International Institutions And Their Role In The Global Economy

Question 1

Recap: 4 approaches to institutions

Answer 1

Efficiency
Accidental
Cultural
Conflict

Question 2

Efficiency

Answer 2

Choosing the leats costly way of transacting

Question 3

Accidental

Answer 3

Institutions result from random or unpredictable influences

Question 4

Cultural

Answer 4

Societies, ethnic groups, or religions hold beliefs that determine institutional rules.

Question 5

Conflict

Answer 5

Different beliefs create conflict which determines institutional development

Question 6

Common elements of the definition international institutions (4)

Answer 6

Institutional agreements
International system/law
International member states
It serves a purpose (Gabriela 2013)

Question 7

Duffield’s definition of international institutions

Answer 7

Relatively stable sets of related constitutive, regulation and procedural norms and rules that pertain to the international system.

Question 8

Gabriela definition

Answer 8

Institutional agreement between members of an international system in order to achieve objectives

Question 9

Global governance implication

Answer 9

Implies an absence of central authority and need for cooperation.

Question 10

Functions of the state (7)

Answer 10

Military defence
Infrastructure
Protection from natural disasters,
Prevent violence among citizens
Poverty relief
Property rights
Education

Question 11

Why do states fail to provide their 7 basic functions? (3)

Provide examples

Answer 11

External effects (interdependence) e.g Climate change depends on everyone contributing to reduce.

Resource deficiency e.g money

Unwillingness

Question 12

The demand for global governance is determined by the specific problem.

State problems and role of global institutions if:
1. No interdependence, resources exist, and state willing to provide functions,

2. No interdependence, no resources, but willingness.

Answer 12

If there is no interdependence, resources exist and states are willing, there is no problem and thus no need for global institutions.

If there is no interdependence, no resources, but willingness, the problem is resource deficiency, and the role of global institutions is to provide assistance or substitution.

Question 13

Now, Supply of Global Governance

3 dimensions to the supply of internationals institutions

Answer 13

Publicness
Delegation
Inclusiveness

Question 14

Publicness

Answer 14

Refers to the nature of the active participants in the governance arrangement.

I.e the type of participants: state or private

Question 15

Delegation

Answer 15

The level of autonomy (control)/independence the institution has.

Question 16

Examples of high delegation

Answer 16

IPCC, where policies decided through negotiation involving the participants

Question 17

Example of low delegation/ centralised

Answer 17

EU, where legislative, executive and judicial functions are performed by autonomous supranational agencies

Question 18

Inclusiveness

Answer 18

The share of individuals with decisional power. How many are involved, and their influence within. (How equally influence is distributed)

Question 19

Putting these 3 dimensions into an example:

International Monetary Fund (IMF) dimensions

Answer 19

High publicness (governments)
High delegation (all member states engaged)
Low inclusiveness (power unequally distributed, voting power depends on its financial contribution to the IMF)

So US and EU control more than half of votes!)

Question 20

Role of IMF

Answer 20

Stabilise global monetary and financial system

Question 21

Graph shows institutions related to UN, in 4 categories (NOT IMPORTANT)

Answer 21

Security, environment, human welfare, economy

Question 22

4 functions of international institutions, and examples

Just discussed where their demand (comes from the problems in states) and supply (publicness, delegation, inclusiveness) comes from.

Answer 22

Authorising the use of force e.g NATO

Manipulating domestic politics e.g membership to UNHRC, ensuring human rights fulfilled.

Developing bureaucratic expertise e.g IMF & WTO

Adjudicating disputes between countries e.g International court of justice

Question 23

Criticisms of global governance mechanisms (2)

Answer 23

Current governance is not equipped to manage the GROWING INTEGRATION and INTERDEPENDENCE between countries (globalisation too fast and unbalcanced)

Global governance suits developed more - severe asymmetries in terms of access, scope and outcomes. E.g developing countries do not have a big enough say, so policy is shaped for developed only. As shown by US and EU having over 50% of votes as contribute most to IMF (stabilising global monetary/financial system)

(So not equipped enough, and uneven inclusiveness)

Question 24

Part 3: Game theory approach.

3 generations to understand international cooperation

Answer 24

First
Second
Third

Question 25

First generation

Answer 25

2 x 2 model to understand why states need to cooperate

Question 26

Second generation, and main question

Answer 26

Tailor made models to address neorealist-neoliberal debate.

How international agreements are created? And the role of domestic politics on international cooperation

Question 27

Third generation, and 4 questions.

Answer 27

Increasingly refined models to answer more specific questions e.g

Distribution-Which countries benefit most and why?

Depth-Are deeper agreements more effective?

Flexibility-When should rules be rigid and when flexible to allow cheating?

Multilateralism- How does size of membership of an agreement affect the depth of cooperation?

Question 28

First generation: why states should comply with agreements?

Answer 28

Avoid externalities (prisoners’ dilemma)

E.g externalities suffered to other countries from one country generating pollution.

However… we see they do not… (not globally efficient)

Question 29

First generation:

Bilateral cooperation: Prisoners’ dilemma

Answer 29

Two states choose a policy that affects welfare of other e.g tariff makes imports more expensive for another state.

Both choose to aim to maximise own utility. MB=MC

However not globally efficient.

If each country takes into account the effect of its policy on the others this creates a cooperative surplus.

Thus, payoff from cooperation (c) is greater than operating in owns interests (q) C>Q

This creates temptation to cheat, and break cooperation.

