Political Economy And Global Affairs

by Sobel, Andrew Carl

• ISBN13: 9781568028613
• ISBN10: 156802861X
• Format: Paperback
• Copyright: 2005-10-31
• Publisher: Cq Pr

Summary

Policy decisions at the domestic level-whether relating to currency rates, tariffs on certain goods, or labor protection-factor heavily on such issues as trade, monetary policy, foreign debt, and development. How can we best understand the way those decisions and events at the national level affect outcomes and policy at the international level? A focus on one over the other paints an incomplete picture for students. Sobel contends that we must focus on the individual preferences, strategies, and choices of political-economic policymakers in order to fully understand the larger, macro view of international political economy. With the aim of linking the two, Sobel helps students develop analytic skills for describing both what happens in the international political economy, and why policymakers make the choices they do. In this groundbreaking new text, Sobel presents-in a lucid and intuitive way-the core assumptions of scarcity, political survival, and rationality which form the basis of the book's micro-level approach. Individuals-not nations-make choices. With constraints as to what resources and opportunities are available, policymakers choose among alternatives that are most in sync with their self-interest. If students understand market failure and social traps, as well as how collective action problems affect interest group and institutional performance, they will be able to answer questions about a wide spectrum of events that start at the domestic level and spill over into global economic markets. To add context, Sobel presents a concise but detailed historical overview of globalization that demonstrates the shortcomings of common macro-level models in the field, from realism to liberalism to hegemonic stability theory. Your students will be equipped with a set of analytic tools that better explain individual behavior and social outcomes in areas such as trade liberalization, institutional bargains, factor endowments, currency exchange systems and convertibility, and development. Special features: Exercises at the end of each chapter encourage students to apply the concepts they've just read about. A suggested reading list for each chapter provides rich sources for further study. Valuable figures and tables as well as highlighted key terms and a glossary help students grasp important concepts and aid in study. Photos enliven the book's presentation and provide visual examples to help students understand core concepts.

Table of Contents

Figures, Tables, and Maps	xvii
Preface	xix
PART I: BUILDING BLOCKS TO EXAMINE GLOBAL POLITICAL ECONOMY AND CONFLICT
Introduction: Concepts, History, and Social Science	1	(23)
A Puzzle and an Agenda	1	(3)
Globalization and Global Capitalism	4	(4)
The Past as Prologue	8	(4)
The Nineteenth Century	8	(2)
The Twentieth Century	10	(2)
An Approach to Social Research: Goals, Assumptions, and Frameworks	12	(7)
Goals and Methods	12	(1)
Social Analysis as Science	13	(4)
Tasks of Inquiry	17	(2)
Plan of the Book	19	(4)
Exercises	23	(1)
Assumptions, Rationality, and Context	24	(23)
What Is Political Economy?	24	(1)
Three Core Assumptions	25	(3)
Scarcity	25	(2)
Political Survival	27	(1)
Rationality	28	(1)
Rationality, Preferences, and Self-Interest Explored	28	(9)
Ordering Preferences	29	(1)
Rationality under Scarcity and Political Survival	30	(1)
Two Properties of Preference Ordering: Completeness and Transitivity	31	(3)
