Collegeaantekeningen Introduction to international political economy

Bevat de aantekeningen van college 1 tot en met 4. De inhoud wordt aangevuld met de overige collegeaantekeningen. De colleges worden aangeboden in het Engels, en daarom de aantekeningen ook.

Lecture 1 February 3rd 2015

During this first lecture (which lasted only for one hour) is an introduction and welcome to this course. We’ll discuss the question ‘What is IPE?’, the course overview (the manual is available on Blackboard) and the requirements and preparations.

What is IPE?

IPE is ’’concerned with the interaction between the state and the market’’ (Cohn, 3). It’s all about the interaction between politics and economics, treated as if these two are on a balance. We’ll look into questions like: ‘To what extent can states intervene in the markets?’ ‘Why and how can states interfere?’ And, ‘can this lead to market failure?’. Interdependence is an important issue in this, especially in the current age of globalisation. Does this necessarily lead to global welfare? Can we reverse these processes?

IPE today

IPE is relatively new as an academic discipline, scholars responded to the failing of the Post-War system on finance and economics. This has been critical to the mutual neglect of politics and economics. IPE is unique as it’s inherently interdisciplinary. In other words: IPE is a notoriously diverse field of study.

Course overview: theories

First we’re going to look to the theoretical foundations of IPE. We use the following order: mercantilism, liberalism and critical perspective. They all evaluate the tension between politics and economics (between the state and the market). 

The themes that we will cover are listed below:

1.    Money – Key currencies, crypto currencies (bit coin etc.) 

2.    Finance – Who is regulating the global finance market?

3.    Trade – How are the trade relations established? We’ll discuss the history of free trade. How do we explain the variations in free trade versus protectionism?

4.    Regionalism – The tendency to create regional trade blocks (like the EU) in a world of globalisation

5.    Emerging markets – What are the roles of the BRICS countries?

6.    Transnational corporations (TNC’s) – What are their roles? What kinds of factors attract or detract businesses to emerge?

7.    Energy and the environment – Environmental regulations in issue of trade

8.    Debt and crises – What are the lessons learnt?

9.    Alternative IPE’s – Illicit global economy for instance drugs trafficking and the role of the internet in this

What you will do and how to do it well…

The learning materials are: the textbook, the lectures, the articles, podcasts and videos. All of these are required to be studies for the final exam. The structure of the exam will look like this: concepts questions, short answer questions and an essay. Do think about the key concepts (at the end of each chapter in the text book for example) and about the connections between concepts. Date: 09 – 12h March 26^th

Lecture 2 February 5^th 2015

IPE: Mercantilism, Realism, & HST (Hegemonic Stability Theory)

Today’s lecture is about the Mercantilist period, we’ll try to address a multidimensional perspective on economic nationalism. What is the mercantilist perspective in IPE and its variations? We’ll discuss Friedrich List, de policy prescriptions of Mercantilism in the past and the present, the Hegemonic Stability Theory (Krasner Article) and The Decline Theory (past and present).

Conceptual confusion? A lot of different labels: Mercantilism, Neo-mercantilism, Realism & Economic Nationalism. We can use a timeline to clarify these different terms. This time line is available in the sheets of this lecture.

The Mercantilist Periode (1500 – 1700)

The emergence of the nation state (the birth of state sovereignty) took place in 1648. From this moment on, the people and the state are regarded as the same thing. Important in this new system is creating sustainability to increase the economic trade. So states were moving away from a more agricultural economy to a more manufacturing/industrial state. To a certain extent states provide the stability for the trade system, but at the same time the state bounded itself in a security dilemma.

The security dilemma is rooted in a deep sense of uncertainty/insecurity. How can states rely on other states in terms of trade, but also ensure their own security? An answer was found in an increasing self-sufficiency (autarky). From this view, the states need to look to its international partners, but also seek to achieve self-sufficiency to a certain extent.

The central Mercantilist insight can be described as: wealth is power. To be self-sufficient, an independent state of power and wealth is needed. The way of thinking from a perspective of a state was: while my wealth increases, it necessarily means your wealth decreases (zero-sum game). So policy that is able to cope with this security dilemma is required, so my win doesn’t necessity mean your loss.