Outcome for state 1 if cheat:
D = Q +benefit from state 2 cooperating

Outcome for state 2:L=losses from own policy as worse than Q, MC≉MB as sticking to the agreement still. Q>L

D>C>Q>L
D=cheat
C=cooperate
Q=Operate in own interest (status quo)
L=Lose (gets cheated on)

Question 30

What is the only equilibrium with no global governance! Learn in diagram form too with DCQL

Answer 30

Only equilibrium is mutual cheating. With no worldwide state to enforce the agreements, states do not comply. Both end up at QQ. (Both defect)

Best outcome is CC (both cooperate but only possible with enforcement)

Question 31

Bilateral cooperation repetition

Answer 31

If states interact an infinite number of times, they can set rules for cooperation (trigger strategy)

Question 32

Trigger strategy for state 1 if state 2 cheats

Answer 32

Player using this initially cooperates but punishes the opponent if a certain level of defection (the trigger) is observed.

I.E state 1 reverts to status quo (Q) if state 2 cheats

So therefore QQ is a nash equilibrium

Question 33

Key factor for stability in agreements to cooperate without cheating.

Answer 33

Patience (consider bilateral cooperation repetition)
States must care enough about the future that they are willing to resist the short term temptation to secure long-term gains from cooperation. (Be globally efficient, not maximise own utility)

Question 34

Multilateral cooperation

Answer 34

Refers to cooperation between multiple countries.

Question 35

First problem of multilateral cooperation (NOT COVERING BROADER-DEEPER YET!)

2.how to address it?

Answer 35

Free-riding- benefits of cooperation are not excludable

E.g if countries 1 and 2 reduce pollution through cooperation , other countries enjoy benefits of lower pollution.

2. Hegemonic stability theory (HST)

Question 36

Hegemonic stability theory (HST)

What question does HST answer?

Answer 36

International system more likely to remain stable when a single nation-state is the dominant world power (hegemon)

Addresses the central questions of first generation: why do states comply;
A hegemon would enforce cooperation because of its size and connection, making it want more stability and thus demand a higher degree of international stability

Question 37

Now onto 2nd generation:

The Neorealist-neoliberal debate

Answer 37

Neorealist-focus on security measures
Neoliberals-focus on environmental and economics issues

Question 38

Should a country cooperate with a partner country? Thoughts of neorealists vs neoliberals

Answer 38

Neorealists (security): fear partner may use them cooperative gains to attack them in future. So must receive more gains than their cooperatives to protect themselves. (COOPERATE AS LONG AS GAINS>OTHERS, TO PROTECT THEMSELVES)

Neoliberals(environmental and economic): states should have no problem creating international agreements if gains of cooperation are greater than TRANSACTION COSTS (AS LONG AS GAINS>COSTS)

Question 39

Second generation

Answer 39

State utilities from agreements are endogenous outcomes from a bargaining game.

Bring domestic politics into models (2 LEVEL GAME)

Question 40

2 level game concept and levels

Answer 40

States must vote for agreement for it to be ratified

1st level: bargaining at international level
2nd level: bargaining that occurs at the domestic level.

Question 41

What helps a states bargaining positioning in international negotiations?

Answer 41

Domestic constraints. I.e it involves local government in negotiations by having to ratify, or counter.

Question 42

Third generation 4 questions (covered earlier)

Answer 42

Asks how should states cooperate: 4 major questions

Distributing cooperative gains (patience-LR gain)
Depth-What affects depth of cooperation
Flexible-How flexible agreements, and why?
Multilateralism-How does multilateralism affect ability of states to cooperate

Question 43

Depth of cooperation meaning (Downs et al)

Answer 43

Extent to which international organisations actually change behaviour.

I.e if treaty only creates slight constraints>country will be very likely to comply. (Treaty ineffective tho)

Strong constraints on state behaviour>unlikely to comply (treaty would be effective tho)

Enforcement level important in effectiveness of cooperation. (Fines)

Question 44

Flexibility:

Pressures on leaders to defect on cooperative agreements can depend on…

Answer 44

Elections
Bad economic conditions
Unemployment

Question 45

So why and how should agreements be designed to promote flexibility? and examples

Answer 45

Flexible governance structure e.g Escape clauses can be designed to account for these pressures which increase flexibility.

Violate agreement but must pay a fine to remain a member of the cooperative regime.

Question 46

Advantages of escape clauses (3)

Answer 46

Enhances stability of cooperative agreements

Makes it more likely an agreement formed (flexible)

And more likely to specify deeper levels of cooperation (more willing to agree to a bigger change if possibility to violate in extreme times)

Question 47

Example of escape clause (2)

Answer 47

Infringement procedure in EU- Can take legal action, imposing financial penalties. (Doesn’t kick them out of EU!)

Paris Agreement-allows adjustment upon changing circumstances

Question 48

How does multilateralism affect the ability of states to cooperate? (2)

Answer 48

Broader-deeper trade-off.

Multilateral cooperation can increase resources dedicated to address global problems by having more countries involved.

but also means monitoring more= challenging, cheating more likely with more states involved. Makes it harder to negotiate in an agreement,more involved, so may result in a less deep treaty.

Question 49

How to solve the broader-deeper trade-off? (3) examples

Answer 49

Gradual growth of an institution overtime
E.g EU: members must agree for admission of new member. (Prospective members make more deeper agreements)

Cooperation among subsets of members-DEEPEN COOPERATION ON SPECIFIC ISSUES, while maintaining broad scope. e.g G20 brings largest economies together to tackle problems like climate change.

Flexible governance structures (mentioned earlier) e.g Exclusion clauses (2)- Infringement procedure in EU, Paris Agreement-allows adjustment upon changing circumstances