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A major new text on contemporary global political economy that focuses centrally on key issues and actors. Concise and accessibly written, it provides an ideal introduction to the contemporary dynamics and processes of change in the global political economy.

Table of Contents

Introduction to International Political Economy

Chapter 1. Introduction to International Political Economy

Abstract
On Black Tuesday in October 1929 the Wall Street stock market crashed, wiping out the enormous stock gains of the Roaring 20s and leading to the Great Depression of the 1930s. The global economic and political instability that ensued fostered the political conditions for World War II. At the same time, policy experiments from the Great Depression era subsequently shaped the construction of a new postwar international economic order. In September 2008, 79 years after the Wall Street crash of 1929, the investment bank Lehman Brothers Holding Inc. filed for bankruptcy protection in the USA, with record debts exceeding US$600 billion. The collapse of Lehman Brothers, later satirized in the animated children’s film Despicable Me as the ‘Bank of Evil’, is widely credited with being one of the critical events that led to the world economic crisis of 2008–09, which saw the global financial system brought to its knees.
André Broome

Chapter 2. Theoretical Perspectives in International Political Economy

Abstract
This chapter introduces the main perspectives used in the field of International Political Economy (IPE) to understand the workings and dynamics that drive the global political economy by discussing the principal elements within each theoretical cluster, which share a common ontology, epistemology and primary unit of analysis. Theories are abstract constructs that comprise ideas about what the world is, how it works and how it can be studied. In particular, theory aids the creation of information shortcuts that simplify the process of comprehending complex phenomena, identifying causal mechanisms and establishing causal effects. Theory helps us to understand the subject matter of IPE by providing an analytical toolkit for analysing both contemporary and historical empirical research puzzles. Different theories make it possible to show alternative scenarios of the dynamics of change and continuity in the global political economy, and they can stimulate new ways of thinking about who can shape agendas, ideas and outcomes, why and what difference it makes.
André Broome

Chapter 3. Contemporary Debates in International Political Economy

Abstract
Scholarly debates serve as intellectual foils that help to highlight the qualities and characteristics which constitute the subject matter of a field and how its disciplinary limits are defined. They also operate as arenas of contention in which to thrash out scholarly disagreements over the relative merits of alternative theoretical perspectives and methodological approaches. When seen in the rear-view mirror with the benefit of hindsight, major scholarly debates can lead to the creation of ‘disciplinary orthodoxy’ over how a particular field has developed (Quirk and Vigneswaran 2005). Like other fields of enquiry, the study of IPE is characterized by a range of scholarly debates over what should constitute the parameters of the field, which actors are most significant for understanding the global political economy and what factors matter most in determining outcomes.
André Broome

Actors in the Global Political Economy

Frontmatter

Chapter 4. State Actors

Abstract
States have traditionally constituted the main actor focus in International Political Economy. More specifically, a small number of ‘major power’ states dominate the attention of IPE students and scholars. Yet substantial differences exist in how states engage in the global political economy, what levels of influence and agency they are able to exercise across different issue areas, and especially whether they are able to shape processes and outcomes in global economic governance or must accommodate the effects of international regimes that are created by others. The powers available to different types of states encompass a broad range of instruments and tactics. Theoretical perspectives in IPE hold different starting assumptions of what states are and what they do in the global political economy, as well as what are the main drivers of change in state roles and activities.
André Broome

Chapter 5. International Organizations

Abstract
International organizations (lOs) have been a major focus of academic research and controversy in IPE since the field emerged. Like most topics in IPE, how much attention lOs receive at a given point tends to rise and fall depending on the hot-button topics of the day and scholarship trends. During much of the 2000s, for example, mature lOs such as the IMF were widely viewed as institutional relics from an earlier era, their machinery and resources designed for the postwar international economic order and unsuited to the fast-paced, globalized economy of the twenty-first century. At the same time, the more recently established WTO became a target of intense public criticism and social activism from critics of contemporary models of economic globalization. Meanwhile, the difficulties associated with negotiating multilateral environmental agreements for action on climate change have prompted calls for the creation of a new World Environment Organization (WEO) within the United Nations system. With the onset of the global financial crisis in 2008–09 and subsequent sovereign debt crises among Eurozone economies, interest in the contemporary roles of IOs has expanded in recent years. Previously settled assumptions about the balance of private and public authority in the global political economy and the aims of global economic governance are also being rethought. This chapter provides a basic introduction to IOs, the instruments they use to shape other actors’ behaviour and the roles they play in the global political economy, as well as how IOs may be retooled or redesigned in the future.
André Broome

