Chapter One: Understanding International Relations

Introduction
International relations, as it is presented in the flow of daily news concern a large number of
disparate events; leaders are meeting, negotiations are concluded, wars are started, acts of
terror committed, and so on. In order to make sense of all this information we need to know a
lot about the contemporary world and its history; we need to understand how all the disparate
events hang together. At university, we study these topics, but it is a basic tenet of the
academic study of international politics that this rather messy picture can be radically
simplified. Instead of focusing on the flow of daily news, we focus on the basic principles
underlying it. This is what we will try to do in this module. So, let us begin by thinking big,
what is international relations? How was it made and how did it come to be that way

1.1. Conceptualizing Nationalism, Nations and States

Nationalism is the most influential force in international affairs. It has caused the outbreak of
revolutions and wars across the globe. It is noted as a factor for the collapse of age-old empires,
a marker for new borders, a powerful component for the emergence of new states and it is used
to reshape and reinforce regimes in history. Nationalism’s triumph is the coming of the nation-
state as key actors in world politics-accepted as the ultimate, legitimate and most basic form of
a political entity. According to Heywood (2014), nationalism is the doctrine that asserts the
nation as the basic political unit in organizing society.
In common parlance, the words ‘nation’, ‘state’ and ‘country’ are used interchangeably and this
is not correct. For instance, the word the ‘United Nations’ is a misnomer since, in reality; it is
an association or a society of states instead of nations. In international politics, it is also
common but incorrect to refer to the ‘Chinese’, the ‘Americans’ and the ‘Russians’ as
‘nations’. Hence, the question remains: what is a nation? According to Heywood, ‘nations are
historical entities that evolve organically out of more similar ethnic communities and they
reveal themselves in myths, legends, and songs (2014).

At the end of the 18th century, this state came to be radically transformed. The ‘state’ was
combined with a ‘nation’ forming a compound noun – the ‘nation-state’ – which was
organized differently and pursued different goals. A nation, in contrast to a state, constitutes a
community of people joined by a shared identity and by common social practices

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The revolutions that took place in Britain’s North American colonies in 1776, and in France
in 1789, provided models for other nationalists to follow. ‘We the People of the United
States’ – the first words of the Preamble to the US Constitution – were a phrase which itself
would have been literally unthinkable in an earlier era. In the 1789 French revolution, the old
regime was overthrown and with it the entire social order. The French nation was from now
on to be governed by the people, the nation, and in accordance with the principles of liberté,
égalité et fraternité– liberty, equality and brotherhood.
Nationalism in the first part of the nineteenth century was a liberal sentiment concerning self-
determination – the right of a people to determine their fate. This program had far-reaching
implications for the way politics was organized domestically, but it also had profound
ramifications for international politics. Most obviously, the idea of self-determination
undermined the political legitimacy of Europe’s empires.

Across Europe, an increasingly prosperous middle-class demanded inclusion in the political

system and their demands were increasingly expressed through the language of nationalism.
For instance, the Finns wanted an independent Finland; the Bulgarians an independent
Bulgaria; the Serbs an independent Serbia, and so on. Yet it was only with the conclusion of
the First World War in 1918 that self-determination was acknowledged as a right. After the
First World War, most people in Europe formed their nation-states.

1.2. Understanding International Relations

Originally, the study of international relations (a term first used by Jeremy Bentham in 1798)
was seen largely as a branch of the study of law, philosophy or history. However, following
the carnage of the First World War, there emerged an academic undertaking to understand
how the fear of war was now equal only to the fear of defeat that had preceded the First
World War. Subsequently, the first university chair of international relations was founded at
the University of Wales in 1919.

Previously, international relations could be used to describe a range of interaction between

nation-state. But today, international relations could be used to describe a range of
interactions between people, groups, firms, associations, parties, nations or states or between
these and (non-) governmental international organizations. These interactions usually take
place between entities that exist in different parts of the world – in different territories,
nations or states. More obviously, events such as international conflict, international

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conferences on global warming and international crime play a fundamental part in the study
of international relations.

Participation in international relations or politics is also inescapable. No individual, people,

nation or state can exist in splendid isolation or be master of its fate; but none, no matter how
powerful in the military, diplomatic or economic circles, even a giant superpower, can
compel everyone to do its bidding.

International relations, therefore, is too important to be ignored but also too complex to be
understood at a glance. Studying international relations provides the necessary tools to
analyze events, and gain a deeper comprehension of some of the problems that policy-makers
confront and understand the reasoning behind their actions.
1.3. Actors in International Relations
1.4.1. State Actors

International Relations (IR) traditionally focused on interactions between states. However,

this conventional view has been broadened over the years to include relationships between all
sorts of political entities (‘polities’), including international organizations, multinational
corporations, societies and citizens. IR captures a vast array of themes ranging from the
growing interconnectedness of people to old and new forms of security, dialogue and conflict
between visions, beliefs and ideologies, the environment, space, the global economy, poverty
and climate change.

There are a lot of states in the world – in fact, according to the latest count there are no fewer
than 195 of them. States are very different from each other, but they are also similar to each
other in important respects. All states call themselves ‘sovereign’, meaning that they claim
the exclusive right to govern their respective territories in their fashion. But states are also
sovereign in relation to each other: they act in relation to other states, declaring war,
concluding a peace, negotiating a treaty, and many other things.

The ‘international’ is hence structurally differentiated from the ‘domestic’ in that where the
former (International), according to this ‘realist’ perspective, is defined as ‘anarchical’, the
latter (Domestic) is hierarchical. State sovereignty comes to be the defining element in the
study of international relations, even where other perspectives challenge the primacy of the
state.

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1.4.2. Non-State Actors

Our everyday lived experience is influenced by Global Firms, International governmental

institutions, and non-governmental organizations that necessitate the remit of our
investigations to account for the diversity of actors and forms of interactions that take place
in global politics.

Similarly, Multinational Corporations (MNCs) – often with headquarters in one state and
operational capability in a range of others – contribute significantly to international relations.
Additionally, there are other trans-governmental organizations where the relations between
players are not controlled by the central foreign policy of the state – such as the exchange rate
of a state’s currency being determined by the money markets.

Despite all the challenges and many new theories of international politics/relations, the state
remains for many, the primary actor in international politics. Thus, contrary to the narrow
traditionalist realist view of international relations and foreign policy/relations, which focuses
on the physical security and protection of the territory of the state and its people one needs to
look wider.

We could say that the increased focus on non-state actors and cross-border issues has marked
a close-to-revolutionary turn in IR; something that could be interpreted as a shift away from
the inter-national (‘between states’) to the ‘trans-national’ (‘across/beyond-states’ and their
borders). Robert Keohane (2016), one of the leading scholars in the field, recently stated that
‘International Relations’ is no longer a suitable label and that we should instead refer to the
discipline as ‘Global Studies’ or ‘World Politics’. In today’s world, few societal and political
issues, challenges and problems are neatly confined by the borders of individual states or
even groups of states. Thinking about world affairs in ‘trans-national’ rather than in purely
‘inter-national’ terms, therefore, seems more of an analytical necessity than just a choice.

1.4. Levels of Analysis in International Relations

Kenneth Waltz’s Man, the State and War: A Theoretical Analysis (1959) introduced an
analytical framework for the study of IR that distinguished between what he referred to as
different ‘images’ of an issue: the individual, the state and the international system.

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1.4.1. The individual level

International relations can be analyzed from the perspective of individuals. Here we would
look at the behaviors, motivations, beliefs and orientation of the individual in affecting a
particular international phenomenon. This can be seen in the psychology and emotions
behind people’s actions and decisions, their fears and their visions as well as their access to
information and capacity to make a difference. Psychological factors do not only matter at the
level of individual members of society or of a group. Focusing on the individual level and,
say, particular actions of specific personalities in the public realm–be they politicians,
diplomats or bankers – would lead us to draw different conclusions again about the causes
and consequences of that phenomenon.

1.4.2. The group level

A group-level analysis would try and break the analysis down into certain kinds of groups,
how they relate to the state level and where they position themselves concerning the global
dimension of the issues they are dealing with. An example of this can be seen in the work of
Engelen et al. (2012), who discuss the global financial crisis as the ‘misrule of experts’,
pointing at the politicized role of technocratic circles and the relative lack of democratic
control over the boards of large banks and corporations. A group-level analysis focusing on
foreign policy would look, for example, at the role of lobbying groups and the way they
influence national decision-making on an issue. In this sense, a group-level analysis would be
more interested in the actions of groups of individuals, such as all voters of a country and the
way they express their views in the general election, political parties picking up on the issue
in their campaigns or social movements forming to counter the effects of the crisis on society.
A group-level analysis could be interested in activist/pressure groups like ‘Anonymous’ that
seek to influence the global debate about the winners and losers of globalization and
capitalism, and so forth.

1.4.3. The state level

States form the primary kind of actor in international relations. The enduring focuses on the
state and, therefore, on the state level of analysis, which is referred to as the relative ‘state-
centrism’ of the discipline. This means that IR scholars would generally not only regard
states as the central unit of analysis as such, they also conceive of the state as a point of

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reference for other types of actors. From this perspective, the state acts as the arena in which
state officials, politicians and decision-makers operate.

A state-level study would also require careful consideration of what kinds of states we are
looking at (how they are ordered politically), their geographical position, their historical ties
and experiences and their economic standing. It would likely also look at the foreign policy
of states, meaning their approach to and practice of interacting with other states. Key
indicators of the foreign policy of states would be the policies proposed and decided by
governments, statements of top-level politicians but also the role and behavior of diplomats
and their adjoining bureaucratic structures.

1.4.4. The system level

The system-level perspective would like to conceive the global system as the structure or
context within which states cooperate, compete and confront each other over issues of
national interest. You might visualize it as a level above the state. Particularly important in
that context is the distribution of power amongst states, meaning, whether there is one main
concentration of power (uni-polarity), two (bipolarity) or several (multi-polarity). In this
perspective, global circumstances are seen to condition the ability and opportunity of
individual states and groups of states to pursue their interests in cooperative or competitive
ways. The view of states being embedded in a global context traditionally comes with the
assumption that our international system is ‘anarchic’. An anarchic system is one that lacks a
central government (or international sovereign) that regulates and controls what happens to
states in their dealings with each other.

A system-level study would need to consider global linkages that go beyond single
interactions between states. A global level would give us the big picture and help us to grasp
wide-ranging dynamics that emerge from the global economic ‘system’ to affect its various
components, states, national economies, societies, and individuals.

1.5. The Structure of International System

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International Relations scholars maintain that political power is usually distributed into three
main types of systems namely: (i) unipolar system, (ii) bipolar system and, (iii) multipolar
system. These three different systems reflect the number of powerful states competing for
power and their hierarchical relationship. In a unipolar international system, there is one state
with the greatest political, economic, cultural and military power and hence the ability to
control other states. On the other hand, in both bipolar and multipolar systems there is no one
single state with a preponderant power and hence ability to control other states.

As a result, the states in such systems are forced to balance each other’s power. In the case of
the bipolar system, for instance, there are two dominant states (superpowers) and the less
powerful states join either side through alliance and counter alliance formations. The problem
with a bipolar system is that it is vulnerable to zero-sum game politics because when one
superpower gains the other would inevitably lose. One typical historical example where the
world was under bipolar system is the cold war period. Multipolar system is the most
common throughout history. During the period around World War I it was a typical world
system. It usually reflects various equally powerful states competing for power.

Power
Power is the currency of international politics. As money is for economics, power is for
international relations (politics). In the international system, power determines the relative
influence of actors and it shapes the structure of the international system. That is also why it
is often said that international relations are essentially about actors’ power relations in the
supra-national domain. For instance, Hans Morgenthau, a famous thinker of realism theory in
IR, argues that international politics, like all other politics, is a power struggle

Anarchy
Anarchy is a situation where authority is absent (government) be it in national or
international/global level systems. Within a country ‘anarchy’ refers to a breakdown of law
and order, but in relations between states (IR) it refers to a system where power is
decentralized and there are no shared institutions with the right to enforce common rules.

Sovereignty
Sovereignty is another basic concept in international relations and it can be defined as an
expression of: (i) a state’s ultimate authority within its territorial entity (internal sovereignty)
and, (ii) the state’s involvement in the international community (external sovereignty). In

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short, sovereignty denotes the double claim of states from the international system, i.e.,
autonomy in foreign policy and independence/freedom in its domestic affairs.


1.6. Theories of International Relations
Theories of international relations allow us to understand and try to make sense of the world
around us through various lenses, each of which represents a different theoretical perspective.
In order to consider the field as a whole for beginners it is necessary to simplify International
Relations theory.

1.6.1. Idealism/Liberalism
Liberalism in IR was referred to as a ‘utopian’ theory and is still recognized as such to some
degree today. Its proponents view human beings as innately good and believe peace and
harmony between nations is not only achievablebut desirable. Immanuel Kant developed the
idea in the 18thc which says shared liberal values should have no reason for going to war
against one another. His ideas have resonated and continue to be developed by modern
liberals, most notably in the democratic peace theory, which posits that democracies do not
go to war with each other, for the very reasons Kant outlined.

Further, liberals have faith in the idea that the permanent cessation of war is an attainable
goal. Taking liberal ideas into practice, US President Woodrow Wilson addressed his famous
‘Fourteen Points’ to the US Congress in January 1918 during the final year of the First World
War. As he presented his ideas for a rebuilt world beyond the war, the last of his points was
to create a general association of nations, which became the League of Nations. Dating back
to 1920, the League of Nations was created largely to oversee affairs between states and
implementing, as well as maintaining, international peace. The academic study of IRs had the
potential to contribute to the prevention of war and the establishment of peace. The creation
of the League of Nations after the end of the WWI was the culmination of the liberal ideal of
international relations.

The two interrelated ideas that emerge from Kant’s reflections on a perpetual peace and
which formed the basic foundations for the liberal internationalism that dominated the
discipline of international relations in its early days centered on democratic governance and
institutionalized law-governed relations of cooperation between states. The two formative
pillars of liberal internationalism, democracy and free trade, required the establishment of
international relations which would promote collectivist aspirations in place of the conflictual

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relations which formed the basis of balance-of-power thinking. Therefore, despite the efforts
of prominent liberal scholars and politicians such as Kant and Wilson, liberalism failed to
retain a stronghold and a new theory emerged to explain the continuing presence of war.

