Contents

• Chapter three: International Political Economy (IPE)

• Defining PE/IPE
• Theoretical views of IPE
• Core issues and Governance of IPE
-International Trade and WTO
-International Investment and WB
-International Finance and IMF
• Exchange rate and systems
• Chapter four: Globalization and regionalism
• Defining concepts
• Debates on globalization
-Hyper globalist view
-The skeptics
-Transformationalist
• Impacts of globalization on Africa
Chapter Three

• Questions for discussion!

 What is Political Economy (PE)? Domestic
• Should the State or the Market be responsible to decide how
the economy of a given country is to be organized and run?
• For example, should housing, medical care, education,
welfare be provided by private citizens or the state?
• Do you support government or state intervention in the
market? Why?
• Or should the Market alone determine the economic affairs?
• For instance, how do you examine the distribution/selling of
edible oil by local government units in Ethiopia, usually by
Kebele level associations?
Continued…

 What is International Political Economy (IPE)?

International
 Questions from your module
• How should international trade be governed?
• How should international investment be governed?
• How should international finance be governed?
• Or what should/not be the role of international institutions
like the IMF, WB and WTO in the governance of
international finance, investment and trade?
 IPE

• IPE has no universally agreed definition

• But we have different ways of defining the concept;
• In Political economy, no matter whether it is domestic or
international, there are always both political and economic
aspects/dimensions
• Political economy (PE) examines the role of a
State/Government/desired bodies in the domestic economy
or market of a State
• Whereas, IPE deals with the external (beyond a single state
level) relations between the economy and politics
(governing body)
Continued…

• The point here is how they relate or being influenced and

governed in practical terms?
• Thus, IPE studies relationships between governments,
businesses, and social forces across history and in different
geographies
• From this, we can derive that IPE is extended to deal with
the history of politico-economic relations, and it’s not also
limited by geography
• The political dimension refers the use of power or the
authority of institutions by different actors in relation to the
economy
Continued…

• These actors can be individuals, domestic groups, States,

International organizations, NGOs and Transnational
corporations (TNCs) and
• And they made decisions about the distribution of tangible
things such as money and products
• Whereas, the economic dimension shows how scarce
resources are being distributed among actors
• Thus, the economic dimension cannot operate with the
absence of the political aspect, particularly States
• The political aspect is the one that runs an order in relation to
the market
• States with their institutions enact rules, laws, regulations that
govern the economy/market/transaction/exchange or import-
Continued…

• With the coming of influential non-state actors, they are also

playing same role as States do
• Such as; the World Bank (WB) and International Monetary
Fund (IMF)
• The market/economy, at the same time, needs to pass/follow
legal procedures developed by the political unit/order
• Market, isn’t just a place where we exchange goods and
services, but that can also be thought of as a driving force
that shapes human behavior
 Theories of IPE

• Theories are lenses of viewing different societal issues such as

political economic relations
• Concerning to the nature and functioning of IPE there are various
theories, that can also serve as ideology
1. Mercantilism –it was first coined in the early 16th century
• Friedrich List is best known and developed this theory
intellectually
• Advocates for the strong role of the state in the economy be it at
domestic or international level
• Proponents urged importance of balance-of-payment surpluses in
trade with other countries
• Accordingly, states are encouraged to identify and develop strategic
and targeted industries that are vital to long-term economic growth
Continued…

• State’s role can be in tax policy, subsidization, banking

regulation, labor control, and interest-rate management
• So that State’s role would ensure adequate levels of
competition
• East Asian countries are good examples to implement such
policies, but usually been called as developmental state
• Developmental State Model since it is the variant of
mercantilism theory it has a similar justification on the role
of state/government in the economy
• But, unlike mercantilism, it was developed recently with the
assumption of the failure of neo-liberalism development
approach where the rich remains benefited at the expense of
the poor states
Continued…