Chapter 6. Club Forums

Abstract
The role of club-based models of governance in the global political economy has become an important topic of study in its own right. While students are usually familiar with the most high-profile club forums, such as leaders’ summits of the Group of Eight (G8) or the Group of 20 (G20), club-based models of governance incorporate a variety of club types. The membership of different club forums may include public actors or private actors, or they may represent hybrid models that incorporate a range of public and private actors. Most clubs in the global political economy operate outside the spotlight of the global media, and are poorly understood because their functions and influence are exercised behind the scenes. Meanwhile, the club forums that most often make the headlines are seen as elite governance forums that lack legitimacy precisely as a result of their closed and selective memberships. In general, club forums enable more flexible, ad-hoc deliberations and negotiations over policy coordination and international regime changes between members. Intergovernmental club forums may also serve to diffuse the hegemony of a dominant state through multilateral processes, which can offer a range of advantages to other club members in comparison to bilateral negotiations characterized by asymmetric power relations. This chapter provides an overview of the emergence of club forums in contemporary global economic governance, focusing in particular on clubs that are formed between state actors, and how the dynamics of club-based models of governance can be understood in IPE.
André Broome

Chapter 7. Market Actors

Abstract
The roles of private market actors in the global political economy have changed markedly over the course of recent decades. The changing dynamics of economic globalization have enabled market actors to dramatically expand the size and distribution of their activities across different countries in terms of sales, production processes, labour tasks, information management systems and customer service functions. Stimulated by government actions to eliminate or reduce restrictions on cross-border economic activities, the international integration of national markets for trade in goods, services and capital has revolutionized how large businesses operate in the twenty-first century compared with the Bretton Woods era of the 1950s and 60s. At the ‘big end of town’, large banks and firms control enormous volumes of capital, while their production, investment, lending and speculative activities shape the economic fortunes of major powers and small states alike. Critically, the actions of major commercial banks, transnational corporations (TNCs) and credit rating agencies now have systemic effects on global macroeconomic stability. Their combined influence constitutes material and ideational constraints on what states can and cannot do in economic policy, while their decisions can both drive economic prosperity and precipitate economic crises. Focusing on the activities of firms, banks and rating agencies, this chapter introduces students to the dynamic changes that have underpinned the evolving roles that market actors play in the global political economy, as well as how different theories of IPE account for the causes and consequences of economic globalization.
André Broome

Chapter 8. Non-Governmental Organizations

Abstract
International Political Economy has traditionally focused on a narrow range of elite actors as the principal institutions or groups of individuals capable of influencing processes of change in the global political economy. For much of its disciplinary history, the analysis of political and economic change in the field of IPE has concentrated on the activities of major states and lOs and changes occurring in financial markets, trade and production. Broader social mechanisms — such as the pressures generated by non-elite actors and public campaigns — have until recently tended to play a marginal role in most accounts of change in IPE. Most scholars have concentrated on adding to what we know about the behaviour of a limited range of actors — and the reasons why their actions achieve or fail to achieve change. Yet understanding the role of non-governmental organizations (NGOs) is often a more complex task compared with the roles of other actors such as states and lOs, which typically have legally defined responsibilities and procedures, a clear organizational hierarchy and a public mandate that empowers their right to act in specific issue areas. This chapter brings the role of NGOs into the main focus of the field of IPE, and shows how NGOs perform a variety of distinct functions that impact upon the behaviour, ideas and interests of other actors in the global political economy, as well as highlighting the characteristics of different types of NGOs as actors in their own right.
André Broome

Chapter 9. Everyday Actors

Abstract
Most studies of actors in International Political Economy concentrate on how global processes and dynamics of change are shaped by the behaviour of public and private elites. In particular, a primary focus is on understanding and explaining the question of ‘who governs’ in the global political economy. A growing body of literature is now also concerned with the distinct question of ‘who acts’ in the global political economy, and how their actions are consequential for the possibilities of economic governance and its effectiveness (Hobson and Seabrooke 2007: 12). While the agential power of elite actors is assumed across many if not most areas of enquiry in IPE, non-elites are typically understood as actors that are characteristically lacking in agency, without sufficient material and ideational capacities to influence global political economy dynamics. To complement the discussion of the roles played by actors with high organizational capacities and institutionalized forms of power such as states, lOs, club forums, market actors and NGOs, this chapter examines the role of ‘everyday actors’ in the global political economy. The emphasis is on how non-elite actors are capable of exercising diverse forms of agency, which can be easily missed when the focus is on formal power structures and the behaviour of actors with high material capabilities. Reorienting the focus of analysis from elite to non-elite actors can help to provide a corrective to overly structural understandings of power in IPE, and emphasizes the importance of understanding how the sources of change in the world economy can be bottom-up processes shaped by everyday actors as well as top-down processes driven by public and private elites.
André Broome