Mercantilism in practice

Protectionism can be defined as: ‘economic policies that restrict or promote trade such as import tariffs or export subsidies (that benefit domestic producers)’. Both are forms of protectionism.

Corn Laws (1815 – 1848): These laws protected the local farmers and the landowners of farms domestically by massive tariffs and subsidies. These showed to be counter-productive.

Smoot-Hawley Tariff Act (1930 – 1934) had a devastating effect on the global export, so it was replaced by the reciprocal trade agreement.

Colonialism is a second practical implication of Mercantilism that has to do withthe relations between motherlands and colonies.

Economic Nationalism

According to Smith, wealth is increasing the state’s production capacity. The bigger the economy, the more you can specialize in.

These thinkers of economic nationalism redefine Smith’s understanding of wealth. They disagree with Smith’s main policy prescription, namely: free exchange will benefit everybody.

Alexander Hamilton (1791) ‘Report on the Subject of Manufactures’

One of his main issues is that Smith doesn’t see the differences between agrarian and industrializes states in this theory, while this distinction is crucial.

Hamilton states that we should move from an industrial society to an agrarian society trough a so-called catch-up. In this way we should fix the imbalance between states.

Another argument from Hamilton regards the terms autarky and security. From his point of view, self-sufficiency and security are the same time.

Furthermore he states that we need some type of Government Intervention, protectionism that undermines free trade.

Friedrich List (1885) ‘The National System of Political Economy’

List said: ‘‘We need to rethink the nature in terms of free trade.’’ He talked about kicking out the ladder of development, a type of economic relationship that Germany was in with other nations, that didn’t allowed Germany to catch-up. Before a state reached a certain level of industrialization/development, it wasn’t possible to be engaged in free trade. So the first priority should be the development of infant industries.

According to List, national unity was key to economic development. The process of development, moving up the ladder, would also help to nurture nationalism (bringing the citizens together). So the two would support each other.

List: ‘’A nation that exchanges good for foreign good is an individual with one arm, which is supported by a foreign arm.’’

Economic nationalism is not totally different from economic liberalism. Both thinkers focus on the process of achieving wealth, something that Smith has not focused on. List’s argument consists of two components: the balance of trade and the terms of trade.

1. Balance of trade: the quantitative argument

Balance of trade = Exports - Imports

Bt surplus = E > I

Bt deficit = E

Since it’s impossible for all states to have a Bt surplus, economic nationalism perceives economic and political relations as a zero-sum game.

2. Terms of Trade: the qualitative argument

This argument concerns how may units the less developed state needs to expert to acquire one unit of import from a more developed state over time. This has to do with the big difference between the industrialized and the agrarian states that Smith didn’t think about. If you want to catch-up, you need to nurture your infant industries. The long-term goal of both types of states is the same, it’s the process of how to get there what differs.

Reading List: Main take home points

List article is a revision (not a refutation) of Smith and the economic liberalism theory. The argument of the balance of trade and terms of trade explain how the ‘’ladder gets kicked away’’. The End Game of economic nationalism is the same as economic liberalism, the path to get there is different. So: the end goal is the same, it’s about the route to get there.

Due to the intense economic institution after World War 2, economics take a back seat. The post WW2 system was build (the Bretton Woods Institutions), the Cold World was emerging and the world was challenged to a lot of security concerns.

These security issues caused the division between High Politics (security) and Low Politics (economics).

Mercantilism’s Revival

As we see the Cold War declining, the question of incorporation of politics back in economics returns.

Next to his, disarray of global economy is increasing caused by the OPEC oil crisis and the failing of the Bretton Woods system.

Scholars from Marxism and Liberalism came with critique: was Mercanitlism economic enough?

This revival knows two main contributions: Neo-mercantilism and the Hegemonic Stability Theory.

