REALISM AND NEOREALISM
potential economic conflicts to the need to maintain
Global Political Economy by Robert Gilpin
CHAPTER 1: THE NEW GLOBAL ECONOMIC ORDER
The end of the Cold War, globalization - most
outstanding characteristic of international economic
affairs and of political affairs
 not nearly as extensive nor as sweeping in its
consequences (negative or positive) as many
contemporary observers believe. This is still a world
where national policies and domestic economies are
the principal determinants of economic affairs.
mid-1980s - revolution in international economic affairs
occurred as multinational firms (MNCs) and foreign
direct investment (FDI) began to have a profound impact
 In the 1960s and 1970s, increased international trade
transformed international economic affairs
 In the 1980s, the overseas expansion of multinational
firms integrated national economies more and more
completely
 MNCs led the way in internationalization of both
services and manufacturing.
1987 - scholarship at that time gave serious attention to
quasi-Marxist dependency theory and the deep division
between the less developed and the developed world.
Today, the debate over economic development centers
on the appropriate role for state and market in the
development process.
Economic regionalism has reached flood tide and is
having a significant impact on the international
economy.
This book takes a consciously realist or state-centric
approach to analysis of the international economy
 the nation-state remains the dominant actor in both
domestic and international economic affairs
Changes in the world economy
most important change - the end of the Cold War and of
the Soviet threat to the United States and its European
and Japanese allies.
 last half of the twentieth century, the Cold War and its
alliance structures provided the framework within
which the world economy functioned
 United States and its major allies subordinated
political and security cooperation. Emphasis on
security interests and alliance cohesion provided the
political glue that held the world economy together
and facilitated compromises of important national
differences over economic issues
The market-oriented world grew much larger as formerly
communist and Third World countries became more
willing to participate in the market system
 Made the task of managing the global economic
system more daunting with the immense expansion of
world trade, international competition has greatly
increased.
 1980s and 1990s, trade competition became even
more intense as a growing number of industrializing
economies in East Asia and elsewhere shifted from an
import substitution to an export-led growth strategy.
 the major competitors for almost all American firms
remain other American firms.
Expansion of global trade
 Since World War II, trade barriers have declined
significantly due to successive rounds of trade
negotiations
 last half of the twentieth century average tariff levels
of the United States and other industrialized countries
dropped from about 40 percent to only 6 percent, and
barriers to trade in services have also been lowered
 late 1970s - deregulation and privatization further
opened national economies to imports. Technological
advances in communications and transportation
reduced costs and thus significantly encouraged trade
expansion
 more and more businesses have participated in
international markets. Nevertheless, despite
 most trade takes place among the three advanced
industrialized economies—the United States, Western
Europe, and Japan, plus a few emerging markets in East
Asia, Latin America
 Most of the less developed world is excluded, except
as exporters of food and raw materials.
mid-1970s, financial deregulation and the creation of
new financial instruments, such as derivatives, and
technological advances in communications have
contributed to a much more highly integrated
international financial system
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  significance of these huge investments is greatly
magnified by the fact that a large portion of
foreign investments is leveraged; that is, they are
investments made with borrowed funds
 derivatives or repackaged securities and other
financial assets play an important role in
international finance
This financial revolution has linked national economies
much more closely to one another and increased the
capital available for developing countries.
As many of these financial flows are short-term, highly
volatile, and speculative, international finance has
become the most unstable aspect of the global capitalist
economy
 Governments can therefore easily fall prey to currency
speculators, as happened in the 1992 European
financial crisis, which caused Great Britain to withdraw
from the European Exchange Rate Mechanism, and in
the 1994–95 punishing collapse of the Mexican peso,
as well as in the devastating East Asian financial crisis
in the late 1990s.
 financial globalization exemplifies the healthy and
beneficial triumph of global capitalism, for others the
international financial system is “out of control” and
must be better regulated
“globalization” came into popular usage in the second
half of the 1980s in connection with the huge surge of
foreign direct investment (FDI) by multinational
corporations
 early postwar decades, most FDI was made by
American firms, and the United States was host to only
a small amount of FDI from non-American firms.
 1980s, FDI expanded significantly and much more
rapidly than world trade and global economic output.
 FDI outflows from the major industrialized countries to
the industrializing countries rose to approximately 15
percent annually.
Information - become a “tradeable,” and this raises such
new issues in international commerce as the protection
of intellectual property rights and market access for
service industries
it is economic, political, and technological developments
that have been the driving force behind economic
globalization
 Novel technologies in transportation have caused the
costs of transportation thus opening the possibility of
a global trading system
 the computer and advances in telecommunications
have greatly increased global financial flows
 The compression of time and space resulting from
these technological changes has significantly reduced
the costs of international commerce.
Globalization has also been produced by international
economic cooperation and new economic policies.
Under American leadership, both the industrialized and
industrializing economies have taken a number of
initiatives to lower trade and investment barriers. Eight
rounds of multilateral trade negotiations under the
General Agreement on Tariffs and Trade (GATT), the
principal forum for trade liberalization, have significantly
decreased trade barriers.
 a profound shift is taking place from a state-dominated
to a market-dominated international economy
 Humanity is moving rapidly toward a politically
borderless world
 The collapse of the Soviet command economy, the
failure of the Third World’s import-substitution
strategy, and the outstanding economic success of the
American economy in the 1990s have encouraged
acceptance of unrestricted markets as the solution to
the economic ills of modern society
In a highly integrated global economy, the nation-state,
according to this interpretation, has become an
anachronism and is in retreat
 decline of the state is leading to an open and truly
global capitalist economy characterized by
unrestricted trade, financial flows, and the
international activities of multinational
critics emphasize the “high costs” of economic
globalization including rowing income inequality both
among and within nations, high chronic levels of
unemployment in Western Europe and elsewhere, and,
most of all, environmental degradation, widespread
exploitation, and the devastating consequences for
national economies wrought by unregulated
international financial flows
 national societies are being integrated into a global
economic system and are buffeted by economic and
technological forces over which they have little or no
control
2

The idea that globalization is responsible for most of the
world’s economic, political, and other problems is either
patently false or greatly exaggerated
 other factors such as technological developments and
imprudent national policies are much more important
than globalization as causes of many, if not most, of the
problems for which globalization is held responsible
Most national economies are still mainly self-contained
rather than globalized; globalization is also restricted to
a limited, albeit rapidly increasing, number of economic
sectors
The end of the Cold War and the growth of economic
globalization coincided with a new industrial revolution
based on the computer and the rise of the information or
Internet economy.
