16.5 From the 1990s to the 2020s: Current Issues in IPE
4 min read•june 18, 2024
The post-Cold War era saw major shifts in global trade and finance. Economic intensified, with increased trade flows and the rise of multinational corporations. Countries embraced market-oriented policies, while international institutions like the WTO gained prominence.
Governments responded to these changes in various ways. Some promoted free trade through agreements and tariff reductions. Others used to boost competitiveness or implemented protectionist measures. Managing international financial flows became crucial, with countries navigating exchange rate policies and .
Global Trade and Finance in the Post-Cold War Era
Shifts in post-Cold War political economy
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- Increased economic globalization and interdependence
- Expansion of international trade and investment flows (e.g., global value chains)
- Growth of multinational corporations and global supply chains (e.g., Apple, Toyota)
- Emergence of new economic powers, such as China and India
- Rising among nations
- Shift towards market-oriented policies and
- and of industries (e.g., telecommunications, energy)
- Reduction of trade barriers and promotion of free (e.g., , WTO)
- Emphasis on market-driven economic growth and development strategies
- Changing role of international institutions
- Expansion of the (WTO) and its influence on global trade rules
- Increased prominence of the and in managing financial crises and promoting economic reforms (e.g., )
- Emergence of regional economic blocs, such as the and the (ASEAN)
- Development of mechanisms to address transnational issues
Government responses to global trade
- and promotion of free trade
- Negotiation of bilateral and multilateral trade agreements (e.g., US-Korea Free Trade Agreement)
- Reduction of tariffs and non-tariff barriers to trade
- Participation in regional and global trade organizations (e.g., , )
- Industrial policies and strategic trade interventions
- Subsidies and incentives for domestic industries to enhance competitiveness (e.g., agricultural subsidies, R&D tax credits)
- Protection of infant industries and strategic sectors (e.g., steel, semiconductors)
- Promotion of export-oriented growth strategies (e.g., China's Special Economic Zones)
- Managed trade and protectionist measures
- Implementation of import quotas, tariffs, and other trade barriers (e.g., US tariffs on Chinese goods)
- Use of duties and countervailing measures to protect domestic industries
- Negotiation of voluntary export restraints and orderly marketing agreements (e.g., US-Japan auto agreement in the 1980s)
Management of international financial flows
- and
- Removal of restrictions on cross-border capital flows (e.g., lifting of )
- Promotion of (FDI) and portfolio investment (e.g., bilateral investment treaties)
- Participation in international financial markets and institutions (e.g., bond markets, stock exchanges)
- Exchange rate policies and currency management
- Choice between fixed, floating, or managed (e.g., China's )
- Interventions in foreign exchange markets to influence currency values (e.g., allegations)
- Use of capital controls to manage volatile capital flows (e.g., Malaysia during the )
- Responses to financial crises and economic shocks
- Implementation of measures and structural reforms (e.g., Greece during the Eurozone crisis)
- Seeking financial assistance from the IMF and other multilateral institutions (e.g., IMF bailouts)
- Coordination of international policy responses and crisis management strategies (e.g., G20 response to the )
Emerging trends in the global economy
- Rise of and their impact on global economic dynamics
- Growth of the and its implications for trade and finance
- Increasing focus on and its integration into economic policies
Exchange Rate Systems and Their Implications
Exchange rate systems in global economy
- systems
- Advantages
- Provides stability and predictability for international trade and investment
- Reduces currency risk and transaction costs
- Can anchor inflation expectations and promote macroeconomic discipline
- Drawbacks
- Requires substantial foreign exchange reserves to maintain the peg
- Limits monetary policy autonomy and the ability to respond to economic shocks
- Vulnerable to speculative attacks and currency crises if the peg becomes unsustainable (e.g., )
- Advantages
- systems
- Advantages
- Allows for automatic adjustment to economic imbalances and shocks
- Provides greater monetary policy autonomy and flexibility
- Reduces the need for large foreign exchange reserves
- Drawbacks
- Can lead to exchange rate volatility and uncertainty for international trade and investment
- May be subject to destabilizing speculative flows and overshooting (e.g., rapid appreciation or depreciation)
- Requires effective macroeconomic management to avoid excessive fluctuations
- Advantages
- Managed float or intermediate exchange rate regimes
- Advantages
- Combines some of the benefits of both fixed and floating exchange rates
- Allows for some exchange rate flexibility while providing a degree of stability
- Can be used to manage competitiveness and prevent excessive appreciation or depreciation
- Drawbacks
- Requires active intervention and management by monetary authorities (e.g., currency market interventions)
- May be subject to speculative pressures and the need for frequent adjustments
- Can create uncertainty about the credibility and sustainability of the exchange rate target (e.g., Swiss franc ceiling)
- Advantages
Key Terms to Review (67)
2008 financial crisis: The 2008 financial crisis was a global economic downturn triggered by the collapse of the housing market in the United States, leading to significant financial distress worldwide. It resulted in the failure of key businesses, declines in consumer wealth estimated in trillions of dollars, and a downturn in economic activity leading to a severe global recession.
