International Political Economy in the U.S.
Political economy has become two artificially diverse things, political study and economics. However the seeds of political success always lie in the success of the economic policies of any government. Political needs often shape economic policies, and these often are beneficial as in the times of depression or are disastrous, as will be seen when political policies are examined in the context of the economic impact. America is the nation where capitalism was experimented when it got independence. Capitalism was the driving economic force that made the U.S. what it is, and is still the fundamental force behind its development and becoming a world wide presence. That capitalism could be experimented in the new constitution was itself a result of a historic change that was taking place in Britain, the former colonizer. On analyzing the war for Independence it can be noted that the war was fought on the economic policies of Britain at that time.
The most important concept and the fundamental theory that advocated a control free economy where the market forces with the competition as the ‘invisible hand’ will lead the economy and result in a fair pricing of goods services and labor is central to capitalism and was propounded by the economist Adam Smith. In the capitalist society restrictions on trade and government regulations are seen to retard the accumulation of the nation’s wealth. Called the ‘laissez-faire policy’, the feature plays the most vital role in the economy of the capitalist countries of today. The changing times and advancements in the world, first the rapid industrialization and later the World wars and its aftermath has slowly changed the perceptions of the Capitalist state ideals and necessitated the intervention of the state in many economic affairs. These interventions that cause regulations and policies of state are the result of political necessities and also social and economic demands of the times. Thus today it can be observed that there are three sets of policies that necessarily affect the economy both within the U.S. And also on a global level. The policies of the U.S. today as far as its impact on the country and in a global level can be compared with the position of Britain when it was the owner of an empire where the sun never set.
Example From History
The British Empire was vast and comprised at one time of the U.S. The economic policies and political attitude of Britain during the colonial period has similar ramifications for the United States in terms of today’s global economy. While one can compare the U.S. intervention in Afghanistan and the economic impact today for both countries, we also can compare it with the Afghan wars that went on in the previous centuries with British occupants. The difference between both the countries, it can be argued is simply that in the case of the U.S. The largest challenge in the interference is political while for Britain it was commercial or economic. (Zakaria, 32)
Today the U.S. has more challenges and seems ready to meet it head on. In the last 20 years the world has been marching ahead and the last few decades saw the globalization of the world economy. The U.S. seems to have benefited more by these changes, firstly by the increase in the market shares of the economies where it could trade, and secondly by being able to shape the economic and political policies of countries. Hundreds of billions of dollars have been invested and the Export seems promising. Historically where British policies failed in the colonies, the U.S. is making it work with better political stands and economic interventions. The welfare agenda and the global concerns seem to give the U.S. A better chance of retaining the control and economic power in the global context. For more than a century the United States has retained domination of the global politics, economics and scientific progress. (Zakaria, 32)
The emerging new international economy which is commonly called globalization has virtually catapulted the U.S. To the apex of the new world order. Thus historically the policies of the United States have effect not only within the economy but will consequently affect the whole global economy. (Zakaria, 32) One fact is clearly emerging that was the feature of both the countries, be it colonial England or modern U.S.. There is a very great importance attached to the defense or military spending which by itself forms a parallel economy. Arms and the ability to provide security which again points to the political policy of the country forms an important aspect that politics and its considerations affect economic forces.