Issues in the Global Political Economy

Frontmatter

Chapter 10. Global Trade

Abstract
The establishment of a common set of global trade rules is widely believed to be an important driver of growth in economic output and trade flows between countries. This is based on the theory of comparative advantage, which refers to the ability of a country to produce a particular good or service relatively more efficiently than others. This chapter examines the actors responsible for making — and breaking — global trade rules, and provides an overview of how the system of global trade rules has evolved over time. This discussion is linked to the establishment of the GATT among capitalist market economies after World War II, which led to the establishment of the WTO nearly half a century later in 1995. The chapter provides an overview of the evolution of trade politics from serving primarily as an instrument of state power, grand strategy and foreign policy by many of the world’s largest and most powerful economies to the legalization of trade rules at the global level, which today both augment state power and constrain it. Contemporary trade politics among the majority of the world’s economies is conducted by diplomats and affiliated trade experts who are instructed by their governments to seek national advantages through common rules and formalized processes, rather than being driven by military imperatives, territorial expansion and colonial conquest. This chapter surveys these broad historical changes in trade politics, as well as discussing the prospects for the evolution of global trade rules in the twenty-first century.
André Broome

Chapter 11. Global Money and National Currencies

Abstract
The role of money in a given society — and the effectiveness of a government’s monetary policy tools — rests upon a general acceptance that the nominal value of a currency can readily be exchanged for material goods and services, both now and in the future. Key international currencies such as the US dollar bestow enormous political and economic benefits on the issuing state, while the structure of the international monetary system both shapes and is shaped by how different countries organize and govern their currencies. Currency exchange rates are one of the most important mechanisms through which broader changes in the global economic weather are transmitted between countries. Monetary integration between countries constrains the policy autonomy of participating states, and can dramatically increase the domestic costs of adjustment during episodes of economic crisis. This chapter examines the evolution of the international monetary system, focusing on how states exercise monetary power in the global political economy as well as the domestic politics of money. This discussion is linked to the emergence of global monetary norms such as current account convertibility after World War II, which set the scene for growth in global trade flows and subsequent moves towards greater capital freedom. The chapter provides an overview of the transition during the twentieth century from the Gold Standard, to the Gold-Dollar Standard, to the post-Bretton Woods ‘Information Standard’, and discusses the potential future development of the international monetary system in the twenty-first century.
André Broome

Chapter 12. Global Capital Mobility

Abstract
International capital movements were subject to tight national controls in many states during the post-World War II era until the early 1970s, and in some countries until much later. Today, however, capital movements between many countries are largely free from policy restrictions. The contemporary global political economy is characterized by large capital flows between particular subsets of countries. Most capital flows travel between developed economies and emerging market economies, rather than less-developed economies. The expansion of cross-border capital mobility has been facilitated by a series of national, regional and global changes in rules, principles and policy practices during the last three decades.
André Broome

Chapter 13. Financial Crises

Abstract
From today’s vantage point, the recent history of the global political economy could be characterized as an ‘age of crises’. Between the onset of the Latin American debt crisis in 1982 and the global financial crisis of 2008–09, the era of economic globalization discussed in previous chapters on trade, money and capital mobility was punctuated by recurrent financial shocks and crises. Although headline-grabbing financial events such as a bank run, a financial institution declaring bankruptcy, the freezing of bank deposits, or the sudden imposition of controls on capital outflows might worsen a crisis episode, they usually represent the surface symptoms of a financial crisis rather than the underlying cause. Throughout the last three decades, the sudden emergence of financial shocks drove many governments to seek sovereign bailouts from multilateral and bilateral creditors, and to sharply alter their economic policy settings in response to financial distress.
André Broome