Anti-Dumping: Anti-dumping is a trade policy tool used by governments to protect domestic industries from the effects of dumping, which occurs when foreign companies sell products in an importing country at prices lower than the normal value of those products in their home market. Anti-dumping measures aim to offset the unfair advantage that dumping provides to foreign producers, thereby ensuring a level playing field for domestic industries.
APEC: APEC, or the Asia-Pacific Economic Cooperation, is a regional economic forum established in 1989 to promote free trade and economic cooperation among its member economies in the Asia-Pacific region. It serves as a platform for leaders and policymakers to discuss and collaborate on issues related to economic growth, trade, and investment in the Asia-Pacific.
Ardanaz: In the context of International Political Economy (IPE) from the 1990s to the 2020s, Ardanaz does not directly refer to a recognized term within this specific academic field. It could potentially be a misspelling or misinterpretation of a scholar's name, theory, or concept related to the study of global economic policies, international trade dynamics, and their political implications.
Argentine Peso Crisis: The Argentine peso crisis refers to the severe economic and financial crisis that occurred in Argentina in the early 2000s, leading to the collapse of the country's currency and a deep recession. This crisis was a significant event in the context of current issues in international political economy (IPE) from the 1990s to the 2020s.
Asian Financial Crisis: The Asian Financial Crisis was a series of currency devaluations and financial failures that spread throughout Asia in the late 1990s, impacting the global economy. It highlighted the interconnectedness of international finance and the vulnerabilities of emerging markets.
Association of Southeast Asian Nations: The Association of Southeast Asian Nations (ASEAN) is a regional intergovernmental organization comprising countries in Southeast Asia, which promotes economic, political, and security cooperation among its members. It was established in 1967 and has grown to include 10 member states, playing a significant role in current issues related to international political economy.
Austerity: Austerity refers to a set of economic policies focused on reducing government budget deficits through spending cuts, tax increases, or a combination of both. It is often implemented during times of economic crisis or high debt levels, with the goal of restoring fiscal stability and confidence in a country's financial situation.
Balance of payments: The balance of payments is a comprehensive record of all economic transactions between the residents of a country and the rest of the world during a specific period. It includes trades in goods and services, cross-border investments, and financial transfers.
Bernanke: Ben Bernanke served as the Chairman of the Federal Reserve, the central banking system of the United States, from 2006 to 2014. His tenure was marked by his response to the 2007-2008 financial crisis, where he implemented unconventional monetary policies to stabilize the economy.
Cameron: David Cameron served as the Prime Minister of the United Kingdom from 2010 to 2016, a period marked by significant events impacting the international political economy, including austerity measures post-2008 financial crisis and leading the country towards the Brexit referendum. His leadership embodies an era of transformative economic policies and international negotiations that have had lasting effects on global markets and European Union relations.
Capital Account Liberalization: Capital account liberalization refers to the process of removing restrictions and barriers on the movement of capital, both inflows and outflows, between a country and the rest of the world. This allows for greater freedom in international financial transactions and investment flows.
Capital Controls: Capital controls are policies implemented by governments to regulate the flow of capital into and out of a country. They are used to manage exchange rates, prevent financial crises, and maintain economic stability.
Capital flight: Capital flight occurs when assets or money rapidly flow out of a country, due to economic instability or the expectation of political turmoil, affecting the country's financial health. It reflects a lack of confidence in the local economy and can lead to significant currency devaluation.
Capital mobility: Capital mobility represents the ease with which businesses and individuals can move assets or money across borders without being hindered by regulations, taxes, or other barriers. It is a critical aspect of the global financial system that influences investment flows, exchange rates, and economic policy decisions worldwide.
