ECON 434 INTERNATIONAL POLITICAL ECONOMY

* What is IPE ;
IPE also known as a global political economy is an acedemic discipline within
the social sciences analysis international relations in combination with political
economy. As an interdisciplinary field it draws on many distinct acedemic
schools most notably political science and economics but also sociology, history
and cultural studies. The acedemic boundaries of IPE are flexible and a long
with acceptable epistemologies (bilgi kuramları) are the subject of robust
(sağlam) debate. This debate is essentially framed (çerçeveli) by the disciplinary
is states as a new and inter disciplinary field of study.
Despite such disagreement most schools can concern that IPE is ultimately
concerned with the ways in which political forces (states, institutions, individual
actions, etc) shape the systems through which economic interaction are
expressed (ifade olunmuş) and controversially the effects that economic
interaction have upon political structure outcomes.
IPE scholars are at the centre of the debate and resources surrounding
globalization both in the popular and acedemic spheres. Other topics that
commands substantial attention among IPE scholars are international trade
development the relationship between democracy and markets, international
finance, global market, multi-state cooperations (MSC) in solving trans-border
economic problems and the structural balance of power between and among
states and institutions.

- Origin  political economy orginally was the term of studying production,

buying and selling and the relations with law, custom and government. It
developed in the 18th century as the study of the economic of states, hence
(bundan dolayı) political economy.
By the late 19th century the term political economy was generally replace by
the term economics.
IPE emerged as a heterodox approach to international studies during the 1970s
as the 1973 world oil crisis and the breakdown of the Bretton Woods system
allerted acedemics particularly in the US of the importance contemporary and
weakness of the economic foundations of the world order.

Nature of the Political Economy ;

The paralel existence and mutual interaction of “state” and “market” in the
modern world create “political economy”; without both state and market there
could be no political economy.
- In the apsence of the state, the price mechanism and market forces would
determine the outcome of economic activities this would be the pure world of
economist.

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- In the apsence of the market, the state or it equivalent would allocate economic
resources this would be the pure world of the political scientist. Although neither
world can ever exist a pure form, the relative influence of the state or the market
changes over time and in different circumstances.
The political economy answers the questions of “how the state and its
associated political processes affect the production and distribution of wealth
and in particular how political decision and interest influence the location of
economic activities and the distribution of the costs and benefits of these
activities. These question also inquire about the effect of markets and economic
forces alter (değiştirmek) the international distribution of power wellfare among
states and other political actors and particularly about how these economic
forces alter the international distribution of political and military power. Neither
state, nor market is primary; the casually relationship are interactive and also
sychological.
State profoundly influences the outcomes of market activities by determining
the nature and distribution of property right as well as the rules governing
economic behaviours.
The market itself is a source of power that influences political outcomes.
Economic dependence establishes a power relationship that is a fundamental
future of the contemporary world economy. In brief, although it is possible to
regard politics and economics as distinct forces creating the modern era they do
not operate independently of one another.
On the one hand, the state is based on the concepts of the territoriality, loyalty
and exclusivity (aykırılık, özellik) and its processes a monopoly of the legitimate
of use of force.
On the other hand, the market is based on the concepts of functional integrate
contractual (sözleşme) relationships and expanding interdependence of buyers
and sellers.
For the state, territorial boundaries are necessary basis of national outonomy
and political unity.
For the market, the elimination of all political and other obstacle to the
operation of the price mechanism is imperative (zorunluluk).
Not: Piyasa ekonomisi için Devlet ve Pazar bir arada olmalı.

Issues of Political Economy;

The first issue is concerned with the economic and political causes and effects
of the rises of a market economy. Because powerfull market forces in the form
of trade, money and foreign investment tend to jump national boundaries, to
escape political control and to integrate societies, but on the other side, the
tendency of government is to restrict to channel and to make economic activities
serve the perceived (seçmek) interest of the state and of powerfull groups within
it. So, when we look at the first issue we can ask some questions.

