14. The Political Economy of the Environment

This chapter assesses the global political economy of the environment. The growth of the world economy is transforming the Earth's environment. Nothing is particularly controversial about this statement. Yet, sharp disagreements arise over the nature of this transformation. Is the globalization of capitalism a force of progress and environmental solutions? Or is it a cause of the current global environmental crisis? The chapter addresses these questions by examining the debates around some of the most contentious issues at the core of economic globalization and the environment: economic growth, production, and consumption; trade; and transnational investment. It begins with a glance at the general arguments about how the global political economy affects the global environment. The chapter then traces the history of global environmentalism — in particular, the emergence of international environmental institutions with the norm of sustainable development. It also evaluates the effectiveness of North–South environmental financing and international environmental regimes.

8. The Evolution of the International Monetary and Financial System

This chapter explores the international monetary and financial system, which plays a central role in the global political economy (GPE). Since the late nineteenth century, the nature of this system has undergone several pivotal transformations in response to changing political and economic conditions at both domestic and international levels. The first was the collapse of the integrated pre-1914 international monetary and financial regime during the interwar years. The second transformation took place after the Second World War, when the Bretton Woods order was put in place. Since the early 1970s, various features of the Bretton Woods order have unravelled with the globalization of finance, the collapse of the gold exchange standard, and the breakdown of the adjustable peg exchange rate regime. These changes have important political consequences for the key issue of who gets what, when, and how in the GPE.

7. The Globalization of Production

This chapter addresses the globalization of production. Although companies have been investing abroad for centuries, the most recent era of globalization has created an unprecedented range of possibilities for global firms to reorganize and relocate their activities. The chapter analyses how advances in transportation and technology allow a firm to divide up a global value chain — the sequence of activities that lead to the production of a particular good or service — and how these decisions create new opportunities and challenges for both companies and the societies within which they operate. It first reviews the rise of global production and the forces that have led to dramatic increases in foreign direct investment (FDI) and outsourcing. The central questions for any firm involved in global production involves how to govern the value chain and where to locate different activities. The chapter then provides a framework for understanding these issues and the implications of the various choices. It also applies these concepts to the case of East Asia, particularly China.

4. The Domestic Sources of Foreign Economic Policies

This chapter examines the domestic sources of foreign economic policies. Different people in every society typically have different views about what their government should do when it comes to setting the policies that regulate international trade, immigration, investment, and exchange rates. These competing demands must be reconciled in some way by the political institutions that govern policy making. To really understand the domestic origins of foreign economic policies, we need to perform two critical tasks: identify or map the policy preferences of different groups in the domestic economy; and specify how political institutions determine the way these preferences are aggregated or converted into actual government decisions. The first task requires some economic analysis, while the second requires some political analysis. These two analytical steps put together like this, combining both economic and political analysis in tandem, are generally referred to as the political economy approach to the study of policy outcomes. The chapter then considers the impact of domestic politics on bargaining over economic issues between governments at the international level.

12. Global Growth, Inequality, and Poverty:

This chapter argues that economists have oversold the virtues of globalization, displaying confidence in derived policy prescriptions well beyond the evidence. The most spectacular recent demonstration of hubris is the failure of almost the whole of the mainstream economics profession in the few years before 2007–8 to forecast a major recession. The chapter then outlines the neo-liberal world view and its application in the form of the development recipe known as the Washington Consensus. Since the 1980s, the Western economic policy ‘establishment’ has espoused a doctrine of ‘best economic policy’ for the world which says, put too simply, that ‘more market and less state’ should be the direction of travel for developed and developing countries. This overarching neo-liberal ideology embraces globalization as a major component, relating to the nature of integration into the international economy. The chapter then looks at trends in world income distribution and poverty, bearing in mind the optimistic claims of the globalization argument.