 Although it is still much too early to gauge the full
impact of the computer on the economy, it is certain
that the computer and the information economy are
significantly changing many aspects of economic affairs
 in the industrialized countries, they have accelerated
the shift from manufacturing to services
 pervasive economic restructuring of the industrialized
economies is economically costly and politically
difficult
Although the United States and the other industrialized
economies still possess a preponderant share of global
wealth and industry, they have declined in relative (not
absolute) terms, while the industrializing economies,
especially China, have gained economic importance.
Before the 1997 financial crisis, which began in Thailand
and eventually plunged East Asia into political and
economic turmoil, Pacific Asia’s economic success had
been extremely impressive; many of these economies
achieved average annual growth rates of 6 to 8 percent
Economic regionalism has spread in response to these
political, economic, and technological developments.
 the new regionalism has much greater significance for
the global economy.
The movement at the beginning of the twenty-first
century is nearly universal; the major economies, with a
few exceptions that include China, Japan, and Russia, are
members of a formal regional arrangement.
 entails increased regionalization of foreign
investment, production, and other economic activities
 Economic regionalism is an important response by
nation-states to shared political problems and to a
highly interdependent, competitive global economy.
 Regionalization is not an alternative to the nation-state
but rather embodies the efforts of individual states to
collectively promote their vital national interests and
ambitions
Effective and legitimate governance requires agreement
on the purpose of the international economy.
 Cold War - the purpose of the world economy was to
strengthen the economies of the anti-Soviet alliance
and solidify the political unity of the United States and
its allies; this goal frequently necessitated acceptance
of trade discrimination and other illiberal policies.
 Today, many Americans and others assert that the
purpose of governance should be to promote
unrestricted free and open markets
 Free trade, freedom of capital movements, and
unrestricted access by multinational firms to markets
around the globe should be the goals of international
governance
Although economic factors will play an important role in
determining the character of the global economy,
political factors will be of equal, and perhaps greater,
importance.
The nature of the global economy will be strongly
affected by the security and political interests of, and the
relations among, the dominant economic powers,
including the United States, Western Europe, Japan,
China, and Russia
Both economic efficiency and national ambitions are
driving forces in the global economy of the twenty-first
century.
Formal economic theories provide indispensable tools,
facilitating comprehension of economic developments;
the conventional theory of international trade, newly
gained insights from the theory of industrial
organization, and other theoretical developments in
economic science provide important additional ideas
a true “political economy” is prerequisite to an improved
comprehension of the implications of new developments
for international economic affairs.
Intellectual Perspectives
 3 Ideologies or perspectives regarding the nature and
function of international economy
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 1. Liberalism
2. Marxism
3. Nationalism
 Since the mid-1980s, the relevance of these
perspectives changed dramatically.
 Marxism declined during the end of communism and
the “import-substitution” strategies of many Less
developed countries (LDCs).
 Liberalism has experienced a considerable growth in
influence.
 As the world open up their economies to import and
foreign investments, the principles of Liberalism
flourished.
 Only few impoverished countries still apply Marxism,
such as Fidel Castro’s Cuba and Kim Jong Il’s North
Korea.
 Yet, Marxism survives as long as those flaws of the
capitalist system emphasized by Marx and his followers
remain: the “boom and bust” cycle of capitalist
evolutions, widespread poverty side by side with
great wealth, and the intense rivalries of capitalist
economies over market share.
 Robert Gilpin was asked in 1987 about his stand. He
was questioned about his belief if he was a Marxist,
Liberal, or Nationalist. And his answer was “NONE of
the ABOVE”.
 His comment about the three principles is that each of
the perspectives is composed of both analytic and
normative elements.
 He stated that, Economic Liberalism is not only an
analytic tool based on the theories and assumptions of
neoclassical economics, but it is also a normative
commitment to a market or capitalist economy.
 As Gilpin mentioned, Karl Marx himself accepted the
basic analytical ideas of the liberal economics of his
time, but despised capitalism—a term he coined—and
asked questions that he considered more fundamental
than those asked by earlier 19th century classical
economists: questions about the origins of the
capitalist system, the laws governing its evolution, and
its ultimate destiny.
 Joseph Schumpeter- economists are interested in the
day-to-day functioning of the capitalist system, both
Marx and Schumpeter is interested in the long-term
dynamics of the capitalist system.
 Nationalism or economic nationalism, is also
composed of both analytic and normative elements.
1. Analytic core- recognizes the anarchic nature of
international affairs, the primacy of the state and its
interests in international affairs, and the importance
of power in interstate relations.
2. Normative- nationalism is also a normative
commitment to the nation-state, state-building, and
the moral superiority of one’s own state over all
other states.
 Economic nationalism is also known as “state-centric”
 Gilpin’s own normative commitment is to economic
liberalism; that is, to free trade and minimal barriers to
the flow of goods, services, and capital across national
boundaries.
 Gilpin also distinguished economic nationalism as a
normative position and political realism as an
analytical perspective.
 Gilpin’s approach to the international political
economy is “realism” or “State-centric realism”.