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 (1) Under what conditions does a highly interdependent world economy
emerge.?
 (2) Does it promote harmony or cause conflict among nation-states.? On this
issue theorists of different schools of thought have conflicting views.

Economic develop
- Economic Liberals believe that benefits of an international division of labor
based on the principle of comperative advantages cause markets to arise
spontaneously and foster (güçlendirmek) harmony among states.
- Economic nationalist stres the role of power in the rise of the market and the
conflictual nature of international economic relations; They argue that economic
interdependence must have political foundation.
- Marxists emphasis the role of capitalist imperialism in the creation
(yaratılmış) of a world market economy.

* The second issue pursuading (takip) the subject of international political

economy is the relationship between economic change and political change.

 The first question “what are the effects on international political relations
and what problems are associated with structural changes in the global focus of
economic activities, leading economic sector and sycholocical rise of economic
growth.
 The second question ; how the political factor effect the nature and
consequences of structural changes in economic affairs.?

* The third issues is the significance of a world economy for domestic

economies.

1) What are its concequences for the economic development, economic decline
and economic welfare of individual societies.?
2) How does world market economy affected economic development of the less
developed countries and the economic of advanced economies.?
3) What is its effect on domestic welfare.?
4) How does it affect the distribution of wealth and power among national
societies.?

* Three Ideologies of Political Economy;

Over the past century and a key, the ideologies of Liberalism, Nationalism and
Marxism have divided humanity. The three ideologies differ an a broad range of
questions such as;
- What is the significant of the market for economic growth and the distribution
of wealth among groups and societies? What ought to be the role of markets in

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the organization of the domestic international society? What is the effect of the
market system on issues of war and peace?
These questions are control to discussion of international political economy.
These three ideologies are fundamentaly in their conceptions of the
relationships among society, state and market.

The Liberal Perspective;

Liberalism, which emerged from the enlightenment in the writing of Adam
Smith and others. It assumes that political and economic exist in separate sphere.
It argue that market in the interest of efficiency, growth and consumer choice
should be free from political interferences.
- Liberal economic theory is committed (tahüt) to free markets and minimal state
intervention and also is committed to individual equality and liberty.
- Liberalism has assumed many forms; classical, neo-classical, Keynessian,
monetarist, national expectation, etc. But all forms however are committed to
the market and the price mechanism as the most efficient means for organizing
domestic and international economic relation.
- Liberalism maybe defined as a doctrine and set of principles for organizing and
managing a market economy in order to achieve maximum efficiency, economic
growth and individual welfare.
- It assumes that market arises spontaneously in order to satishfy human needs
and that once it is in operations, it functions in accordance (uygun) with its own
integral logic and therefore market evolved naturally without central direction.
As Adam Smith put it, it is inherit (miras) in mankind to “truck, barter, and
exchange”. To facilite exchange and improve their well being people create
markets, money and economic institutions.
- The national for a market system is that it increases economic efficiency,
maximizes economic growth and thereby (böylece) imposes human welfare.
Although liberals also assumes that a market exists inwhich individual have
complete information and are thus anabled to select the most benefical cause of
action. Individual producers and consumers will be highly resposive to price
signals and this will create a flexible economy.
- Governments should not intervene in the market except where a “market
failure” exists or in order to provide a called public or collective good.
- A market economy is governed principally by the law of demand and supply.
- On the supply side of the economy, liberal economies assume that individuals
pursue their interests in a world of scarcity and resource constraints (kaynak
kısıtları). Every decision involves an opportunity cost, a tradeoff among
alternative areas of available resources.
- Liberalism also assumes that a market economy exhibits (sergilemek) a
powerfull tendency toward equilibrium and inherit stability. A basic long term
harmony of interests underlines the market competition of producers of
consumers.

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- Liberal believe that trade and economic interference (girişim) are a sorce of
peacefull relation among nations because the mutual benefits of trade and
expanding interdependence among national economies will tend to foster
(beslemek) cooperative relations.