2. The Nineteenth-Century Roots of Theoretical Traditions in Global Political Economy

This chapter focuses on the historical origins and the subsequent intellectual lineage of the three core theoretical positions within contemporary global political economy (GPE): realism, liberalism, and Marxism. ‘Textbook GPE’ privileges nineteenth-century understandings of political economy when discussing the pre-history of its own field. This helps explains GPE's treatment of feminist scholarship within the textbooks; feminism remains largely marginalized from textbook GPE, presented as something of a postscript to avoid accusations of it having been omitted altogether rather than being placed centre stage in the discussion. The chapter then looks at how the nineteenth-century overlay operates in textbook GPE. To do so, it makes sense to concentrate in the first instance on the issue that did most to divide nineteenth-century economists: namely, the free trade policies resulting from the general ascendancy of laissez-faire ideology. The most celebrated of the critics, Friedrich List, is treated much more as a dependable authority figure in GPE than he is in the history of economic thought. Indeed, in textbook GPE, the disputes between realist and liberal positions is very often presented initially through an account of List's work, despite the pre-history of liberalism being much the longer of the two.

13. The Political Economy of Development

This chapter examines the political economy of development. Despite the many accomplishments since the end of the Second World War, the problems of development in the contemporary global political economy are still of arresting proportions, and the various incarnations of a ‘global development agenda’ to deal with these problems have had a very mixed record. In fact, there is still little consensus on what development actually is, let alone how it might be achieved, in either academic debates or public discourse. One of the most disputed questions in this context relates to the relationship between globalization and development, and how people should understand the impact of globalization on development across the world. The chapter explores these debates. It starts by reviewing the different ways of thinking about development that have emerged since the end of the Second World War, and demonstrating how particular understandings of development have given rise to particular kinds of development strategies, at both the national and global levels. The chapter then considers the impacts and consequences of these strategies for development, and shows on this basis that many of the problems and failures of development have not only persisted but also worsened in the contemporary period.

10. The Logics of Economic Globalization

This chapter provides a systematic account of the causes of economic globalization. Within the global political economy (GPE) literature, economic globalization tends to be more precisely specified as ‘the emergence and operation of a single, worldwide economy’. This assists its measurement by reference to the intensity, extensity, and velocity of worldwide economic flows and interconnectedness, from trade, through production and finance, migration to information and data. Understood as a historical process, the concept of economic globalization also infers an evolving transformation or evolution in the organization and operation of the world economy. The chapter then reviews the principal theories of economic globalization, drawing upon the GPE literature. It develops a multi-theoretic account of economic globalization which captures its structural, conjunctural, and contingent causal factors. The chapter also demonstrates how this multi-theoretic framework is relevant to understanding the current crisis of economic globalization. It considers whether, in the aftermath of the Global Financial Crisis, this crisis is the precursor to a period of accelerating deglobalization.

6. Regional Trade Agreements

This chapter assesses regional trade agreements (RTAs). The number of RTAs has grown rapidly since the World Trade Organization (WTO) came into existence in 1995. Roughly one-half of world trade is now conducted within these preferential trade arrangements, the most significant exception to the WTO's principle of non-discrimination. Governments have entered regional economic agreements motivated by a variety of political and economic considerations. They may prefer trade liberalization on a regional rather than a global basis for several reasons. The chapter then reviews the political economy of regionalism: why RTAs are established; which actors are likely to support regional rather than global trade liberalization; the effects that regionalism has had on the trade and welfare of members and non-members; and the relationship between liberalization at the regional and global levels.

5. The Evolution of the Global Trade Regime

This chapter details the history, politics, and recent trends and challenges of the multilateral trade system. The twentieth century witnessed a remarkable emergence of international institutions, and nowhere was their impact greater than in international trade. Following decades of depression and war, a global trading regime was initiated with the creation of the General Agreement on Tariffs and Trade (GATT) in 1947, which expanded steadily in both scope and membership through the twentieth century and culminated in the establishment of the World Trade Organization (WTO) in 1995. Underpinned by the philosophy that open markets and non-discriminatory trade policies promote the prosperity of all countries, and issued with a powerful dispute settlement mechanism, the WTO has been hailed as the most prominent example of cooperation between countries. At the same time, however, the WTO has been subject to internal and external criticism and now faces a number of difficulties.