My Perspective: State-centric Realism
 Realism- is a philosophical position and an analytic
perspective; it is not necessarily a moral commitment
to the nation-state.
 A lot of realist lament a world in which the nation-state
is not adequately restrained by international rules
and moral considerations. Nor is realism a scientific
theory.
 Morgenthau and other realists (Gilpin included),
stated that realism and nationalism are not identical.
Nationalists may be realists, but realists are not
necessarily nationalists.
 The realists recognize the central role of the state,
security, and power in international affairs, they do not
necessarily approve of this situation.
 Professor George Little- introduced realism to Gilpin.
 Martin Wight- author of Power Politics was a Christian
pacificst.
 Hans Morgenthau- “Politics Among Nations”,
condemned “Universal-nationalism” that is
imperialistic behavior, as immoral.
 All realist shares a few fundamental ideas such as the
anarchic nature of international system and the
primacy of the state in international affairs.
 One should distinguish between two major realistic
interpretations of international affairs, that is,
between state-centric and system-centric realism.
 State-centric realism, is the traditional form of realism
associated with Thucydides, Machiavelli, and
Morgenthau, as well as many others. It emphasizes the
state as the principal actor in international affairs and
the fact that there is no authority superior to these
sovereign political units.
 System-centric realism, what is sometimes called
structural realism or neorealism, is a more recent
version of realist thought and is primarily associated
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 with Kenneth Waltz’s innovative and in- fluential
Theory of International Politics.
 Waltz’s systemic version, emphasizes the distribution
of power among states within an international system
as the principal determinant of state behavior. Unlike
state-centric which gives emphasis to the state and
state interest.
 The state-centric realist interpretation of international
affairs makes several basic assumptions.
1. It assumes that the international system is anarchic,
this interpretation views the state
2. In the absence of a higher authority
3. As the principal actor in international affairs
 Anarchy, does not mean that international politics is
characterized by a constant and universal Hobbesian
war of one against all.
 Anarchy means rather that there is no higher authority
to which a state can appeal for succor in times of
trouble.
 The state is the primary actor in international affairs
and brings about the concern of national interest.
Realism should give importance to non-state actors
which are the NGOs.
 Global political economy is defined as the interaction
of the market and such powerful actors as states,
multinational firms and international organizations.
 Gilpin believes that the state is not the only important
actor, he believes that the other entities/elements
within the state such as the World bank, International
Monetary Fund (IMF), etc.. are important.
 But he still brings emphasis to the national government
as the primary decision makers specifically in economic
matters.
 His interpretation of international political economy is
that the interests and policies of the states are
determined by the governing body.
 Gilpin argued in his work which is titled “War and
Change in World Politics” that economic/ foreign
policies of a society reflect the nation’s national
interest as defined by the dominant elite of that
society.
 Gilpin’s state-centric position assumes that national
security is and always will be the principal concern of
states.
 Self-help international system- states must constantly
guard against actual or potential threats to their
political and economic independence.
 Richard Rosecrance argues that “trading state” has
become a much more prominent feature of
international affairs.
 Constructivism- important critique of realism.
 For constructivism, international politics is “socially
constructed” rather than constitutingan objective
reality.
 Alexander Wendt stated that constructivism has two
basic tenets.
1. Human structures are determined mainly by shared
ideas rather than material forces.
2. The identities and interests of human beings are
constructed or are the product of these shared
ideas rather than being products of nature.
 Constructivism- is an important corrective to some
strands of realism and the individualist rational-choice
methodology of neoclassical economics.
 The principal critique of constructivism to realism is
that realism is purely materialistic and analyzes the
political world only in terms of technological forces,
physical circumstances, and other objective factors.
 Constructivism is said to emphasize the role of ideas,
social structures, and human volition in political affairs.
 One of the key ideas in constructivist analysis of
international affairs is the idea of identity, or how a
society defines itself; for example, whether a society is
democratic or authoritarian in nature affects its
behavior.
 According to constructivists, realists neglect the
importance of identity and focus only on material
interests and power considerations.
 In general, realists do stress “interest” over “identity.”
 However, many state-centric realists recognize the
importance of identity in state behavior; for example,
the nature of the domestic political system.
 Political and economic identities or ideologies can have
a strong influence on national behavior.
 The sociopolitical nature of a society, the national
ideology, and the political identity all contribute to a
society’s definition of its interests and influence its
behavior.
 The state-centric interpretation of international
political economy (IPE) rejects a belief that economic
and technological forces have eclipsed the nation-state
and are creating a global world economy in which
political boundaries and national governments are no
longer important.
 The international political and security system
provides the essential framework within which the
international economy functions; domestic and
international economies generate the wealth that is
the foundation of the international political system.
 “The Law of uneven growth”, the resulting
transformation of the international balance of power
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 causes states to redefine their national interests and
foreign policies.
Purpose of Economic Activity
 Most economist, trained in the discipline of
neoclassical economics, believe that the purpose of
economic activity is to benefit individual consumers
and maximize efficient utilization of the earth’s scarce
resources.
 The basic task of economists is to instruct society on
how markets function in the production of wealth and
how these markets can be made most efficient.
 In the study of political economy, however, the
purpose of economic activity is a fundamental issue:
the purpose of economic activity to benefit individual
consumers, to promote certain social welfare goals, or
to maximize national power.
 The purpose that a particular society (domestic or
international) chooses to pursue in turn determines
the role of the market mechanism in the economy.
Conclusion
 The functioning of the world economy is determined
by both markets and the policies of nation-states.
 States set the rules that individual entrepreneurs and
multinational firms must follow.
 The market is indeed a potent force in determination
of economic and political affairs.
 Both political and economic analyses are required to
understand the actual functioning and evolution of the
global economy.