Neo-Mercantilism

Neo-mercantilism knows two Strategies:

1.    Industrial and Infrastructural Policies

These policies relate to the state’s effort to limit foreign investment in order to reduce threats to independence/sovereignty. These states needed a different way of economic growth, for example by banning investment in strategic industries (oil sector for example). 

For instance: Post WW2 Europe (returning prosperity by a form of protectionism),

Japanese economic miracle (Japan challenged the US for economic power) and the

Canadian ‘culture industries’ (Canada has a lot of policies to protect its cultures).

2.    Strategic Resource Policies

These policies place effort on securing/maintaining strategic resources. Strategic Resource Policies are programs to promote self-sufficiency and to generate prosperity by security. Being ‘cut off’ for strategic resources can cripple an economy.

Hegemonic Stability Theory (HST)

This theory is knows as the crown jewel of Neo-Mercantilism. This theory was primarily an American concern, especially after the height of its hegemonic power. What happens to the world order during its decline?

The HST: the idea that an international economic system is more likely to be open and stable when a dominant or hegemonic state is willing and able to provide leaderships (and when most other major states view the hegemon’s policies as relatively beneficial). What does an open and a stable system mean? For Krasner it was about a global free trade system.

When are you a hegemon? Hegemony is an extremely unequal distribution of power, in which a single powerful state controls or dominates the lesser states in the international system.

There are thee hegemonic strategies: 1.Benevolent hegemon, 2. Mixed Hegemon and 3. Exploitive / Coercive Hegemon.

Krasner’s State-Power Theory of state

Kranser has two main points. The first is: bringing the state back in and second: predicting the structure of global trade / predicting the variation in trade openness.

Step 1: different types of states will experience different outcomes to open systems of trade. Some states win, others lose. This relates to four states preferences:

1.    Aggregate national income

2.    Social stability

3.    Political power

4.    Economic growth

How do states respond to free trade? And does the behaviour of small states differ from big states? And what about developed states versus less developed states? At least it’s clear that some states experience free trade differently than other states.

Step 2: Predicting Global Trading Structure

Different distributions of power (multipolar … hegemonic) relate to different predictions for international trading structures. See the figure in the sheets of this lecture;  This table shows that when states are very unequal from size but equal on the level of development, the hegemonic stability will be high. In other words: according to Krasner on open system means hegemonic stability.

3 Lingering Questions

1.    Empirical and theoretical challenges to HST

2.    The Decline thesis

3.    Beyond the decline thesis

Critiques of Hegemonic Stability Theory

• Does a state have to dominate in all areas? Is its legitimacy declining?
• Can we draw meaningful conclusions from 2 cases? Are the US and the UK enough?
• What about regional hegemony? Perhaps China is a regional hegemon in Asia. What does that mean? Do states seek global hegemony? Is that a realistic state goal?
• Hegemony in the CREATION & MAINTENANCE of the global economic order.

The end of US Hegemony?

The US is still seen as a hegemonic power, but at the same time it’s dependent on energy. So what does this mean in terms of independence and power? Besides, these days there are lots of costly, protracted conflicts around the world, which affect the US as well. Furthermore the US has the largest account deficit in history, which shows that its economic policy unsustainable. The US is also challenges by the economic crisis and it facing diminishing legitimacy: a decline in its soft power.

When will China surpass the USA? Various monetary institutions like the IMF (2016), the Economist (2019) and the PWC (2020) predict when China will surpass the USA in global power. Goldman Sachs also tried to estimate this changing world order, in 2003 he predicted that 2041 would be the year, but five years later (in 2008) this predication already changed to 2028.

End of hegemony?

We are now living in an ‘Age of Non-Polarity’, Richard Haas declares. A non-polar world order is characterized by numerous centers with meaningful power that include both state and non-state actors. Ian Bremmer, another scholar, speaks of a ‘G-Zero’ World (instead of the G8, G20 etc.) and ‘an empty driver’s seat’. Conclusion: the state has lost the monopoly on power.