Arms and the economy
Military spending can be positive and negative. (Gerace, 254) Military supplies and commerce were always related in the bygone days and even at present. There seems to have been established a direct ink between the military power and commerce. There is a very strong connotation between the U.S. navy and exports. It is rightly in accordance “with the export orientation of the American state and with American naval ideas on supporting exports.” (Gerace, 254) the shades of mercantilism that was current in Britain can still be seen in the threads of capitalism and the import that can be gathered is that economic issues, and management of internal resources, with the policies of foreign trade all revolve around the political need and the influence desired over the international community. Thus trade could also mean in the context of the military linked economic concept, the creating of unrest in desired territories, and ensuring conflict among states becomes a priority. The political actions in many countries that resulted in U.S. ‘help’ or presence could be attributed to this thread of mercantilism. (Gerace, 73)
The U.S. remains the world’s biggest military and economic force. The distribution of power in future will drift, and the policies of the U.S. will shape or alter its economy and probably the world economy in a large scale. The United States as a nation therefore needs t rethink the strategy and probably create policies that must accommodate other nations and their view point and coexist without the reliance on might alone. Today the U.S. is able to shape the economic and political thinking of the world, with many countries adapting the American way of governance with more transparency. The global changes have therefore necessitated the politicians and policy makers to rethink policies that could affect the domestic economy and emerging world order. (Zakaria, 34) War and technology plays an important part in all markets that the U.S. is dominant and competitive. Policies that revolve around a combat is the direct result of this need. Defense related research and development outlay far exceeded that of all other. (Ruttan, 219) the general purpose technology like the internet the nuclear energy and transport and mass production first were used for military purposes. The use of this means of economic power necessitates that the economy revolve around a conflict. The adventures in Iraq and the positions adopted regarding Iran are possibly fallout of such policies.
Globalization and the International political economy
Today we can view political economy only with the context of global transformation. In fact it can be seen as the result of globalization and there is a direct link to it in the historical context. (Amoore, 47) More and more issues regarding political sovereignty of states crop up. The most import ant factor that cave rise to the conflict in the international economy is the rise of the Multinational Corporations, most incidentally from the U.S. The direct involvements of the Multinationals in the politics of other nations and there are quite a few examples has necessitated the view of the policies that ought to govern the Multinational Corporations — MNCs themselves. (Kline, 17)
Cocoa Cola and companies like Enron have cause spectacular international issues. Thus the Pure capitalism ideals of the times of Smith is now giving way to a large measure of political control of all economic institutions both at home and abroad. Some controls help the domestic economy while others ensure justice and equity in the international field. “Privatization and deregulation reduce or remove many national government controls over business, while lower barriers to international trade and investment expose domestic economies to MNE penetration.” (Kline, 60)
This requires that the national government must control the corporations and also effectively rue out their role in overseas issues. This is a political expedient that makes the legislature pass laws that effectively interfere in the free market both at home and overseas. The new Corporate Social Responsibility — CSR agenda that was ushered in during the 1990s has a political profile. Kofi Annan, the then UN Secretary-General, insisted on the in house monitoring especially of social projects of MNCs overboard, especially in developing countries. The legislature that followed known as the Sullivan Principles enjoined U.S. MNCs to responsible conduct of affairs. This together with the Social Accountability 8000 auditing provisions and the human rights declaration all added to the requisite change in National policy and appropriate political stands and postures. The European Union also has its own version for corporate social responsibility. (Landau, 85) Thus the U.S. polity was forced to adapt international opinions and legislate both for the external and internal aspects of its economy. Human rights, labor laws and a host of international issues like global warming and the use of chemicals were all reflected in amendments of the local laws while some of the issues like terrorism and nuclear proliferation have conversely changed the international conventions as per the dictates of the U.S. policies. International accounting practices which has undergone more transparency checks is one such result.