THE REALIST PERSPECTIVE by Cohn
 REALISM- emphasizes power and the national interest,
and directs more attention to political security than to
economic issues
 LIBERALISM- more concerned with economic issues,
has therefore been the dominant perspective in IPE
 1st: realism is the oldest school of thought in
international relations (IR)
 Thucydidesis- often credited with being the first realist
author and also with writing the first important work
on IR—The History of the Peloponnesian War
 2 : classical realism was the dominant approach to IR
nd
for so long that it “provides a good starting point and
base line for comparison with competing models.”
 3rd: realism is an important IPE perspective today
because of debates about the decline of U.S. economic
hegemony vis-à-vis emerging powers such as China,
and about the relative merits of government
involvement in the market
 Two strains of realism:
 1st: largely neglects economics, was evident in the
views of Niccolò Machiavelli, saw little connection
between economics and politics
 Machiavelli also considered military strength to
be more important than wealth in making war
because “gold alone will not procure good
soldiers, but good soldiers will always procure
gold.”
 2nd: stemming from Thucydides and the
mercantilists, is more attuned to economic–political
linkages
 Thucydides attributed war among the Greek city-
states to several economic changes, including the
growth of trade and the emergence of new
commercial powers such as Athens and Corinth
BASIC TENENTS OF REALIST PERSPECTIVE
THE ROLE OF THE INDIVIDUAL, STATE AND SOCIETAL
GROUPS
 Realists see the state as the principal actor in IR, and
they emphasize the need to preserve national
sovereignty
 A state has internal sovereignty when it has a
monopoly on the legitimate use of force within its
territory, and it has external sovereignty when it is free
of control by outside authorities
 States may settle for value-satisficing rather than
value-maximizing decisions, because policy makers
have misperceptions and may lack information and
capabilities needed to make optimal choices
 the state in the realist view is basically a rational
decision maker
THE NATURE AND PURPOSE OF INTERNATIONAL
ECONOMIC RELATIONS
 In a self-help system such as IR, a security dilemma
results because the actions a state takes to bolster its
security may increase the fear and insecurity of others
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  thus, even if a state arms itself only for defensive
purposes, this may raise fears and contribute to an
arms race
 realists see each state as being most concerned with
relative gains, or its position vs other states
 The realist emphasis on relative gains stems from their
view that IR is a zero-sum game, in which one group’s
gain equals another group’s loss
 Liberals by contrast focus on absolute gains, in which
each state seeks to maximize its own gains and is less
concerned about the gains of others
 thus, liberals see IR as a variable-sum game, in
which groups may gain or lose together
 Despite their concern with relative gains, realists focus
on the redistribution of power within the capitalist
system
 whereas historical materialists believe that a more
equitable distribution of power and wealth is not
possible with unfettered capitalism
 In the view of historical materialists, there are
only two “modes of development in contemporary
history: capitalist and redistributive,” and realism
fits with liberalism in the capitalist mold
THE RELATIONSHIP BETWEEN POLITICS AND ECONOMICS
 Realists give priority to politics over economics and
view “the economy as a creature of the state.”
 This was especially the case during the height of
the Cold War when American realist scholars focused
almost exclusively on political security issues and
largely ignored economics
 Realists also believe that the distribution of political
power has a major effect on international economic
relations
THE CAUSES AND EFFECTS OF GLOBALIZATION
 Realists see globalization mainly as an economic
process that does not affect the basic international
political structure in which states are predominant
 Globalization increases only when states permit it to
increase, and the largest states can either open or close
world markets to improve their power positions vs
weaker states
 liberals see globalization as imposing pressure on
states to adopt a single model of capitalism
 realists argue that different national capitalism can
continue to exist in a world of separate states
 Some realists argue that globalization has
enabling as well as constraining effects on the state
 Thus, many states have “increased direct tax
yields, maintained or expanded social spending, and
devised more complex systems of trade and
industrial governance in order to cope with
deepening integration.”
THE MERCANTILISTS
 Adam Smith- used the term mercantilism to refer to
economic thought and practice that prevailed in
Europe
 Mercantilists believed that a state could use its gold
and silver to increase its power by building up its armed
forces, hiring mercenaries, and influencing its enemies
and allies
 States therefore took all necessary measures to
accumulate gold by increasing their exports and
decreasing their imports
 Because it is impossible for all states to have a
balance-of-trade surplus, mercantilists viewed IR as
a zero-sum game, in which relative gains were more
important than absolute gains
REALISM AND INDUSTRIAL REVOLUTION
 Mercantilism was a pre-industrial doctrine, and the
Industrial Revolution gave new impetus to realists who
viewed industrialization as essential for a state’s
military power, security, and economic self-sufficiency
 Alexander Hamilton, the first U.S. secretary of the
treasury
 Friedrich List, a German civil servant, professor, and
politician who was imprisoned and exiled for his
dissident political views
 Hamilton’s 1791 Report on the Subject of
Manufactures“ contains the intellectual origins of
modern economic nationalism and the classic defense
of economic protectionism.”
 The report argued that the United States could
preserve its independence and security only by
promoting economic development through
industrialization, government intervention, and
protectionism
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  Industrialization was especially important
because the “independence and security of a
Country, appear to be materially connected with the
prosperity of manufactures,” and U.S. government
intervention was necessary to establish an industrial
base because Britain had discouraged manufacturing
in its colonies
 To counter Britain’s industrial advantages, the
U.S. government had to promote the use of foreign
technology, capital, and skilled labor and adopt
protectionist policies such as tariffs and quotas to
bolster its fledgling industries
 List wrote that “a nation which exchanges agricultural
products for foreign manufactured goods is an
individual with one arm, which is supported by a
foreign arm.”