The Nationalist Perspective;

Economic nationalism has undergone (geçirmiş) several metamorphise over the
past several centuries. Its rebels also changed; mercantilism, statism,
protectionism, the German Historical School, and recently New protectionism.
- Its central idea is that economic activities one and should be subordinate
(emrine) to the goal of state building and the interests of the state. All nationalist
ascribe (tanımlamak) to the primary of the state, of national security and of
military power in the organization and functioning of the international system.
- Economic nationalist stress to role of economic factors in international
relations and view the struggle among the states. States at least over the long
run, simultaneously pursue wealth and national power.
- The for most objective of nationalists is industrialization. In the front place,
nationalists believe that industry has spillover (yayılma) effects throughout the
economy and leads to its overall (tüm) economy.
- Second, they associate the procession of industry with economic self
sufficiency and political authonomy.
- Third industry is prized because of military power and national security in the
modern world.
- Economic nationalist both in the early modern era and today, arises in pact
from the tendency of markets to consentrate wealth and to establish dependency
or power relations between the strong and weak economies. In its more
defensive form it attempt to protect the economy against …… external
economies and political forces. Defensive economic nationalism frequently
exists in less developed economies as in these advanced economies, such
government pursue protectionist and related policies to protect their declining
industries and to safeguard domestic interests.

The Marxist Perspective ;

- Like liberalism and nationalism Marxism has evolved in singnificant ways
since its basic ideas were set for by Karl Marx and Fredrich Engels in the middle
of the 19th century.
- Four essential elements can be found in the overall corpus (gövde) of Marxist
writings.
- The first element is the dialectical approach to knowledge and society that
defines the nature of reality as dynamic and conflictual; social disequilibrium
and consequent change are due to the class struggle and the working out of
contradiction inherit in social and political phenomena (olgu). There is

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according to Marxists no inherit social harmony or return to equilibrium as
liberals believe.
- The second element is a materialist approach to history; the development of
productive forces and economic activities is central to historical change and
operates through the class struggle over distribution of the social product.
- The third is a general view of capitalist development; the capitalist mod of
production and its destiny are governed by a set of “economic laws of motion of
modern society”.
- The fourth is a normative commitment to socialism all Marxists believe that a
socialist society is both a necessary and desirable end of historical development.
- Marxism characterized capitalism as the private ownership of the means of
production and the existence of wage labor. It believes that capitalism is driven
by capitalists starving (aç) for profits and capital accumulation in a competitive
market economy. Labor has been dispossessed and has become a commodity
(emtia) that is subject to the price mechanism. In Marx’s view these two key
characteristic of capitalism are responsible for its dynamic nature and make it
the most productive economic mechanism.
- The orgin evolution of the capitalist mod of production are according to Marx
governed by three in evitable economic laws.

1) The first law, the law of disproportionality which holds that supply create its
own demand so that supply and demand will allways be accept for brief
movemet, in balance.
- Marx denied that this tendency toward equilibrium existed and argued that
capitalist economies tend to overproduction particular type of goods. Constantly
require disproportionality between production and consumption due to the
“anarchy” of the market causes periodic depression and economic fluctuation
(dalgalanma). He predicted that these requiring economic crisis would become
increasingly severe (şiddetli) and in time would impel (zorlamak, itmek) the
suffering prolateria to rebell against the system.
2) The second law propelling (itici) the development of a capitalist system,
according to Marxism is the law of the accumulation of capital. The motive
force of capitalism is the drive of profits and the consequent necessity for the
individual capitalist to accumulate (biriktirmek) and invest. Competition forces
the capitalists to increase their efficiency and capital investment. As a result the
evolution of capitalism is toward increasing consentration of wealth in the hands
of the efficient few. Proletariat, the reserve army of the unemployed increases
labor wages decline and the capitalist society becomes ripe (olgun) for social
revolution.
3) The third law of capitalism is that of the falling rate of profit. As capital
accumulates and becomes more abundant (bol), the rate of return declines,
thereby decreasing the incentive to invest. For Marx, as the pressure of
competition forces capitalists to increase efficiency and productivity through