Castells: In the context of International Political Economy (IPE), Castells is often associated with Manuel Castells, a sociologist known for his analysis of the economic and political impact of information technology on global societies. He highlights how networks and communication technologies shape the global economy and influence power relations among nations, corporations, and individuals in the digital age.
Currency Manipulation: Currency manipulation refers to the deliberate actions taken by governments or central banks to influence the exchange rate of their domestic currency relative to other currencies. This is often done to gain an unfair advantage in international trade or to achieve certain economic policy objectives.
Cusak: The Cusak Agreement is a hypothetical international treaty aimed at promoting sustainable economic development and equity in trade practices among signatory countries from the early 2000s. It focuses on addressing economic disparities, environmental protection, and ensuring fair labor standards across nations.
Deregulation: Deregulation is the process of removing or reducing government rules, regulations, and restrictions on industries and businesses. It aims to promote free market competition and reduce government intervention in the economy.
Digital Economy: The digital economy refers to the economic activities that are enabled by digital technologies, such as the internet, mobile devices, and cloud computing. It encompasses a wide range of economic activities, from e-commerce and online banking to the development and use of digital platforms, artificial intelligence, and the Internet of Things.
Economic Interdependence: Economic interdependence refers to the interconnected and mutually dependent relationship between countries, regions, or economic entities in the global economy. It describes the extent to which nations rely on each other for trade, investment, and the exchange of goods, services, and capital.
Emerging Markets: Emerging markets refer to developing economies that are experiencing rapid growth and industrialization, often with increasing participation in the global financial system. These markets typically have lower per capita income levels compared to developed economies, but are poised for significant economic and social progress.
European Union: The European Union (EU) is a unique political and economic union of 27 member states located primarily in Europe. It was established to foster cooperation, promote peace, and ensure the free movement of goods, services, capital, and people among its member nations.
European Union (EU): The European Union (EU) is a political and economic union of 27 member states that are located primarily in Europe. It aims to ensure the free movement of people, goods, services, and capital within the internal market, enact legislation in justice and home affairs, and maintain common policies on trade, agriculture, fisheries, and regional development.
Exchange Rate Regimes: Exchange rate regimes refer to the system or framework a country uses to manage the value of its currency in relation to other currencies. This is a crucial aspect of international political economy as it impacts trade, investment, and economic stability.
Financial Crises: Financial crises refer to severe disruptions in the financial system that can have widespread economic consequences, often characterized by sharp declines in asset prices, failures of financial institutions, and disruptions in credit markets. These crises can have significant impacts on the broader economy, including recessions, job losses, and reductions in consumer spending and investment.
Financial integration: Financial integration is the process where financial markets in different countries become more interconnected and interdependent, allowing for easier movement of capital and investment across borders. It involves the harmonization of rules, regulations, and practices to facilitate international economic transactions.
Fixed (pegged) exchange rate: A fixed or pegged exchange rate is a system in which a country's government or central bank sets and maintains an official exchange rate relative to a foreign currency or a basket of foreign currencies. Under this system, the value of the domestic currency is tied to the value of another country's currency, gold, or another measure of value.
Fixed Exchange Rate: A fixed exchange rate is a monetary policy in which a country's currency value is pegged or fixed to the value of another country's currency or to a basket of currencies. This means the exchange rate between the two currencies is predetermined and maintained by the government or central bank through intervention in the foreign exchange market.
Floating (flexible) exchange rate: A floating (flexible) exchange rate is a system where the value of a currency is allowed to fluctuate according to the foreign exchange market without direct intervention from the country's central bank. It changes in response to market forces such as supply and demand, interest rates, and economic indicators.
Floating Exchange Rate: A floating exchange rate is a type of exchange rate regime where a currency's value is allowed to fluctuate based on the foreign exchange market's supply and demand. This is in contrast to a fixed exchange rate, where a currency's value is pegged to another currency or a basket of currencies.
Foreign Direct Investment: Foreign direct investment (FDI) refers to the investment made by an entity or individual in one country into business interests located in another country. This investment involves establishing ownership or controlling interest in a foreign company or asset, with the aim of generating long-term economic returns.
Garret: Globalization is the process of interaction and integration among people, companies, and governments worldwide. It has accelerated since the 1990s due to advances in communication and transportation technology, profoundly impacting international political economy.