 Thus, Germany and the United States could catch up
with the British only by providing protection for their
infant industries
 List argued that governments had responsibilities to
educate their citizens because Britain’s leadership in
manufacturing stemmed largely from its superior
educational system
 List’s view Adam Smith’s arguments favoring a division
of labor and free trade overemphasized the existence
of natural peace and harmony and underestimated the
importance of national rivalries and conflict
 List integrated “the advances in economic thought
produced by the liberal school” with his own brand of
realism
 List argued that protectionism could be used to
promote industrialization, he criticized the
mercantilists for supporting agricultural protectionism
 List also referred to the benefits of free trade, but
believed that states had to follow other policies
because of the possibilities of war
 Thus, free trade would be valuable in the long term for
states that had achieved industrial supremacy
REALISM IN THE INTERWAR PERIOD
 The extreme nationalism and protectionism
contributed to the Great Depression and World War II
and gave leaders at Bretton Woods the impetus to
establish a liberal economic system
 In the postwar international political system, however,
realist thought was to reign supreme
REALISM AFTER WWII
 U.S. realist scholars after World War II focused almost
exclusively on security issues
 Security was a major concern with the emergence of
the Cold War, and economic issues seemed to have less
political importance
 A consensus formed under U.S. leadership at Bretton
Woods ushered in a period of economic stability and
prosperity, and LDCs that did not share in this
prosperity had little influence
 The Cold War was also largely excluded from the
postwar economic system because most Soviet bloc
countries were not members of the IMF, World Bank,
and GATT
 These organizations functioned well without the
Soviet bloc because it accounted for only a small
share of global economic transactions
 Thus, realist scholars considered economic issues to be
“low politics” and not worthy of much attention
Postwar realists were also influenced by liberal views
on the separability of economics and politics
 realist scholars emphasized politics and largely ignored
economics
 The U.S. view that the state should be separated from
the economy also influenced postwar realists
 Thus, liberalism and Marxism clearly overshadowed
realism as IPE perspectives during the 1950s and 1960s
THE REVIVAL OF REALIST IPE
 Two factors contributed to the revival of realism as an
IPE perspective:
 1st: the decline of the Cold War and increasing
disarray in the global economy induced many realists
to shift some attention from security to economic
issues
 2nd: realists returned to IPE because they
considered liberal and Marxist IPE studies to be
economics, they exaggerated the importance of
economics and underestimated the importance of
politics
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 A number of developments demonstrated the need for
realist studies focusing on the economic role of the
state
 The “Keynesian Revolution” caused DC
governments to become heavily involved in
macroeconomic management, the decline of
colonialism led to the creation of newly independent
states that differed from the Western liberal
democratic model, and growing international
competition put pressure on states to promote
industry and technology
 Thus, realists had to “bring the state back in” to the
study of IPE
 liberals believed that postwar international economic
relations had flourished because of the growth of
interdependence
 the newer realists argued that the distribution of
power among states was a more important factor
 A major issue was whether there was a global
hegemonic state with predominant power willing and
able to provide leadership
 Thus, the realists strongly supported hegemonic
stability theory
 Although hegemonic stability theory is closely tied with
realism, it is a hybrid theory that also draws on
liberalism and historical materialism
HEGEMONIC STABILITY THEORY AND U.S STABILITY
 Hegemonic stability theory asserts that the
international economic system is more likely to be
open and stable when a dominant or hegemonic state
is willing and able to provide leadership, and when
most other major states view the hegemon’s policies
as relatively beneficial
 Scholars generally agree that Britain was a global
hegemon during the 19th century and the United
States was a hegemon after World War II
 Some studies assert that Portugal, Spain, the United
Provinces (or present-day Netherlands), and the British
were world powers before the 19th century
 However, most scholars believe that these states were
less influential than the British and American
hegemons of the 19th and 20th centuries
 Hegemonic stability theory spawned a vast array of
literature and “remained atop the agenda of IPE in the
United States” for two decades.
 Scholars critiqued virtually all aspects of the theory,
and many of the criticisms were based on empirical
grounds
 scholars have continued to debate whether or not U.S.
economic hegemony has declined as a result of the U.S.
foreign debt, the 2008 global financial crisis, and the
growing influence of emerging powers such as China
and India
WHAT IS HEGEMONY?
 Hegemony- as an extremely unequal distribution of
power, in which “a single powerful state controls or
dominates the lesser states in the [international]
system.”
 Most theorists have stringent conditions for hegemony
and believe that only two or three states have been
global hegemons
 Thus, one definition limits hegemony to a relationship
in which one state “can largely impose its rules and
wishes (at the very least by effective veto power) in the
economic, political, military, diplomatic and even
cultural arenas.”
 Gramscian theorists use the term in a cultural sense to
connote the complex of ideas social groups use to exert
their authority
 According to Gramscians, the capitalist class offered
subordinate social classes some concessions such as
welfare payments, unemployment insurance, and the
rights to unionize; the subordinate classes in return
viewed capitalist hegemony as perfectly legitimate
 This hegemony is difficult to overcome because
subordinate classes are not aware they are being
oppressed
 Neo-Gramscians assert that globalization in trade,
foreign investment, and finance is enabling a
“transnational capitalist class” to establish its
hegemony and remove all impediments to the free
flow of capital
 Although the Gramscian views alert us to other aspects
of hegemony, mainstream scholars usually define
hegemony only in state-centric terms
9
WHAT ARE THE STRATEGIES AND MOTIVES OF
HEGEMONIC STATES?
 Hegemonic stability theorists have differing views of a
hegemon’s strategies and motives
 First: model portrays the hegemon as
benevolent—promotin general benefits rather than
its self-interest, and using rewards rather than
threats to ensure compliance by other states.