Liberals also argue that International Law (IL) offers a mechanism by which cooperation
among states is made possible. International law refers to the body of customary and
conventional rules which are binding on civilized states in their intercourse with each other.
In playing this role, international law performs two different functions. One is to provide
mechanisms for cross-border interactions, and the other is to shape the values and goals these
interactions are pursuing. The first set of functions are called the ‘‘operating system’’ of
international law, and the second set of functions are the ‘‘normative system.” In short, the
purpose of IL is thus to regulate the conduct of governments and the behaviors of individuals
within states.
However, the legal standing of international law is a contentious issue among scholars. There
are three competing views on this matter. Some scholars say IL is not a law at all but a branch
of international morality. Others say it is a law in all senses of the term. Yet, others say it is a
matter of definition. As a result, the operating system of international law functions in some
ways as a constitution does in a domestic legal system and not as law proper-i.e. it does
nothing beyond setting out the consensus of its constituent actors on the distribution of
authority, rights and responsibilities for governance within the international system.

1.6.2. Realism

Realism as a school of thought centres on the view that the international system is ‘anarchic’;
in and it is devoid of an all-encompassing authority. Where domestic society is ruled by a
single system of government, the international system of states lacks such a basis and renders
inter-national law non-binding and ultimately ineffectual in the regulation of relations
between states. Conflict is hence an inevitable and continual feature of international
relations. Hans Morgenthau, whose Politics among Nations(1948) leads the realist
perspective asserts that ‘realism’ assumes that its key concept of interest defined as power is
an objective category which is universally valid, but it does not endow that concept with a
meaning that is fixed once and for all’. Morgenthau’s text starts with the assumption that
‘international politics, like all politics, is a power struggle.

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Activity:
 Organize yourselves into two groups and play the role of Hitler and W. Wilson in
affecting international stability and present your findings to the class.
 Do you think that these leaders had differing orientation of international relations?
How?
Key Concepts:
 Liberalism depicts optimism by arguing that human beings are good, cooperation is
possible and conflict can be resolved peacefully
 Realism depicts pessimism by arguing that human beings are bad, conflict is
inevitable and war is the most prominent instrument of resolving conflict
 Structuralism/Marxism focused on the structure of dependency and exploitation
caused by the international division of labor
 Constructivism/Critical Theories challenge the foundations of the dominant
perspectives and argue for the marginalized and the voiceless

One central area that sets realism and liberalism apart is how they view human nature.
Realists do not typically believe that human beings are inherently good, or have the potential
for good, as liberals do. For realists, people are selfish and behave according to their own
needs without necessarily taking into account the needs of others. Realists believe conflict is
unavoidable and perpetual and so war is common and inherent to humankind. Hans
Morgenthau, a prominent realist, is known for his famous statement ‘all politics is a struggle
for power’ (Morgenthau 1948). This demonstrates the typical realist view that politics is
primarily about domination as opposed to cooperation between states.

Realists and liberals look at the very same world. But when viewing that world through the
realist lens, the world appears to be one of domination. The realist lens magnifies instances of
war and conflict and then uses those to paint a certain picture of the world. Liberals, when
looking at the same world, adjust their lenses to blur out areas of domination and instead
bring areas of cooperation into focus. Then, they can paint a slightly different picture of the
same world. And, both realism and liberalism have been updated to more modern versions
(neoliberalism and neorealism) that represent a shift in emphasis from their traditional roots

Liberals share an optimistic view of IR, believing that world order can be improved, with
peace and progress gradually replacing war. Conversely, realists tend to dismiss optimism as

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a form of misplaced idealism and instead they arrive at a more pessimistic view. This is due
to their focus on the centrality of the state and its need for security and survival in an
anarchical system where it can only truly rely on itself. As a result, realists reach an array of
accounts that describe IR as a system where war and conflict is common and periods of peace
are merely times when states are preparing for future conflict.

Another point to keep in mind is that each of the overarching approaches in IR possesses as
different perspective on the nature of the state. Both liberalism and realism consider the state
to be the dominant actor in IR, although liberalism does add a role for non-state actors such
as international organizations. Nevertheless, within both theories states themselves are
typically regarded as possessing ultimate power.


1.6.3. Structuralism/Marxism

Marxism is an ideology that argues- a capitalist society is divided into two contradictory
classes – the business class (the bourgeoisie) and the working class (the proletariat). The
proletariats are at the mercy of the bourgeoisie who control their wages and therefore their
standard of living. Marx hoped for an eventual end to the class society and overthrow of the
bourgeoisie by the proletariat

Structuralism emerged as a critique of both realism and pluralism, and concentrated on the
inequalities that exist within the international system, inequalities of wealth between the rich
‘North’ or the ‘First World’ and the poor ‘South’ or the ‘Third World’. Inspired by the
writings of Marx and Lenin, scholars within what came to be known as the structuralist
paradigm focused on dependency, exploitation and the international division of labor which
relegated the vast majority of the global population to the extremes of poverty, often with the
complicities of elite groups within these societies. Imperialism generated by the vigor of free
enterprise capitalism in the West and by state capitalism in the socialist bloc imposed unequal
exchange of every kind upon the Third World (Banks, 1984).
The basis of such manifest inequality was the capitalist structure of the international system
which accrued benefits to some while causing, through unequal exchange relations, the
impoverishment of the vast majority of others. The class system that pre-dominated internally
within capitalist societies had its parallel globally, producing Centre–periphery relations that
permeated every aspect of international social, economic and political life. Thus, where
pluralism and its liberal associations had viewed networks of economic interdependence as a

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basis of increasing international cooperation founded on trade and financial interactions, neo-
Marxist structuralism viewed these processes as the basis of inequality, the debt burden,
violence and instability.

Major writers in the structuralists’ perspective emerged from Latin America, Africa and the
Middle East, primary among which were Andre Gunter Frank and Samir Amin, both of
whom concentrated on dependency theory. Immanuel Wallerstein’s world systems analysis
provided a historicist account of the spread of capitalism from the sixteenth century to the
present, providing a definitive statement on the impact of this structure on interstate, class
and other social relations (Amin, 1989; Frank, 1971; Wallerstein, 1974, 1980, 1989).

1.6.4. Constructivism

Constructivism is another theory commonly viewed as a middle ground, but this time
between mainstream theories and the critical theories that we will explore later. Unlike
scholars from other perspectives, constructivists highlight the importance of values and
shared interests between individuals who interact on the global stage. Alexander Wendt, a
prominent constructivist, described the relationship between agents (individuals) and
structures (such as the state) as one in which structures not only constrain agents but also
construct their identities and interests. His famous phrase ‘anarchy is what states make of it’
(Wendt, 1992) sums this up well. Another way to explain this, and to explain the core of
constructivism, is that the essence of IRs exists in the interactions between people. After all,
states do not interact; it is agents of those states, such as politicians and diplomats, who
interact. As those interacting on the world stage have accepted international anarchy as the
defining principle, it has become part of our reality. International anarchy could even be
replaced with a different system if a critical mass of other individuals (and by proxy the states
they represent) accepted the idea. To understand constructivism is to understand that ideas, or
‘norms’ as they are often called, have power. IRs is, then, a never-ending journey of change
chronicling the accumulation of the accepted norms of the past and the emerging norms of
the future. As such, constructivists seek to study this process.

1.6.5. Critical Theories

Critical approaches refer to a wide spectrum of theories that have been established in
response to mainstream approaches in the field, mainly liberalism and realism. In a nutshell,
critical theorists share one particular trait – they oppose commonly held assumptions in the

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field of IRs that have been central since its establishment. Thus, altered circumstances call for
new approaches that are better suited to understand, as well as question, the world we find
ourselves in. Critical theories are valuable because they identify positions that have typically
been ignored or overlooked within IR. They also provide a voice to individuals who have
frequently been marginalized, particularly women and those from the Global South.

Critical theorists who take a Marxist angle often argue that the internationalization of the
state as the standard operating principle of IRs has led ordinary people around the globe to
become divided and alienated, instead of recognizing what they all have in common as a
global proletariat. For this to change, the legitimacy of the state must be questioned and
ultimately dissolved. In that sense, emancipation from the state in some form is often part of
the wider critical agenda.

Post-colonialism differs from Marxism by focusing on the inequality between nations or

regions, as opposed to classes. The effects of colonialism are still felt in many regions of the
world today as local populations continue to deal with the challenges created and left behind
by the former colonial powers. Post-colonialism’s origins can be traced to the Cold War
period when much activity in IRs centered on decolonization and the ambition to undo the
legacies of European imperialism. This approach acknowledges that politics is not limited to
one area or region and that it is vital to include the voices of individuals from other parts of
the world. Edward Said (1978) developed the prominent ‘Orientalist’ critique, describing
how the Middle East and Asia were inaccurately depicted in the West. As a result, more focus
within the discipline was placed on including the viewpoints of those from the Global South
to ensure that Western scholars no longer spoke on their behalf.. Postcolonial scholars are,
therefore, important contributors to the field as they widen the focus of enquiry beyond IR’s
traditionally ‘Western’ mindset.

Chapter Two: Understanding Foreign Policy and Diplomacy

Introduction
The Foreign policy of a state is the actions, decisions and goals that states pursue towards the
outside world. It is shaped by both external/systemic factors and internal factors. International
regimes, international organizations, the prevalence of great powers at international level are
some of the systemic factors that impinge on the foreign policy of a state. Internally, the
economic, technological and military capabilities of states heavily affect foreign policy. On

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top of these, the idiosyncrasy of leaders contributes much in affecting the foreign
policymaking and implementation of a country. In this manner, it is important to understand
the deriving motives behind the foreign policy, viz., the pursuit of national interest. States
adopt a foreign policy to achieve and promote their national interests often defined as the
short-term, medium-term and long-term goals. To this end, states establish diplomatic
relations and contacts and use different tactics to protect, often to maximize, their national
interest. In this chapter the attempt has been made to examine the debates on national interest
and foreign policy, patterns and instruments of foreign policy, and finally an overview of
Ethiopia’s foreign policy.

2.1. Defining National Interest

National interest is the raison de`tat, (the reason of state), to justify its actions and policy
towards other states at international level. National interest refers to set of values,
orientations, goals and objectives a given country would like to achieve in its international
relations. It has been the main driving force that determines the contents of foreign policy.
However, there are controversies on the exact meaning, scope and contents of national
interests.

Seabury gave the normative and descriptive definition of national interest is. In the normative
sense, national interest is related to “…set of purposes which a nation…should seek to realize
in the conduct of its foreign relations”. In the descriptive sense as well, national interest may
be regarded, “as those purposes which the nation [states] through its leadership appears to
pursue persistently over time” (Seabury cited in Holisti).

Colmbis has provided a multiplicity of criteria used in defining national interest, including
“operational philosophy, moral and legal criteria, pragmatic criteria, ideological criteria,
professional advancement, partisan criteria, bureaucratic-interest criteria, ethnic/racial
criteria, class-status criteria and foreign –dependency criteria” (1984: 82-87).

Operational Philosophy
Depending on time, location, your orientation toward the world around you, and in particular
the action of your predecessors, you may choose one of two major style of operation. First,
act in a bold and sweeping fashion. Up on taking office, introduce major new practices,
policies, and institutions and discontinue others. This style is often referred to as synoptic in
the decision making literature. The decision maker with synoptic orientation assumes that

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he/she has enough information about an important issue to develop a major policy with some
confidence that its consequence can be predicted or controlled. The second major style of
operation is to act in caution, probing, and experimental fashion, following the trial and error
approach. This style is called incremental in the decision making literature. The decision-
maker in an incremental orientation assumes that political and economic problems are too
complex to proceed with the bold initiative without worrying about their consequence.
Thus the instrumentalist usually seeks to perfect existing legislations, policies, institutions
and practices.

Ideological Criteria:
Most of the time, governments employ ideological criteria and establish their relations on the
basis of that criteria. They may identify their friends or enemies countries using the litmus
test of ideology. During cold war, the ideology of communism and capitalism had been often
used to establish cooperation or conflict with countries. Hence, national interest may be
shaped by underlying ideological orientations of the regime in power.

Moral and Legal Criteria:

Sometimes, states are expected to act morally as this is equated with acting honestly and
making your public decision accordingly. Thus moral behavior, in international politics
involves keeping your promise –treaties, living and letting others live (the poor and the
disadvantaged), avoiding exploitation and uneven development between the developing
countries and the developed ones; and generally standing up for the principles to which you
are morally committed and that are widely accepted in your culture. Acting legally means,
abiding by the rules of international law to the extent that such rules are identified and
accepted. If there are lacunas, areas where no international regimes have been developed,
then you act in a general sprit of equity and justice.

Pragmatic Criteria:
As pragmatist, your orientation is low key, matter of fact, not on emotions and professions.
You look at issues and events around you and the world with sense of prudence and with sort
of rationality. On the basis of the scientific analysis of cost and benefit or merit and demerit
to your country interest, you may act. Here, your decisions are made without considering
normative issues, issues that involve judgment, be it bad or good. So the practical utility of
merit of your action will be counted other than morality and personal sentiments.

Professional Advancement Criteria:

15
In this case, your action may be manipulated and adjusted in consideration of your
professional survival and growth, in short, your success. Quite often, in large bureaucracies
that lack good governance, the trick to success is to “play the game” and “not to rock the
boat.” This attitude has been referred to cynically as the “go along to get along” effect. So,
bureaucratic behavior is conformist behavior that is marked strong resistance to new policies
and thinking. Even leaders might choose conformity to either to popular pressure or to strong
elites whose support they consider indispensable for their political survival.

Partisan Criteria:
Here you tend to equate the survival and the success of your political party, or ethnic or
religious origin with the survival and success of your country. Similarly, you may use
bureaucratic criteria to prioritize the policy issues. You may tend to equate the interest of
your organization (the army, the foreign office, and so forth) with the national interest.

