Page 110 - Global Political Economy_Understanding The International Economic Order

INT ERNAT IONAL POLIT ICAL E CONOM Y
hegemonic power has to provide international collective goods dimin-
ishes as it becomes relatively less important in the world economy. In
the United States, there has been a conspicuous resurgence of protec-
tionist thinking, and a diminishing willingness of the country to pro-
vide foreign aid, as the American economy has come to encompass
relatively less of the world economy.” 45 From this perspective, the
emergence of new industrial powers and new exporters of manufac-
tured goods has resulted in increased American protectionist policies,
beginning with the New Protectionism in the mid-1970s and with the
shift to a greater emphasis on economic regionalism made manifest in
the 1994 formation of the North American Free Trade Agreement. 46
Lack of a counterfactual makes it impossible either to validate or
refute the theory of hegemonic stability, but Eichengreen’s empirical
examination of the theory, the supportive commentary of other econ-
omists and political scientists, and the theoretical writings of Olson
and others lend considerable support to its validity. For these reasons,
even though the hegemonic stability theory (HST)does not provide a
foolproof account of the eras of British and American leadership of
the world economy, it does hold up quite well by the standards of
the social sciences, including economics.

Governance of the Global Economy
Creation of effective international regimes and solutions to the com-
pliance problem require both strong international leadership and an
effective international governance structure. Regimes in themselves
cannot provide governance structure because they lack the most criti-
cal component of governance—the power to enforce compliance. Re-
gimes must rest instead on a political base established through leader-
ship and cooperation. Although many liberal scholars consider the
concepts of hegemony and of regimes to be incompatible or even op-
posed to one another, regimes governing economic affairs cannot
function without a strong leader or hegemon. The theory of hege-
monic stability posits that the leader or hegemon facilitates interna-
tional cooperation and prevents defection from the rules of the regime
through use of side payments (bribes), sanctions, and/or other means

45
Ibid, 125.
46
Robert E. Baldwin attributes the decline in U.S. support for a multilateral system
and the shift to regionalism to the loss of hegemony. See Robert Baldwin, “Changes
in the Global Trading System: A Response to Shifts in National Economic Power,” in
Dominick Salvatore, ed., Protectionism and World Welfare (New York: Cambridge
University Press, 1993), Chapter 4.
97