• It refers to a state that intervenes and guides the direction

and pace of economic development
• Where Ethiopian government was/is highly infatuated with
the political economy of this model
• In fact, currently there are some trends (though very rare)
towards the liberalism policy of liberalizing the market and
privatizing of state owned properties
• Such as the proposal of selling some percent of Ethio-
telecom and Ethiopian Airlines to the privates
Continued…

• Attributes of developmental state model:

• Strong state intervention, to extent that government led
economy should be implemented
• Encourages bureaucratic apparatus to the efficient and
effective accomplishment of planned economic policies
• Extensive regulation and planning
• Active participation of the public as a response to gov’t
policies
• Regime legitimacy on the basis of economic development
results
 2. Liberalism
• Liberalists argue that there should no be government intervention
in the market
• Free market or capitalism system is promoted that consists of
trade liberalization and free financial and Foreign Direct
Investment (FDI) flow
• It aims at removing barriers to the free flow of goods and services
among countries
• It promote privatization, opening up of the economy and free
trade
• Advocated there would be a comparative advantage where all
actors could be benefited
• However, it is criticized for being competitive advantage due to
the economic dominance of the wealthy countries
• Where the wealthy overruns the market at the expense of the poor
 3. Marxism
• Since there exists huge gap between the rich and poor
(center Vs periphery respectively) there should be an
abolishment of capitalism system
• In stead, Marxists advocated for socialism or communism
mode of economic system
• Where communal ownership of property is encouraged
• It aims on the systemic change headed by the workers all
over the world
• Structuralism as a variant of Marxism theory advocates for
structural change
• Unlike what is propagated by the liberalists, structuralists
argue that there is a dependency relation between the North
and South hemisphere
Continued…

• This is due to the reason that there is unequal competition

among states
• Thus there should be policies such as protectionist and
import substitution by developing countries
• Moreover, the Global South should follow new path of
economic development independent of the west style
• Whereas, proponents of Modernization theory argue if
poor countries want to develop they should follow the
footsteps of west
• For this reason, Structuralists and Dependency theorists
advocated for independent way of development for LDCs
• For Dependency proponents the reason behind ‘our’ under
development is because ‘we’ are dependent on the west
 4. Hegemonic Stability
theory (HST)
• Has the elements of the preceding theories, but more close to
mercantilism, where HST argue for institutional intervention
in the economy
• The reason behind HST is the need for a hegemon or a
dominant actor that oversees the world economy
• That protect the world economy from collapse/depression
• The assumption is ‘Great Depression of the 1930s’ wouldn’t
have been happened if we had a hegemon/economic stabilizer
• Thus it argues there should be a benevolent hegemon for
stabilizing the world economy
• Accordingly, the reasons behind the establishment of WB and
IMF is believed to be with similar assumption
• Aimed at searching for supra-national institutions
Continued…

• However, such international institutions could not escape

from the influence of the developed nations such as USA
 Reading assignment
• Countries’ PE systems or models
- American market oriented capitalism
- Japanese developmental capitalism
- German social market capitalism
- Divergences among them
 Core issues and governance of IPE

• International Trade, Investment and Finance could not

operate in a vacuum where there is no supervising
institutions
• Thus, we have institutions such as WTO, WB and IMF that
govern the international trade, investment and finance
respectively
• NB: Despite these institutions are believed to be global
institutions with member states at world wide, they are
highly handmaids of developed countries that influences the
policies of poor States
• International Trade and WTO
• International trade is a trans boundary or cross-national
trade by various actors including individuals
Continued…

• But it is not entirely a free trade, states may impose

economic restrictions such as tariff , quota,..
• International trade has currently increased than the previous
periods
• But the central question lays, who is benefiting or being
harmed from it?
• WTO replaced the General Agreement on Trade and tariff
(GATT) in 1995
• It enacts rules or regulations for international trade
• However, decisions are made indirectly by the USA, Japan
EU…in line with their own interest
• Regarding international trade states may also have regional
organizations such as NAFTA to secure economic interests
Continued…

