Page 113 - Global Political Economy_Understanding The International Economic Order

CHA PTER F OUR
ital movement. The leader must also encourage other states to obey
the rules and regimes governing international economic activities. The
theory assumes that a liberal international economy requires that cer-
tain “public goods” will be promoted by the leader. A public good,
as originally defined by Paul Samuelson, has the properties of “non-
excludability” (inclusiveness)and nonrivalrous consumption. This
rather obtuse jargon means that any individual’s consumption of a
public good does not affect (decrease)consumption of the good by
others, and that no one can be prevented from consuming the good
whether or not he or she has paid for it. A lighthouse, of benefit to
every ship whether or not the ship has contributed to the upkeep of
the lighthouse, fulfills such criteria. In such a situation, individuals
(and individual nations)have an incentive to free ride—to take ad-
vantage of the public good without paying for it—since no one can
be excluded from enjoying the good. This means that public goods
will generally be undersupplied because few actors will have an incen-
tive to pay the costs of providing such goods. 51
The public goods associated with a liberal international economy
include an open trading system and a stable international monetary
system. However, there are even greater tendencies toward free riding
and for international public goods to be undersupplied within the
international economy than in domestic affairs. This problem can, at
least in theory, be overcome by a small group of cooperating states;
however, I know of no example of this type of cooperation on such
a large scale as the world economy. In practice, public goods have
been and can be provided only by a leader (or hegemon)with an
interest in supplying the good for all or in forcing others to share
payment for the good.
A brief examination of the British and American eras of interna-
tional leadership increases comprehension of the dynamics of the rise
and erosion of a liberal world economy; both eras of economic liber-
alism required a hegemonic power. From the mid-nineteenth century
to the outbreak of World War I, Great Britain led the efforts for trade
liberalization and monetary stability; the United States has led the
52
world economy since World War II. The liberal world economy in

51
For the case of international money, consult Paul De Grauwe, International
Money: Post-War Trends and Theories (Oxford: Clarendon Press, 1989), 2
52
My interest in the relationship between the structure of the international political
system and the nature of the international economy was first aroused by my reading
of E. H. Carr, The Twenty Years’ Crisis, 1919–1939: An Introduction to the Study of
International Relations (London: Macmillan, 1951). In this classic study of the collapse
of the open world economy at the outbreak of World War I and the subsequent inabil-
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