Foreign Dependency Criteria:

These criteria usually apply to less developing countries, which had fallen under the yoke of
colonialism, and now, even after political independence, kept the colonial ties with their ex-
masters intact. These countries are still dependent on their ex-colonial states for technical aid;
expertise and technology, sometimes even for their security. Governments in these countries
are therefore heavily dependent on the support of the outside powers, sometimes, for their
survival. As a result of this state of dependency, the less developing countries face difficulties
to defend and promote their national interest. Looking at these conflicting criteria, one can
conclude that national interest is not a purely scientific endeavor that results in an optimal
advantage for states. On the contrary, determination of national interest appears to be a
product of conflicting wills ambitions, motivations, needs, and demands.


2.2. Understanding Foreign Policy and Foreign Policy Behaviors

Foreign policy refers to the sets of objectives and instruments that a state adopts to guide its
relation with the outside world. The objectives of foreign policy which a state wants to
achieve are in one way or another related to national interest. So, the national interest is often
considered as the objective of the foreign policy of a state. The scope and content of the
foreign policy of a state are often determined by the capabilities of the concerned state. As

16
the capabilities of states vary across the board, the foreign policy orientation, percepts,
visions as well as instruments vary as well.

2. 2.1. Defining Foreign Policy

Foreign policy is something that a state would like to achieve in its external relations with
others. It involves the general purposes and specific strategies a state employs to achieve or
promote its national interest. According to Rochester, foreign policy refers to “the set of
priorities and percepts established by national leaders to serve as guidelines for choosing
among various courses of action in specific situations in international affairs” (p111). The
foreign policy thus involves general purposes, priority of goals to be realized and achieved. It
also encompasses specific strategies and instruments, economic and diplomatic tools that
states employ to achieve their objectives.

These objectives, visions and goals state aspire to achieve is commonly referred as national
interest. The minimum goal a state would like to achieve is survival. Every state should
protect their physical, political, and cultural identities against any encroachment by other
states. Translated into more specific objectives, the preservation of physical identity is
equated with the maintenance of the territorial integrity of a state. Preservation of political
identity is equated with the preservation of existing politico-economic systems. And the
preservation of cultural identity is equated with ethnic, religious, and linguistic and historical
norms of the peoples residing in the state (Columbis: year:? 78).

Foreign policy also involves specific instruments and tactics that must be employed to realize
those objectives and goals. The most widely employed instruments include, diplomatic
bargaining, economic instruments, propaganda, terrorism (sabotage), and use of force (war).
Each instrument is used to affect the behaviors of other states, and has an element of power.

In diplomacy, states attempt to affect the behavior of others through bargaining that involves
less element of power as compared to other instruments. Yet states may manipulate carrot
and stick methods such as reward or threats so as to induce agreement whenever there
appears to be incompatible goals and objectives.

Security and survival of a state, as explained above, has always been considered as the first
priority, among various foreign policy objectives, which a state aspires to achieve in the short
run.

17
 
2.2.2. Foreign Policy Objectives

K. J. Holisti (138-160) categorizes the foreign policy objectives of states into three, namely
the short range, middle ranges and long-range objectives. Foreign policy, just like any policy,
sets short term, middle term and long term goals and objectives to be achieved in proportion
to a state’s capability. Such classifications of foreign policy objectives is based on the
combination of the three criteria:(1) the value placed on the objective; (2) the time element
placed on its achievement; and (3) the kind of demands the objective imposes on other states
in international system. Based on these criteria, the objectives can be classified as: (1) core
values and interests, to which states commit their very existence and that must be preserved
or extended at all time; (2) middle range goals, which normally impose demands on several
others states (commitments to their achievement are serious and time limit is also attached to
them); and (3) universal long range goals-which seldom have definite time limits. In practice
leaders rarely place the highest value on long range goals and it’s very much dependent on
the capability and ideology of the state.

Core Interests and Values (Short Range Objectives)

Core values and interests can be those kinds of goals for which most people are willing to
make ultimate sacrifices. They are usually stated in the form of basic principles of foreign
policy and become article of faith that society accepts without any questioning it. So core
interests are sacrosanct by entire peoples residing in the state. Core interests and values are
most frequently related to the self-preservation of political and economic systems, the people
and its culture, and the territorial integrity of a state. These are short-range objectives because
others goals cannot be realized if the existence of the state and its political units are not
ensured.

The most essential objective of any foreign policy, core interests and values, is to ensure the
sovereignty and independence of the home territory and to perpetuate a particular political,
social, and economic systems based on that territory

Middle Range Objectives

Unlike, the short range objective, the middle range objectives drastically varies across states.
The variation is obviously due to the difference in the level of economic and technological
progress, as well as the military capability. The bottom point that a state would like to

18
achieve in its medium term is to take a course of actions that have the highest impact on the
domestic economic and welfare needs and expectation. This would include the attempts of
government to meet economic-betterment demands and needs through international action.
Social welfare and economic development cannot be achieved through self-help, as most
states have only limited resources, administrative services, and technical skills.
Interdependence means that to satisfy domestic needs and aspirations, states would have to
interact with others. Trade, foreign aid, access to communication facilities, sources of supply,
and foreign market are for most states necessary for increasing social welfare.

It can be argued that with the very great demands people have placed on governments to
provide them jobs, income, recreation, medical services, and general security, government
increasingly have to develop policies to satisfy expectations of face political defeat. Hence,
the primary commitment of governments must be to pursue those course of action that have
the highest impact on domestic economic and welfare needs of its people.
Long- Range Objectives

Long range goals are those plans, dreams, and visions concerning the ultimate political or
ideological organization of the international system, and rules governing relations in that
system. The difference between middle-range and long range goals relates not only to
different time elements inherent in them; there is also a significant difference in scope. In
pressing for middle range goals , states make particular demands against particular interest; in
pursuing long range goals, states normally make universal demands, for their purpose is no
less than to reconstruct an entire international system according to a universally applicable
plan or vision.

Here it must be noted that such long range visions and dreams may have international
repercussions as far as they are complemented by the capabilities and powers; otherwise the
long range visions will not have any international significance beyond paper consumption
and rhetoric level.

2.2.3. Foreign Policy Behavior: Patterns and Trends

Foreign policy behavior refers to the actions states take towards each other. The nature of
foreign policy is such that one can expect to find double standards and inconsistencies in the
records of all countries. It is not easy to label countries as simply peace loving or war-like or
to use other such categorizations. Nevertheless, patterns of foreign policy behavior can be

19
identified. Arnold Wolfers, a famous specialist in the field of International Relations,
suggested that all foreign policy behavior ultimately boils down to three possible patterns: (1)
self-preservation (maintaining the status quo); (2) self-extension (revising the status quo in
one’s own favor); self-abnegation (revising the status quo in some else’s favor).

The foreign policy patterns of countries such as United States can be categorized as self-
preservation. United States, following second world emerged as one of the strongest actor,
super power in international relations. One can say, with no doubt, that the international
institutions (IMF, World Bank, GATT/WTO) that were established following WWII have
been strongly shaped by United States. The underlying philosophy of such institutions, and
even the decision making procedures are all shaped to serve the global interests of US. Even
the UN has been serving the interest of United State as the country has key position in the
Security Council as one of Veto power among the few.

On the other hand newly emerging powers such as China, India, Brazil, Germany and others
are competing to restructure the international institutions and different regimes so as to create
an enabling environment to promote their national interest. Such policy trend can be equated
with Wolfers’ model of self-extension.

The third model, i.e. self-abnegation reflects the foreign policy trends that are being displayed
in Less Developing Countries (LDCs). This can be seen in the weak states of the world which
fail to defend and promote their national interests in their external relations. States that are
weak and very much dependent on foreign aid are profoundly caught with many problems in
order to pursue an autonomous policy. Such countries may succumb to such challenges and
compromise its long lasting national interest for temporary and immediate benefits.


2.2.4. Foreign Policy Dimensions
The analysis of foreign policy behavior can also be done along a number of specific
dimensions, keeping in mind that behavior can change over time and with different style of
leaderships and circumstances. These dimensions include alignment, scope and modus
operandi.

Alignment

Alignment means, whether national leaders choose to ally with certain countries or to remain
neutral. The focus here is not to discuss the alignment configuration at international level as

20
in the form of bi-polarity or multi-polarity but we are discussing the alignment decisions of
individual states or governments. A country’s alignment behavior can vary from time to time
during its history in response to changing circumstances and policy decisions. Yet one can
identify the alignment tendencies such as alliance, neutrality and non-alignment.

Alliances are formal agreements to provide mutual military assistance; as such, they carry
legal weight and certain benefits as well as risks. Allied countries can pool their military
resources, acquire access to foreign bases and stake out territories that enemies are on notice
will be denied them by force if necessary. Yet an alliance state also risks interference by
allies in its domestic affairs, the possibility being dragged.

Neutrality is a stance of formal nonpartisanship in world affairs. By keeping a low profile,

neutrals may avoid some of the problems associated with alliances, particularly the
generating of potential enemies and counter alliances. Switzerland is one country that has
carried neutrality to an extreme case in refusing membership to United Nations till 2002.

Nonalignment has been the foreign policy pattern of most developing state during cold war.
Most developing countries had a movement-Non Alignment Movement (NAM) in which
they called for a new foreign policy path/choice/ to be followed disregarding both the West
and East bloc politics and alliances. Although that was practically impossible, NAM had
noble agenda that called for the South-south cooperation.


Scope

A second foreign policy dimension is the scope of a country’s activities and interests. Some
countries have extensive, far-reaching international contacts, while other countries have more
limited activities abroad. With regards to the scope of activities a state has in international
relations, one can identify at least three patterns of foreign policy behaviors. These are:
actors act in Global terms, others as Regional terms, and those that follow policy of
Isolationism.

A country such as U.S.A has often defined its national interest in global terms, and it has
more or less the wherewithal and the capability to influence world events. Its military
presence and diplomatic communication in every part of the world make her global actor.

21
Most countries in the world are essentially regional actors, interacting primarily with
neighboring states in the same geographical area except for contacts, frequently concerning
economic issues such as trade. For example, South Africa is a regional actor in Africa in
general and in Southern Africa in Particular. It is the most important actor in regional
organizations such as SADDIC and AU. India can also be considered as the most important
actor in South Asian region, so is China in entire Asia.

Whereas, some moments in history, such as key weakness or geographic remoteness, may
cause the scope of a country’s foreign policy to become so narrow that isolationism results.
This was the case with Burma in 1960 and 70s. Few countries have ever been totally cut off
from the outside world, and in an age of interdependence, isolationism becomes an
increasingly less viable foreign policy orientation. Some of the known global actors such as
USA, China, and the ex-USSR all have passed through period of relative isolationism and of
mainly regional interests, finally branching out in to global concerns.


Mode of Operation/ “Modus Opernadi’

In addition to the alignment and scope dimensions of a country’s foreign policy, we can also
identify certain patterns of foreign policy behaviors on the basis of the modus operandi-the
method of operation. Some countries often rely on multilateral institutions to address
different issues. Still others very much rely on unilateral means. They may choose to solve
the problems by themselves. The more multilateralist a state is, the greater its tendency to
seek solutions to problems through diplomatic forums in which several states participate,
such as the UNs, rather than utilizing purely bilateral, country to country approaches. Most
developing countries used the multilateral approaches to address many issues of concern. The
multilateral forum would enhance collective barraging power of these countries vis-a-vis
other developed countries. In addition, establishing bilateral relations (establishing Embassies
and assigning diplomatic staffs) are often found to be costly. Germany, though it is an
economic power, is known to be multi-

lateralist in its external relation. Most of Scandinavian countries fall under this category.
Whereas countries may opt to rely on unilateral means of settling different issues with other
countries that have strong economic and military muscles they would prefer this approach to

22
settle problems. The more unilateral a state is the more likely to initiate actions in
international relations or to resist initiatives taken by others (Rochester; p118).

2.2.5. Instruments of Foreign Policy

Diplomacy

Diplomacy can be defined as a process between actors (diplomats, usually representing a

state) who exist within a system (international relations) and engage in private and public
dialogue (diplomacy) to pursue their objectives in a peaceful manner. Diplomacy is not
foreign policy and must be distinguished from it. It may be helpful to perceive diplomacy as
part of foreign policy. When a nation-state makes foreign policy it does so for its own
national interests. In basic terms, a state’s foreign policy has two key ingredients; its actions
and its strategies for achieving its goals. The interaction one state has with another is
considered the act of its foreign policy.

Diplomacy is a complex game of maneuver in which the goal is to influence the behaviors of
others in one’s interest. In the past diplomacy had been practiced in formalistic and somewhat
rigid manner that was limited to the bilateral relations of countries as being represented
through the ambassadors hosted in foreign soil. The bargaining process and other diplomatic
process, such as exchange of ideas were the business of ambassadors, undertaken under
closed and secret manner. Nowadays the nature of diplomacy, its strategy of doing diplomacy
has been radically different from the old practices. After WWI and formation of the League
of Nations, the old style of diplomacy has been drastically reformed. There arose multilateral
diplomacy, public diplomacy, leader-to-leader (summitry diplomacy) in sharp contrast to
secret diplomacy and bilateral diplomacy.

Regardless of whether diplomacy is conducted openly or secretly, multilaterally or

bilaterally, tacitly or formally, by ambassadors or leader-to-leader; the essence of diplomacy
remains bargaining. Bargaining can be defined as a means of settling differences over
priorities between contestants through an exchange of proposals for mutually acceptable
solutions. There must be conflict over priority in order for bargaining to take place, for if
there is total agreement there would be nothing to bargain. Diplomatic bargaining is used
primarily to reach agreements, compromises, and settlements where governments objectives
conflict.

23
In the modern context then, a system dominated by states, we can reasonably regard
diplomacy as something that is being conducted for the most part between states. In fact, the
applicable international law that governs diplomacy – the Vienna Convention on Diplomatic
Relations (1961) – only references states as diplomatic actors. Yet, the modern international
system also involves powerful actors that are not states. These tend to be international non-
governmental organizations (INGOs) and international governmental organizations (IGOs).
These actors regularly partake in areas of diplomacy and often materially shape outcomes.
For example, the United Nations and the European Union (two IGOs) materially shaped
diplomacy. And, a range of INGOs – such as Greenpeace – have meaningfully advanced
progress toward treaties and agreements in important areas tied to the health and progress of
humankind such as international environmental negotiations.