• International Investment and WB

• WB was first designed to reconstruct the Europe after WWII
• But later the WB supervises issues related with international
investment
• This org promotes FDI in the developing countries
• It involves in providing of aid on agriculture, service and
infrastructural development
• However, it needs the fulfillment of prerequisites for gaining aid
from WB
• Some of them are; opening up market, allow privatization and
reducing gov’t role in the market which by definition are
liberal/capitalism economic systems
• Thus; however, criticized for maintaining the gap between the
poor and rich countries since it favors for the developed ones
Continued…
• International finance and IMF
• It governs the flow of finances at world wide
• Also supervises financial institutions and regulations
• Financial system has both monetary and credit system; the
former refers the relations between currencies,
• Whereas the later indicates the rules or agreements to
control financial flows
• In IMF though there are many member countries they have
no equal voting or decision making power
• The voting power is given for those who pay much for the
institution
• Thus, indirectly the IMF’s decisions are results of countries
like the USA –pays more money than other member states
 Exchange rating system
• Exchange rate is the value of one’s currency in terms of
others
• We have two exchange rate system: Fixed and Floating
• The first, the value of a currency is determined to remain
fixed in terms of others by national governments
• Whereas the second is determine by the demand and supply
of the money where there is no government intervention
Chapter Four

 Globalization and Regionalism

• Both are forces that influence the global trend and reorganize
inter-states relations
• What is Globalization?
• Globalization became an academic discourse since 1980s
• Globalization is a supra-regionalization force that aims to bring
the world into a village
• Politics and technology are the driving forces behind the
intensification of globalization
• Politics refers the power, whereas technology is part of the
economy
• In short, globalization is attributed as the growing
interconnectedness and interdependence of actors in social,
Continued…

• By social we can observe the cultural influences of the west in the

developing countries such as Africans as example;
• The adaptation of “Democracy” and “Liberalism as political
ideology” can be taken how we are interconnected in terms of
politics;
• Where as the flow of goods and services, transfer of technology,
international trade, finance and investment are the manifestation
of the economic interconnectedness
• The modernization of transport and communication has expended
both globalization and regionalization
• By globalization, the world is considered as a shared social space
of all
• Due to globalization the territorial borders no longer demarcate
the limit of economic or socio-political relations; however
 Debates or theories of Globalization

• Since there are different views on the various issues of

globalization, we can classify them in to three:
1. Hyper Globalist perspective
• They argued that States or governments are less important
and obsolete to regulate their economy and boundaries
• To the extreme, proponents believed as it is the end of state
sovereignty
• Globalists prefer the economy over politics; the market over
the state
• Globalists believe that due to the transnational networks of
production, finance and trade; states are becoming de-
nationalized and de-territorialized
Continued…

• Advocated that the role of state is driven by globalization

• For this reason, states or national governments are unable to
control trans boundary goods and services, ideas, info,
socio-economic activities
• Thus, States become ineffective to achieve the interest or
demand of their own citizens
• Due to this claim, global market creates winner versus loser
division/relation
 Skeptics
2. The Skeptics
• Unlike globalists, they consider the power of state or
government
• Skeptics argue globalization is dependent on the power of state
to continue economic liberalism
• That’s why states are believed as central actors and agents of
globalization to shape and regulate economic activities
• Despite there are a trans boundary connections among actors,
the world is not moving in to a village
• Accordingly, globalization is considered as something not
more than regionalization
• Skeptics argue, we have regional institutions such as EU,
NAFTA and ASEAN, where member states are strongly
Continued…
• Moreover, though these institutions are regional by nature,
they are considered as a global actors
• So that what we have now is regional based globalization
• That’s why the western countries are more connected,
integrated and globalized than the rest of the world such as
Africans
• States of Africa are loosely associated comparing to
Europe
• Thus, globalization for Skeptics, is nothing but the
manifestation of the already gap between the North-South
• Skeptics also argue globalization is the extension of
imperialism of politics, economy and culture of westerners
• And the economy, for instance, is not globally inclusive
 Transformationalist
3. Transformationalist perspective
• In similar vein, globalization is considered as a driving force
behind the rapid socio-economic and political changes
• However, proponents argue there is no clear cut distinction
between international and domestic affairs
• Unlike the preceding theories, transformationalists believe that
globalization is a force that re-constituting or re-engineering the
power and function of the state
• Though, states have a legal power to manage domestic affairs;
they have no sole control over trans boundary issues
• Due to this, there is “new sovereign regime” replacing the
absolute and indivisible power of the state
• These can be strong international institutions that share power
with state
Continued…