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investment in new labor-saving and more productive technology, the level of
unemployment will increase and the rate of profit or surplus value will decrease.
Capitalists will thereby lose their incentive to invest in productive ventures
(girişim) and to create employment. This will result in economic stagnation
(durgunluk), increasing unemployment. In time the even increasing intensity and
depth of the business cycle will cause the workers to rebell and destroy the
capitalist economic system.
- The core of the Marxist critique of capitalism is that although the individual
capitalist is rational, the capitalist system itself is irrational. The competitive
market necessitates (gerekliliği) that the individual capitalist must save invest
and accumulate. “If the desire for profit is the fuel of capitalism, then investment
is the motor and accumulation is the result”. But finally this accumulating
capital of individual capitalist leads to the periodic overproduction of goods
surplus capital and the disappearence (kaybolma) of investment incentives.
Thus, the inherit contradiction (çelişki) of capitalism is that with capital
accumulation, capitalism forces the needs of its own destruction (imha) and is
replaced by the socialist economic system.

The dynamic of international poitical economy.

* The market system has become a major factor in shaping modern society;
Although the market system is driven largely by its own internal dynamics, the
pace and direction of its forward movement are profoundly effected by external
factors.
The market itself affects and transform external factors in important ways; It
disolves social distructure, alters political relations and stimulate both scientific
and technological advance. An understanding of the ways in which market
forces and external factors affect one another is essential to comprehension of
the dynamic of the international political economy.
* Contemporary theories of the international political economy;
- Three contemporary theories accounting for the emergence, expansion and
functioning of the international political economy have gained influences in
recent years.
1) The first derived from economic liberalism will be called the theory of “dual
economy” it regards the evolution of the market as a response to the universal
desire for increased efficiency and the maximization of wealth.
2) The second strongly influenced by Marxism is best identified as the theory of
modern world system (MWS). The world market is essentially a mechanism for
the economic exploitation of the less developed countries by the advanged
capitalist economies.
3) The third, closly but not entirelly associated with political realism has
become known as the theory of hegemonic stability; it interpret the rise and
operation of the modern world, international economy in terms of successes
liberal dominant powers.

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 Although these theories contradict one another in a number of particulars, they
can also be considered complementary in other ways and together they provide
important inough to into the reasons for the dynamics and functioning of the
international political economy.

* The Theory of the Dual Economy (Dualism);

The theory of the dual economy (dualism) asserts that every economy
domestic and international must be analyzed in terms of two relativelly
independent sectors; a modern progressive sector characterized by high level of
productive efficiency and economic integration and a traditional sectors
characterized by a backward mod of production and a local self-sufficiency.
- The theory argue that the process of economic development involves the
incooperation and transformation of the traditional sector into a modern sector
through the modernization of economic, social and political structures. Global
integration of markets and institution is the consequence of an inexorable
(amansız) movement of economic forces toward higher level of economic
efficiency and global interdependences.
In this view, the rise of a market economy is the natural result of the
unleashing (serbest bırakmak) of market forces. Human being, in natural
tendency “to truck, barter and exchange” will expand their economic activity as
external constraints (sınırlamalar) are removed and opportunities unfold
(açılmak) advances in communication and transportation the development of
efficient economic institutions and reduction of transanction costs have led to
the continious displacement of traditional economies by modern ones. Dualism
views the modern world economy as having evolved through the global
expansion of the market mod of production and the incooperation of new areas
into the international economy. The modern sector has displaced the backward
sector gradually as more and more societies have adopted to the market mode of
economic organization.
The primary forces at work in this process have been economic, organizational
and technological; they include innovation of new products and productive
techniques oppening of new markets and sources of supply and new means of
organizing and managing economic activities. The monetarization of economic
life the rise of cities and advances in communication and transportation such as
the telephone and the railway have been particularly important; these
devlopments have reduced the cost of economic transanction and thereby
faciliated the expansion of individual markets and their integration into an
evolving global economic interdependence. The prosess of economic evolution
is driven by market competition. The resulting expension of markets
accumulation of capital and other factors of production and innovation of new
technologies and organizational forms have set the world on a cause of
continious economic growth and global interdependence.

