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About this book

Now in its fourth edition, this highly regarded and critically acclaimed textbook offers an authoritative introduction to international political economy. It is unique in offering an accessible, broad introduction to the development of the global economy from its inception to today’s complex relationship between states and markets in the midst of economic crises.

Herman Mark Schwartz deftly shows that globalization is not a novel phenomenon but a recurrent process whereby markets have, since the 16th century, periodically redistributed economic activity. It links the production of goods and services in one region to the markets for those goods, and shows how this can lead to conflicts among states that try to create, enhance or subdue the markets.

Taking into account the continued rise of China, and the recent shift towards populism in the West, this book has been extensively rewritten and updated throughout. This is a thought-provoking text which will encourage upper level undergraduate and postgraduate students to think analytically about the inevitability of a global market influencing a state’s policies and geo-economic position and to locate their own thinking within the IPE tradition.

Table of Contents

States, Agriculture, and Globalization

Frontmatter

1. The Rise of the Modern State

Abstract
Where and why did the modern state and market emerge? To what extent do they represent a break from or continuity with the past? Why did the modern state emerge in Europe, which was considerably backward economically, administratively, and technologically compared to contemporaneous empires in China or India? These impossibly broad questions have been debated since the nineteenth century and cannot be answered in one book let alone in a few chapters here. But we can narrow down the issues so you can understand why the modern globalized political economy emerged from the European state and state system and its related global markets around the fifteenth century, and then accelerated in the nineteenth. In particular we can focus on three major issues. First, the limits that agricultural economies, miserable transportation systems, and a limited division of labour placed on state power. Second, how ancient empire differed from modern states and empires, and related to that, why European efforts to create something like the various Chinese empires inadvertently led to the modern, territorial, national state.
Herman Mark Schwartz

2. European Mafias Abroad

Abstract
Constant struggle among European kings, nobles, and merchants from the 1500s to the 1800s produced states out of the multitude of small ‘mafias’ then present in Europe. These mafias preyed on their immediate neighbours as well as on the Americas and Indian Ocean economies. Wannabe kings trying to establish absolutist states fought continuously to subordinate both nobles and merchants, and swallow up competitor states in Europe. This conflict drove continuous improvement in the ability to organize violence. Successful external predation helped fund that improvement. Merchants’ relative independence from the state, despite state efforts to control commerce, helped in the creation of a bond market that gave some states access to war-fighting funds above and beyond current tax revenues.
Herman Mark Schwartz

3. States, Markets, and the Origins of International Inequality

Abstract
The previous chapter looked at actors in the form of predatory European states using organized violence to exploit other parts of the world. Does the economic inequality we now see around the world rest only on political or non-economic mechanisms like this predation? In effect, are the Realist theories mentioned in the Introduction the best explanation for persistent economic inequality? Or did the rise of a global economy initially centred on Europe also cause inequality through economic mechanisms? Specifically, did the market forces unleashed by Europe’s agricultural and industrial revolutions necessarily create inequality elsewhere by generating an unequal global distribution of production? Were these revolutions dependent on the creation of absolute poverty elsewhere? And finally, could this inequality be overcome? These questions lie at the heart of earlier assertions that what we now call ‘globalization’ has been a persistent and defining feature of the world economy since 1500. Answering these questions explains the kinds of structural pressures actors faced.
Herman Mark Schwartz

4. Economic and Hegemonic Cycles

Abstract
Chapters 1 through 3 presented relatively static pictures of the interaction of states and markets. Chapters 1 and 2 explained how states transformed themselves from mafias into modern bureaucratic states by deploying increasingly more organized forms of violence internationally and internally. Much of the funding for this organized violence initially came from external violence to secure monopolies over global trade, but over time regularized forms of internal extraction proved more secure. Meanwhile, the growth of industrial activity inside some specific regions within those emerging nations created or enforced opportunities for other nations/regions to specialize in the production of agricultural goods (we will see more of this in Chapters 5 and 6). Chapter 3 showed how the market pressures generated by a Thünen or Krugman metropolis will structure global economic activity around itself in persistently unequal ways.
Herman Mark Schwartz

