Author: Adekola Taylor
In recent years, international political economy has evolved into a growth industry. Before 1970, it was practically nonexistent as a field of study. International political economy began its boom after the oil crises in the 1970 that affected both states and world markets. Today, the field of international political economy is not only comprised a lot of political economies but also entailed international and comparative politics. Attention was shifted to the field’s main focus when the Cold War ended. After the Cold War, scholars suddenly took interests in international political economy to understand how states and markets affect one another. With the advent of international political economy, scholars are realizing that the impacts of politics on the openness and stability of the international economy are profound. Undoubtedly, international political economy is the study of the impacts of politics on world economic actions.
According to Stephen Krasner, and Robert Gilpin from the realist tradition, the distribution of power among states has been noted as a key factor in explaining the stability and openness of the international economy. This brought about the concept of Hegemonic stability theory first introduced by Charles Kindleberger in the 1970s. The theory argued that for the existence of a stable and open world economy, the overwhelming dominance of one country was necessary. The theory asserted that instability, creation of competing regional blocs, and financial closure were pointers to the decline of a hegemon. There are two different lines of argument about the vision of international political economy.
One school of thought asserts that the United States is necessarily a hegemon in international trade regimes because she plays a dominant role of maintaining the stability of the international regimes; either trading or financial. Friedan and Lake subscribed to this position in their papers. However, Ravenhil argued that it is not hegemon, not single country domination that creates stable international trading regimes, but it is cooperation among the countries (Keohane). This paper is written to support the argument that without the domination by a hegemon, the United States, a stable international trading regime cannot exist.
Some scholars view political economy as the economy basis for political actions. Whichever way, the fact remains that politics and economy interrelate mutually. For instance, many believe that the state’s foreign economy policy choices are the key factors determining the rhythm of the international economy. That is to say states formulate policies to protect their economies, give foreign aids, and set their exchange rates. However, decisions of these states are coined from the impacts of domestic, economic, political, and international factors. Moreover, international political economy has paid attention to how individual states develop and grow drastically over time, while others decline in growth and development. Causes ranging from economic ones, political ones and both domestic and international causes have been accrued to it.
Hegemonic trend in US foreign policies
The Britain exercised a form of economic hegemony over the world during the nineteenth century. The leadership of Britain during this period was associated with the rise of multinational corporations, the globalization of markets, the political and economic stability of European countries, and the openness of international trade and capital movements. However, British hegemony was abruptly brought to an end by World War 1, and the United States assumed the position of the world’s strongest economic power at the end of World War I. The unilateral military actions launched by the United States with the support of Britain against Iraq asserted a predictable hegemonic trend in U.S. foreign policy right from the end of World War II. From the end of World War II still the present day, the roles of U.S in international relations have vehemently affirmed the hegemonic stability and traditional realist theories, which have argued that there must be a hegemonic power that can enforce certain rules of behavior in international relations, to ensure stability of institutions of international political economy.
The United States, the strongest world economy, rapidly ascended to a leadership role and steadily put forward the establishment of a stable monetary system founded on the Bretton Woods system, and creation of open international trade system based on the General Agreement on Tariffs and Trade (GATT) (Gibert). The leadership roles of U.S over the years have helped in creating conditions necessary for peace and prosperity beyond its borders, rapid development of nations such as South Korea and Japan, and steady economic growth up to the 1970s experienced by industrial countries. The evidence of the early phase of the post-World War II period during which the U.S pushed the former European imperial powers to accept a multilateral economic system has been a potent indicator backing the hegemonic stability theories. The multilateral economic system existed beside the United Nations system, with the leadership roles being played by the U.S.
The multilateral economic system, Bretton Woods system (e.g. World Bank, the International Monetary Fund, and the World Trade Organization), was predicated on the concentration of both political and economic power in the coffers of a small number of (western) countries, the presence of a dominant power that is able and willing to take up a leadership role, and the existence of a group of primary interests shared by those states. From the realist point of view, the functions of these international institutions are controversial. As a matter of fact, the key role of these international institutions is derived from the actions and decisions of the states constituting them. For instance, the U.S. through her political and economic power subtly uses IMF and World Bank to exert her influence on countries, also in the EU the hegemonic position of Germany as the key to monetary union also confirms the subtle use of international institutions to exert influence on countries.
It is not an exaggeration saying that the impact of state power is the key driver of the actions and characters of these international institutions. This is in line with the assertion of the realists that emphasize on the state power, and denigrate the role of such institutions as having little independent impact (Krasner). Without gainsaying, the current international economy emerged as a result of the hegemonic functions of U.S, and the relationship between globalization and the American power cannot be underestimated in the international political economy. In consonance with this submission, countries such as Malaysia and France have earnestly expressed their opinion that globalization is fundamentally a tool for the extension of American power, and an outshoot of American ideals and economic practices to the world.
The dominance of the U.S. in strategic and global economic institutions, such as the South East Asia Treaty Organization (SEATO), the North Atlantic Treaty Organization (NATO), the Bretton Woods institutions, and The Central Treaty Organization (CENTO) has helped to maintain the stability of the international regimes. The power relations of U.S. in the global system have been severely tested with the events of September 11, 2001. The terrorist attacks on the Pentagon in Washington and the World Trade Center in New York were targeted to test the economic, political, and standing positions of the world’s sole superpower. The events that followed the attacks are indicators to the hegemonic roles of the U.S in the international political economy. The U.S. exerted her hegemonic roles independently and through her influence on the international institutions to start her campaign against terrorism on a global scale.
Having taken critical decisions responsible for the existence of a stable and open world economy by the overwhelming dominance of one country, it is not an exaggeration to state that without the ascendancy of a hegemon like the United States, the global world system would have been in disarray. The hegemonic role of the U.S. over years has helped create stability in the world political economy. The world has witnessed confusing situations and challenges in recent years with nations holding discrepant views, but the unilateral decisions of U.S. and support of her alliance have helped to salvage most of these confusing and threatening challenges on a global platform. Therefore, in consonance with the realist tradition, hegemony, not cooperation, that creates stable trading regimes. Finally, as a kind of emphasis, the United States is necessarily a hegemon in international trade regimes because she plays a dominant role of maintaining the stability of the international regimes; either trading or financial.
Lake, David also discusses this issue, in "Leadership, Hegemony and the International Economy: Naked Emperor or Tattered Monarch with Potential? International Studies Quarterly 37, December 1993.
Frieden and Rogowski, "The Impact of the International Economy on National Policies: An Analytical Overview," in Robert O. Keohane and Helen V. Milner, eds., Internationalizat ion and Domestic Politics (Cambridge: Cambridge University Press, 1996).
Gibert, Winham R. “The Evolution of the Global Trade Regime”
Kindleberger, Charles, “American Business Abroad: Six Lectures on Direct Investment” New Haven: YaleUniversity Press, 1969, 207. Krasner, Stephen, "State Power and the Structure of International Trade," World Politics 28 (April 1976).
Keohane ,Robert O., "The Theory of Hegemonic Stability and Changes in International Economic Regimes, 1967-1977
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