 Second: mixed model portrays the hegemon as
seeking both general and personal benefits, and as
relying on both threats and rewards to achieve its
goals
 Third: model portrays the hegemon as purely
exploitative—pursuing only its self-interest and
using coercion to enforce compliance
 Benevolent hegemons focus on absolute gains,
coercive hegemons seek relative gains, and
hegemons with mixed strategies and motives seek
both absolute and relative gains
 Liberals view the hegemon in benevolent terms as
willing to “take on an undue share of the burdens of the
system” by providing public goods to help create open,
stable economic regimes
 Public goods (or collective goods) are nonexcludable
and nonrival
 Nonexcludability means that others can benefit
from the good, even if they do not contribute to its
provision
 Nonrivalness means that a state’s or an
individual’s use of the good does not decrease the
amount available to others
 In the liberal view, a benevolent hegemon provides
public goods to ensure there is economic openness and
stability
 Rational choice theorists point out that public goods
are underproduced in IR even though rational
individuals and states benefit from them, because
states receive public goods even if they are
noncontributors or free riders
 To convince states that they will benefit from
contributing to the provision of public goods, it is
necessary to overcome collective action problems:
occurs when the uncoordinated actions of individuals
or states do not produce the best possible outcome for
them
 Liberals assume that the hegemon will rely on rewards
rather than coercion in encouraging others to
contribute
 Realists are more inclined than liberals to portray the
hegemon as furthering its national interest rather than
the general good
IS HEGEMONY NECESSARY AND/OR SUFFICIENT TO
PRODUCE AN OPEN, STABLE ECONOMIC SYSTEM?
 Hegemonic stability theorists believe that the
international economy is more likely to be open and
stable if there is a hegemonic state. A hegemon
promotes openness and stability by helping create
liberal international regimes, or “sets of implicit or
explicit principles, norms, rules, and decision-making
procedures around which actors’ expectations
converge in a given area of international relations.”
 Some liberal critics also argue that a hegemon that
helped create open international regimes may not be
necessary for the maintenance of those regimes. Other
states that benefit from open regimes may collectively
maintain them even after the hegemon declines. Thus,
it is important to ask not only whether there is a
hegemon to supply open regimes, but also whether
there is sufficient demand to maintain those regimes
after a hegemon declines.
 Negotiated regimes may arise among states that are
relatively equal in stature, and spontaneous regimes
may arise when countries’ expectations converge even
without negotiating an explicit agreement.
What Is the Status of U.S. Hegemony?
 Scholars have had vigorous debates on the status of
U.S. hegemony. Some theorists are “declinists,” who
see hegemony as inherently unstable.
 Declinists predict that the hegemon will overextend
itself in military and economic terms (imperial
overstretch), that free riders will gain more than the
hegemon from economic openness, and that dynamic
economies will rise to challenge the hegemon’s
predominant position.
 Thus, an historian writes that “the only answer to . . .
whether the United States can preserve its existing
position is ‘no’—for it simply has not been given to any
one society to remain permanently ahead of all the
others”; and a political scientist claims that “one of the
most important features of American hegemony was
its brevity.”
10
 Pitted against declinists are “renewalists” who
question whether the United States is in fact declining.
Although most renewalists concede that U.S. economic
power has declined in a relative sense since 1945, they
argue that U.S. hegemony remains largely intact.
 As evidence of its continued hegemony, renewalists
argue that the United States has not only hard power
based on the use of coercion and payments, but also
structural or soft power based on attraction and co-
option; that is, the United States can persuade “other
countries to want what it wants.”
 Declinists and renewalists can be found on all ends of
the political spectrum. Prominent among the
renewalists are U.S. neoconservatives, who called for
greater U.S. activism when the Soviet bloc and Soviet
Union imploded in the late 1980s and 1990s. For
example, Robert Kagan and William Kristol argued that
the United States achieved its recent position of
strength not by practicing a foreign policy of live and
let live, nor by passively waiting for threats to arise, but
by actively promoting American principles of
governance abroad—democracy, free markets, respect
for liberty.
 In assessing the declinist–renewalist debate, economic
as well as security issues must be considered.
Renewalist arguments that the breakup of the Soviet
bloc and Soviet Union enabled the United States to
become the unchallenged hegemon in a unipolar world
were mainly applicable to the security sphere.
 Whereas renewalists underestimate the importance of
economic issues, declinists sometimes overlook
political-security issues.
 It is also important to consider soft as well as hard
power in assessing the views of declinists and
renewalists. During the Cold War, Western Europeans
“welcomed the United States as their protector against
the other superpower,” but after the Cold War,
Europeans responded to the possibility of unrivalled
U.S. military power by strengthening their own
“military capacity, and forging an inner core within an
enlarged European Union, as a balance to American
power.”
REALISM AND NORTH–SOUTH RELATIONS
 Although the realists focus mainly on relative gains,
their preoccupation with power and security leads
them to emphasize distributional issues among the
most powerful states.
 During the Cold War, realists were less concerned
about conflict in the South (Korea, Vietnam, and the
Middle East were exceptions) than about possible
conflict in Europe, where fear of “East-West
confrontations prevented even the most minor form of
warfare between the two power blocs.”
 In IPE, the realist tendency to ignore Southern interests
was especially evident in earlier years. For example,
Friedrich List believed that the United States and
Germany should adopt protectionist policies to develop
their manufacturing industries so that they could
compete with Britain, but he ruled out industrialization
for the South.
 The realist and liberal perspectives on North–South
relations differ in several respects. Whereas liberals see
LDCs as seeking wealth and prosperity, realists argue
that LDCs seek increased power as well as wealth. In
the realist view, LDC problems result not only from their
poverty but also from their weak position in the
international system; the South can decrease its
vulnerability to the North only by increasing its power.
 Although realists focus on the North–South struggle for
a redistribution of power and wealth, they assume that
such a redistribution is possible within the capitalist
system. Thus, both realists and liberals generally accept
capitalism as the most desirable system for conducting
international economic relations. As discussed in
Chapter 5, historical materialists by contrast believe
that a significant redistribution of power and wealth
between the North and the South can only occur under
socialism.