5. The Industrial Revolution and Late Development

Abstract
The British and then European industrial revolution changed the fundamental workings of the world economy described above by accelerating economic processes already under way, and giving western European states the ability to subdue the world’s remaining ancient agrarian empires. In particular, the industrial revolution decentred the existing pattern of world trade from China and recentred it on Europe and particularly Britain. This recentring by the industrial revolution was more abrupt and transformative than in prior epochs.
Herman Mark Schwartz

6. Agricultural Exporters and the Search for Labour

Abstract
Chapter 5 discussed states that opted for Kaldorian strategies of industrial creation and upgrading in response to Britain’s industrial revolution. What about those areas that opted for or were forced into a Ricardian strategy of exporting along the lines of comparative advantage? The industrial revolution’s voracious appetite for agricultural goods created a system of Thünen agricultural production rings (see Chapter 3) around industrializing north-western Europe. The expansion of those Thünen rings created two distinct dynamics.
Herman Mark Schwartz

7. Agriculture-Led Growth and Crisis in the Periphery

Abstract
Ricardo’s two sources of happiness are synergistic. Britain’s industrial revolution and successful Kaldorian late industrialization in parts of Europe, the United States, and Asia both relied on Ricardian development elsewhere and made that development possible. The cyclic expansion of industrial country output engendered similarly sized expansion of peripheral agricultural production. States violently created new production zones in successive waves, inducing the massive waves of involuntary and voluntary migration seen in Chapter 6. But as Chapter 3 argued, the opportunity to produce agricultural goods for an industrial core guaranteed neither exports nor development. Value produced per acre was necessarily low out in the periphery. Furthermore, while trade flows were complementary and fairly stable, the investment flows that accompanied them were not
Herman Mark Schwartz

8. The Collapse of the Nineteenth-Century Economy

Abstract
By the end of the nineteenth century all the institutions of British global hegemony were slowly decaying. The major western European states had abandoned free trade during the 1870s and 1880s as part of their Kaldorian strategies. This insulated them from the peripheralizing effects of Britain’s market. After 1890, even Britain itself began a slow retreat into its colonial markets as protection in Europe and the United States and declining industrial competitiveness eroded its global market share. Surpluses in imperial markets offset rising British deficits with third parties like Germany and the United States. The slow shift away from Ricardian to Kaldorian strategies in the new agricultural countries (NACs) presaged rising protectionism, to Britain’s ultimate loss, in agricultural production zones as well.
Herman Mark Schwartz

The Fall and Rise and Fall Again of Globalization

Frontmatter

9. Depression 2.0, US Domestic Politics, and the Foundation of the Post-World War II System

Abstract
British hegemony declined because British firms could not master the hard and soft technologies in the electricity, chemicals and continuous-flow production leading-sector techno-economic paradigm. American hegemony was built on the subsequent petroleum, car, and assembly-line leading sector cluster. This cluster allowed the US economy to continuously expand its productivity lead over the rest of the world from the late 1890s until roughly 1960. This new Schumpeterian cluster encompassed petroleum as an energy source, motor vehicles as a new mode of transportation and as a consumption good, and consumer durables (refrigerators, washing machines) as an additional consumption good. At the level of production processes, the common factor was the marriage of continuous-flow processes with high levels of component and product standardization – in short, the assembly line
Herman Mark Schwartz

10. International Money, Capital Flows, and Domestic Politics

Abstract
In 1992 the US Resolution Trust Company, which was responsible for the sale of properties acquired from collapsed US savings and loan banks, sold a hotel in the small New Hampshire resort community of Bretton Woods. This event accurately symbolized the final passing of the first post-World War II international economic system. For the 1944 multilateral conference that created the International Monetary Fund (IMF) and fixed exchange rates against the US dollar and gold took place in that hotel, and its owner’s bankruptcy emerged from the deregulation of the controlled financial systems characteristic of the Bretton Woods period. Regulated finance, minor crises, and inflation gave way to deregulated finance, major crises, and disinflation as global supply began outstripping global demand in the second post-war international regime
Herman Mark Schwartz