So what do we see? We face a challenge both from above and below. From international organizations (IMF, UN, WB, OPEC, WHO), to regional organizations (EU, AU, ASEAN, Arab League), cities and states within states (New York, Sao Paulo, Shanghai, California), transnational corporations (Exxon Mobil, JPMorgan, GE, Shell) and Global Media (Al Jazeera, BBC, CNN), militias (Hamas, Hezbollah and Taliban) to NGO’s (Gates Foundation, Greenpeace, Doctors without Borders) are all members on the playfield of global power.

Lecture 3 February 10^th 2015

Liberalism

Today we’re talking about liberalism, the dominant en most influential theory in International Political Economy. It therefor has been a foundation to other theories as well. The underlying thought of liberalism can be described as ‘greed is good’ (a well known phrase from the Wallstreet movie). This means that individual’s motivation is driven by self-interest. The question is: what does this mean to the economy?

Today we’ll address the different types of liberalism as seen in the table in figure in the seets of this lecture, except for institutional liberalism. Read this type extra carefully in the text book.

There are six main theoretical tenets of liberalism. The first considers the human nature, which liberalists see as cooperative and social. But, they are still assuming that people are self-interested. This point of view is in contrast to the pessimistic view of realistic thinkers like Hobbes. Second: individuals matter. The unit of analysis is the individual, so liberalism gives primacy to individuals. Third: humans are perfectible. This optimistic stance believes that individuals can learn and improve. The fourth point is that progress and technological advance make the world a better, more equal en freer place. Liberalists believe in progression. The last two main tenets are: domestic politics and institutions matter.

Orthodox (classical) liberalism – Smith & Ricardo

This first type of liberalism is an economic theory that promotes the (negative) freedom of the individual and freedom of the market to function with minimal state interference. Why negative freedom? To classical liberalism freedom is fundamental. The market in particular should be free from any constraints. The economy is free from limiting interventions from the state. Freedom from (instead of freedom to) is called negative freedom.

Adam Smith 1723 – 1790

Smith should be placed in the context of four developments: the political revolution, the scientific revolution, the industrial revolution and the new economic thinking. At first, the political revolution: this was a response to Machiavelli and Hobbes regarding their view on the human nature and the state (the notion of ‘The Invisible Hand’). Secondly the scientific revolution took place, influenced by Isaac Newton. Thirdly the industrial revolution: Smith lived in a transforming period of specialization. And fourthly the new economic thinking influenced Smith. At this time thinkers started to question economic liberalism and the notion of wealth. ‘Laisser faire and Laisser passé’ is the quote of this philosophy, the belief in minimal state intervention emerged.

Smith’s major contribution is his notion about the relationship between self-interest and the collective interest. Smith states that self-interest serves collective interest and that it therefore will produce and support the public good. He explains this in two ways: first he redefines wealth as productive capacity, second he introduces the invisible hand (the role of self-interest in material exchange).

Back to his definition of wealth: ‘Wealth is the stream of goods and services a state creates and maintains.’ Therefore, wealth is related to the efficiency of a state’s Productive Capacity (PC). This is a dynamic understanding of wealth. In this view wealth is related to the efficiency of a state’s Productive Capacity and to the division of labour. This division produces specialization, which increases efficiency and therefore PC. So, increasing wealth requires maximizing a state’s PC.

Second Smith spoke about self-interest. Smith: ‘Individuals serve the collective interest precisely because they are guided by self-interest.’ What gets specialists to trade? Self-interest is, because everyone wants to have the best set of weapons (means) possible. It’s not about relying on the goodness of someone’s heart, but from his or her regard to his or her own self-interest.

The invisible hand is probably the most well known term introduced by Smith. This is a metaphor that explains the self-regulating character of the market. It transforms self-interest into collective interest and it balances the market (supply and demand mechanisms).

When we see this on a more abstract level, acting out of self-interest increases the Wealth of the Nation, which is a collective interest.

Smith’s argument for Free Trade

Regarding to Smith, economic growth is primarily a function of the extent of the division of labour, which in turn is dependent upon the scale of the market. In other words: economic growth works best when we expand the markets. Rather than speaking of individuals, here we’re talking about states. Smith believes in absolute advantage (versus comparative advantage which we’ll address later).