Rules of Effective Diplomacy

The following are some of the basic rules that diplomats have employed with greater
effectiveness over the years:
 Be realistic: It is important to have goals that match your ability to achieve them
 Be careful about what you say: The experienced diplomats plans out and weighs
words carefully.
 Seek common ground: Dispute begins negotiations; finds common ground ends
them successfully. Almost any negotiation will involve some concession, so it is
important to maintain a degree of flexibility.
 Understand the other side: There are several aspects to understanding the other side.
One is to appreciate an opponent’s perspective even if you do not agree with it.
 Be patient: it is also important to bide your time. Being overly anxious can lead to
concessions that are unwise and may convey weakness to an opponent.
 Leave avenues of retreat open: it is axiomatic that even a rat will fight if trapped in
a corner. The same is often true for countries. Call it honor, saving face, or prestige; it
is important to leave yourself and your opponent an “out”.
In general, states make considerable use of what are known to be “carrot and stick”
approaches when they rely on such diplomatic tactics such as threats, punishment, promise,
and rewards.

24
 
Economic Instruments of Foreign Policy

Just as modern states are politically and technologically interdependent, they also rely up on
each other for resources and commodities which enable them to develop and sustain viable
economies. There is a considerable degree of dependence up on trade among states.
Cognizance of such dependency situation, states often uses their economic muscle to
influence the behavior (action, perception and role) of others.

Holisti (245) states that economic, particularly trade instruments of foreign policy are
normally used for three purposes, namely: (1) to achieve any foreign policy objective by
exploiting need and dependence and offering economic rewards, or threat, ending or
imposing economic punishments; (2) to increase a state’s capability or deprive a potential
enemy’s capabilities ;and (3) to create economic satellites (guaranteed markets and resources
of supply) or help maintain political obedience in satellites by creating a relationship of
economic dependence. To serve the above objectives, states often employ different
techniques of economic reward and punishment.
When rewards are offered or economic punishment are threatened, at least two conditions
must be fulfilled to make the exercise of influence effective: (1) the target of the influence or
act must perceive that there is a genuine need for the reward or for the avoidance of the
punishment, and; (2) no alternative market or source of supply must be easily available to the
target. The specific techniques that can be used to reward or punish constitute various control
over the flow of goods between countries including, tariffs, quotas, boycotts, and embargos.
Loans, credits, and currency manipulation can be used for reward as well.

Tariff: Almost all foreign made products coming into a country are taxed for the purpose of
raising revenue, protecting domestic producers from foreign competition, or other domestic
economic reasons.

Quota: To control imports of some commodities, governments may establish quotas rather
than tariffs (tariffs may of course be applied to the items enter under quota). Under such
arrangement, the supplier usually sends his goods into the country at a favorable price, but is
allowed to sell only a certain amount in a given time period.

Boycott: A trade boycott organized by a government eliminates the import of either a

specific commodity or the total range of export products sold by the country against which

25
the boycott is organized. If the importer doesn’t comply with these requirements, any goods
purchased abroad can be confiscated.

Embargo: A government that seeks to deprive another country of goods prohibits its own
business men from concluding its transactions with commercial organization in the country
against which the embargo is organized. An embargo may be enforced either on specific
category of goods, such as strategic materials, or on the total range of goods that private
businessmen normally send to the country being punished.

Loans, Credits and Currency Manipulations: Rewards may include favorable tariff rates
and quotas, granting loans (favorable reward offered by the major powers to developing
countries) or extending credits. The manipulation of currency rates is also used to create more
or less favorable terms of trade between countries.

Foreign Aid: The transfer of money, goods, or technical advice from donor to recipient-is an
instrument of policy that has been in international relation. There are main type of aid
program including, military aid, technical assistance, grants and commodity import program,
and development loans.
Military Aid: probably the oldest type of aid which had been used for buttressing alliances.
In the last century, both France and United States had spent millions of Francs and pounds to
strengthen their continental friendship/ alliance. In this aid scheme, the donors supply money
and material, while the recipient provided most of the man power. Since World War II, the
United States and the Soviet Union have spent more resources on military aid than on their
foreign aid programs-and the objective has been the traditional one of safeguarding their own
security by strengthening the military capabilities of allies. By helping recipients build up
modern forces, the donors hope to obtain some immediate political or security objective. In
short, military aid is used to create local power balances or preponderances, thus reducing the
likelihood that the donor will have to station troops abroad or intervene militarily to protect
its interests.

26
2.3. Overview of Foreign Policy of Ethiopia
2.3.1. Foreign Policy during Tewodros II (1855-1868)

Throughout his reign Tewodros tried to develop a dynamic foreign policy that reached out
beyond the Horn Region. He sought the Western Christian world to recognize his country and
help him to modernize his country. Moreover, as Keller has put it “he appealed specifically to
Britain, France and Russia as Christian nations to assist him in whatever ways possible in his
fight against the Turks, Egyptians and Islam”.
The emperor attempted to establish his diplomatic relations to fight his immediate enemies
claiming Christianity as instrument of foreign policy. However, the emperor’s passionate
demand for modern technology and skilled man power from Britain was not concluded to his
satisfaction as the latter sent religious missionaries. Despite his demand to be recognized as
the emperor of Ethiopia and treated with respect and equal footing with the British Queen,
which was not reciprocated by Queen Victoria. Consequently Tewodros took desperate
measures by taking hostage of several British missionaries including the consul which was
responded with the British Millitary Expedition (Keller). Tewodros’s Troops were easily
defeated and the King did not surrender but tragically committed suicide.

2.3.2. Foreign Policy during Yohannes IV (1872-1889)

Yohannes IV succeeded Tewodros II. Like his predecessor, Yohannes considered Islam as a
threat to the territorial integrity of the polity. Indeed Egypt tried to put a serious security
threat in its continued attempt to invade the country under many pretexts, yet its motive was
to control the source of Blue Nile. These, however, were not successful as Egypt faced
subsequent defeat both in 1875 and 1876 at the Battle of Gundet and Gura respectively
(Keller). In addition to Muslim threat, the emperor saw European expansionism as greater
threat to the survival of the country. In fact, his calculation of threat has turned out to be real
as Italy got a foot hold at the port of Massawa in 1885.This colonial ambition of Italy was
reflected by the Foreign Minister speech “The Red Sea is the key to the Mediterranean”
implicating the strategic importance of Ethiopia (Novati). However, the emperor died
fighting with the “Mahadists”. The Sudanese resistance groups against British rule happened
to invade Western Ethiopia because of their presumption that Yohannes IV was collaborating
with the British.

27
2.3.3. Foreign Policy during Menelik II (1889-93)

Following the death of Yohannes, Menlik II of Showa has assumed to the throne. He had
expanded his sphere of influence towards the far South and East incorporating new areas and
communities. The southward expansionism policy of the King was mainly targeted to have
access to Sea Port, Zeila. Minelik was aware of the strategic importance of outlet to the sea
for the country as he felt that the country’s access to the sea in the North had fallen under
Italy’s influence since the mid-1890s. Before the death of Yohannes Italy had good
diplomatic relation with Menelik with the objective of weakening its immediate enemy in the
North, Yohannes. Menilik comfortably exploited the opportunity to consolidate his power,
perhaps to deter Yohannes and bolster its expansionist policy to the south. Menelik’s relation
with Italy had disappointed Yohannes as witnessed by the absence of Menelik from
participation in the war against Mahadists.

Following the death of Yohannes, however, Italy continued to be the main challenge in the
North. Moreover the King saw the other colonial powers surrounding all four corners of the
country as the scramble of Africa was heightened. Italy expanded towards the hinterland of
Ethiopia from its first hold of Bogess, later named Eritrea, and Missawa port crossing Tekeze
River. Menelik was cautiously following such colonial expansionism of Italy. The emperor
followed double track diplomacy to contain or reverse Italy’s expansion and maintain the
territorial integrity of his country. On the one hand, he entered many treaties and agreements
to solve the challenge amicably. One of the remarkable treaties was the ‘Wuchalle’ friendship
and peace treaty where the parties agreed to avoid war and solve the problem peacefully. On
the other hand the emperor was preparing himself by accumulating military ammunitions to
defend the aggression from any side of colonial powers, British, French and of course Italy.

However, the emperor’s diplomatic endeavor with Italy failed to result in peace due to Italy’s
misinterpretation of the controversial article 17 of the ‘Wuchalle’ treaty. In 1896, the emperor
declared nation-wide war against Italy in defense of the territorial integrity and sovereignty of
the century old nation. The significance of the Adowa victory is loud and clear as many
European powers recognized Ethiopia as an independent African state on similar footing with
the Europeans. Indeed Britain, France, Russia and the vanquished Italy came to Menelik’s
Palace to arrange formal exchange of Ambassadors. Moreover, these powers signed formal
boundary treaties with the emperor. In fact the present boundary of Ethiopia vis -a-vis its
neighbors had been defined at least on paper, but not demarcated.

28
Activity:
 What do you think is the short, medium and long range foreign policy objectives of
Ethiopia during the era of Tewodro II, Yohannes IV and Menelik II respectively?
 Debate in groups as to the changes and continuities of foreign policy objectives
during these three regimes.
2.3.4. Foreign Policy during Emperor Haile Selassie I (1916-1974)

Menelik died in 1913 and it was not until 1930 that the next strong emperor Haile Selassie I,
assumed the throne. He was dedicated to the creation of a stronger, centralized and
bureaucratic empire with unquestioned respect by the international community. This was
clear as early as 1923, when as Regent to the crown; Teferi Mekonen facilitated Ethiopia’s
entry to the League of Nations. Ethiopia’s membership in the League of Nations was clearly
instigated by the ever present danger of invasion by Italians. When the Italian Fascists finally
invade Ethiopia between 1936 and 1941, the Emperor fled to London and established a
government in exile.
From there he traveled to Geneva, Switzerland, to make a plea before the League of Nations
for aid in defense to the country. The League ultimately failed to take any substantive
measure against Italy and the plea of the King was ignored. Apparently viewing the League
of Nations’ in action, the King continued to believe in the ultimate value of effective
diplomacy. He also recognized Ethiopia’s need for a powerful external patron until he could
restore the independence of his country. His diplomatic skills and Britain’s own strategic
necessities in the area enabled him to elicit the aid of the British in securing the liberation of
Ethiopia.

In the immediate post-war period, Ethiopia was extremely dependent on British military,
economic and technical aid. At the same time, the Emperor feared that Britain might either
declare Ethiopia a protectorate or use the claim that the whole of Italian East Africa; Eritrea,
Ethiopia and Somalia, as an occupied enemy territory and thus could be partitioned for the
administrative convenience. Haile Sellasie’s fear moved him to seek alternative relationships
that would allow him to loosen Ethiopia’s tie with Britain. The United States wanted to
establish a new presence in the region. As an emerging power, U.S was willing to heed
emperors plead to strengthen diplomatic relations.

Through diplomacy, Haile Selassie was able to regain complete administrative control over
the territory he claimed and more by 1954. In 1952 a U.N. resolution had made possible a
federation between Ethiopia and the former Italian colony of Eritrea. Eritrea was to have

29
regional autonomy within the federation, but Haile Selassie was not content with only
administrative control. He was not satisfied until he secured the endorsement of both the
Eritrean and Ethiopian Assemblies in 1962, which allowed him to incorporate Eritrea fully in
to the Empire, making it a province of Ethiopia instead of a trustee-ship.
Since the early 1940s, the United States had coveted a base in Eritrea where it could set up a
radio tracking station. Haile Selasie viewed the use of such an installation by the United
States as having more benefits than costs; that is, he would reap the benefit of being closely
allied with the most powerful military power in the world, while being paid rent in the form
of military aid that could be used to strengthen the state’s military capacity. Two agreements
were concluded in 1953 to formulize this new relationship. As a result, the United States
guaranteed Ethiopia’s security, which added greatly to the confidence with which the
emperor could approach the task of political consolidation.

In addition to the military aid Ethiopia received from the United States over the next 23
years, its armed forces also benefited from the presence of a Military Assistance Advisory
Group, which was established in 1954. This group provided training for the Ethiopian forces.
By 1975, the total U.S. military assistance to Ethiopia amounted to almost $ 280 million. In
addition, between 1953 and 1976, 3978 Ethiopian soldiers were trained in the United States.
The military aid was decisive for the Emperor to ensure his survival at home and maintain the
territorial integrity of the country. He effectively used military action against those riots and
rebellions both in rural and urban places. On more consistent basis, the United States
contributed to the expansion of Ethiopian military as a hedge a against the Somalia threats. It
also provided counterinsurgency training and on the ground advisors to help to suppress
Eritrean Nationalism.

Ethiopia also played significant role in Africa in fighting for African independence and to end
colonialism and apartheid. In the United Nations, Ethiopia played its part in raising agendas
and pressing for resolutions against colonialism in collaboration with some countries that
supported the cause. India was strong partner in that regard. In this manner, the emperor can
be considered as one of the founding fathers of African Unification. The establishment of the
organization of African Unity in the capital of Ethiopia witnessed the prominent role of the
emperor in African affairs as well. There was a time when the emperor resolved the perennial
conflict in Sudan through His Good Offices. Ethiopia also played a significant role in

30
maintaining international peace and security by committing its troops for peacekeeping
operations in Korea in 1951 and the Congo in 1961.

Of course the emperor’s strategic alliance with outside powers helped him to stay on power
for decades. The emperor secured the territorial integrity of the country and also secured port
through Eritrea, yet the abrogation of the UN imposed federation arrangement of Eritrea
remained one of a foreign policy challenge to the military regime who came to power through
coup de’tat. So was the question of Ogaden.

2.3.5. Foreign Policy during the Military Government (1974—1991)

The military regime that took control of state power in 1974 adopted a foreign policy largely
oriented to socialist ideology. The primary objectives of the foreign policy were survival of
the regime and maintaining the territorial integrity of the country. Apart from these,
restructuring the society along socialist lines was also considered as the foundation for the
foreign policy motives at home.

However, since the regime did not have the necessary economic and military capabilities to
achieve its objectives, the country was very much dependent on economic and military aid on
the Soviet Union which prevented it from securing any kind of military and technical
assistance from the US and other European countries. The regime was condemned by the
west for its human rights record, especially its treatment of former government officials. This
resulted in declining Ethio-US relations marking its lowest point with the closure of the US
military base and operation of military assistance within 72 hours (Keller).


