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The International Political Economy Since World War II

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The International Political Economy Since World War II
Joseph M. Grieco *
Duke University

The International Political Economy Since World War II (Full Text, PDF, 29 pages, 644 KB)

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IV. Sustainability of International Economic Integration

There may be strong grounds to believe that international economic integration will continue to intensify in the years ahead. However, it is also possible to identify circumstances in which the rate of integration might be slowed or even reversed.

1. The issue of system instability

During the 1990s, a number of countries, and indeed the entire international financial system, witnessed a number of crises in Latin America, East and Southeast Asia, and Russia. Often a financial crisis in one country would spread to others as a result of cross-national capital flows and the tendency of investors to view emerging-market developing countries or transitional economies as having similar risk profiles. 29 Although to date these crises have been contained and managed as a result of U.S. leadership within the IMF, it is possible that at some point a financial crisis might bring about sufficient domestic political and social turmoil in a developing country that it could experience political collapse and the rise of a government hostile to international economic integration. 30 Less dramatic, but still worrisome, was the case of Long Term Capital Management (LTCM) in the summer of 1998, in which foreign financial losses by a U.S. investment firm led to a severe sell-off in U.S. equity markets and threatened the stability of a number of major U.S. financial enterprises (and which ultimately required the intervention of the U.S. Federal Reserve to help arrange a bail-out of LTCM). This case provides evidence that even the United States is not immune to externally induced financial shocks of a serious magnitude.

2. The issue of system legitimacy.

In recent years, there has developed in the advanced industrial countries a modest backlash against international economic integration. This backlash can be observed in the street demonstrations that took place as a backdrop to the Seattle WTO Ministerial meetings in 1999. Such "globalization fatigue" may be observed as well in the reluctance of the European Union countries (prompted most strongly by France) to agree to trade liberalization in the audio-visual field as a result, at least in part, of a concern that such liberalization would lead to greater American cultural domination of Europe and indeed the world. 31 It may also be seen in the EU expressions of concern that further liberalization of trade in agricultural products would expose Europeans to unsafe American genetically-modified food products. Again, these popular and governmental concerns in the advanced democracies about globalization have to date touched only on the margins of the international economy, and it is unlikely that they presage some larger alienation from the long-term process of world economic integration. However, if a significant number of citizens in an advanced industrialized democracy were to become convinced that world economic integration meant a diminution of the capacity of their government to maintain the social-welfare side of the embedded liberalism compromise, including strong national regimes to protect worker rights or the natural environment, and that such integration threatened their national culture, then it is possible that they would press their government at least to delay further integration of their country with the world economy. By consequence, economic integration in the future will depend on the capacity of governments to work individually and collectively to manage the risks and instabilities associated with that integration.

 


Endnotes

Note 29: An extraordinarily helpful inventory of the vast literature on international financial crises is maintained and organized by Professor Nouriel Roubini at http://www.stern.nyu.edu/globalmacro. Back.

Note 30: On this danger, see Jeffrey Garten, "Troubles Ahead in Emerging Markets," in Garten, ed., World View, (Boston: Harvard Business School, 2000), pp. 57-69. Back.

Note 31: See Bill Grantham, "America the Menace: France's Feud with Hollywood," World Policy Journal 15 (Summer 1998); Mel van Elteren, "GATT and Beyond: World Trade, the Arts, and American Popular Culture in Western Europe," Journal of American Culture 19 (Fall 1996): 59-73; and Tyler Cowen, "French Kiss-Off," Reason 30 (July 1998): 40-47. It should be noted that Canada has expressed similar concerns that trade liberalization would accentuate America’s domination of Canada’s popular culture. Back.


Note *: Joseph M. Grieco (Ph.D., Cornell, 1982) is Professor of Political Science at Duke University. He is the author of Cooperation Among Nations: Europe, America, and Non-Tariff Barriers to Trade (1990) and Between Dependency and Autonomy: India’s Experience with the International Computer Industry (1984). Articles and notes by him have appeared in Security Studies, Review of International Studies, the American Political Science Review, International Organization, the Journal of Politics, and World Politics. His teaching interests include theories of international relations, issues of international political economy, international business-government relations, the relationship between international economics and international security, and the rise of the European nation-state. During 1978-1979 he was a Pre-Doctoral Fellow at the Center for International Studies at Princeton University; during 1981-1982 he was a Post-Doctoral Fellow at the Harvard Business School; during 1985-1986 he was a German Marshall and a Paul Henri Spaak Post-Doctoral Fellow at the Center for International Affairs at Harvard University; during 1990-1991 he served with the Office of the United States Trade Representative and the International Monetary Fund as an International Affairs Fellow of the Council on Foreign Relations; and during 1998-2001 his research is being supported by a grant from the National Science Foundation. He has served as an intern with the U.S. Department of State and the Central Intelligence Agency. During the summer of 1994 he was the Karl W. Deutsch Visiting Professor at the Wissenschaftszentrum Berlin, and since May 1996 he has been a Visiting Professor at the Post-Graduate School of Economics and International Relations at the Catholic University of Milan.  Back.

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