UNITED STATES INTERNATIONAL UNIVERSITY

NAME: Faith Njoki Kisio IDNo: 625662 COURSE CODE: IRL2000 LECTURER: Stephen A. Biko TASK: Its the economy, stupid (A phrase in American politics widely used during Bill Clintons successful 1992 Presidential Campaign). Is this accurate of the contemporary global system? DATE: 20TH April 2009.

Introduction Its the economy stupid was a phrase widely used during Bill Clintons successful presidential campaign of 1992 against George H. W. Bush. It was a sign hung by his political strategist James Carville in Clintons Little Rock campaign headquarters as a formulaic reminder of central issues on the campaign. Clinton was a better choice because Bush (whose campaign was on foreign policy developments due to the end of the cold war and the Persian Gulf War), had not adequately addressed issues on the economy that had recently undergone a recession. The original phrase was its the economy retard but Clinton changed it to stupid for fear of offending handicapped voters. His policies on issues such as North American Free Trade and welfare reform have been described as centrist. Clinton presided over the longest period of peaceful economic expansion in American history which included a balanced budget and a reported federal surplus of $559 billion. His other campaign slogans included: For people for change and Putting people first. Money makes the world go round and nothing can be done without it. Although politics determines the framework for economic activity, the exercise of power in all its forms is a major determinant of the nature of the economic system. This means that the relationship of politics and the economy are intertwined hence, the International Political Economy (IPE).

The challenge in writing this essay is to clearly illustrate how the economy determines the political and social interactions among states. To solve this challenge, the essay will largely encompass the relevance of the IPE and Marxism as a theory and in turn, diminishing realism and liberalism as theories thus proving that the economy is the most important. I will do this by going through Marxism and showing how it plays a role in aiding realism

and liberalism to come to play i.e. they both need money to fund military and to promote peace respectively. Thus, emphasizing the significance of the phrase its the economy stupid.

The United States economy produced roughly $15 trillion worth of goods and services in 2008, making it easily the largest in the world. China is next, at about $12 trillion, according to one widely used estimate. Per person, the American economy has the fourth largest output-- more than $45,000 for every man, woman and child, on average --behind Luxembourg, Bermuda and Liechtenstein, all havens for offshore banking (New York Times, Jan 8, 2009). Thus proving the United States economy is the largest and most productive nation- state in the world. The science of economics presupposes a given political order cannot be profitably studied in isolation from politics so wrote E.H.Carr in The Twenty Years Crisis in 1939. Fifty years earlier, in an essay entitled Socialism: Utopian or science Karl Marxs coauthor Frederick Engels asserted that the materialistic conception of history of arts from the proposition that the production of the means to support human life is the basis of all social structure. These two views that the economic processes are not autonomous but require political structure to support them and that economic factors determine the social and political structure of states- represent the polar extremes on the relationship of politics and economics.1 The economic interests of individual in a state within the international arena powerfully affect the goals they seek and the degree of success with which they are attained but the political structure of international action is also a constraint. Anarchy makes cooperative actions more difficult to attain than would otherwise be the case and requires that statesmen consider both relative and absolute positions when framing actions in the international economy realm. The above is configured in the Marxist theory in form of economic reduction because it declares meaningful changes within the social arena take place within the sphere of economic (class) relations. Marx himself expressed this theory in terms of his metaphoric distinction between base and superstructure. The superstructure is shaped and determined
1

Robert Art and Robert Jervis, International Politics: Enduring Concepts and Contemporary Issues (New York, Longman, 2005). Pp 276