Smith’s caveats

Smith writes about the legitimate role of the state, in his opinion the following state functions are required to keep the market functioning: Defense, policing, building public works, prevent spread of disease, enforcing contracts, keeping the market functioning, protect (achieve) individual rights and curb rent seeking.

David Ricardo 1772 – 1823

Another main thinker in liberalism is Ricardo. He provided liberalism with its more compelling argument: ‘Trade increases the wealth of the entire world’. He provided the foundation for radically expanding free trade, with a key for Comparative Advantage.

Comparative advantage is an important theme in Ricardo’s work. States should produce and export those goods they can produce at a lower cost than other states and import those items that other states can produce at lower cost. But what is lower cost? This measures how much production of one unit of one good you have to give up to produce one unit of another. This is also known as the opportunity costs.

Absolute advantage, where Smith was talking about, looks for the efficiency of production. Ricardo argues that even when Country A can produce two goods more efficiently than Country B, it still should trade with Country B.

Heterodox or Interventionist Liberalism – Keynes

The main difference between this theory and liberalism are the arguments about self-interest and state intervention. Interventionist Liberalism is an economic theory advocating support for some state intervention. In its view free markets do not always lead to widespread benefits or aggregate welfare gains; therefore the state is important in promoting equality and justice. This theory returns to social issues of economic equality and justice.

John Maynard Keynes 1883 – 1946

Keynes was a key person in the negotiation of the Bretton Woods Institutions. He structured the global economic system after World War II. His main work is called ‘The General Theory of Employment, Interest and Money’ (1936). The Great Depression proved that orthodox liberals had over-estimated the degree of convergence between self-interest and the public interest.

Keynes: “It is possible for individuals to behave rationally and in their individual self-interest, and yet for the collective result to be irrational and destructive”. This is in contrast to what Smith advocated. According to Keynes individuals make irrational decisions when faced with uncertainty, and this can lead to economic instability.

Keynes thinks about rationality versus irrationality. When we’re facing unemployment, it’s rational and natural for us to save money and to spend less. Keynes defines this as collective irrationality. Keynes: ‘This is a form of collective irrationality. If everyone spends less and saves more, then less is purchased, fewer workers are needed and incomes decline.’

What is the solution to this human behaviour? Keynes says: ‘Invention!’ When businesses are afraid to invest, government needs to make adjustments to get money into their hands (even if this means running a deficit). The state pumps money into the economy.

Embedded Liberal Compromise (“We are all Keynesian Now”)

The coupling of open international markets with government measures to cushion domestic economies (especially with regard to domestic security and stability).

States are permitted to use protectionist measures when necessary to promote full employment. So Keynes is concerned about issues of equality and health, free market aren’t enough to ensure this.

Neo-classical / Neo-liberalism

In the 70’s several events of massive shock to the economical breakdown took place, like the OPEC Oil Crisis (1973), Global recession (1974) that made welfare and full employment very costly, the collapse of Bretton Woods and the redistributive strategies that reduced competitiveness of business.

Neo-liberalism’s theoretical foundation

“Laissez-faire does not mean: let the evils last. It means: let the consumers, i.e. the people, decide – by their buying and by their abstention from buying what should be produced and by whom. The alternative to laissez-faire is to entrust these decisions to a paternal government. There is no middle-way. Either the consumers are supreme or the government.” (Ludwig von Mises)

Greed is good!

Masters of the Universe is a work by Jones about the rise and dominance of neo-liberalism. It’s a conscious and deliberate unfolding of neo-liberalism consolidated in the way of thinking and policy-making.

Friedrich Hayek 1899 – 1992

Hayek was concerned about the fascism, totalitarianism and the emergence of collectivism in US & Britain politics. He introduced an attack on collectivism. He goes back to Smith: the market and its price mechanisms provides perfect information. Furthermore he accepted substantive inequality. Basically he says: ‘It you’re poor, it’s your fault.’

Milton Friedman 1912 – 2006

Friedman: “The kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other”.

