Lecture 4

• International Political Economy (IPE) is a sub-field of Political Science which deals with the convergence of international political and economic forces. An example of this is are Powerful nations having dominant multi-national corporations (MNCs).
• MNCs control global markets and they are representatives of the interests of their home nations.
• IPE is also responsible for giving the most mainstream discussion on Globalization
• In the era of economic globalization, there is no denying about the value of global trade, investment and finance
• International economic relationships have important implications for natural environment
• International economic relationships can contribute to environmental problems or solutions
• Environmental benefits being attached to the economic growth that global economic transactions seek to facilitate. An example for this is the relationship between Norway and Indonesia constituting a $56billion agreement. This agreement can be terminated for non-payment.
• It is important that environmental policies do “restrict” global economic transactions
• The third view seeks to bridge the divide – arguing that while there are potential negative aspects, a balance management of the global economy can bring both economic and environmental benefits
• Global political economy vs environment - Around 1990s, debates between global political economy and the environment erupted in full force because there were concerns that trade and investment interests would override environmental considerations.
• Different perspectives on the impact of trade to the environment: Neoclassical and the ecological economists'.
• Neoclassical view (focuses on supply and demand as the driving forces of production) – trade has positive environmental implications related to efficiency BUT trade restrictions can lead to the domestic underpricing of resources which encourages their overuse
• Ecological economists':

  Social metabolism has damaging impact. Ex. Shifting of industrial countries from biomass energy to fossil fuels (India, China and Brazil)
• Critics also point to the development of a “race to the bottom”. Rather than environmental standards rising with trade liberalization, some countries lower them to attract investment and improve trade competitiveness.
• Mechanisms of global governance that deal with trade and environmental issues include international agreements on trade as well as international environmental agreements. An example for this is the 2015 Paris Agreement.
• 2015 Paris agreement: 195 countries took global action plan to tackle climate change. This gives the world a framework for avoiding dangerous impacts of climate change.
• Reasons why 2015 Paris agreement is good for economies:

  (1)Climate action could produce $26 trillion globally in economic benefits thru low carbon economy(2) Can create 24 million new jobs(3)Climate related disasters cost nearly $2.3 trillion over the past 2 decades(4)Air pollution poses a huge financial burden(5)Subsidizing the fossil fuel industry up to $5 trillion(6)Investors wanted the governments to act now(7)Climate action under the Paris Agreement can drive sustainable economic growth
• Mainstream discussions brought about by IPE:

  • Economic globalization became the major basis of defining Globalization
  • Globalization is often associated with Western liberalism
  • Free trade, privatization, and foreign direct investments