Question

Choose any quote on this reading below and explain.

I. Major Themes and Causal Mechanisms "State Power and the Structure of International Trade" operates simul taneously on three levels. Its first sentences announce a program for the revival of the state in studies of international relations: "In recent years, students of international relations have multinationalized, transnation 1 Krasner, "State Power and the Structure of International Trade," World Politics 28 (April 1976). This content downloaded from 146.96.128.36 on Thu, 28 Aug 2014 15:04:13 PM All use subject to JSTOR Terms and Conditions 152 WORLD POLITICS alized, bureaucratized and transgovernmentalized the state until it has virtually ceased to exist as an analytic construct_This perspective is at best profoundly misleading" (p. 317). Krasner s rhetoric is dazzling: the core subject matter of political sci ence is threatened and must be recovered. "State Power" sounds the ral lying cry for the defenders of the state. People who look to the state for redress of market unfairness, scholars whose human capital is invested in understanding how states work, and Hobbesian skeptics suspicious of visions of efficiency and harmony can all rally around the statist stan dard. Teaching and writing on this theme in the mid-1970s, after the defeat of the United States in Vietnam, Krasner helped to launch a counterwave of renewed interest in the state against the trends empha sizing economic interdependence, transnational relations, "ungov ernability," and the states alleged economic irrelevance. Leading economists had been more impressed with the advantages of multina tional firms over states. Not long before Krasner wrote, Charles Kindle berger had proclaimed that "the nation-state is just about through as an economic unit."2 Even political scientists sympathetic to the transna tionalist research agenda recoiled from such rhetoric. It was Krasners counterrhetoric that energized a statist reaction?and it mattered little that his article nowhere defines "the state"; contests over definitions also became part of the subsequent scholarly debate. Some of the appeal of "State Power" derives from its clear specifica tion of 2l puzzle. Puzzles are central to social science, and Krasner s puz zle is an important one. Why, he asks, has the world economy vacillated between openness and closure? To clarify this issue, Krasner carefiilly defines the continuum between openness and closure. While acknowl edging the significance of movements of capital, labor, and technology, he focuses on trade. He argues that openness or closure in the structure of international trade can be operationalized by examining tariff levels, trade as a proportion of national product, and the regionalization or globalization of trade. Krasner does not merely present an important puzzle; he provides a way to measure the dependent variable that he has identified. Thus he lays out the basis for a focused research program. "State Power" also advances a strong proposition, as stated above, that hegemonic ascendancy tends to create openness. Indeed, Krasner pro posed a set of explanatory variables?position in the world political economy, defined in terms of size, level of development, and changes in 2 Kindleberger, American Business Abroad: Six Lectures on

Answer 1

"State Power and the Structure of International Trade"

The structure of international trade, identified by the degree of openness for the movement of goods, can best be explained by a state-power theory of international political economy. This theory begins with the assumption that the nature of international economic movements is determined by states acting to maximize national goals. Four goals--aggregate national income, political power, social stability, and economic growth--can be systematically related to the degree of openness in the international trading system for states of different relative sizes and levels of development. This analysis leads to the conclusion that openness is most likely to exist when there is a hegemonic distribution of potential economic power. Time-series data on tariff levels, trade proportions, regional concentration, per capita income, national income, the share of world trade, and share of world investment are then presented. The first three are used to describe the degree of openness in the trading system; the last four, the distribution of state power. The data suggest that the state-power theory should be amended to take into consideration domestic political constraints on state action.

In a Nutshell

Krasner develops a model of receptiveness to open trade based on the interests of states. This contrasts with last week’s readings which focus on societal cleavages that explain the openness to trade liberalization. He sets up this model not to specifically refute other perspectives although presumably, the superiority of his approach is implicit. He does specifically mention wishing to refute the idea that states open a trade policy as the result of international elements beyond the control of any state or system created by states. His specific findings are that trade openness is most likely to increase when there is one dominant and ascending hegemonic power. However, states are not always able to act in their best interest due to past policy choice constraints, therefore often some large-scale exogenous event is needed to act as a catalyst, to sweep away the previous policy environment.