According to the neo-liberals the legitimate role of the state has to do with “determining the rules of the game and to act as an umpire to interpret and enforce them”. Practically these are rules against monopoly for instance. In terms of policies this has to do with stimulating business competitiveness by deregulating. And for banks this means to allow and enable innovations freely, without any restrictions.

Reaganomics is a new way of generating prosperity

Reagan: ‘Lowering taxes, instead of spending, increases money supply and releases capital to business and consumers.’

The end of History – Fukuyama

Francis Fukuyama states: ‘There’s no alternative to the Western economic model. Democratic liberalism is the way to go and in the end everybody will benefit.’

Critique of the Liberal Perspective

Some argue that liberalists are too optimistic about the role that technology plays in solving the world’s problems. Additionally the issue of absolute gains legitimizes liberal thinking about development issues. In contrary of what liberal thinkers say, economic exchange is rarely free and equal. For example powerful states usually dominate at expense of poor states, which proves that a free market doesn’t provide benefits for all.

Lecture 4 February 12^th 2015

From Marx to Piketty, Critical perspectives in IPE

This is the last theoretical lecture in which we’ll discuss Marx and Marxism (and historical Marxism used to explain this theory), Lenin (how did he move beyond Marxism?), Imperialism & Dependency Theories, (Neo-)Gramscian Theorie, Piketty’s capital in the 21^st Century and lastly Alternative approaches with a spotlight on Feminism.

The Hermeneutics of Suspicion

This is a fundamental attitude for critical theories: things aren’t what they seem. It’s a search for truth; there must be something behind the curtain. This attitude focuses on concepts that tend to be not value-neutral.

What makes critical perspectives different?

At first all critical perspectives got an approach that provides the grounds for a moral critique. They all take issues of morality, justice and inequality very serious. Secondly they raise questions of human freedom: what does it mean to be free or to be slaved? Is our freedom limited by material circumstances? Thirdly are the critical perspectives the only ones that view things ‘from below’, they use a bottom-up approach. Next to this they posit a dynamic and long-term view of IPE. The dominant theories Liberalism and realism don’t look at the real long-term processes.

Karl Marx 1818 – 1883

Marx was a German philosopher whose most important work was Das Kapital from 1867. He responded to Hagel. Marx: ‘The (current) capitalist order, like other order before it, is inherently exploitative and wrong.’ But, the unique thing for that time, was Marx’ optimistic attitude: things can be changed! He talked about how to implement a new system that distributes good in a more just and fair manner. The relevance of Marx is still visible in the current financial crisis with its imbalance and unfairness.

Marx introduced four main ideas: 1. Theory of History 2. Notion of Class Conflict 3. Critique of Capitalism 4. Theory of Ideology. These are all interlinked.

Theory of History

In his Communist Manifesto Marx states: ‘’The history of all hitherto existing society is the history of class struggles’’. All history, according to Marx, is linked to struggles between classes.

This idea derives from Historical Materialism: a theory of change and development in which material changes (technological advances) structure and organize society and social relations. This is also described as Technological Determinism. It argues that technological advances are responsible for inequality (and therefore the struggle) in classes. Each successive world order generates the contradictions that bring about its transformation. In other word: each state exhaust itself to compel another state.

Class Conflict

A class is determined by ownership (or a lack of ownership) of capital. It’s about the distinction between owners of the means of production and those who don’t own capital but own labour. This leads to class conflict: ‘’the presence of unemployed workers functions to keep wages down’’. Since there always is a certain level of unemployment, there always are people who need to be willing to take the low wages.

Critique of Capitalism

The state is powerful enough to regulate certain industries and picks winners and losers via taxes, spending en regulation. Capitalists have an incentive to ‘capture’ the rules of the game. The state can help friends and punish enemies.

Theory of Ideology

The quote that summarizes his ideology is: ‘The ideas of the ruling class are, in every epoch, the ruling ideas’ (The German Idelogy). This has to do with false consciousness, is implicates that the true liberation doesn’t begin in the mental world but must be carried out in the real world. Before we can change the way people think, we first need to change the relationship between workers and the owners of capital.