Realist political economy: Traditional themes and
contemporary challenges by Jonathan Kirshner
Realist political economy rests upon 3 foundations:
1. The state
2. Pursuing the national interest
3. In an environment defined by anarchy
 These attributes distinguish realism from other
approaches to the study of the politics of international
relations
Realists – see an autonomous state
 State that is neither the sum of individual interest a la
liberalism nor implicit or explicit representative of
certain privileged interests within society anticipated
by Marxism
 State pursues the national interest
Much of the distinctness of the national interest comes
from the existence of anarchy
 Security is a public good – public goods tend to be
underprovided by private actors
11
 Realists assume that states must be alert to the
possibility that war could occur and are sensitive to the
potentially catastrophic consequences of defeat
 Some mutually beneficial transactions might leave the
state less secure – so according sa realists, mas pipiliin
daw ng state ang security rather than a short-run
economic development. So, kapag may nag-offer
sakanila ng bilateral trade partnership pero may
security issues, mas pipiliin nila ang security
International politics are an essential and formative
influence on the patter of international economic
relations
 The science of economics presupposes a given political
order, and cannot be profitably studied in isolation
from politics
Liberalism and Marxism share an inherently economistic
perspective: individuals are motivated by desire to
maximize their personal wealth; want more stuff; and
individual behavior is best described, explained, and
predicted by the rational pursuit of more stuff
 Realist: places the influence of those tangibles in the
context of a mindset by fear and desire
- Realists share the view that fear (alertness to the
dangers of the world) is a primal motive of behavior,
and that security is a principal and urgent desire
- Realist expects actors to trade wealth for power
 Example: Germany cultivated a series of
asymmetric trading relationships with the small
states of Southeastern Europe as part of its pre-
WW2 grand strategy to secure needed raw
materials and increase German leverage
 Focusing on small states increased Germany’s
political leverage there by making exit more costly
for others
The pattern of international economic relations affects
domestic politics, which in turn shapes foreign policy
Realists anticipate that large states will routinely make
economic sacrifices in an effort to enhance their political
influence in this fashion
Continuity in the realist perspective over time
So diba nga galing sa mercantilism yung ideas of realism
Classical mercantilism – emphasize zero sum nature of
international trade and the need to accumulate precious
metals
 This idea was debunked by Adam Smith – established
that wealth derived from productive capacity, not
precious metals; the economic effects of trade were
positive sum, not zero sum; that the balance of trade
was not usually a crucial determinant of economic well
being
Liberals and realists share the view that both power and
plenty are crucial and contemporary aims of state action,
and further that power flows from productive capability
and productive capability from economic growth
Influence of war required states to deviate from some of
the policy prescriptions of liberalism
State stood at the center of mercantilist endeavors
developed historically: the state was both the subject
and the object of mercantilist economic policy
The emergence of the state as a powerful actor with
interests distinct from other groups within society –
remained a central theme from the neomercantilists
States – autonomous actors with their own interests; will
find those interests in conflict with the interests and
preferences of other groups in society
 Likely when state, due to its greater sensitivity to
security concerns or its tendency to have a longer time
horizon than individuals, is more willing to accept short
term economic sacrifices in order to reap greater long
run rewards
 State as an end in itself and the major end of policy,
rather than as an instrument for the promotion of
individual welfare
Realist political economy was forged by the experiences
of the world wars and the cold war
 First world war confirmed realist skepticism that
economic interdependence would assure peace
 States are more likely to chafe from the frictions and
enroachments that interdependence will present
 Realists – question of cooperation
 Liberals – market failure often prevents states from
reaching mutually beneficial transactions and
agreements
 Realists – the existence of mutually beneficial
transactions is not sufficient to assure international
cooperation; states have to be concerned about the
consequences of those interactions for national
security
12
 Liberals – remarkable growth of the international
economy after the WW2 is attributable to the
leadership of the US
 Realists – same outcome is attributable to the
dominance of the US vis-à-vis its allies, and the stable
bipolar nature of the Cold War
Wealth and might of a nation depends principally on
whether its neighbors possess more or less of it – power
and riches have become a relative matter
What ultimately distinguishes realism is not the pursuit
of relative gains, but the motives behind that pursuit –
states in anarchy must fear that others may seek to
destroy or enslave them
 Actors, in the absence of anarchy and concerns for
security, routinely seek relative, not absolute gains in
their interactions
Realist political economy in the 21st century: issues and
controversies
Realists political economy has struggled with the
transition from the Cold-War international order to the
post-Cold War international environment
Globalization – encroached on the state autonomy
without generating a reassertion of state authority that
realists would naturally anticipate
 Emergence of a more discriminatory regionalism and a
common realist expectations, has not emerged
2 old habits that realism should shed:
1. Realist scholars have stumbled on the question of
globalization, failing to recognize the distinction
between it and interdependence
2. Realists have also hitched their analytical wagons to a
structuralist albatross
Globalization for realists
Realist instinct – skeptical of the significance of
globalization
Instinct was rooted in 3 foundations:
1. Tendency for realism to stress continuity
2. The anticipation of realists that states will seek, to the
extent that it is feasible and not self-defeating, to
enhance the protect their autonomy
3. Visceral skepticism regarding the commercial peace, or
the idea that interdependence between states is an
important factor in inhibiting war
Globalization – array of phenomena that derive from
unorganized and stateless forces but that generate
pressures that are felt by states
 Condition; matters for world politics and national
security
 Affects the balance of power between states
 Will reshape the relative distribution of capabilities
and vulnerabilities between states
 Influences the nature and axes of conflict
 Reinforces already powerful incentives for peaceful
relations between advanced industrial states
Manifested in a number of ways in contemporary
international politics:
1. Intensification of economic exchange
2. Dramatic changes in the nature of information flows
resulting from a confluence of innovations including
satellites and cellphones, faxes and the internet
3. Marketization