after various stages of more or complex mediations by the activities and processes of change that occur at the level of the base. The notion of economic determination has a dimension that completed the privileged position of the forces of production, namely the equation of material existence and the economy via the concept of production. The Marxist notion of production encapsulates the axiom of human existence: the need to obtain food and shelter to secure basic needs of life. The economy emerges as the realm in which Marxs dull compulsion of life produces the laws of motion of material production independently of human will thus justifying the primacy and objectivity of the economic realm.2 For example, in cases of technological advancement, goods produced will have to meet the requirements and up to date and the previous models will be outdated. After World War II, the United States used its considerable economic and military power to create an open international economic order in order by working to lower the barriers among nations to the flow of manufactured goods, raw materials other than agriculture, and capital. This resulted in interdependence particularly among the developed nations of the world and to some extent, the developing nations in East Asia and Latin America. High levels of participation can bring the benefits of efficiency that flow from specialization. As in security affairs, the main international economic institutions were created near the end of World War II. In the early 1940s, the issues of economics and politics in international relations were totally isolated from each other. The Bretton woods system was adopted at a conference of the winning states in 1944 at Bretton Woods in New Hampshire. They needed to ensure that the great depression of the 1930s would not happen again and also rebuild the war-torn economies of Europe. Thus it established the International Bank for Reconstruction and Development (IBRD) more commonly called the World Bank. The International Monetary Fund (IMF) was also created to coordinate international currency exchange, balance of international payments and national accounts.3 These plans were
2

Ephraim Nimni, Marxism and Nationalism: theoretic origins of a political Crisis, (London, Pluto press, 1991). Pp 8-9 3 Joshua Goldstein, International Relations, (New York, Longmann,2001)

however postpone in 1945 when the US made its priority to contain the Soviet Union for fear or communizing arising in Europe. While the structure of the multinational corporation is a modern concept, designed to meet the requirements of a modern age, the nation-state is very old fashioned idea and adapted to serve the needs of our present complex world. - George Ball, a former US undersecretary of state. In the above quote, George Ball emphasizes the realists view that the nation-state continues to command mens loyalties and to be the basic unit of political decision making. The above statement does not put into consideration the fact that powerful economies and technological forces are creating a highly independent world economy thus diminishing the traditional boundaries. Furthermore, often in international politics, the imperative of security and survival override the dictates of economic interests. War after all doesnt pay when waged between states of roughly equal power. The economic wealth lost in fighting is not usually recouped in the peace that follows. On one aspect of politics, the economic factor has been historically important. Franklin Roosevelt ended Hoover Republicanism in 1932 because Main Street America was bleeding profusely in the Great Depression. Politics determines the framework for economic activity and channels it in directions intended to serve dominant groups; the exercise of power in all its forms is a major determinant of the nature of the economic system. Economy itself redistributes power and wealth and transforms the power relationships. The dynamics in the modern world is largely a function of reciprocal interaction between economies and politics. In this essay, the concern is with other primary instruments (except military power) of state action, economic power. Disparities in power, as we saw earlier, have important effects on

state behaviour. Such disparities occur not only because of differences in military power that states wield but also because of the differences in economic resources they generate. The Marxian approach to the role of the state is generally that public sector is influenced by the needs of the capitalist class and therefore the state acts largely in the interests of capital. One important aspect of this is the legal framework that is set by the state within which market operates and economic activity is organized. For example, the legal workers organizations will have an impact upon their ability to bargain successfully in terms of the power that they have relative to that of the employees. This means that the legislation that is passed will endevour to be favourable to the capitalists and to create the superstructure that is most appropriate to accumulation and, therefore, economic growth.4 The individual nations will retain governmental, economic and cultural power in such considerable degree into the foreseeable future, but the government is becoming less identified with the nation state as the powers become more dependent upon their active collaboration with other nations and regions (Giddens, 1998, p.32). As capitalism itself becomes global through multinational imperialism, transnational corporations compete in terms of foreign direct investment and the exploitation of cheap labour in less developed regions. The economic structure is changing globally and as such the state must change to accommodate this shift. *****The U.S. and the other nations of the industrial core are more "on top" than ever, for the world economy grows more unequal with every passing generation. In spite of the fact that the storehouse of industrial technology is a public good open to all--that if you are literate in English and can afford to hire an engineer, than you can adapt perhaps not leading-edge but certainly generation-old machine technologies--with each passing decade the world economy becomes, in relative terms, more unequal (Bradford de Long, 1998). Marxists believe in economic determinism. People babble about ideology, but really what makes things tick, supposedly, is the economic understructure. Thus, George Bush was
4