The cornerstone of Ethiopia’s foreign policy at the time was maintaining continuing
friendship with the Soviet Union and other socialist countries. Indicative of the magnitude of
its foreign relations, the Dergue has signed numerous economic, social, political, trade,
cultural, educational, consular, and administrative agreements and protocols with almost all
socialist countries. The Soviet Union and its allies were thus able to exert immense influence
in both domestic and foreign affairs of Ethiopia. The Dergue had sent hundreds of Ethiopians
for training to the Soviet Union, Eastern Europe and Cuba while employing many of their
administrators and technicians.

31
Apart from socialism, Ethiopia’s strategic locations and other questions, such as; Eritrea,
Somalia, and the issue of the Nile, had also shaped the foreign policy orientation and
behavior of military government. Ethiopia being located in the Horn of Africa is at the cross
roads to the oil rich middle East region and Indian Ocean. As a result of this the U.S.S.R was
keen to have stronghold over the area, replacing the United States. U.S.S.R came at the right
time when the Dergue called for military aid to reverse the aggression from Somalia in the
East and quell the Eritrean nationalists in the north part of the country. It should be noted that
U.S.S.R was used to be a friend of Somalia, yet all of a sudden, it made a swift change of
policy when it came to Ethiopian side; while the U.S.A piped in to Somalia. That was a time
of cold war whereby the two super powers, U.S.S.R and U.S.A were pitting each other to
have a sphere of influence in the region.


Ethiopia shares the Nile and its longest border with Sudan, yet the relation between the two
had been strained for decades. Sudan was one of the host countries for Ethiopian opposition
forces. In turn Ethiopia had been supporting the dissent groups in southern Sudan, including
the Sudan’s People’s Liberation Army/SPLA (Amare Tekle). Amare argues that Ethiopia’s
foreign policy towards Sudan was based in part on the mistrust of the Arab Northerners as
well. Similarly Amare contends that, “Ethiopia’s relation with any third state in the Nile
Valley have been shaped as much by Egypt’s attitude and action as regards to Somalia,
Eritrea and the Sudan and by its close association with Arab and Muslim States”.
With regard to Africa’s broader issues of decolonization and anti-Apartheid struggle,
Ethiopia played significant role. The regime had extended its military and technical support
to Freedom fighters in Angola and Rhodesia. The regime had also showed its solidarity to
Palestine’s cause by condemning Israel and sought political allegiance with the Arab world,
however the negative perception that most Arab countries have towards Ethiopia remained
unchanged. Finally, the regime collapsed following the end of cold war unable to survive in
the absence of military aid from the socialist blocs, USSR, Cuba.
In general the adoption of socialism and its subsequent impact on the foreign policy of the
country could be considered as a departure from its predecessors; however the policy
objective of the country remained unchanged. The country’s policy towards its neighbors,
the region, and the Arab world remained unchanged. Such continuity of in the era of dynamic
world teaches us the determining role of geography in the making and implementation of
foreign policy of Ethiopia. The issue of Nile River, boundary issues, the strategic location of

32
the country, unique culture (Christianity) amid the Islam religion and Arab culture had
cumulative effect in shaping the foreign policy the country

2.3.6. The Foreign Policy of Ethiopia in the Post 1991

With EPRDF’s ascent to power the country adopted a new foreign policy orientation and
objectives. In the post 1991 period, Ethiopia’s foreign policy is driven primarily by the quest
to ensure national interest and security. As such, one of the goals of the foreign policy is to
ensure the survival of the multi- national state. If the equality and democratic rights of
nations, nationalities, peoples and individuals are not realized, then conflicts can happen
leading to instability and eventual disintegration. The foreign policy of Ethiopia has been
designed to create favorable external environment to achieve rapid economic development
and build up democratic system. So democracy and development are the foreign policy
visions of the country.

The primary strategy in realization of these goals is to put the focus on domestic issues first.
Addressing domestic political and economic problems requires forging national consensus
about the problems and exit strategies from the problem. This strategy is called an “inside-
out” approach. If we solve our domestic problems the country would not be vulnerable and its
peace and survival can be ensured. Even its outside enemies can be effectively deterred only
after the country builds up strong economic capability and build up a democratic system
which would in turn minimize the risk of disintegration at home as well. The inside out
approach would then help to reduce the countries vulnerability to threat. It is often true that
countries may tempt to pose a threat thinking that Ethiopia could easily succumb to them due
to its internal problems. Our internal problems then would invite the outside enemies to come
in and exploit that opportunities


At diplomatic level, economic diplomacy is adopted to strengthen the domestic efforts in
fighting poverty and backwardness and address the issues of development. Economic
diplomacy involves attracting foreign investments, seeking markets for Ethiopian exportable
commodities, seeking aid and confessional loans too. Economic diplomacy has also been
considered as viable strategy under the age of globalization. It helps to exploit the
opportunities that globalization offers, such as free trade, investment and technological
transfers. Economic diplomacy can help the country to cope up with the challenges of

33
globalization, but only if we create self-reliant and sustainable development. The Security
and Foreign Policy of the country also indicated that Ethiopia would adopt a kind of East-
look policy. Ethiopia appreciates the East Asian countries economic successes and
development paths. The country would like to learn from such successful countries such as
Singapore, Malaysian and Indonesia.

The other foreign policy strategy is building up the military capability of the country.
Peaceful dialogues and negotiations will be employed to peacefully coexist with others.
Diplomatic solutions can always be taken prior attention when dealing even disputes. But
above all building up military capability would have a deterrence effect if the military
capability of the country is scale up and modernized.

Looking at the patterns of the country’s foreign policies over the years, there have been
changes and continuities in the foreign policy goals and tactics adopted by different
governments of Ethiopia. Though strategies may sometimes differ the primary foreign policy
objective of all the three regimes remained the maintenance of the territorial integrity and
independence of the country. To this end the three regimes used a combination of both
military force and diplomacy to address both internal and external challenges depending on
the circumstances. In this manner, while the imperial and the military regime’s foreign policy
strategy is largely an approach the current regime followed “in-side out” approach.

Chapter Three: International Political Economy (IPE)

Introduction
3.1. Meaning and Nature of International Political Economy (IPE)

International Political economy (IPE) is a field of inquiry that studies the ever-changing
relationships between governments, businesses, and social forces across history and in

34
 different geographical areas. Defined this way, the field thus consists of two central
dimensions namely: the political and economic dimension. A political dimension accounts
for the use of power by a variety of actors; including individuals, domestic groups, states
(acting as single units), International organizations, nongovernmental organizations (NGOs),
and Transnational corporations (TNCs). All these actors make decisions about the
distribution of tangible things such as money and products or intangible things such as
security and innovation. In almost all cases, politics involves the making of rules pertaining
to how states and societies achieve their goals. Another aspect of politics is the kind of public
and private institutions that have the authority to pursue different goals. The economic
dimension, on the other hand, deals with how scarce resources are distributed among
individuals, groups, and nation-states. Today, a market is not just a place where people go to
buy or exchange something face to face with the product’s maker. The market can also be
thought of as a driving force that shapes human behavior. When consumers buy things, when
investors purchase stocks, and when banks lend money, their depersonalized transactions
constitute a vast, sophisticated web of relationships that coordinate economic activities all
over the world.
Activities:
 Define International/Global Political Economy, Mercantilism, Liberalism and Marxism your
own words.
 Why do you think some countries/societies in the world are poor and others rich?
 Which of these actors do you think are and should be drivers of development? Market, state,
civil society or others?
3.2. Theoretical perspectives of International Political Economy

There are three major theoretical (often ideological) perspectives regarding the nature and
functioning of the IPE: liberalism, Marxism, and nationalism (mercantilism). Mercantilism is
the oldest of the three, dating back as early as the 16th century (perhaps even earlier). Many
scholars point to Friedrich List(1789–1846) as the intellectual father of the mercantilist
thought and it is a thought in response to classical economics and, more specifically, to
Adam Smith’s (1723–1790) liberal perspective. Marxism, by contrast, is the youngest of the
three and is advanced by Karl Marx who also emerged as a critique of classical economics.

35
Since the mid-1980s, the relevance of the three perspectives has changed dramatically. With
the end of both communism and the “import-substitution” strategies of many Least
Developed Countries (LDCs), the relevance of Marxism greatly declined, and liberalism has
experienced a relatively considerable growth in influence. Around the world, more and more
countries are accepting liberal principles as they open their economies to imports and foreign
investment, scale down the role of the state in the economy, and shift to export-led growth
strategies. Marxism as a doctrine of how to manage an economy has been discredited but as
an analytic tool and ideological critique of capitalism it survives and will continue to survive
as long as those flaws of the capitalist system remain-e.g. widespread poverty side by side
with great wealth and the intense rivalries of capitalist economies over market share.

Mercantilism/nationalism: as a theoretical and ideological perspective defends a strong and

pervasive role of the state in the economy – both in domestic and international trade,
investment and finance. In arena of international trade, for instance, mercantilism emphasizes
the importance of balance-of-payment surpluses in trade with other countries, and to this end,
it often promotes an extreme policy of autarky to promote national economic self-sufficiency.
As it developed in the 21st century, mercantilism (or neo-mercantilism) defended even a much
more sophisticated and interventionist role of the state in the economy-for example, the role
of identifying and developing strategic and targeted industries (i.e. industries considered vital
to long-term economic growth) through a variety of means, including tax policy,
subsidization, banking regulation, labor control, and interest-rate management.

36
According to mercantilists, states should also play a disciplinary role in the economy to
ensure adequate levels of competition. The proof of the relevance of mercantilist thought in
the contemporary IPE is found in the recent experience of the Japanese, South Korean,
Taiwanese and Chinese national political economies whose states fulfilled the above stated
roles almost perfectly. Instead of the term mercantilism, however, the East Asian economies
(especially Japan, South Korea, and Taiwan) used the term ‘developmental state approach’ (a
less politically laden term) to describe the nature of their national political economy system.

Liberalism: is a mainstream perspective in IPE and it defends the idea of free market system
(i.e., free trade/trade liberalization and free financial and Foreign Direct Investment (FDI)
flows). Accordingly, removing impediments (barriers) to the free flow of goods and services
among countries is the foundational value and principle of liberalism. In other words, liberal
political economists believe that by removing barriers to the free movement of goods and
services among countries, as well as within them, countries would be encouraged to
specialize in producing certain goods, thereby contributing to the optimum utilization of
resources such as land, labor, capital, and entrepreneurial ability worldwide. If countries
focused on what they do best and freely trade their goods with each other, all of them would
benefit. The concept that captures this idea is also known as comparative advantage.

However, the theory of comparative advantage has been undermined by the current wave of
economic globalization. The growth of (MNCs/TNCs) complicates global trading. The
production of goods and services is strongly influenced by costs, arbitrary specialization, and
government and corporate policies. These developments thus mark a shift from the
conventional theory of comparative advantage to what is known as competitive advantage.
As a result, despite global acceptance of the concept of free trade, governments continue to
engage in protectionism. For example, the European Union (EU) and the United States each
support their own commercial aircraft industries so that those industries can compete more
effectively in a market dominated by a few companies.

Marxism: Following the collapse of the Soviet Union in the 1990’s and the apparent embrace
of the free market economy by a significant number of developing countries, there was a
widely held belief that such phenomenon marks a clear failure and hence death of Marxism.
However, while it is certainly true that central planning in command economies (which was
what existed in Soviet Union and other so called socialist/communist states- they were not

37
true communists though!) has proven to be a failure, it is not necessarily true that all or even
most of the Marxist critique of capitalism has been negated by any historical and
contemporary realities. In fact, according to advocates of Marxism just the opposite is the
case. Global and national income inequality, for example, remains extreme: the richest 20
percent of the world’s population controlled 83 percent of the world’s income, while the
poorest 20 percent controlled just 1.0 percent. Exploitation of labor shows no sign of
lessening; the problem of child labor and even child slave labor has become endemic and so
on and so forth.
Marxists then tell us that all of these crises are cut from the same cloth. In particular, they all
reflect the inherent instability and volatility of a global capitalist system that has become
increasingly reliant on financial speculation for profit making. Some actors are always
making huge sums of money from the speculative bubbles that finance capitalism produces,
and this is creating the illusion that everything is working well. Give all the above realities
about contemporary IPE; therefore, the report of Marxism’s death is greatly exaggerated.

In addition to the above mentioned foundational theories of International Political economy,

the following three contemporary theories of International political economy are also worth
considering.

Hegemonic Stability Theory (HST): is a hybrid theory containing elements of mercantilism,

liberalism, and even Marxism. Its closest association, however, is with mercantilism. The
connection with mercantilism may not be immediately apparent, but it is not difficult to
discern. The basic argument of HST is simple: the root cause of the economic troubles that
bedeviled Europe and much of the world in the Great Depression of the 1920s and 1930s was
the absence of a benevolent hegemony—that is, a dominant state willing and able to take
responsibility (in the sense of acting as an international lender of last resort as well as a
consumer of last resort) for the smooth operation of the International (economic) system as a
whole. In this regard, what then happened during the Great depression period was the old
hegemon, Great Britain, had lost the capacity to stabilize the international system, while the
new (latent) hegemon, the United States, did not yet understand the need to take on that role
—or the benefits of doing so-hence global economic instability.
During its explanatory power to the Great Depression, HST has thus influenced the
establishment of the Bretton Woods institutions (IMF and WB) - both being the products of
American power and influence. On this point, it is specifically worth noting that Great Britain
was given an important role to play but British interests and desires were clearly secondary.

38
U.S. dominance was manifested, in particular, by the adoption of the U.S. blueprint for the
IMF.

Structuralism: is a variant of the Marxist perspective and starts analysis from a practical
diagnosis of the specific structural problems of the international liberal capitalist economic
system whose main feature is centre-periphery (dependency) relationship between the Global
North and the Global South which permanently resulted in an “unequal (trade and
investment) exchange.” The perspective is also known as the ‘Prebisch-Singer thesis’ (named
after its Latin American proponents Presbish and Singer). It advocates for a new pattern of
development based on industrialization via import substitution based on protectionist
policies. During the 1950s, this Latin American model spread to other countries in Asia and
Africa and then the domestic promotion of manufacturing over agricultural and other types of
primary production became a central objective in many development plans.