Chapter 14. Sovereign Debt

Abstract
Access to external sources of finance for domestic investment is widely agreed to be a critical ingredient for successful economic development and growth. Excluding official development assistance (ODA) and remittances by foreign workers to their home countries, for much of the post-World War II era official creditors provided the lion’s share of external finance to developing countries in the form of debt flows from creditor governments and publicly guaranteed agencies as well as IOs such as the World Bank and the IMF. In recent decades the private sector has replaced official creditors as the largest source of external finance for many developing countries. FDI and access to private sources of finance now play a much greater role in national economic growth than at any previous time in history. However, countries which rely on high net debt inflows may run a greater risk of macroeconomic instability and financial distress, especially if they face adverse global economic conditions. The second half of the twentieth century and the first decade of the twenty-first century have been characterized by a succession of sovereign debt crises around the world. The IMF and the World Bank have both played a central role in coordinating the response to sovereign debt crises during the last 30 years. The outcomes of sovereign debt renegotiations determine the level of a debtor’s repayment burden, and the distribution of financial losses that is sustained by official or private creditors. This chapter examines the causes and consequences of sovereign debt crises, and identifies the main drivers of change in the international sovereign debt regime.
André Broome

Chapter 15. Tax and Welfare

Abstract
The ability of governments to levy taxes is one of the defining features of state power. Taxes determine the volume of public revenue and therefore a state’s capacity to spend money. Moreover, tax policies are a potent tool for governments to shape economic behaviour, and can be used as a form of business regulation. How governments raise revenue, what they spend it on and the exogenous factors that influence national fiscal policies underwent radical changes during the course of the twentieth century. Today, different countries rely on a wide variety of fiscal policies for raising government revenue, which reflect their different economic and developmental trajectories, ideas about the appropriateness of different forms and levels of taxation and the policy objectives of national governments. The development of tax policies has traditionally gone hand-in-hand with an expansion of the role of the state in providing public welfare services and greater administrative capacity to intervene in economic processes. In the contemporary global political economy a series of interrelated transformations in the external environment governments now face has impacted upon their capacity to levy taxes, which has altered the scope of national fiscal autonomy. These processes have affected all states despite their vastly different sizes and capacities, from small island states to major powers. This chapter puts these broad processes in context through explaining how the rise of global tax competition has shaped processes of change at the global, regional and national level, which have altered the political dynamics of welfare across many societies.
André Broome

Chapter 16. Global Poverty and Development

Abstract
The problems associated with global poverty and the challenges of economic development are a fundamental concern for IPE. The emergence of development as a modern concept is closely associated with the Industrial Revolution in the second half of the eighteenth and early nineteenth centuries, and remains bound up with the role and power of modern nation-states. Both development goals and the idea of ‘development’ itself comprise highly controversial issues that cut cross politics at the local, national, regional and global levels, and are subject to intense contestation over competing conceptions of fairness and justice in the global political economy. In comparison, the concept of underdevelopment refers to a situation where the resources of a country or area are not used to achieve their economic and social potential. In the twenty-first century, comparative statistical indicators show that levels of extreme poverty in many countries around the globe remain high, while debates over the most efficient allocation and use of foreign aid to tackle poverty and address broader development issues are characterized by strong disagreements among scholars, development practitioners and policy experts and the staff of lOs, as well as aid donor and recipient governments. This chapter introduces the contemporary context of economic development and global poverty, the role of economic ideas in shaping the range of possibilities for global development policies and the contemporary challenges and sources of change in development and poverty in the global political economy.
André Broome

Chapter 17. Resource Competition and Energy

Abstract
Access to natural resources (or ‘raw’ materials) is essential for economic growth, and especially for the development of manufacturing and agricultural industries. Nonrenewable resources are by definition scarce, while the environmental issues related to resource competition do not respect national territorial boundaries, but rather are regional or global in scope. Key natural resources include energy materials (such as oil, natural gas and coal, as well as uranium for nuclear power), but also minerals and precious metals (gold, silver, iron, copper and so on), arable land (for farming), forests and plant life, wildlife and marine life and water. As well as providing important economic ‘inputs’ for industrial production, the quality and diversity of a country’s natural environment may be a major source of income from international tourism.
André Broome

Chapter 18. The Environment and Climate Change

Abstract
Contemporary environmental challenges are reshaping how the nature of the global political economy is understood. From conflicts over access to scarce resources and dependence on non-renewable fossil fuels for energy and transportation to the problems generated by climate change, increasing population size and density, natural disasters, transnational environmental crime, pollution and environmental degradation, the salience of environmental issues for IPE has significantly increased in recent years. The greater importance attached to environmental issues has driven a variety of new research agendas in the field that have challenged traditional conceptions of economic growth, development, wealth and public goods, on subjects such as sustainable development, the political economy of environmental governance at the national, regional, or global level and the emergence of low-carbon ‘climate capitalism’ models of industrial expansion (Newell and Paterson 2010).
André Broome
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