• Also argued that sovereignty is less territorially defined

• In a nutshell, proponents of this theory attempted to balance
or create a middle ground to the preceding views
• For this reason, they argued, the world order/IPE is not
purely state centric (skeptics) and not fully undermine the
role of the state (hyper globalist)
• Thus, transformationalists considered both the roles of non-
state and state actors in influencing globalization
Impacts of Globalization on Africa

• With no doubt it has both negative and positive impacts

• Despite Africa is developing in terms of infrastructures
usually by west and East Asian countries owned companies;
• It is becoming victim of dependent on them
• Among others, Africa is negatively impacted by the
Eurocentric and Americanization policies
• After the old colonialism, globalization has brought neo-
colonization/new imperialism to Africans
• There exists west hegemony, for example, in culture and the
economy
Continued…

• These with different dimensions of globalizations such as:

• Economic globalization,
• Political globalization,
• Cultural globalization…Africa is being globalized by the
values of the west and most developed nations
• Which at the same time abnegates /reject the indigenous
values of Africans
Some Merits and demerits of globalization

• Merits
• Exchange of ideas, knowledge, expert, information,
experience,…
• Innovation, adaptation and transfer of technology, medicine,
science,…
• Demerits
• Maintaining the poor rich gap/unable to narrow it
• Unequal competition in all aspects basically in the economy
• Cultural imperialism, particularly being westernized
• Eroding domestic cultures
• Spread of migration, climatic problems, cross border
crimes…
Continued…
• Based on the above or any other advantages and
disadvantages of globalization; is Ethiopia benefited and
harmed respectively? How?
• On the other hand, Regionalism is the interconnectedness
or relationship of countries with geography or aspiring a
common interest
• Common interests of regionally defined countries could be
collective security, market integration and the use of a
single currency, access of free visa entries for member states
of the region, et cetera
• Having this in mind, does regionalism diminishes the spread
of globalization or vice versa?
Chapter Five: Major Contemporary Global Issues

•One of the most important dynamics of the 21 st century

is the shift in focus from International Relations to
Global relations and issues.
•And, more than ever before revolutions in technology,
transportation, and communication and way of thinking
that characterize interdependence and globalization are
exerting pressures on nation-states that strengthen them
in some ways but weaken them in others.
5.1. Survey of Major Contemporary Global Issues

•An obvious starting point is to look critically at the idea that the
world today is distinctively different from, say, the world of the
1970s or 1980s – because of the end of the Cold War.
•No longer is world politics dominated by issues arising from
East–West relations – the threat of nuclear war, the ideological
struggle between liberal democracy and Marxism– Leninism,
crisis diplomacy, and so on.
•‘New World Order’, the impact of terrorism, the disparities in
wealth between developed and developing countries,
environmental issues and so on.
 What makes an issue a global issue?