Interdependence – relations between two states, which
can be more or less interdependent depending on the
level and nature of economic exchange between them
 Intense economic interdependence between states
can take place in the absence of globalization
Globalization affects traditional national security issues
in 3 principal ways:
1. Affects state capacity and autonomy
2. Reshapes the relative power of the states vis-à-vis non-
state actors, social forces, and market pressures
3. In some areas relative state power can be enhanced
Realist political economy can integrate the influence of
globalization with an emphasis on the primary role of
politics in shaping both globalization and its
consequences
Processes of globalization reshape the costs, benefits,
and consequences of pursuing different policy choices
Realist perspective on globalization – emphasizes its
political foundations and political consequences, which
are not neutral
Realist political economy can and should, and while
retaining fidelity to its first principles, generate
hypotheses about the consequences of globalization for
contemporary world politics
Putting structure in its place
13
Realist analysis has been shaped by the influence of
neorealism
 Neorealism has much to offer the study of world
politics
 On the systemic level of analysis has skewed realist
analysis
Most important factor for understanding world politics is
not the static distribution of power, but dynamics of
power relations over time
Economic change – redistributes relative power; creating
a natural tendency for the system as a whole to drift
away from equilibrium
Central problem in international relations is addressing
these changes to the balance of power, which is
commonly resolved by war
Waltz – the behavior of states and statesmen is
indeterminate
 Elephant in the neorealist room is that this is also true
for the system
 Realists cannot dispense with close attention to the
distribution of power and changes in the distribution of
power over time, because, at bottom, in the context of
anarchy and the possibility of war, these variables
condition states’ fears and expectations, and influence
the pattern of interactions between them
States in world politics are much more like large
oligopolists than small firms under perfect competition
 It is the very greatest powers that neorealism is most
interested in: a general theory of international politics
is necessarily based on the great powers
 In the pursuit of that most narrow, common goal –
survival – states are still less predictable than firms –
firms are selected out of the system with much greater
frequency than are states
 Structure informs importantly the environment in
which all states act
 All states enjoy considerable discretion with regard to
how they will pursue their goals and what sacrifices
they will make in the face of constraints
 Impossible to understand and anticipate the behavior
of states by looking solely at structural variables and
constraints
 It is necessary to appeal to a host of other factors,
including domestic politics, history, ideology, and
perceptions of legitimacy
There may be no moral difference between states that
prefer status quo to those that pursue revisionist
strategies, but those states will nevertheless behave
differently
What is realism?
 See states, pursuing interests, in an anarchic setting
where the real possibility of war, and with it the
prospect of subjugation or annihilation, must be
accounted for
 It should be noted that realists seem to share a certain
pessimistic view of humanity of the prospects for
fundamental progress or transformation in the nature
of human behavior
 Non-structural realism is possible and indeed
necessary to better understand 21st century
international politics and political economy
Real realism on China
Central question: American foreign policy towards China
 China is rising and is an emerging great power
 Borders major powers
 Demand for energy is a potential source of political
friction with other states
 Its participation in any international political
conventions related to the environment is essential
 Same time an important strategic rival of the US
 Massive dollar holdings are a key pillar of support for
the stability of the US dollar
Realist perspective - ^this is not a pretty picture
 As the power of the state increases, it seeks to extend…
its political influence, and/or its domination of the
international economy
Consequences of China’s rise – default setting is
pessimistic: China will become more ambitious,
challenging the interests of other states
 China’s participation in international agreements will
be increasingly necessary for those agreements to
have meaning, but cooperation between strategic
rivals will be brittle
Realists – pessimistic about the rising China
 What does this suggest for policy?
- States motivated to ensure their own security,
recognize that the safest position in the system is
one of regional hegemony
- Regional hegemon – secure in the knowledge that it
will not be conquered by others
14
 - Anarchic nature – states that can plausibly make bids
for regional hegemony will do so
It is certainly in China’s interest to be the hegemon in
Northeast Asia
 Current US policy of engaging China is misguided
because a wealthy China would not be a status quo
power but an aggressive state determined to achieve
regional hegemony
 US should reverse course and do what it can to slow
the rise of China
^analysis illustrates the limits of structuralism
engagements abroad, and be especially alert to the
potential dangers that might result from them
Realist political economy has been sluggish in engaging
some of the prominent phenomena of the early 21st
century
Realists have also been considerably addled by an
otherwise myopic attention to aspects of the structure of
the system at the expense of other important variables
Realism – can easily bring globalization on board and
inform its analyses with appeals to domestic politics,
history, ideology, and perceptions of legitimacy

Non-structural realism is pessimistic regarding the

consequences of China’s rise, its tenets lead to the
conclusion that engaging China is indeed the wises
strategy
Only a power with a complete ignorance of history would
be quick to embark upon a bid for hegemony
Realists – major powers and great powers prefer not to
be threatened and pushed around
A rising China will almost certainly be more ambitious
and assertive
 Its future foreign policy trajectory is uncertain, at least
in the eyes of a number of realists
 One important determinat of those foreign policy
choices will be the evolution of domestic politics within
China
 China’s continued and internationally oriented
economic growth will empower those within China
who prefer relatively friendly relationships with the
outside world
 Economic distress within China would likely create a
legitimacy crisis for the ruling Chinese Communist
Party, which might then resort to a virulent nationalism
in order to cling to power
 Misguided bid for hegemony become more plausible
Realists – have universally criticized the idealism and
even utopianism of others rather than respecting the
realities of power – pero ganito naman daw yung
inaadvocate ng ibang realists
Real realist approach: acknowledge this, and try to
manage it as best as possible
Politics remains primal: international politics are an
essential and formative influence on the pattern of
international economic relations, and states will be
sensitive to the political consequences of their economic
15