Bob Milward, Marxian Political Economy: Theory, History and Contemporary Relevance, (Great Britain, Macmillan Press, 2000). Pp 158

merely the chairman of the board of capitalism. No wonder he prattled about lowering capital gains taxes and remained impervious to the growing inequality between rich and poor.5 The above statement is justified by the Marxist theory that the effects of global capitalism are to ensure that the powerful and wealthy to continue to prosper at the expense of the powerless and the poor. Hence, the relative prosperity of the few is dependent on the destitution of the many.6 The powerful are those who own the means of production while the poor are the working class. The dependency theory clearly plays out in the interactions of industrialized countries and developing countries. The underdevelopment is thus linked to the economic, political and social structures in a country. These structures are influences by the economic relations among states and they play a part in determining the role and power of the state in the international arena. Liberal political economists have stressed the cooperative, not the conflictual, nature of international economic relations. They have extended Adam Smiths arguments about the domestic economy to the international economy. Smiths argument was that specialization of function by individuals within a state, together with the unfettered pursuit of selfinterest, would increase the wealth of a nation and benefiting all. Collective harmony and national wealth could thus be the product of self-interested behaviour. The 18th century philosophers argued that what was good for individual within the state would also be good for the state in the international arena. By trading freely with one another, states could specialize according to their respective cooperative advantages and the wealth of all nations would as a consequence increase. Thus, the slogan make trade not war has been the slogan of the liberal free traders. By contrast, mercantilists and Marxist have seen state relations as inherently conflictual. For Marxists, this is because capitalists within and among states compete fiercely with one
5 6

Paul Samuelson, The Economy Before and After the Election, Challenge, Vol. 36, 1993. Stephen Hobden and Richard Jones, Marxist Theories of International Relations. Globalization of World Politics : An introduction to world politics, (New York, Oxford University Press, 2008)

another to maximize their profits. Driven by greed, they are incapable of cooperating with one another. Because a states policy is determined by the capitalist ruling class, state will wage wars for profit and under Lenins dictum, will wage wars to re-divide the worlds wealth. Imperialism as the highest stage of capitalists ruling states there is no profit.7 In conclusion, there are various similarities between the Bill Clinton and Barak Obama campaign strategies more so because Clintons campaign was just when the United States was coming out of a recession. Obamas campaign on the other hand, was when the U.S economy was going into recession. Both came up with stimulus plans, $30 and $838 billion respectively. A stimulus package is used to revive an economy undergoing a recession. By so doing, the nation-state can regain its power in the global economy. This proves how important the economy is to any given state. It (the economy) determines the role that state will play. Whether it will be classified as an industrialized state or a developing state is determined by their economic power. Moreover, in order for a country to be fully defined as a state, it must be able to interact with other state. In order to do this, one needs money. If the interaction is geared towards peace or war, money will be necessary to facilitate these interactions. NGOs need money to start up and to facilitate a war, weapons must be bought. Thus proving that the economy is important hence the validation of the statement, Its the economy, stupid.

Art and Jervis, International Politics: Enduring Concepts and Contemporary Issues,pp.276

Reference: Art, Robert and Jervis, Robert (2005). International Politics: enduring concepts and contemporary issues, New York, Longman. Bradford De Long, J. (Jan 12, 1998). The U.S. Economy "Back on Top?" Economic Growth and the Rhetoric of National Power, eco161.berkeley.edu. Hobden, Stephen and Wynn Jones, Richard (2008). Marxist Theories of International Relations, Globalization of world politics: an introduction to international relations, New York, Oxford University Press. Giddens, Anthony (1998). The Third Way: The Renewal of Social Democracy, Cambridge, Polity Press. Goldstein, Joshua (2001). International Relations, 4th Ed. New York, Longmann. Milward, Bob (2000). Marxian Political Economy: theory, history and relevance, Great Britain, Macmillan Press. Nimni, Ephraim (1991). Marxism and Nationalism: theoretic origins of a political crisis, London, Pluto Press. Leonhardt, David (Jan 8, 2009). The U.S Economy. The New York Times. www.nytimes.com. Samuelson, Paul (1993). The economy before and after the election, Challenge, vol.36, www.questia.com Worsely, Peter (2002). Marx and Marxism, revised edition, London: Routledge.

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