•The answer to this question is found in

addressing the following four interlinked
questions. These are:

•i) what is the extent or scope of an issue? Does it

affect large parts of the global arena or it is
confined and contained to a narrow scope.
• ii) what is the urgency or intensity of the
issue? This, of course, is a rather subjective
question, since it relates to the general
question of ‘significant to whom?
•iii) what is the salience or visibility of a given issue? This
question relates to the roles of the media or other actors who
confer urgency or intensity, and

•iv) What is the centrality or location of an issue? This is

partly an objective issue of geography, implying that the
closer the issue is to important actors the greater the
attention and significance it will acquire
 5.1.1. Global Security Issues
•In the security arena, there are two main issues and
challenges facing the emerging new world order. These are:
terrorism and nuclear proliferation.
•Global Terrorism
•The question: ‘who gets to define terrorism and why?’ often
complicates the task of defining terrorism. Indeed, the
saying ’some one’s terrorist is another’s freedom fighter’
•Terrorism is defined by many as a global security problem
characterized by the use of violence in the form of hostage
taking, bombing, hijacking and other indiscriminate attacks
on civilian targets.
Factors Conducive to Terrorism:
•Terrorism might have many causes
•Socio-economic cause (poverty in the sense of
economic and political isolation, feelings of
hopelessness, violations of human rights, and the lack of
democracy
•Political cause (legitimate grievances and the failure of
governments to adequately address these problems often
foment terrorism.
•Psychological cause (humiliation is another factor
conducive to the use of terrorism).
 Types of Terrorism

•Although the types of terrorism tend to

overlap, they vary in their implications and the
different ways they affect us. the following
five are the most commonly observed types
of terrorism.
•Domestic terrorism: occurs within the borders of a
particular country and is associated with extremist
groups
•Nationalist terrorism: is closely associated with
struggles for political autonomy and independence.
•Religious terrorism: grows out of extreme fundamentalist
religious groups that believe that God is on their side and
that their violence is divinely inspired and approved

•State terrorism: is a cold, calculated, efficient, and

extremely destructive form of terrorism, partly because of
the overwhelming power at the disposal of governments.

•Global terrorism: is partly an outgrowth of the

forces of globalization, which enable the different
kinds of terrorism to spread worldwide.
Nuclear Weapons and Their Proliferations AND GLOBAL
crime and threatens human sec
•Fear of nuclear war dominated security planning during
the cold war, the end of the cold war has not diminished
the significance attached to nuclear weapons, as many
had hoped. Four comments are relevant here

•First, the fact that nuclear weapons states have

substantially maintained their nuclear arsenals shows
that they consider that nuclear weapons play some
positive role in providing security.
•Second, there are now greater incentives to acquire
nuclear weapons for those non-nuclear states who
have lost the guarantee of extended deterrence
previously provided by super powers.
•Third, the combination of the loss of extended
deterrence with regional dynamics appears to have
increased the incentives to proliferate.
•Fourth, the contrasting experiences of Iraq and North
Korea suggest strong incentives to proliferate fast and
establish deterrence.
•Four events have increased fears about horizontal nuclear
proliferation since the end of the cold war.

•First, in the aftermath of the 1991 gulf war, UN Weapons

Inspection Teams discovered alarming evidence of the
extent of the Iraqi nuclear program.

•Second, the threat of horizontal proliferation was

heightened by one of the consequences of the end of the
cold war; the demise of the Soviet Union.
•Third, a nuclear arms race began in South Asia
after nuclear tests by India and Pakistan in May
1998.

•Fourth, in 2003 the International Atomic energy

agency (IAEA) uncovered an illicit supply network
in an investigation triggered by US-led concerns
that Iran had an illicit nuclear weapons program
 Reasons for the Proliferation /explosion of Weapons

•There are strategic, economic, and political motivations

for weapons proliferation. These include
•Super-power Rivalry during the Cold War:
Geopolitical considerations influenced the United
States and the Soviet Union to transfer weapons to
their respective allies.
•Military Burden Sharing: Reluctant to engage
in direct military confrontation, both superpowers
provided weapons, technical assistance, and arms
production technologies to their allies so that they
could defend themselves
•Regional Balance of Power: Arms sales are often
defended on the grounds that such transfers contribute to
regional stability and diminish the likelihood of war.
Political, Military, and Economic Influence: Given the
dependence of the United States on petroleum supplies
from the Middle East in general and Saudi

•Economies of Scale: Many countries export weapons to

obtain resources to finance the development and
production of more advanced weapons.
•Ethnic Conflicts: Ethnic conflicts generate
demand for weapons transfers.
•Authoritarian Regimes: Governments that rule
without the consent of the people generally rely on
military force to exercise control.
•Self-Reliance: Many countries develop their own
weapons to preserve or enhance their independence.
•Economic Factors: Much of the global weapons
trade is motivated by financial considerations.
5.1.2. Global Environmental Issues

•The environment is gradually becoming one of the

most pressing issues of twenty-first century.