The Model

He calls his model the “state-power” model (SPM). It is trying to explain why we see a policy that is not in line with neo-classical theory. The theory states that open trade maximizes aggregate economic utility and this is what states are seeking to do. Why then do we see protectionism? The answer is that states are pursuing at least four separate goals, and their relative importance and how they interact with freer trade determines policy.

1. Aggregate national income goal – greater openness leads to greater income. This is so for all states regardless of size or development, although it may benefit smaller states more as they have higher ratios of trade to national income.
2. Social stability goal – greater openness means exposing the domestic economy to the vicissitudes of the world economy. Social instability increases as domestic factors have to adjust to world pricing levels. This is less so in large states as they are less involved in the world economy. Additionally, more developed states are better able to adjust. Instability may be mitigated by increased prosperity.
3. Political power goal – relative costs of closure are smaller for large states and more for developed states. So a large developed state will find its political power enhanced by an open trading system.
4. Economic growth goal – growth generally associated with openness in small states due to efficiency savings and access to world markets, etc. These benefits countries with advanced technology that do not need to protect infant industries etc. Large states need to maintain technological needs if it is to survive the open competition to service its domestic market. It is hard to specify reactions by medium-sized states – some say it retards development others say it spurs economic transformation.

Next, he imagines different international makeups to see which would lead to openness.

1. Lots of small advanced states – likely to want open structure due to income and growth goals. Instability is mitigated by growth and no loss of power as all in the same boat.
2. Large unequally developed states – likely to want closed structure. Only modest income gains, more instability in less developed countries as well as the loss of power.
3. Hegemonic system – one single state much larger and relatively more advanced than its trading partners. The hegemonic state wants an open structure to increase income and growth (when it is ascending – i.e. technological lead is increasing). The open structure increased its power and instability is mitigated by high factor mobility due to skills and technology. Small states likewise will want to be open. Medium states are hard to predict, it depends on the ways the hegemonic state uses its power. Symbolically the hegemonic state stands as an example of successful policies even if they would not be appropriate for all. It can use its resources to create an open structure. It can offer positive incentives (access to market and cheap exports) and negative ones (withholding grants etc. The author states this is the type of situation when we are most likely to see openness increasing.

Testing the Theory

He looks at tariffs, trade as a proportion of income, and the concentration of trade within specific trading blocs to define periods from 1870-1970 into periods of expanding/contracting free trade. I will not go into all the detail other than to point out the following contradictions highlighted by Krasner:

• 1945-46 is well explained by the theory. The USA was in ascendency and the international trade structure became ever more open. This was the time of the GATT, lowered tariffs, rising trade proportions, and extensions of trade away from traditional blocs. The USA used leverage to force Britain to end its imperial preference system. Bretton-Woods revolutionized the monetary system. Behind the economics, the USA military stood as protectors of other industrialized market economies – a big incentive for them to accept free trade.
• 1960 to 1976 is not well explained by the model. The size and development level of the US had fallen but there was no return to protectionism as the model would envisage. This was the time of the Kennedy Round of international tariff cuts. This was a time of increased openness but the SPM predicts a downturn or faltering in these indicators as American power waned.

Amending the Model

• Krasner notes that Britain’s free trade commitment lasted well beyond the time when its position in the world declined, and the USA’s commitment to openness started many years after it began its rise to hegemonic dominance and continued during its period of decline. So changes do not move in step with state interests.
• This is because policies are “sticky” (institutions live longer than the environments in which they are created, social groups benefitting from a policy have access to lobby, etc.) Once they are adopted they are pursued until some event shows them to be no longer feasible. States become locked in prior policy choices and have to wait until catalytic events allow for dramatic moves of policy to align them with state interests.