Developmental State Approach: Realizing the failure of neo-liberal development paradigm

(in the 1980’s) in solving economic problems in developing countries, various writers
suggested the developmental state development paradigm as an alternative development
paradigm. It is a variant of mercantilism and it advocates for the robust role of the state in the
process of structural transformation. The term developmental state thus refers to a state that
intervenes and guides the direction and pace of economic development. Some of the core
features of developmental state include;
 Strong interventionism: Intervention here does not imply heavy use of public
ownership enterprise or resources but state’s willingness and ability to use a set of
instruments such as tax credits, subsidies, import controls, export promotion, and
targeted and direct financial and credit policies instruments that belong to the realm of
industrial, trade, and financial policy.
 Existence of bureaucratic apparatus to efficiently and effectively implement the
planned process of development.
 Existence of active participation and response of the private sector to state
intervention
 Regime legitimacy built on development results that ensured the benefits of
development are equitably shared and consequently the population is actively engaged
in the process of formulating and executing common national project of
development....etc.

39
 Activity:
 Compare and contrast the following theories of International Political Economy based on
their assumptions, core propositions and policy prescriptions:
 Mercantilism
 Liberalism
 Marxism
 Hegemonic Stability Theory (HST)
 Structuralism
 Developmentalism

3.3. Survey of the Most Influential National Political Economy systems in the world
3.3.1. The American System of Market-Oriented Capitalism

The American system of political economy is founded on the premise that the primary
purpose of economic activity is to benefit consumers while maximizing wealth creation;
the distribution of wealth is of secondary importance. Despite numerous exceptions, the
American economy does approach the neoclassical model of a competitive market economy
in which individuals are assumed to maximize their own private interests (utility), and
business corporations are expected to maximize profits.
The American model like the neoclassical model rests on the assumption that markets are
competitive and that, where they are not competitive, competition should be promoted
through antitrust and other policies. Emphasis on consumerism and wealth creation results in
a powerful pro-consumption bias and insensitivity, at least when compared with the Japanese
and German models, to the social welfare impact of economic activities.
At the same time, however, the American economy is appropriately characterized as a system
of managerial capitalism. Put differently, the economy was profoundly transformed by the
late nineteenth-century emergence of huge corporations and the accompanying shift from a
proprietary capitalism to one dominated by large, oligopolistic corporations. Management
was separated from ownership, and the corporate elite virtually became a law unto itself. The
economic ideal of a self-regulating economy was further undermined by passage of the Full
Employment Act of and the subsequent acceptance of the Keynesian idea that the federal
government has a responsibility to maintain full employment through use of macroeconomic
(fiscal and monetary) policies. Although at the opening of the twenty-first century the federal
government retains responsibility for full employment and social welfare, a significant retreat

40
from this commitment began with the 1980 election of Ronald Reagan as President of the
United States and the triumph of a more conservative economic ideology emphasizing free
and unregulated markets.

Commitment to the welfare of individual consumers and the realities of corporate power,
have resulted in an unresolved tension between ideal and reality in American economic life.
Whereas consumer advocates want a strong role for the government in the economy to
protect the consumer, American economists and many others react negatively to an activist of
government because of their belief that competition is the best protection for consumers
except when there are market failures. In addition, there has been no persistent sense of
business responsibility to society or to individual citizens. Japanese corporations have long
been committed to the interests of their stakeholders, including labor and subcontractors, and
German firms acknowledge their responsibility to society and are more accepting of the
welfare state than are American firms. This explains why Japanese and German firms are
much more reluctant to shift industrial production to other countries than are their American
rivals.

The role of the American government in the economy is determined not only by the influence
of the neoclassical model on American economic thinking but also by fundamental features
of the American political system. Authority over the economy is divided among the
executive, legislative, and judicial branches of the federal government and between the
federal government and the fifty states. Whereas the Japanese Ministry of Finance has virtual
monopoly power over the Japanese financial system, in the United States this responsibility is
shared by the Treasury, the Federal Reserve, and several other powerful and independent
federal agencies; furthermore, all of those agencies are strongly affected by actions of the
legislative and judicial branches of government. In addition, the fifty states frequently contest
the authority of the federal government over economic policy and implement important
policies of their own.

Industrial policy represents another great difference between the United States and other
economies. Industrial policy refers to deliberate efforts by a government to determine the
structure of the economy through such devices as financial subsidies, trade protection, or
government procurement. Industrial policy may take the form either of sectoral policies of
benefit to particular industrial or economic sectors or policies that benefit particular firms; in
this way such policies differ from macroeconomic and general policies designed to improve

41
the overall performance of the economy, policies such as federal support for education and
Research and Development (R &D). Although Japan has actively promoted sector specific
policies throughout the economy, the United States has employed these policies in just a few
areas, notably in agriculture and national defense. However, the United States in the 1980s
took a major step toward establishing a national industrial policy.

The rationale or justification for industrial policy and associated interventionist activities is
that some industrial sectors are more important than others for the overall economy. The
industries selected are believed to create jobs of higher quality, like those in manufacturing,
to produce technological or other spillovers (externalities) for the overall economy, and to
have a high “value-added.” These industries are frequently associated with national defense
or are believed to produce a highly beneficial effect on the rest of the economy; the computer
industry and other high-tech sectors provide examples of such industries.
In general, however, the only justification for an industrial policy considered legitimate in the
United States is to overcome a market failure. In practice, most American economists, public
officials, and business leaders are strongly opposed to industrial policy. Their principal
objection is that governments are incapable of picking winners; many argue that politicians
will support particular industries for political reasons rather than for sound economic reasons.
American economists argue that the structure and distribution of industries in the United
States should be left entirely to the market. This belief is supported by the assumption that all
industries are created equal and that there are no strategic sectors. Nevertheless, despite the
arguments against having an industrial policy in America, such policies have developed in the
areas of agriculture, national security, and research and development.
3.3.2. The Japanese System of Developmental Capitalism

At the end of World War II, American occupation officials advised the Japanese that they
should follow the theory of comparative advantage and hence concentrate on labor-intensive
products in rebuilding their economy. Japan’s economic and political elite, however, had
quite different ideas and would have nothing to do with what they considered an American
effort to relegate Japan to the low end of the economic and technological spectrum. Instead,
the Japanese Ministry of International Trade and Industry (MITI) and other agencies of the
Japanese economic high command set their sights on making vanquished Japan into the
economic and technological equal, and perhaps even the superior, of the West. At the

42
opening of the twenty-first century, this objective has remained the driving force of Japanese
society.

In the Japanese scheme of things, the economy is subordinate to the social and political
objectives of society. Ever since the Meiji Restoration (1868), Japan’s overriding goals have
been making the economy self-sufficient and catching up with the West. In the pre–World
War II years this ambition meant building a strong army and becoming an industrial power.
Since its disastrous defeat in World War II, however, Japan has abandoned militarism and has
focused on becoming a powerful industrial and technological nation, while also promoting
internal social harmony among the Japanese people. There has been a concerted effort by the
Japanese state to guide the evolution and functioning of their economy in order to pursue
these sociopolitical objectives.
These political goals have resulted in a national economic policy for Japan best characterized
as neo-mercantilism; it involves state assistance, regulation, and protection of specific
industrial sectors in order to increase their international competitiveness and attain the
“commanding heights” of the global economy. This economic objective of achieving
industrial and technological equality with other countries arose from Japan’s experience as a
late developer and also from its strong sense of economic and political vulnerability. Another
very important source of this powerful economic drive is the Japanese people’s
overwhelming belief in their uniqueness, in the superiority of their culture, and in their
manifest destiny to become a great power.
Many terms have been used to characterize the distinctive nature of the Japanese system of
political economy: developmental state capitalism, collective capitalism, welfare corporatism,
competitive communism, network capitalism and strategic capitalism. Each of these labels
connotes particularly important elements of the Japanese economic system, such as its
overwhelming emphasis on economic development, the key role of large corporations in the
organization of the economy and society, subordination of the individual to the group,
primacy of the producer over the consumer, and the close cooperation among government,
business, and labor. Yet, the term “developmental state capitalism” best captures the essence
of the system, because this characterization conveys the idea that the state must play a central
role in national economic development and in the competition with the West. Despite the
imperative of competition, the Japanese frequently subordinate pursuit of economic
efficiency to social equity and domestic harmony. Many aspects of the Japanese economy
that puzzle foreigners are a consequence of a powerful commitment to domestic harmony;

43
and over-regulation of the Japanese economy is motivated in part by a desire to protect the
weak and defenseless. For example, the large redundant staffs in Japanese retail stores
developed from an effort to employ many individuals who would otherwise be unemployed
and discontented. This situation is also a major reason for the low level of productivity in
non-manufacturing sectors, and it accounts in part for Japan’s resistance to foreign direct
investment by more efficient foreign firms. The Japanese system of lifetime employment has
also been utilized as a means to promote social peace; Japanese firms, unlike their American
rivals, are very reluctant to downsize and lay off thousands of employees. At the opening of
the twenty-first century, however, Japan’s economic problems are causing this situation to
change. Nevertheless, the commitments to political independence and social harmony are
major factors in the Japanese state’s determination to maintain firm control over the
economy.
Following Japan’s defeat in World War II, the ruling tripartite alliance of government
bureaucracies, the governing Liberal Democratic Party (LPD), and big business began to
pursue vigorously the goal of catching up with the West. To this end, the state assumed
central role in the economy and specifically the elite pursued rapid industrialization through a
strategy employing trade protection, export-led growth, and other policies. The Japanese
people have also supported this extensive interventionist role of the state and believe that the
state has a legitimate and important economic function in promoting economic growth and
international competitiveness. The government bureaucracy and the private sector, with the
former frequently taking the lead, have consistently worked together for the collective good
of Japanese society.

Industrial policy has been the most remarkable aspect of the Japanese system of political
economy. In the early postwar decades, the Japanese provided government support for
favored industries, especially for high-tech industries, through trade protection, generous
subsidies, and other means. The government also supported creation of cartels to help
declining industries and to eliminate excessive competition. Through subsidies, provision of
low-cost financing, and especially administrative guidance by bureaucrats, the Japanese state
plays a major role in the economy. In this regard the Japanese state’s extensive use of what is
known as the “infant industry” protection system deserves special attention. Among the
policies Japan has used to promote its infant industries include the followings:

 Taxation, financial, and other policies that encouraged extraordinarily high savings
and investment rates.
44
  Fiscal and other policies that kept consumer prices high, corporate earnings up, and
discouraged consumption, especially of foreign goods.
 Strategic trade policies and import restrictions that protected infant Japanese
industries against both imported goods and establishment of subsidiaries of foreign
firms.
 Government support for basic industries, such as steel, and for generic technology,
like materials research.
 Competition (antitrust) and other policies favorable to the keiretsu and to inter-firm
cooperation.
Japanese industrial policy was most successful in the early postwar years when Japan was
rebuilding its war-torn economy. However, as Japan closed the technology gap with the West
and its firms became more powerful in their own right, Japan’s industrial policy became
considerably less significant in the development of the economy. Yet the population and the
government continued to believe that the state should play a central or at least an important
supportive role in the continuing industrial evolution of the economy.
3.3.3. The German System of Social Market Capitalism

The German economy has some characteristics similar to the American and some to the
Japanese systems of political economy, but it is quite different from both in other ways. On
the one hand, Germany, like Japan, emphasizes exports and national savings and investment
more than consumption. However, Germany permits the market to function with considerable
freedom; indeed, most states in Western Europe are significantly less interventionist than
Japan. Furthermore, except for the medium-sized business sector (Mittelstand), the
nongovernmental sector of the German economy is highly oligopolistic and is dominated by
alliances between major corporations and large private banks.
The German system of political economy attempts to balance social concerns and market
efficiency. The German state and the private sector provide a highly developed system of
social welfare. The German national system of political economy is representative of the
“corporatist” or “welfare state capitalism” of continental Europe in which capital, organized
labor, and government cooperate in management of the economy. This corporatist version of
capitalism is characterized by greater representation of labor and the larger society in the
governance of corporate affairs than in Anglo-Saxon share holder capitalism. Although the
continental economies differ from one another in many respects, in all of them the state plays
a strategic role in the economy. It is significant, especially in Germany, that major banks are

45
vital to the provision of capital to industry. While, in many European countries, employee
councils have some responsibility for running the company, in Germany labor has a
particularly important role in corporate governance. Indeed, the “law of co-determination”
mandates equal representation of employees and management on supervisory boards.
Although the power of labor on these boards can be easily overstated, the system is a
significant factor in Germany’s postwar history of relatively smooth labor relations.

The most important contribution of the German state to the economic success of their
economy has been indirect. During the postwar era, the German federal government and the
governments of the individual Lander (states) have created a stable and favorable
environment for private enterprise. Their laws and regulations have successfully encouraged
a high savings rate, rapid capital accumulation, and economic growth. Germany has a highly
developed system of codified law that reduces uncertainty and creates a stable business
climate; the American common law tradition guides U.S. business, and the Japanese
bureaucracy relies on administrative guidance.

At the core of the German system of political economy is their central bank, or Bundes bank.
The Bundes bank’s crucial role in the postwar German economy has been compared to that of
the German General Staff in an earlier German domination of the Continent. Movement
towards the European Economic and Monetary Union has further increased the powerful
impact of the Bundes bank. Although the Bundes bank lacks the formal independence of the
American Federal Reserve, its actual independence and pervasive influence over the German
economy have rested on the belief of the German public that the Bundes bank is the
“defender of the mark” (euro) and the staunch opponent of dreaded inflation. Indeed, the
Bundes bank did create the stable macroeconomic environment and low interest rates that
have provided vital support to the postwar competitive success of German industry.

On the other hand, the role of the German state in the microeconomic aspects of the economy
has been modest. The Germans, for example, have not had an activist industrial policy
although, like other advanced industrial countries, the government has spent heavily on
research and development. The German government has not also intervened significantly in
the economy to shape its structure except in the support it has given through subsidies and
protection to such dying industries as coal and shipbuilding and the state-owned businesses
such as Lufthansa and the Bundespost (mail and telecommunications). However, since the
early 1990s, these sectors have increasingly been privatized. On the whole, the German

46
political economy system is thus closer to the American market-oriented system than to the
Japanese system of collective capitalism.
3.3.4. Differences among National Political Economy Systems

While national systems of political economy differ from one another in many important
respects, differences in the following areas are worthy of particular attention: (1) the primary
purposes of the economic activity of the nation, (2) the role of the state in the economy, and
(3) the structure of the corporate sector and private business practices. Although every
modern economy must promote the welfare of its citizens, different societies vary in the
emphasis given to particular objectives; which range from promoting consumer welfare to
pursuit of national power, strongly influence and are influenced by such other features of a
national economy as the role of the state in the economy and the structure of that economy.

