological innovation drives the information revolution.
Robert O’Brien, Marc Williams

Chapter 14. Security

Abstract
IPE and international security have developed as distinct sub-fields of IR and political science and are taught as separate subjects in many colleges and universities. Nevertheless, the intersection of political economy and security has long been recognized in studies of both sub-fields. Indeed, in one of the pioneering texts on IPE, the security structure is identified as a key structure of power in the international political economy (Strange, 1998). This chapter examines the global political economy of security and develops in a more explicit sense some of the security aspects of topics addressed elsewhere in the book. The security dimensions of some of these topics, for example development (Ballentine and Sherman, 2003), environment (Dalby, 2002) and gender (Hudson, 2009), have also been explored in the literature. This chapter provides an introduction to the political economy of security through an examination of changing views on security, different approaches to the search for security in world politics and the links between economic structures and processes and security dynamics.
Robert O’Brien, Marc Williams

Chapter 15. Governing the Global Political Economy

Abstract
The subject of this chapter is global governance. While previous chapters of the book have given some attention to global governance, this chapter explores the concept in greater detail. Specific attention is given to understandings of governance, multiple levels of governance, contemporary issues facing the global political economy and the attendant challenges ahead for global managers and citizens. First, we explore the term global governance. We then debate the role of the state in global governance. The major developments we highlight are the proliferation of governance levels and actors. The key governance challenges facing the global political economy are development and economic growth, equality and justice, and democracy and regulation. Overall, we paint a picture of an increasingly globalized world, with states, firms and citizens struggling to create, manage and distribute wealth and power (O’Brien, 2003).
Robert O’Brien, Marc Williams
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