Examples of Complete and Intransitive Preferences	34	(3)
Context and the Interdependence of Choices	37	(1)
Game Theory: Modeling Context and Interdependent Choices	38	(2)
Outcomes versus Choice	40	(3)
Backward Induction	41	(1)
An Example of Backward Induction	42	(1)
Conclusion and Some Other Pitfalls	43	(1)
Exercises	44	(2)
Further Reading	46	(1)
Structure of the International System	47	(28)
The Context of International versus Domestic Political Arenas	47	(1)
Nation-States	48	(18)
States and Their Defining Characteristics	48	(1)
Functional Equality and Specialization	49	(3)
Nation and Collective Identity	52	(10)
Origins of the State System: Empire and Fragmentation	62	(4)
The Treaty of Westphalia and Sovereignty	66	(4)
The Principle and the Practice of Sovereignty	68	(1)
Common Violations of the Principle of Sovereignty	69	(1)
Anarchy: Conflict, Competition, and Cooperation	70	(2)
Self-Help Dispute Resolution under Anarchy	71	(1)
Realism	72	(1)
Conclusion	72	(1)
Exercises	73	(1)
Further Reading	74	(1)
Power and Hierarchy in the International System	75	(28)
Looking for Order and Predictability	75	(1)
Power Defined as a Relative Concept	76	(1)
The Tools of Statecraft and Diplomacy	77	(5)
Persuasion	77	(1)
Offer of Rewards	78	(1)
Granting of Rewards	78	(1)
Threat of Punishment	78	(1)
Nonviolent Punishment	79	(1)
Force	80	(2)
Cost Calculations and the Tools of Statecraft	82	(1)
Finding Order in Anarchy: Capabilities and Attributes	82	(17)
Motivation versus Capability	83	(1)
Tangible and Intangible Attributes	84	(15)
Conclusion	99	(1)
Exercises	100	(2)
Further Reading	102	(1)
Economic Liberalism and Market Exchange in the Global Arena	103	(31)
Baseline Evaluation	103	(2)
Liberal Economic Exchange	105	(5)
The Price Mechanism	105	(1)
Factors of Production	106	(2)
The Normative Appeal of Economic Liberalism	108	(2)
Theoretical Prerequisites for Efficient Competitive Markets	110	(5)
Clear Property Rights and Low Transaction Costs	110	(1)
Competition	110	(1)
Externalities	111	(2)
Asymmetric Information	113	(2)
Money: A Functional Approach	115	(2)
A Tool of Exchange	116	(1)
A Storehouse of Value	116	(1)
A Unit of Accounting	117	(1)
Mechanisms at the Core of Global Liberalism	117	(11)
Absolute Advantage	119	(1)
Comparative Advantage	119	(3)
Revisiting Factors of Production	122	(3)
The Balance of Payments	125	(3)
Conclusion: Expectations from the Baseline Economic Framework	128	(3)
Exercises	131	(1)
Further Reading	132	(2)
Political Markets and Exchange	134	(26)
Market Exchange in the Political Arena	134	(1)
The Mechanism of Political Exchange	135	(4)
Voluntary versus Nonvoluntary Exchange	136	(2)
Social Choice and Voting Rules	138	(1)
Revisiting Theoretical Conditions for Efficient Markets	139	(12)
Property Rights and Transaction Costs	140	(2)
Manipulation of the Price Mechanism	142	(3)
Third-Party Externalities	145	(2)
Information	147	(4)
An Example: The Median Voter and Political Exchange	151	(6)
Conclusion	157	(1)
Exercises	158	(1)
Further Reading	159	(1)
PART II: CONTEXT
Around the World in Eighty Days: The Advent of Globalization	160	(45)
Globalization Is Nothing New	160	(2)
Intellectual Change: Comparative Advantage, Efficiency, and Welfare	162	(1)
Shifts in Public Policy	163	(6)
Mercantilism and Protectionism as the Legacy of War	163	(1)
The Rise of British Protrade Political and Policy Pressures	164	(3)
Bilateral Trade Treaties and Most-Favored-Nation Status	167	(1)
Other Liberalizing Policy Shifts and a Caveat	168	(1)
Risk and Uncertainty	169	(4)
Incomplete Contracting, Default Risks, and Banker's Acceptances	169	(2)