•National policy measures essentially cannot cope

with international environmental problems because the
source of pollution or the impact of pollution may not
be within a particular state’s jurisdiction.

•one of the most pressing contemporary global issue

related to the environment, i.e., climate change and
global warming.
 Climate change and Global warming

•Climate change poses numerous and harsh challenges for

sustainable development and its effects are be felt in all
regions of the globe. Degree of vulnerability varies even more
with developing countries and the poor which have
contributed the least to global warming but are suffering the
most.

•The greenhouse gas reduction goals set out in the Kyoto

Protocol remain largely unachieved. If the economies in
transition are not taken into account, most of the developed
countries have failed to achieve their reduction targets.
 5.1.3. Global Socio-economic Issues

•Global Inequality and Poverty

•Does Inequality matter?
•The existence of inequality is not automatically a major problem,
especially when the economy is growing and there are many
opportunities for upward mobility.
•While economic disparities remained a serious problem in
developing countries, the forces of globalization created conditions
that helped widen the gap between rich and poor in industrialized
societies.
•Extreme inequality perpetuates poverty and the concentration of
economic and political power and reduces economic efficiency.
•It strengthens inequality-perpetuating
institutions in three ways:
 Inequality discourages the political
participation of poor people
 Inequality often prevents the building and
proper functioning of impartial
 Inequality enables the wealthy to refuse to
compromise politically or economically,
•International
Migrationmigration
andand refugeeproblems
refugee (including asylum
seekers and Internally Displace Peoples)have become
more prominent on the international agenda in recent
years. Several factors account for these developments.
•First, the number of states in the international system
has steadily increased since the end of the First World
War.
•Second, there has also been a rapid increase in the
world’s population, and it continues to grow.
• Third, the revolution in communications and
transportation has made people aware of conditions and
opportunities in other parts of the world.
Finally, the turmoil and uncertainty of the turbulent and
unstable world place an important role in motivating
people to search abroad for a better life.

•Until recently, migration and refugee were not seen as

central political issues by most governments in the world.

•The inability of states to maintain complete control of

entry to their territory, or to prevent the formation of
migrants and refugees with extra-territorial connections
and affiliations, is also pointing to an erosion of
sovereignty.
 5.1.4. Global Cultural Issues

•Cultural Imperialism
•Cultural imperialism is the result of cultural globalization-
a process whereby information, commodities and images
that have been produced in one part of the world enter into a
global flow that tends to ‘flatten out’ cultural differences
between nations, regions and individuals.
• Globalization is linked to homogenization as cultural
diversity are destroyed in a world in which we all watch the
same television programmes, buy the same commodities,
eat the same food, support the same sports stars and etc
 Cultural (civilizational) clash and identity conflicts

•Culture and nationalism have generally been

closely intertwined.
•The more culturally distinct the other society is
perceived to be, the more inferior it is often
deemed to be and thus suitable for negative
treatment.

•This perception is at the heart of ethnic conflicts

and international wars.
•For Huntington, civilizations will be the dividing
lines in future global politics and it is the clash of
these civilizations that would primarily define the
feature of 21st century global order Huntington
argues that there are eight major civilizations in
this game namely: Western, Confucian, Japanese,
Islamic, Hindu, Slavic-Orthodox, Latin American,
and African.

•The clash-of-civilizations theory thus stresses that

there exists and will continue to exist conflict
instead of cooperation among civilizations
End of the
Good luck!
Semester!