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* The Theory of Economic Stability;
According to this theory as set for initialy by Charles Kindleberger an open
and liberal world economy requires the existence of a hegemonic or dominant
power. It argues that a particular type of international economic order could not
florish end reach its full development other than in the presence of such a
hegemonic power.
Hegomany liberal ideology and common interest must exist for the emergence
end expansion of the liberal market system.
Historically the conjoncture the circumstances favourable to hegemonic
leadership and the emerge of a liberal world economy has occured only twice.
1) The first was the era of the Pax Britanica that extended from the ended of the
Napoleonic Wars to the outbreact of the First World War, with the political
triumph (zafer) of the middle class, comitted to the ideology liberalism, Great
Britain use its influence to when in the age of free trade. The example of
Britania economic success, the general acceptence of liberal ideals among the
major economic powers and the recongnized benefits of trade encourage states
to negotiate tarif reduction and to open their borders to the world markets.
Similarly, the US took the lead in promoting a liberal international economic
order following the Second World War. The general agreement on tarif and trade
GATT and International Monetary Fond (IMF) embodying (somutlaşan) liberal
principles were established by the US states and its alliances. American
leadership was exercised subsequently in the reduction of trade barriers. During
the these eras of British and American permanence the international market and
global economic interdependence expanded.

* The Theory of the Modern World System;

Modern world system can be defined by a unit with a single division of labor
and multiple cultural system.
Modern world system position asserts that the primary task for political
economists is the analysis of the orgins, structure and functioning of this system.
Modern world system theory is grounded in the Marxist conception of social
reality.
1) The theory accepts the primacy of the economic sphere and the class struggle
over political and group conflict as a determinant of human behaviour.
2) Secondly the analysis centers on capitalism as a global phenomena.
3) Finally, This modern world economy is believed to be characterized by
inherent (doğal) conradiction and functions according to determinestic laws that
govern its historical development, inevitable crisis. Modern world system also
argue that the world capitalist system under develops the less developed
countries.
The modern world system’s creator is Wallerstein and his studied world as a
single unit instead of relations among states.

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 He maintaned that the modern world system is a unit with a single division of
labor and multiple cultural systems period. The world is a structural whole and
is appropriate unit and level of analysis. Modern world system must be
understood as “system” in which all the various parts of the structure are
functionally and necessarily related. A system that sperate in accordance (uygun)
with a set of economic laws.
The world economy is an international division of labor and is responsible for
the accumulation of capital in the advanced capitalist states and for the cycle of
backwardness (geri kalmışlık) and underdevelopment in the rest.
The major components in this international division of labor are three
hiearchically ordered two of states: the core, the semiphery, and the
periphery.
The “core” states tend to specialize in manufactoring, the periphery is
related to the production raw metarials and the semiperiphery is somewhere in
between these structural features of modern capitalism, it is argued have
remained essentially unchanged over centuries. (Paul Baran ).
The most important feature said to characterized this modern world system is
that, functioning as an integrated whole, it extract (çıkarmak) economic surplus
and transfer wealth from the dependent periphery to imperial centers. The
components of the system, their relation to one another and their internal social
and other characteristics are determined by the overall system.
In summary, according to Wallerstein, the modern system put into place by
Western capitalism in the 16th and 17th centuries has not been altered
(değişmiş) in its essentials over the centuries. It is a system that tends to
reproduce itself as the rich get richer and the poor get poorer. Over the long
term, however, it cannot escape the inevitable laws of demise (ölüm, yok olmak)
of capitalist mode of production set for by Marxist theory. This conception of
the world economy has profoundly influenced many less developed countries
and their demands for a New International Economic Order.

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