Currency Risk and Monetary Regimes	171	(2)
The Gold Standard	173	(9)
Alternatives to the Gold Standard	174	(4)
Why Converge on a Gold Standard?	178	(1)
British Commitment to Convertibility as a Collective Good	179	(1)
Why Would a Government Renege on a Commitment to Its Currency Price?	180	(2)
More Collective Goods and Globalization	182	(6)
Liquidity	182	(3)
Lender of Last Resort	185	(2)
Market Access under Duress	187	(1)
Technology	188	(8)
Transportation	189	(4)
The Industrial Revolution and Migration	193	(1)
Communication	194	(2)
The Dark Side of Globalization and Colonialism	196	(7)
Creative Destruction and Dislocation	198	(1)
Colonialism and Imperialism	199	(4)
Conclusion	203	(1)
Exercises	203	(1)
Further Reading	204	(1)
The World Between the Wars: A Breakdown in Globalization	205	(39)
Why the Shift?	205	(2)
Allocating Costs of Adjustment	207	(1)
The Legacy of Rapid Change in the 1800s	208	(3)
Agriculture and Costs of Adjustment	209	(1)
Retrenchment and Tariffs	210	(1)
The Unsettling Legacy of World War I in the Interwar Years	211	(29)
Population Loss	212	(2)
The Exchange-Rate Mechanism: Currency Instability and Convertibility	214	(4)
Beggar-Thy-Neighbor and Currency Devaluation	218	(1)
Breakdown in the Liquidity and Lender-of-Last-Resort Collective Goods	219	(1)
The Effect of War Debts and Reparations on Liquidity	220	(2)
The Absence of Hegemonic Leadership	222	(2)
German Hyperinflation	224	(1)
The Rise of Political Extremism	225	(2)
U.S. Financial Market Speculation and the Crash	227	(1)
Crisis in the Credit Mechanism	228	(4)
The Breakdown in Trade	232	(4)
Tit-for-Tat Retaliation	236	(2)
Capability and Willingness: British Inability and U.S. Failure	238	(2)
Conclusion	240	(1)
Exercises	241	(1)
Further Reading	242	(2)
The Bretton Woods System: The Rebuilding of Globalization	244	(42)
Past Mistakes	244	(2)
Lessons from the Interwar Years and the Postwar Dilemma	246	(3)
Postwar Domestic Strategy and Mechanism Design	249	(2)
Postwar International Strategy and Mechanism Design	251	(20)
Trade and the GATT	253	(6)
Monetary Arrangements and the IMF	259	(7)
Development and the World Bank	266	(5)
Active Engagement and the Truman Doctrine	271	(4)
Containment	272	(1)
The Marshall Plan	273	(2)
Breakdown in Bretton Woods Monetary Arrangements	275	(9)
Suspension of Convertibility and Imposition of Capital Controls	275	(1)
The Leading Currency Problem and the Triffin Dilemma	276	(2)
Growing Pressures on the Dollar-Gold Relationship	278	(1)
U.S. Financial Constraints and International Reactions	279	(3)
Suspension of Dollar-Gold Convertibility	282	(2)
Conclusion	284	(1)
Exercises	284	(1)
Further Reading	285	(1)
The World Post-Bretton Woods: Globalization Advances	286	(41)
Fundamental Shifts in Global Finance	286	(1)
Post-Bretton Woods Monetary Arrangements	287	(15)
The Float	289	(4)
Currency Pegs	293	(1)
The European Snake	294	(2)
The European Monetary System (EMS)	296	(2)
The European Monetary Union (EMU)	298	(4)
Financial Globalization and Liberalization	302	(14)
Explanations for Globalization	306	(5)
Petrodollars and a Debt Crisis	311	(5)
Implications of Financial Globalization	316	(4)
The Capital Mobility Hypothesis	316	(2)
The Unholy Trinity	318	(2)
Going Forward: The IMF and the Washington Consensus	320	(4)
Conclusion	324	(1)
Exercises	325	(1)
Further Reading	326	(1)
Detente and the End of the Cold War: Globalization During Transition	327	(21)
Cold War to Post--Cold War Transformation	327	(1)
The Command Economies Gradually Join the Global Economy	328	(1)
