Page 55 - Global Political Economy_Understanding The International Economic Order

CHA PTER T WO
States, but what Westerners would call “bribery” has long been a
normal and accepted business practice in China. Many Americans
complain that competition from low-wage Asian labor is unfair;
many Asians retort that the American criticism is unfair because low
wages constitute their only important comparative advantage. Such
national differences have been a major source of misunderstandings
and even of political conflict as national economies have become
more closely linked to one another through trade and investment.
The international economy is also embedded in a sociopolitical sys-
tem, although not as deeply as are national economies; the interna-
tional economy is embedded in an international system of regimes,
public and private organizations, and, most important of all, nation-
states. As I shall argue in greater detail below, the dominant power/s
in the international system plays/play a major role in defining the
purpose of the international economy and the principal rules govern-
ing international economic activities. For example, during the Cold
War, the Western international economic system, under American
leadership, was intended to strengthen security ties against the Soviet
Union.
Economists in general believe that an international economy easily
and automatically emerges because, in the words of Adam Smith, it
is natural for mankind to “truck, barter, and trade.” However, it is
in fact politically very difficult to create an open world economy. As
Mancur Olson has pointed out, the decision of a government to open
its economy to imports and other commercial activities constitutes a
politically risky action because it immediately results in many resent-
24
ful losers and, at least initially, produces just a few winners. Neces-
sarily then, Olson argues, the creation of an international economy is
the result of costly actions taken by powerful states (hegemons) for
economic, political, and especially security reasons. Private economic
interests, especially those of powerful business groups, also obviously
play an important role in the efforts of powerful states to create an
international economy. However, the political and security interests
of states themselves play the central role in its creation. 25
The primacy of the national economic and political interests of
dominant powers is illustrated in the nature of successive interna-
tional economies since the mid-seventeenth century. During the mer-
cantilist age of the seventeenth and eighteenth centuries, the major
24
Mancur Olson provides an illuminating discussion of this subject in De Melo and
Panagariya, eds., New Dimensions in Regional Integration.
25
The nexus of economic and security affairs is discussed by Edward D. Mansfield
in his Power, Trade, and War (Princeton: Princeton University Press, 1994).
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