Earlier in the divided world, the international trade related to trade surplus, and the maximization of foreign exchange. International financial responsibility is a result of the changes that came about in the world in the later part of this century, and the impact of financial decisions both of the U.S. And the capitalist advanced countries have a greater global impact. Prior to the Second World War, the British financial order was the decisive factor in the capital markets of the world and set about the financial powers within each economy. The U.S. was seen imposing its policy after the war with the Marshall Plan aid. (Langley, 114) American financial order has in the modern era become powerful and stable. “American financial order heralded ‘a new phase in international finance’. (Langley, 114) This has its obvious implications. The political and economic policies of the U.S. today can affect any nation in the world. For example restrictions on the credit based on the policy regarding any nation can have severe repercussions. The theorists, who propound the neo-liberal orthodoxy of ‘global finance’, accuse that this policy is based on the expansionary tendencies of markets. However still others argue that the U.S. is declining with the rise of Japan, and there is a probability of Japan rising to economic power and dominating the world market. (Langley, 127)
The concepts are many but the argument regarding financial power stems from the consideration of money as a commodity. It is surprising to note that in spite of its competitive and absolute advantage at the end of the 1990s the United States had large international and foreign debt. This was then regarded as an important determinant for the dollar’s parity with other currencies. (Fatemi, 76) in other words there is a great responsibility that always comes with greater power, and while in the earlier century’s policies of political economy first affected the U.S. And much later the world, today the difference is thin. While it appears that the economy is strong, Barry Herman on analyzing the “net transfer of resources” of the U.S. foreign debt predicted far back in the beginning of the millennium that the dollar as an asset is now risky. They also predicted that there could be a “crisis” for the United States in future. (Fatemi, 76)
These predictions somehow seem to come true in the current year with the fall in dollar prices and the internal stagnation of the U.S. The answer to the problem of losing out to developing nations on the economic front is not only based on the mercantilist attitude highlighted earlier but also on the attitude of world organizations largely controlled by the U.S. For example the International Monetary Fund which manages the debt problem of the developing countries, and the conditions imposed by the fund is not encouraging to payments adjustment. (Fatemi, 78) U.S. policies regarding the institution must therefore be in making it more flexible and affording development in real terms. The credit that is made available through the monetary institutions to the countries of the world cannot be viewed as a mere commodity. Investment policies also create equity and debt and institutions like the IMF therefore is looked at by some as its savior and by others with distaste. A large part of the decisions of these agencies today is evidently based on U.S. policies.
The Competition and Modern State
In the earlier times, right from the times of Smith, it was believed that the nation got richer by accumulating wealth and that the superior basis of production created a better product that could be trades at an advantage overseas. Earlier the value of commodities and things were based on the enhancement of labor. In the information age, the total global changes in information and the transfer of technology have all made it necessary for countries to abandon pure capitalism and legislate, both to protect the domestic economy and also to sustain the interest in the global arena.
The most important concept and the fundamental theory that advocated a control free economy is now not viable. This is because of the changes in the whole globe and also the need to revitalize and make the U.S. economy and keep in line with the global changes have necessitated the intervention of the state in many economic affairs. The policies of the U.S. have the same global economic impact as did the policies of the British Empire to the colonies. For more than a century the United States has retained domination of the global politics, economics and scientific progress. It has a say in all international institutions. The mercantilist policies of military use of power and progress have to be replaced by a better understanding of the emerging new world order. While the U.S. can hope to be the world leader for a long time to come, the policy adopted at home and in the international arena is likely to create strife in other nations which may become hostile to the country. The costs of keeping the peace will be found to be costlier than the business gains acquired. No doubt the U.S. policy both domestic and international has a wide immediate repercussion on a global scale. It is time that the U.S. woke up to its own position and used its might to save the global community.
Amoore, Louise. Globalization Contested: An International Political Economy of Work.
Manchester University Press. Manchester, England. 2002.
Dhamee, Yousuf. Adam Smith’s Laissez-Faire Policies. 1996. http://www.victorianweb.org/economics/laissez.html
Fatemi, Khosrow. International Trade and Finance: A North American Perspective. Praeger Publishers. New York.1988.
Gerace, Michael P. Military Power, Conflict and Trade.
Frank Cass. London. 2004.
Kline, John M. Ethics for International Business: Decision Making in a Global Political
Economy. Routledge. London. 2005.
Landau, Alice. The International Trade System. Routledge.
New York. 2004.
Langley, Paul. World Financial Orders: An Historical International Political Economy.
Routledge. London. 2002.
Ricardo, David; Dent, J.M. The Principles of Political Economy & Taxation.
Ruttan, Vernon W. Is War Necessary for Economic Growth? Military Procurement and Technology Development. Oxford University Press, 2006.
Zakaria, Fareed. The Future of American Power: How America Can Survive the Rise of the Rest. Foreign Affairs, May/June, 2008. pp: 31-35.
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