11. Transnational Firms

Abstract
Before World War I, foreign entrepreneurs were a pervasive feature in all developing economies (including western Europe). Whenever these immigrant entrepreneurs lacked a corporate structure based in their original home economy, however, they rapidly became indistinguishable from locally rooted firms. British entrepreneurs founded Belgium’s biggest steel firm (the Cockerill Brothers) and the Rhineland’s biggest coal mine (William Mulvaney) in the first half of the nineteenth century, and immigrant Jewish entrepreneurs helped found Britain’s largest retailer (Michael Marks) and chemical company (Ludwig Mond) in the second half, but these became local heroes whose children grew up with local citizenship. European settlers in the temperate zones nearly always developed strong local identities. Only Europeans in the tropics, surrounded by thousands of local inhabitants, retained a strong non-local identity by creating racially stratified societies
Herman Mark Schwartz

12. Industrialization in the Old Agricultural Periphery

Abstract
The dispersion of agriculture from the European Thünen town to the European settler colonies in the nineteenth century created modern, advanced agricultural production in those temperate zone colonies. The dispersion of manufacturing from the United States, north-west Europe and Japan by TNCs from the early 1960s forward to select areas in Latin America, eastern Europe, and Asia has created modern manufacturing in those areas, particularly China. Indeed, Asia has regained its pre-industrial revolution share of world GDP, although the probability of continued rapid Chinese growth is overstated. It is fashionable to cast this industrialization as a return to some natural distribution of global economic activity. But this is true only in the aggregate, and conceals both the actual process of (re-)industrialization and the nature of much of that manufacturing..
Herman Mark Schwartz

13. Trade and the Rise and Fall of Globalization 2.0

Abstract
Like the post-war international monetary system, the world trade regime moved back to nineteenth-century patterns between 1945 and 2017, reflecting two different processes. First, although the dynamics differed, new production zones emerged in both agriculture and manufacturing as Thünen and Krugman dynamics played out (see Chapters 3 and 12). In agriculture, rising urban-industrial populations continued to push cultivation outward much along the lines the Thünen model would predict. A new set of new agricultural countries (NACs) emerged, with old locations exporting novel – to them – agricultural goods, and new locations literally blossoming with flowers and vegetables for export.
Herman Mark Schwartz

14. US Hegemony from Below

Abstract
Every decade since the 1970s has seen a vigorous debate about the end of US global dominance, usually with pointed comparisons to Britain’s nineteenth-century decline. US vulnerability to energy imports animated the 1970s debate, while the apparent decline of US manufacturing relative to Japan and Germany animated debates from the 1980s through the mid-1990s. In the late 1990s and early 2000s the impending creation of the euro suggested displacement of the dollar. Finally, China’s spectacular economic growth in the 2000s (not to mention that of the BRICs in toto – Brazil, Russia, India, China) led to linear projections showing that Chinese GDP would exceed that of the United States in short order. Each debate about decline had a parallel debate about the possible end to global economic openness, or, in other words, an end to Globalization 2.0.
Herman Mark Schwartz

15. US Hegemony and Global Stability

Abstract
Capitalism is about profits, and political hegemony is about power. These are ultimately the same thing insofar as both are about securing compliance and routinized behaviour from the majority of people and states enmeshed in this system of power. The previous chapter discussed profits: the revival of US manufacturing and the transformation of the US and thus global economy away from one in which control over physical capital assured profitability to one in which control over intellectual property (IP) assured profitability. From 1999 to 2013 the share of profits captured by firms in IP-heavy sectors like pharmaceuticals, medical devices, media, finance, and information technology rose from 17 to 31 per cent for firms in the north Atlantic economies (Dobbs et al., 2015). It’s one thing to make profits.
Herman Mark Schwartz
Additional information