The road to Communism

The current thought was: capitalism necessary exhausts itself. The problem was that capitalism lacked a consumer base. Who’s going to but all the produced goods if nobody has got the money? So the communists said to all the workers of the world: unite! A harmony of interest (or dissatisfaction) will cause a world-wide revolution.

Marx’s enduring influence

Marx’s enduring influence becomes clear when we look into the philosophy of V. Lenin, the Dependency Theory from Frank and the World-Systems Theory form Wallerstein.

Vladimir Lenin was inspired by Marx and said: ‘Imperialism is the highest standard of capitalism.’ Lenin explains why we haven’t seen the communist revolution that Marx predicted. Capitalism has changes since Marx, there is a two-tier structure consisting of Core and Periphery states. The creation of these exploiting C-states and P-states means that there is no longer (as assumed) a harmony of interests between wokers. The Bourgeoisie of the Corse use profits gained by exploiting P-states to improve the existence of their own Proletariat.

Antonio Gramsci 1891 – 1937

Gramsci updated Marx and stated that Marx ignored politics and other important factor that cause the unequal distribution of wealth.

Coercion

Counter-Hegemony

David Harvey: ‘’Any sane person today would join an anti-capitalist moment.’’ Gramsci isn’t only critical by telling what’s wrong, he also wanted to change the status quo.

Do we see a rising harmony of interests, where Marx was talking about? “There hasn’t been a revolt because the poor do not experience inequality as intolerable. It is erroneous that because no one is storming the castle that no real injustice exists”(Matt Miller, Washington Post).

Thomas Piketty

Piketty, French economist, is known as the big hit in IPE. In 2014 he wrote ‘Capital in the 21th Century’. He’s challenging natural processes in the economic world. What is normal? He’s redefining what we assume as normal in economics.

R > g Return on capital is always greater than the return in economic growth. In other words the main thesis is as follows: Over the term, the rate of return on capital ® is greater than the rate of economic growth (g), except in instances of historical anomalies/shocks. This results in a growing inequality and undercuts notions on social mobility because it denies that when you work hard enough, you will be able to get yourself out of poverty since R will be greater than G anyway.

Why should we care?

Piketty is challenging the establishment view of the natural state of economics, namely the idea that income inequality automatically decreases in advanced stages of capitalist development. To illustrate this, he points out to The Kuznet’s curve. See the figures in the sheet of this lecture. 

Piketty called the period between 1945 and 1985 ‘The Great Compression’ and tried to explain this period of shrimping income inequality in Anglo-Saxon countries. This support Kuznet’s theory: inequality decreased over time. But: when we look at the bigger picture (1910 – 2010), ‘The Great Compression’ seems to be just an exception. Nowadays we see inequality rising again. And, what makes Piketty’s claim so provocative is his prediction that it will even become worse over time.

Piketty’s Policy Solution

Piketty introduced the Global Wealth Tax (chapter 15 in our text book) to increase the global income equality. However, this is unlikely to be realized.

When we look to various perceptions of the causes of poverty and wealth, we see differences between countries. The majority of Americans for example, think not knowing the right people or being born poor is the main cause of poverty. Europeans however, believe that deeper issues of injustice in society are causing poverty.

Alternative Approaches to IPE: Focus on Feminism

There are different types of feminism: essentialism, liberal feminism and constructivist feminism.

Essentialism states that gender is equal to biology, for it’s also called biological determinism. Secondly there’s liberal feminism, which stresses the roles of women form a social science approach. Liberal feminists investigate why it is that women are marginalized. What happens to our understanding of global politics when we make the experiences of women central to our analysis? C. Enloe wrote a book about this called ‘Seriously! Investigating Crashes and Crises as if Women Mattered’ (2013). The Lehman Sisters Hypothesis raises the interesting question: ‘Would we have avoided the crisis if more women were in the top of banking?’ Thirdly constructivist feminism, which is about the social construction, and meaning we address to gender.