What is 'International' and what is 'Global'

The most common starting point is with the precise nature and form of the set of relationships that is conventionally labelled 'the international econ­omy'. Let us now look at what is meant by the term 'international economy' and what it represents 'in reality'. We have already discussed how 'interna­tional economy' is shorthand for a complex and negotiated mix of politics and economics, and therefore should be called 'the international polit­ical economy', but (as also discussed) it also signifies a particular arrangement of entities and a spe­cific set of relationships that is reproduced and modified by our actions. At its most straightfor­ward, the 'international economy' is the sum total of economic relations between and among nation states. The basic units are national economies and the activities that are significant are initially trade (with international payments for trade) and then followed by investment.

The basic unit of the 'international economy' is the national economy, bounded by the physical limits of the state, in which national governments mediate between the 'interna­tional' and the 'national'.

This simple model of 'international economy' is the extension into international economics and political economy of the core assumptions of real­ism and neo-realism — the dominant world views of international relations based on the state (see Ch. 6). It is this model of the world which is the implicit basis for much international economic policy and for most media reporting on and discussion of 'international economy'. It is this model which is the basis of most sets of statistics which claim to describe and measure international economic activity, that is, they are based on flows across national political boundaries. And, it is this model that has become the 'common-sense' basis to our day-to-day understanding of IPE—hence, in terms of the argument above, privileging its definition of economic reality. It is,of course a gross simplifica­tion, but it clearly identifies the defining character­istics of the international economy as flows between national economies, where national economies are defined by territory (see Agnew and Corbridge 1995).

If we do live in a world where this model—of international economy—accurately describes the way that economic relationships between states are structured, then our approach to understanding and explaining the problems that are created would lead us to emphasize the competencies and author­ity of national governments and international gov­ernmental organizations, and the construction and operation of international regimes to regulate inter­national economic activity. We would be con­cerned above all with problems of trade and investment. We would acknowledge that the con­tinuing increase in and importance of the volume of world trade and the extent and significance of global investment produces problems for the state's ability to achieve its political goals, but, given the structure of the 'international economy', we would conclude that the state (and its international insti­tutions) still has the fundamental capacity to con­trol, modify, and benefit from the consequences of an internationalized economy. This conclusion would assert the primacy of continuity over change, and confirm that we would be working in a world that is essentially unchanged since the for­malization of the modern state system over two hundred years ago.

However, there are many in business, politics, and academic life who now argue that we no longer have a simple and straightforward international economy based on trade and investment relations between separate national economies and con­trolled by national governments. In their view what we now have is much more complex, and as a result this simple model of 'international economy' needs to be either modified and extended or discarded in favour of a 'world' or 'global' political economy. The essence of such a global economy is that we now have a structure that is more than and addi­tional to the 'international economy', and is made up of firms and other entities that operate transnationally over the whole globe. The activities of these firms are based upon and geared towards global pro­duction and services for a global market, with much of their economic activity taking place outside of the market within their own global structures. Together these activities constitute a fundamental change in the overall structure of international political economy. The structure of global political economy contains the 'old' international economy within a new framework which is based in the terri­tory of states, but not necessarily 'national' in terms of purpose, organization, and benefit. Perhaps the best way to demonstrate this is to use and extend the illustration for the 'international economy':

The relationships and structures of the international economy continue to exist but they only describe a part of the total of world economic activ­ity (around 55 per cent in 1990). So in order to describe the total of political economic activity we must include a consideration of what is called the 'integrated production and service' economy (Michalet 1982). Hence, a full picture of the totality of world activity—the global political economy- is a complex multi-level structure and is composed of the 'international economy' plus 'the integrated production and service economy'. The activities of this economy are the aggregation of the activities of a large number of transnational firms and entities (shown in Fig. 11.2 by the lines linking the national economies and the integrated economy) and they are linked organically to the national and interna­tional economy by both being located within the territory of states and within the jurisdiction of state legal/economic regimes, and having eco­nomic relations with specifically national eco­nomic entities, such as purely national suppliers of components or goods. But, and crucially, the strate­gies and purposes of these 'global' entities are not necessarily congruent with or supportive of the strategies and purposes of the separate national governments of the states within which they are located. This means that in analytical and political economy terms this economy is distinct from the activities that constitute the 'international econ­omy', although clearly there are many linkages between the two.

If we now have a 'global' economy alongside and superseding the 'international economy' the ability of the state to achieve its objectives is, at the very least, challenged and, depending on the extent of 'globalization', may be severely reduced. If this is the case, then the possibility of any democratic control or accountability is also severely reduced, even from the low levels that 'executive' govern­ments have already placed it. This situation gives rise to a number of fundamental questions and problems, to which we shall now turn.