Key Points

• Words matter—the IPE is constructed through our intersubjective understanding, which is then reproduced and/or modified through our words and actions.

• 'Globalization' brings different benefits to differ­ent people, but clearly benefits some more than others.

• The argument for and about 'globalization' is itself part of politics, and is already changing the way that governments frame and implement pol­icy.

• 'Who benefits?' is the key question that IPE asks of the world.

Thinking about ipe, ir, and Globalization States and the International Economy

From the point of view of IPE, the relationship of states to the international economy has always been problematic because, according to realist theory, the international system is anarchic. And the anarchic is difficult to 'manage'—even with effective regimes (see Ch. 12). Hence, if the inter­national economy is important to the wealth of states (and their populations) it immediately becomes a significant domestic political issue.

In more general terms, the 'fit' of a national econ­omy into international structures—production, trade, resources, finance, etc. — will produce a range of political economy issues, the resolution of which will vary according to the specific circumstances of the industries and sectors of the national economy. For example, protecting domestic industries through trade restrictions, principally tariffs (trade taxes) and quotas (limits on the amount or number imported), has been a conventional way of ensur­ing that domestic production is not swamped by cheaper imports. But, if an industry is successful in international trade or depends itself on imports, say of semi-finished goods or key components, then that industry's interests may not necessarily be served by protection, partly because it may put up the cost of essential components and partly because of the fear of retaliation. So it is perfectly possible to have some parts of an economy (sectors) that want and support protection, e.g. steel or agriculture, and at the same time other sectors, that depend to a greater extent on an internationalized economy, to be against any policy that adds to their costs, e.g. automobile manufacturers. Hence, it is often diffi­cult to generalize about the appropriate mix of pol­icies that may resolve the issues resulting from national interaction with the international econ­omy.

The Core Question

From the perspective of this book the key question and issue for IPE in a globalizing or globalized IR is not derived from the problems of international investment, production, trade, or even finance, although all these are important. And unfortu­nately the fundamental issue is not and has not been the alleviation of worldwide poverty and inequality either (see Ch. 23). The problem for IPE is one of the actual or potential structural mismatch between a formal state system based on territory (i.e. nation states) and an economic system that is increasingly non-territorial and globalized (see, among others, Agnew and Corbridge 1995). This is a problem at a much deeper level than, say, the political economy of trade, because it addresses the basic, underlying framework of IPE and therefore sets the context for the consideration of all contempo­rary issues. Consider the issue of trade as an import­ant and 'live' policy issue in many national political economies and international forums. Trade gener­ates much political controversy, for example the US-Japan trade balance has been a major feature of both US domestic politics and US-Japan interna­tional relations for some time, but its explanation and resolution as an issue for politics depends on identifying and understanding the underlying framework of the international economy (and the way in which 'national' economic activity fits into the international) within which trade takes place. Different frameworks produce different explana­tions and different policies according to our polit­ical objectives. Given the importance of this structural question and the fact that this whole book could be taken up with a discussion of the myriad problems and complexities of IPE, the rest of this chapter will focus principally on this core problem.

The material in Case Study 3 (Box 11.4) iden­tifies, describes, and confirms the central problem for IPE as the tension between the national, territorial nature of the state as the prime political unit in International Relations) and the world economy, increasingly transnational (across national boundaries) in character and global in extent and nature. This tension has been in evidence for some time, in that as a greater part of a state's economic activity has become either international or has been linked to international activities it becomes more complex to manage in order to achieve the political objec­tives of the government of that state. Of course, given the historical conditions of the emergence of modern states it is doubtful whether the physical boundaries of the state ever contained the total of economic activity, so managing the economy outside of the territory of the state is an old prob­lem.

Box 11.4. Case Study 3: The Core Problem for IPE in a Globalizing World

'The new reality is that the system of states is overlaid by a highly integrated, incompletely regulated, rapidly growing—but consequently somewhat unsta­ble—world economy. There is a tension between the principle of national self-determination and the principle of openness in the world economy which is the core problematic of international political economy.' (Strange 1994a: 212)

'The most important tension of late capitalism ... is the national political constitution of states and the global character of accumulation.' (Burnham 1994: 229)

'The evidence of the past four decades does show convincingly that participation in the world economy has become the controlling factor in the domestic economic performance of developed countries.' (Drucker 1993: 105)

It is significant that the three quotes in Case Study 3 (Box 11.4) are also drawn from three differ­ent approaches to IPE—so there is no question of this problem simply being one derived from a par­ticular point of view and hence allowing that point of view to set the agenda for politics. This is known as 'privileging' a perspective and the issues identi­fied as important by the perspective, and is an important aspect of the political function of domi­nant ideas—what viewpoints and issues are 'privi­leged' and what issues are ignored or silenced?