The purpose of economic activity in a particular country largely determines the role of the
state in that economy. In those liberal societies where the welfare of the consumer and the
autonomy of the market are emphasized, the role of the state tends to be minimal. Although
liberal societies obviously differ in the extent to which they do pursue social welfare goals,
the predominant responsibility of the state in these societies is to correct market failures and
provide public goods. On the other hand, in those societies where more communal or
collective purposes prevail, the role of the state is much more intrusive and interventionist in
the economy. Thus, the role of such states can range from providing what the Japanese call
“administrative guidance” to maintaining a command economy like that of the former Soviet
Union.

As for the role of the state in the economy, market economies include the generally laissez-
faire, non-interventionist stance of the United States as well as the Japanese state’s central
role in the overall management of the economy. And the mechanisms of corporate
governance and private business practices also differ; the relatively fragmented American
business structure and the Japanese system of tightly integrated industrial groupings (the
keiretsu) contrast dramatically with one another. Very different national systems of political
economy result from the variations in the basic components of economies.
.

The system of corporate governance and private business practices constitutes another
important component of a national political economy. American, German, and Japanese

47
corporations have differing systems of corporate governance, and they organize their
economic activities (production, marketing, etc.) in varying ways. For example, whereas
shareholders (stockholders) have an important role in the governance of American business,
banks have played a more important role in both Japan and Germany. In addition, regarding
business practices, whereas the largest American firms frequently invest and produce abroad,
Japanese firms prefer to invest and produce at home. The policies of each government have
also shaped the nature of business enterprise and business behavior through regulatory,
industrial, and other policies; furthermore, some national differences in corporate structure
and business practices have evolved largely in response to economic and technological
forces.
3.4. Core Issues, Governing institutions and Governance of International Political
Economy
3.4.1. International Trade and the WTO
WTO
The World Trade Organization (WTO) is an international organization which sets the rules for
global trade. This organization was set up in 1995 as the successor to the General Agreement
on Trade and Tariffs (GATT) created after the Second World War. It has about 150 members.
All decisions are taken unanimously but the major economic powers such as the US, EU and
Japan have been managed to use the WTO to frame rules of trade to advance their own
interests. The developing countries often complain of non-transparent procedures and being
pushed around by big powers.
What is International Trade? Most of you might have a basic understanding of trade but if
someone gives you his/her laptop computer in exchange for your brand new iPad it means
that you are engaged in trade. The exchange of a good or service for another illustrates a
particular type of trade, referred to as barter trade. In the contemporary period, however, the
great preponderance of trade involves the exchange of money for goods and services. This
type of trade can take place entirely within a domestic economy or internationally.
But there are a number of critical distinctions between domestic and cross-border trade.
While in cross-border trade the exchange of goods and services is mediated by at least two
different national governments, each of which has its own set of interests and concerns, and
each of which exercises (sovereign) authority and control over its national borders (In
practice, this means that even the “free trade’’ we know it from the standard definition of
free trade as “The unrestricted purchase and sale of goods and services between countries
without the imposition of constraints such as tariffs, duties and quotas” is never entirely free).

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Any ways, despite the long history of trade, it is important to recognize that the scope and
scale of cross-border trade is, today, immensely greater than at any other time in human
history. Why this is so? To the liberal economists, this is not a surprise because they are
convinced that cross-border trade is beneficial, both for individual national economies and for
the world as a whole. But even in the general public (especially in wealthy capitalist
economies), most people acknowledge that the antithesis of trade—namely, autarky (i.e., a
policy premised on complete economic independence or self-sufficiency)—is essentially
impossible and self-defeating in the industrial and post-industrial eras. Yet, one has to also
bear in mind that there is still ongoing debate revolving around both on practical political
issues—e.g., who benefits and who is harmed by trade—and also around deeper theoretical
disagreements. As a result, it is common to observe in the world disputes and frequently
serious tensions over trade.
This brings the question: “how is international/global trade governed?” One most common
answer is the idea that Global/Regional Free Trade Agreements govern it-i.e., institutions like
World Trade Organization (WTO) and North American Free Trade Agreement (NAFTA) or
similar other organizations. How does this work? In the case of NAFTA- a trade agreement
among the U.S., Canada, and Mexico- for example, “free trade” was initially meant a lesser
degree of governmental constraints in cross-border trade, but not an elimination of
government action. The tariffs were eliminated by mutual agreement in 2008; at the same
time, both Mexico and the U.S. also agreed that “import-sensitive sectors” could be protected
with emergency safeguard measures in the event that “imports cause, or threatened to cause,
serious injury to domestic producers”. In other words, the notion of free trade in NAFTA had
and still have significant element of protectionist /mercantilist policies such as a tax on
specific imported goods (tariff), prohibiting their importation (import ban), or imposing a
quantitative restriction (import quota). The latter two policies are examples of nontariff
barriers, or NTBs. Other types of NTBs include domestic health, safety, and environmental
regulations; technical standards (i.e., a set of specifications for the production or operation of
a good); inspection requirements; and the like.
3.4.2. International Investment and the WB
WB
The World Bank was created immediately after the Second World War in 1945. Its activities
are focused on the developing countries. It works for human development (education, health),
agriculture and rural development (irrigation, rural services), environmental protection
(pollution reduction, establishing and enforcing regulations), infrastructure (roads, urban

49
regeneration, and electricity) and governance (anti-corruption, development of legal
institutions). It provides loans and grants to the member-countries. In this way, it exercises
enormous influence on the economic policies of developing countries. It is often criticized for
setting the economic agenda of the poorer nations, attaching stringent conditions to its loans
and forcing free market reforms.
International/Transnational/global production (in short global FDI) is a type of production in
which different parts of the overall production process for a particular product take place
across different national territories and it is one major element of the international or global
political economy. To appreciate how many countries participate today in the production of a
single product, consider the following case for example.

From the above picture, one would observe that in a production of one particular model of
Swedish automobile, at least 38 major and minor components were manufactured in factories
spread throughout the world. In addition, it is likely that each of these manufacturers had
their own transnational system of production. This thus tells us that today transnational
production networks are immensely more complex and larger in scale and scope than at any
other time in history. What then explains such International production structure? Well,
casual observers have identified a number of major factors but one of the most important is
the drastic decrease in transport and communications costs which made transnational
production much more economically efficient. This is also reflected in the rise of efficiency-
seeking FDIs worldwide. Besides, the developments of new and better technologies and
improvements in global finance have also made it easier and more profitable to build
integrated production systems across borders.

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While investment and the development process in general in the developed countries is
predominantly governed by the interactions of multinational companies, in the developing
countries, on the other hand, they are directly or indirectly governed by the WB (some times
more powerfully than the governments of sovereign states).

The WB which was primarily designed as a vehicle for the disbursement of Marshall Plan
money set up to aid the (immediate) reconstruction of Europe. And, the end result was
exactly what the U.S. had hoped to achieve: a financially, economically, politically more
stable and stronger Europe. Later on, the bank expanded its influence to all developing
countries in Asia, Africa, and Latin America. However, unlike in the case of Europe, the
impact of the WB on the development of developing countries has been at best controversial
and at worst negative. This has largely to do with the ‘one size fits all’ types of excessive and
hard to implement policy prescriptions (mostly of the neo-liberal versions) of the bank to
developing countries and the tough aid/loan conditionality it often puts for policy
conformance. That is also why the bank’s relationship with the governments of the
developing countries who seriously want to defend their policy freedom has often been not
smooth.

3.4.3. International Finance and the IMF

IMF
The International Monetary Fund (IMF) is an international organization that oversees those
financial institutions and regulations that act at the international level. The IMF has 184
member countries, but they do not enjoy an equal say. The top ten countries have 55 per cent
of the votes. They are the G-8 members (the US, Japan, Germany, France, the UK, Italy,
Canada and Russia), Saudi Arabia and China. The US alone has 17.4 per cent voting rights.

The global financial system is divided into two separate, but tightly inter-related systems: a
monetary system and a credit system. The international monetary system can be defined as
the relationship between and among national currencies. More concretely, it revolves around
the question of how the exchange rate among different national currencies is determined. The
credit system, on the other hand, refers to the framework of rules, agreements, institutions,
and practices that facilitate the transnational flow of financial capital for the purposes of
investment and trade financing.

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3.5. Exchange Rates and the Exchange-Rate System
An exchange rate is the price of one national currency in terms of another. For example,
according to July 2013 rate, one U.S. dollar ($1) was worth 98.1 Japanese yen (¥), while one
British pound (£) was worth 1.54 U.S. dollars. Yet, in August 1998, one U.S. dollar was
worth 145.8 yen. Compared to the rate in July 2013, the difference is then almost 50 percent.
This implies that in August 1998, the yen was substantially “weaker” (the quotation marks
are used because a weak currency is not necessarily a disadvantage). What does this mean in
concrete terms? Well, say you have $2,000. In 1998, if you had traveled to Japan you could
have exchanged that $2,000 for 291,000 yen, but in 2013 that same $2,000 (to keep things
simple, disregard inflation) could be exchanged for only 196,000 yen. In short, you would
have a lot less Japanese yen to spend in 2013.

There are two main exchange rate systems in the world namely: fixed exchange rate and
floating exchange rate. In a pure floating-rate system, the value of a currency is determined
solely by money supply and money demand. In other words, this system exists only when
there is absolutely no intervention by governments or other actors capable of influencing
exchange-rate values through nonmarket means. A pure fixed-rate system, on the other hand,
is one in which the value of a particular currency is fixed against the value of another single
currency or against a basket of currencies. The IMF, which was set up as an ostensibly
neutral international financial institution, was designed to clearly represent U.S. interests and
power first and foremost, and the interests of the other major capitalist countries (the
developed economies) secondarily while governing the global finical system. This can be
seen, more concretely, from the way decision-making power within the IMF was designed-
i.e. voting power is determined by what the IMF calls a quota. A quota (or capital
subscription) is the amount of money that a member country pays to the IMF. Accordingly,
the more a country pays, the more say it has in IMF decision makings. And, it is the US that
tops up in this regard.

Activities:
 What are the existing problems in the current governance of international/global trade,
investment and finance?
 Do you think that global institutions such as the IMF, WB and WTO are relevant and
indispensable for governing international finance, international investment and
international trade? In other words, what do you think might things look like if there
were no IMF, WB and WTO?

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Chapter Four: Globalization and Regionalism
Introduction
Globalization and Regionalism are two major phenomena influencing global trend. Both as a
form of integration and differentiation among states characterize a form of reorganization of
interstate relations: formal and informal. Globalization is often understood as a phenomena,
or a process characterized by increasing interconnectedness or interdependence. In short, it is
a supra regional process bringing the world into one global village.The economy, politics,
and technology have been the driving forces of globalization. Regionalism, on the other hand,
is conceived as a way of dealing with politico-economic, social, military and security issues
affecting states in common.
Both developments have continued to significantly shape the nature of global politics, peace
and security. The mutual causation between regionalism and globalization is an area of
unsettling debate involving convergence, divergence and overlap. This chapter, therefore,
brings the whole theoretical and practical debates around regionalism, regional integration,
globalization and the interplay among them in influencing global trends.

Objectives
After successfully completing this chapter students should be able to:
 Conceptualize the concepts of globalization and regionalism
 Expose themselves with the contemporary debates on the essence and direction of
globalization
 Develop a position regarding the essence and effects of Globalization
 Analyze the impacts of globalization on Africa, Ethiopia and the developing world
 Explain the theoretical caveats and practice of regionalism and regional integration
 Explain the mutual interaction between regionalism and globalization
4.1. Defining Globalization
Globalization can be defined as a multidimensional process characterized by: (1) the
stretching of social and political activities across state (political) frontiers so that events,
decisions, and activities in one part of the world come to have significance for individuals
and communities in other parts of the world. For instance wars and conflicts in developing
countries would increase the flow of asylum seekers and illegal migrants in to the developed
countries; (2) the intensification or the growing magnitude of interconnectedness in almost
every aspect of social existence from the economic to the ecological, the spread of HIV-
AIDS, from the intensification of world trade to the spread of different weapons; (3) the

53
accelerating pace of global interactions and process as the evolution of worldwide systems of
transport and communication increases the rapidity of or velocity with which ideas, news,
goods, information, capital and technology move around the world; (4) the growing extensity
and velocity of global interaction is associated with a deepening enmeshment of the local and
global insofar as the local events may come to have global consequences and global events
may come to have serious local consequences creating a growing collective awareness of the
world as shared social space, i.e. globality or globalism.
Although geography and distance still matters it is nevertheless the case that globalization is
synonymous with a process of time-space compression-literally meant that in the shrinking
world events or actions no longer coincides with the place in which it takes place. In this
respect globalization embodies a process of deterritorialization, viz., as social, political, and
economic activities are increasingly stretched across the globe they become in a significant
sense no longer organized solely according to territorial logic. For example terrorist and
criminals operate both locally and globally.

Another example is that under the condition of globalization, national economic space is no
longer coterminous with national territorial space since, as in the case of many U.S
companies based their headquarters in Europe. This indicates that, in the globalized world,
territorial borders no longer demarcate the boundaries of national economic or political space.
This is not to argue that territory and borders are now irrelevant but rather to acknowledge
that under condition of globalization this relative significance, as constrains of social action
and exercise of power, is declining. Note only that the distinction between the domestic and
international, inside and outside the state breaks down.

4.2. The Globalization Debates

Globalization is a contentious issue in international relations. There has been intense debate
as to the direction, nature and effect of globalization on states. In this regard, there are three
perspectives: the hyper-globalists, the skeptics, and transformationalists. Each perspective
delivers a distinct response to the questions of: what is new about globalization; and what are
its political consequences for sovereign statehood?