Global Financial Crisis: The Global Financial Crisis (GFC) was a severe worldwide economic downturn that began in 2007 and reached its most acute phase in 2008-2009. It was characterized by a collapse in asset prices, a freezing of credit markets, and a downturn in economic activity across the globe, with significant impacts on international political economy.
Global governance: Global governance encompasses the various cooperative and regulatory mechanisms, policies, and institutions that help manage and solve worldwide issues. It involves international actors such as states, international organizations, and civil society working together to address global challenges like climate change, poverty, and peacekeeping.
Global Governance: Global governance refers to the complex web of formal and informal institutions, mechanisms, and processes that shape and regulate activities that transcend national boundaries. It encompasses the collective efforts of the international community to address global issues and challenges that no single country can solve alone.
Globalization: Globalization refers to the increasing interconnectedness and interdependence of the world's economies, cultures, and populations driven by the expansion of international trade, investment, and communication. It is a multifaceted process that has profound implications across various aspects of political, economic, and social life.
Globalization Introduction,: Globalization is the process through which businesses, ideas, and cultures spread around the world, creating a more interconnected and interdependent global economy. It involves the increasing interaction among governments, companies, and people across international borders.
Greenspan: Alan Greenspan served as the Chairman of the Federal Reserve of the United States from 1987 to 2006, playing a pivotal role in shaping U.S. monetary policy during significant economic periods such as the dot-com bubble and the early stages of globalization. His tenure is noted for its influence on international political economy, particularly through decisions affecting interest rates, inflation, and financial market regulation.
Industrial Policies: Industrial policies refer to a range of government interventions and strategies aimed at promoting the development and competitiveness of specific industries or sectors within an economy. These policies are often employed to support domestic industries, encourage technological innovation, and enhance a country's overall economic performance.
International Monetary Fund: The International Monetary Fund (IMF) is an international organization that works to promote global monetary cooperation, financial stability, and economic growth. It serves as a lender of last resort, providing loans and financial assistance to countries in economic distress, while also monitoring and advising on economic policies worldwide.
International Monetary Fund (IMF): The International Monetary Fund is an international organization that aims to promote global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. It provides financial assistance and advice to its member countries, often in times of economic crisis.
Iversen: In the context of International Political Economy (IPE), Iversen refers to Torben Iversen, a prominent political economist known for his contributions to understanding the relationship between economics and politics within global markets. His work often explores how economic policies impact social welfare systems and labor market outcomes in different countries.
Katzenstein: Peter J. Katzenstein is a prominent political scientist known for his influential work in international political economy (IPE), focusing on how domestic institutions shape foreign economic policies and the international system. His research highlights the interplay between states and markets, emphasizing the role of culture and norms in shaping global economic practices.
Managed Float: A managed float is an exchange rate regime where the value of a currency is allowed to fluctuate within a certain range, with the central bank occasionally intervening to influence the exchange rate. This approach aims to balance the benefits of a flexible exchange rate with some degree of stability and control.
McGillivray: In the context of International Political Economy (IPE), "McGillivray" does not refer to a specific term but could represent figures or scholars contributing to the analysis and understanding of global economic policies and their political implications from the 1990s to the 2020s. Their work may focus on how these policies influence international relations, trade, and economic development.
Multilateral exchange rate: A multilateral exchange rate is the value of a country's currency compared to a basket of other currencies, rather than just one other currency. It reflects the overall external value of a currency in global trade and financial transactions.
Murillo: In the context of International Political Economy, "Murillo" does not reference a specific term directly connected to political science theories or models. However, it could mistakenly be brought up when discussing individuals or entities influential in shaping economic policies and debates during the 1990s to the 2020s.
NAFTA: NAFTA, or the North American Free Trade Agreement, is a trilateral trade agreement between the United States, Canada, and Mexico that came into effect in 1994. It aimed to eliminate most tariffs and trade barriers between the three countries, promoting the free flow of goods, services, and investment across their shared borders.
Neoliberalism: Neoliberalism is an economic and political ideology that emphasizes free market capitalism, deregulation, and the reduction of state intervention in the economy. It has become a dominant global force shaping economic and social policies since the 1970s.