Detente and Shifts in the International Political-Military Context	329	(8)
The Cuban Crisis and a U.S.-Soviet Strategic Gap	330	(1)
The Two Germanys and Political Settlement in Europe	331	(2)
Vietnam	333	(3)
Discord within the Communist Bloc	336	(1)
Domestic Shifts in the Eastern Bloc and China	337	(5)
Access to Western Markets, Technology, and Capital	338	(1)
Second Thoughts and Over-Leveraged Political Economies	339	(1)
Renewal of Political-Military Tensions	339	(1)
Chinese Steps toward Liberalization	340	(1)
Gorbachev: Arms Control, Perestroika, and Glasnost	341	(1)
Conclusion	342	(3)
Exercises	345	(1)
Further Reading	346	(2)
PART III: MICRO TOOLS
Political and Economic Market Failure and Social Traps	348	(26)
Revisiting Theoretical Market Frameworks	348	(1)
Reviewing Expectations of Baseline Models	349	(3)
Market Failure and Suboptimal Social Outcomes	349	(1)
Empirical Challenges to the Baseline Models	350	(1)
Revisiting Historical Lessons	351	(1)
Conditions for Efficient Markets	352	(2)
Understanding Market Failure	354	(10)
Property Rights and Transaction Costs	354	(2)
Manipulation of Supply and Demand	356	(2)
Third-Party Externalities	358	(3)
Asymmetric Information	361	(3)
Social Traps	364	(6)
Context	364	(2)
Cycling and Coordination Problems	366	(2)
Cooperation Dilemmas	368	(2)
Conclusion: Opportunities for Strategic Behavior	370	(1)
Exercises	371	(1)
Further Reading	372	(2)
The Dilemma of Collective Goods, Solutions, and Hegemonic Stability	374	(22)
The Individual and the Group	374	(1)
A Paradox	375	(1)
Dismantling the Social Trap	376	(4)
What Is a Collective Good?	377	(1)
Initial Expectations about Provision of Collective Goods	377	(1)
Positive Externalities and Incentives to Free-Ride	378	(1)
The Unraveling of Collective Good Provision	379	(1)
A New Paradox: Collective Good Provision Despite the Social Trap	380	(1)
Mechanisms for Overcoming Barriers to Collective Action	380	(10)
Compulsion	380	(2)
Selective Incentives	382	(2)
Entrepreneurship	384	(1)
Piggybacking	385	(2)
Group Size	387	(2)
Some Other Considerations	389	(1)
A Special Case of Hegemonic Stability	390	(4)
Conclusion	394	(1)
Exercises	394	(1)
Further Reading	395	(1)
Interest Groups and International Economic Foundations of Political Cleavage	396	(25)
A Macro Puzzle	396	(2)
Alternative Explanations Grounded in Micro Political Economy	398	(1)
Interest Groups	399	(2)
Cleavage: Biological and Social Foundations	401	(2)
International Economic Sources of Cleavage	403	(15)
The Factor Endowment Framework	404	(9)
A Critique of the Factor Endowment Framework	413	(2)
Industry Sector	415	(1)
Asset Characteristics	416	(2)
Conclusion	418	(1)
Exercises	419	(1)
Further Reading	420	(1)
Institutions	421	(34)
Further Exploration of Constraining Social Traps and Market Failure	421	(2)
Institutions as Rules of the Game	423	(16)
Formal versus Informal Institutions	424	(2)
Institutions as Social Bargains and Ex Ante Agreements	426	(1)
Institutions as Equilibria	427	(1)
Institutions as Incentives and Path Dependency	428	(1)
A Normative Caveat	429	(1)
Institutional Effectiveness and Durability	430	(5)
Distributional Implications of Institutions	435	(1)
Origins of Institutions	436	(2)
Institutions as Devices to Overcome the Time Inconsistency Dilemma	438	(1)
Important Institutional Considerations	439	(12)
Regime Type	440	(2)
Electoral Systems	442	(2)
Structure of Government	444	(4)
Social Institutions	448	(1)
Veto Points: Institutional Checks and Balances	449	(2)
Conclusion	451	(1)
Exercises	451	(1)
Further Reading	452	(3)
Glossary	455	(16)
Index	471	(14)
Photo Credits	485	(2)
About the Author	487