Page 25 - Global Political Economy_Understanding The International Economic Order

CHA PTER O NE
kets. The global economy and the rules governing it, they believe,
should be guided by the policy prescriptions of neoclassical econom-
ics and be based on market principles. Free trade, freedom of capital
movements, and unrestricted access by multinational firms to markets
around the globe should be the goals of international governance.
With the triumph of the market, economic logic and the relative effi-
ciencies of national economies should determine the distribution of
economic activities and wealth (and, of course, of power) around the
world. Critics of globalization, on the other hand, challenge this em-
phasis on the importance of free trade and open markets.
Despite the growing importance of the market, historical experi-
ence indicates that the purpose of economic activities is ultimately
determined not only by markets and the prescriptions of technical
economics, but also (either explicitly or implicitly) by the norms, val-
ues, and interests of the social and political systems in which eco-
nomic activities are embedded. Although economic factors will play
an important role in determiningthe character of the global economy,
political factors will be of equal, and perhaps greater, importance.
The nature of the global economy will be strongly affected by the
security and political interests of, and the relations among, the domi-
nant economic powers, includingthe United States, Western Europe,
Japan, China, and Russia. It is highly unlikely that these powers will
leave the distribution of the global economic product and the impact
of economic forces on their national interests entirely up to the mar-
ket. Both economic efficiency and national ambitions are driving
forces in the global economy of the twenty-first century.
In this book, I have taken a “political economy” approach that
integrates economic and political analysis with other modes of schol-
arly analysis. Formal economic theories provide indispensable tools,
facilitatingcomprehension of economic developments; the conven-
tional theory of international trade, newly gained insights from the
theory of industrial organization, and other theoretical developments
in economic science provide important additional ideas. However,
economic theories alone are not sufficient for an understandingof
developments and their significance for economic and political affairs.
One must also draw upon ideas and insights from history, political
science, and the other social sciences. In brief, a true “political econ-
omy” is prerequisite to an improved comprehension of the implica-
tions of new developments for international (and, where relevant, do-
mestic) economic affairs.
The intensity and importance of the debate over the nature of the
changingworld economy makes one aware of a troublingparadox.
At the same time that economic issues have moved to the center of

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