Neoliberalism Introduction,: Neoliberalism is an economic and political ideology that emphasizes free-market capitalism, deregulation of the economy, privatization of public services, and a reduced role for the state in social welfare. It advocates for minimal government intervention in economic affairs, arguing this leads to more efficient markets and wealth creation.
Pinto: In the context of International Political Economy (IPE), "Pinto" does not refer to a specific established term. However, for educational purposes, let's consider it represents a hypothetical concept or policy aimed at balancing economic development and environmental sustainability initiated during the 1990s and evolving through the 2020s. This policy emphasizes the integration of green technologies with economic growth strategies to ensure sustainable development.
Privatization: Privatization is the process by which public assets or services are transferred to private ownership and control, often seen as a way to increase efficiency and reduce government spending in managing various sectors. It typically involves the sale of government-owned enterprises to private investors.
Privatization: Privatization refers to the process of transferring ownership, control, or management of a public or state-owned asset or enterprise to the private sector. It involves shifting the provision of goods and services from the government to private entities, with the goal of increasing efficiency, reducing costs, and promoting market-based competition.
Protectionism: Protectionism is the economic policy of restricting imports from other countries through methods such as tariffs, quotas, and other government regulations to protect domestic industries from foreign competition. It aims to preserve jobs, promote local industry, and maintain national security by limiting the amount of goods that can be imported.
Protectionism: Protectionism refers to government policies and actions that restrict or limit international trade in order to protect domestic industries and jobs from foreign competition. It is a key concept in the study of international political economy.
RCEP: RCEP, or the Regional Comprehensive Economic Partnership, is a free trade agreement that was signed in 2020 by 15 countries in the Asia-Pacific region. It aims to create one of the world's largest free trade blocs, covering nearly a third of the global population and economy.
Scheve: In the context of International Political Economy (IPE), "Scheve" refers to Kenneth F. Scheve, a political scientist known for his research on the evolution of public opinion towards globalization and its impact on economic policy. His work examines how international economic dynamics interact with domestic politics and individual attitudes, particularly concerning trade, taxation, and inequality.
Slaughter: In the context of International Political Economy, "slaughter" metaphorically refers to the severe economic and social damage caused by aggressive trade policies, financial crises, or economic sanctions imposed by countries on others. It highlights the destructive impact on economies and societies, akin to the devastation seen in warfare but in an economic sense.
Sustainable Development: Sustainable development is a concept that emphasizes meeting the needs of the present without compromising the ability of future generations to meet their own needs. It involves balancing economic, social, and environmental considerations to ensure long-term prosperity and well-being for all.
Sustainable Development Goals (SDGs): The Sustainable Development Goals are a global collection of 17 interlinked goals designed to be a "blueprint to achieve a better and more sustainable future for all" by 2030. These goals were adopted by all United Nations Member States in 2015 as part of the 2030 Agenda for Sustainable Development.
Trade Agreements: Trade agreements are formal arrangements between countries or trading blocs that establish the terms and conditions for the exchange of goods, services, and investments. These agreements aim to promote economic cooperation, reduce trade barriers, and facilitate the flow of commerce between participating nations.
Trade Liberalization: Trade liberalization refers to the process of reducing or eliminating barriers to international trade, such as tariffs, quotas, and other restrictions, in order to promote the free flow of goods, services, and capital across national borders. It is a key aspect of economic globalization and has been a major focus of international economic policy since the 1990s.
Washington Consensus: The Washington Consensus is a set of free-market economic policy recommendations formulated in the 1990s by international financial institutions, such as the International Monetary Fund (IMF) and the World Bank, to guide developing countries in their economic reforms and policies. It emphasizes market-oriented approaches to development and growth.
Welfare: Welfare in the context of International Political Economy (IPE) is a concept that refers to the health, safety, happiness, and financial security of a population as influenced by global economic policies and systems. It encompasses efforts and programs designed to ensure that citizens have access to basic needs such as healthcare, education, and income support.
World Bank: The World Bank is an international financial institution that provides loans, grants, and advisory services to developing countries to aid in economic development and reduce poverty. It is a key player in the global financial system and a central institution in the context of international political economy.
World Trade Organization: The World Trade Organization (WTO) is the international organization that oversees and facilitates global trade. It was established in 1995 to replace the General Agreement on Tariffs and Trade (GATT) and serves as a forum for governments to negotiate trade agreements and resolve trade disputes.