4.2.1. The Hyper-globalists

For the hyper-globalists, globalization today defines a new epoch in human history in which
nation states become obsolete to regulate their economy and boundary. This view of
globalization privileges the economic over the political, the market over the state, and
prefigures the decline of states. Advocates of this view argue that economic globalization is

54
bringing about a de-nationalization/ de-territorialization of economies through the
establishment of transitional networks of production, trade and finance. In this borderless
economy national governments are relegated to little more than transmission belts for global
capital or ultimately powerless institutions marginalized by the growing significance of local,
regional and global mechanisms of governance. In this respect the hyper-globalists share a
conviction that economic globalization is bringing about the decline of states. The cumulative
effects of these forces would make the state ineffective to fullfill the demands of its citizens.

Furthermore; the hyper globalists claim that economic globalization is generating a new
pattern of losers as well as winners in the international economy. The already existing South-
North gap has been considered as acronyms as a new international division of labor emerges
with more complex economic configuration of economic power. The competitive nature of
the market would bring new economic class as winners and losers; hence this put a challenge
for the state, especially welfare states, to helping those losers under the constraint of liberal
market economy.

Hyper-globalist further argue that globalization is imparting new liberal ideas and implant
culture of modernization replacing the traditional culture having an impetus towards creating
a new global order marked by uniform cultural values or way of life.

4.2.2. The Skeptics

The skeptics rejected the view of super- globalist as a myth, flawed and politically naïve
since it fundamentally underestimate the enormous power of national governments to
regulate international economic activities. For them, rather than being out of control, the
force of globalization, which is synonymous to internationalization, very much dependent on
the regulatory power of the state to ensure the continuation of economic liberalism. States are
central actors and agents of globalization playing central role in shaping and regulating the
economic activities including the Trans-boundary flows of ideas, goods and peoples.

Skeptics also undermine the view that the world is interconnected and moving into a village
where by there exist a free flow of goods and services, investment and circulation of money
from one corner of the world in to another. For them, the so called globalization is not more
than regionalization that is being manifested in the emergence of financial and trading blocs
in Western countries, North America, in Asia and to some extent in Africa. For instance in
Europe, there exists EU as site and expression of globalization; in North America, there exist
a trading bloc, NAFTA, ASEAN in Asia. And we have seen more interconnectedness at

55
regional level lesser than at the global level. For that matter, Skeptics argues that there is no
free flow of goods, resources, technology and finance at the global level; instead we have
regional based globalization.

In this regard, it has become evident that the Western region is more intergraded and
globalized than the other part of the world such as Africa and Asia. In fact these countries are
in one way or another interconnected in terms of trade; yet we have seen less instantaneous
flow of technology, financial capital from the west to Africa and other developing countries.
The Sceptics thus do not believe that globalization would help to narrow the economic and
technological gap that is still prevailing between the Global North (developed Countries) and
The Global South(Developing countries). So, for the Skeptics, globalization brings nothing
new, rather it is just the crystallization the already existing realities of the world which has
been marked by the North-South gap reflected in terms of the deeply rooted patterns of in
equality and hierarchy.

4.2.3. The Transformationalist

This group views that globalization is a critical driving force behind the rapid social, political
and economic changes which are reshaping societies and international politics. According to
the proponents of this view ,the contemporary process of globalization are historically
unprecedented such that governments and societies across the globe are having to adapt to a
world in which there is no longer a clear distinction between the international and domestic
affairs. At the core of the transformationist view is the belief that globalization is
reconstituting or reengineering the power, function and the authority of the state.

Even though the state has ultimate legal power to control events inside its boundary, it can’t
command sole control over trans-boundary issues, actors, resource movements. Under
globalization, national economic space no more coincides with state boundary.

In arguing that globalization is transforming or reconstituting the power and authority of

national governments, they however reject both the hyper globalist view of the end of the
sovereign state as well as the Sceptics claim that nothing much has changed. Instead they
assert that a new sovereignty regime is displacing traditional conception of state power as an
absolute, indivisible, territorially exclusive power. Accordingly, sovereignty today is best
understood as “….less a territorially defined barrier than a bargaining resource for a politics

56
characterized by complex transnational network. Under globalization, there are non-state
actors as MNCs, transnational social movements, international regulatory agencies.

In this sense world order can no longer be conceived as purely State-Centric or even
primarily state managed as authority has become increasingly diffused amongst public and
private agencies at the local, national, regional and at global levels i.e. downward, upwards
and sideways. This does not mean that the power of national government is necessarily
diminished but on the contrary it is being redefined, reconstituted and restructured in
response to the growing complexity of process of governance in a more interconnected world.

Activities:
 Discuss the different views on the ongoing debates about globalization?
 Which line (s) of debate is more compelling? Explain why?
4.3. Globalization and Its Impacts on Africa

Specific impacts of globalization on Africa can be identified. In the political sphere, the most
important consequence is the erosion of sovereignty, especially on economic and financial
matters, as a result of the imposition of models, strategies and policies of development on
African countries by the International Monetary Fund, the World Bank and the World Trade
Organization. On the other hand, globalization has promoted greater respect for human rights
and contributed to the development of an African press. This has opened African countries to
far greater scrutiny than in the past, making it somewhat more difficult for African
governments to get away with blatant and excessive abuses of democratic governance and
transparency. However, this positive development is negated by the fact that these principles
of democratic governance and transparency tend to be applied selectively and subjectively.
More important is the fact that globalization for the most part does not facilitate the
establishment of the economic conditions necessary for genuine democracy and good
governance to take solid roots and thrives.

In this regard globalization has negative impacts on the development and effective
governance of African States. One form of this is the reduction of the capacity of
governments to determine and control events in their countries, and thus their accountability
and responsiveness to their people, given the fact that the context, institutions and processes
by which these decisions are taken are far from democratic. In addition, the fragmentation of
national economies, polities, societies and cultures that are triggered by globalization weaken
national consciousness and cohesion, leading to social divisiveness and instability, which in
57
turn facilitate the emergence of authoritarian rule. Strong countries are, however, in a better
position to fend off these negative consequences and may even see their democracies
strengthened.

One major positive impact of globalization on Africa is that it has made available information
on how other countries are governed and the freedoms and rights their people enjoy. It has
also opened African countries to intense external scrutiny and exercised pressure for greater
transparency, openness and accountability in Africa. However, most of the forces unleashed
by globalization have had a negative impact on the growth and consolidation of democratic
governance in Africa. Among these are the following:

 While calling for greater accountability and responsiveness of leaders to their

people, globalization has often pressured African leaders to adopt policies and
measures that are diametrically opposite to the feelings and sentiments of the vast
majority of their people. This has led to the rise or reinforcement of authoritarian
regimes. A good recent example of this is the pressure on many African
governments to take certain measures in the fight against terrorism at the behest of
external powers;
 By defining basic and generally accepted principles of democratic governance,
such as good governance, transparency and accountability, in narrow terms,
conditioned by particular historical, political, social, and cultural factors, while
leaving little or no room for adapting them to different societies and cultures,
democracy takes on the image of something alien and imposed from the outside.
Support for the fundamental principles of democracy is thus undermined, cynicism
arises, and the effort itself fails to develop roots in the countries to which they are
being artificially transplanted.
 Globalization leads to the development of anti-developmentalism by declaring the
state is irrelevant or marginal to the developmental effort. Development strategies
and policies that focus on stabilization and privatization, rather than growth,
development and poverty eradication, are pushed by external donors, leading to
greater poverty and inequality and undermining the ability of the people to
participate effectively in the political and social processes in their countries.
Welfare and other programs intended to meet the basic needs of the majority of the
population are transferred from governments to non-governmental organizations
that begin to replace governments in the eyes of the people. As a result,

58
 governments lose what little authority and legitimacy they have. The consequent
gap between government leaders and the public leads to alienation of the
population from the political process and creates a favorable environment for the
emergence of non-representative governments.
 By imposing economic specialization based on the needs and interests of external
forces and transforming the economies of African countries into a series of enclave
economies linked to the outside but with very little linkages among them, divisions
within African countries are accentuated and the emergence of national
consciousness and the sense of a common destiny is frustrated. Democracy, with its
emphasis on tolerance and compromise, can hardly thrive in such an environment.
 Further, because the economic specialization imposed on African countries makes
rapid and sustainable growth and development impossible, conflicts over the
distribution of the limited gains realized from globalization become more acute and
politicized. Vulnerable groups, such as women, the youth, and rural inhabitants,
fare very badly in this contest and are discriminated against. This further erodes the
national ethos of solidarity and reciprocity that are essential to successful
democracies.
 Lastly, globalization, by insisting on African countries opening their economies to
foreign goods and entrepreneurs, limits the ability of African governments to take
proactive and conscious measures to facilitate the emergence of an indigenous
entrepreneurial class. Consequently, due to their weakness and incapacity to
operate on a national basis, rather than being forces for national integration and
consolidation as was and is the case of European and American entrepreneurs,
African entrepreneurs reinforce social divisions based on ethnicity, religion, race,
language, culture, and location.
Economically, globalization has, on the whole, reinforced the economic marginalization of
African economies and their dependence on a few primary goods for which demand and
prices are externally determined. This has, in turn, accentuated poverty and economic
inequality as well as the ability of the vast number of Africans to participate meaningfully in
the social and political life of their countries. Economic and social stagnation has also
triggered a substantial brain- drain from Africa, further weakening the ability of African
countries to manage their economies efficiently and effectively. As a result of the cultural
domination from outside that goes with globalization, African countries are rapidly losing
their cultural identity and therefore their ability to interact with other cultures on an equal and

59
autonomous basis, borrowing from other cultures only those aspects that meet its
requirements and needs.

Finally, while the scientific and technological forces unleashed by globalization have
facilitated to some extent access by Africans to advanced technology and information, this
has been at the expense of stultifying the indigenous development of technology and
distorting patterns of production in Africa, notably by utilizing capital as against labor
intensive methods of production, which in turn increases unemployment and poverty. Overall
therefore, the negative consequences of globalization on Africa far out way their positive
impact.

4.4. Ethiopia in a Globalized World

Ethiopia like any other country found itself facing a fast track of multidimensional changes
that positively and negatively affected its place in the globe. For instance, the triumph of
western free market economy and liberal democracy has put the country’s defiant political
economic policy in a head-on collision course with the requirements of Briton woods
institutions and western powers. This indeed has its mark on the development aid and loan
Ethiopia managed to secure to finance its national development projects and design its own
economic policy independently. Nevertheless, with meticulous planning and strategic
thinking, Ethiopia achieved amazing economic transformation and gained a lot from the
positive opportunities of globalization. It has also benefited from the technological and
knowledge transfer, free movement of ideas, people and finance.
The other side of the globalization coin shows negative impacts on Ethiopia. Among others,
the expansion of information communication opened the historically closed doors of Ethiopia
to new values that affected its people. This is reflected western cultural erosion and omission
of indigenous cultures and values. Socio-cultural impact of western values is amply observed
in urban centres. The prevalence of human trafficking and migration is partly attributable to
the onset of globalization. To sum up, Ethiopia has benefited less from globalization than its
negative influences.
Activity:
 Discuss the positive or negative impacts of globalization on the developing
countries in general and Africa/ Ethiopia in particular by looking at their:
 Economy
 Politics

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  Culture
 Security
4.5. Pros and Cons of Globalization

Globalization has its merits and demerits. Among the leading merits of globalization are the
expansion of democratic culture, human right and the protection of historically minority and
subaltern groups. Innovation in science, medicine, and technology and information
communication has enabled the improvement of quality of life. Agricultural technological
expansion resulted in the lifting out of millions of people out of poverty. The technological
and social revolution significantly contributed to advancement of human security and safety.
Moreover, the free movement of good, service, people, ideas, expertise, knowledge and
technology across national borders strengthened international interdependence. This in turn
contributed to the birth of a new sense of global society and the perspective of global
citizenship that contradicts the classical idea of citizenship limited national borders and
defined by nationalism and patriotism. The emergence of the idea of global civil society also
pertains to this phenomenon. States ceased to be the sole actors and referents of international
relations and diplomacy, and conception of security as well. Along with it emerged the
responsibility of states to protect their citizens and the shared responsibility of the global
society for protecting vulnerable groups from human right violations and victimization.
Furthermore, economists characterize the rapid economic growth in some countries of the
south to globalization.

However, globalization is not also without its demerits. It is an aspect of Western imperialism
of ideas and beliefs eroding and inroading the sovereignty of non-Western countries. For
example, while wealth and power of the multinationals seems to have increased significantly,
neither they nor national governments have so much control over macro-economic forces as
they would like. Global capital and international financial institutions like WB and IMF made
free inroads into countries of the south influencing the economic and political dynamics of
negatively. With technological advancement, climatic, environmental and technological risks
have multiplied. Globalization, in the sense of connectivity to the global economic and
cultural life, brings with it a different order than what it was before threatening the continuity
of non-Western age-old traditions, way of life and cultural values.

Besides, globalization has made the globalization of risks, threats and vulnerabilities like
global terrorism, religious fundamentalism, proliferation of Small Arms and Light Weapons

61
(SALWs), arms and human trafficking. Moreover, globalization has stimulated the
emergence of a simultaneous but opposite process of Glocalization, which involves a process
of integration to the world and differentiation to the local. This process has contributed to the
rise of radical nationalism and ethnicity, which set the context for the emergence of the era of
identity and identity conflicts. In general, without denying the opportunities of globalization,
countries of the global south have faced multidimensional economic, political, socio-cultural,
security and military challenges induced by globalization.

4.6. Defining Regionalism and Regional Integration

Region can be defined as a limited number of states linked together by a geographical

relationship and by a degree of mutual interdependence (Nye, 1968). Regionalism
consequently refers to intensifying political and/or economic processes of cooperation among
states and other actors in particular geographic regions, which can be developed either 'from
below' i.e. from the decisions by companies to invest and by people to move within a region
or 'from above' i.e. from political, state-based efforts to create cohesive regional units and
common policies for them; or from both approaches. Regionalism normally presents the
sustained cooperation (either formal or informal) among governments, non-governmental
organizations, or the private sectors in three or more countries for mutual gains (Allagappa
1994; Palmujoki 2001; Griffiths and O'Callaghan 2004).
Regionalization can be conceived as the growth of societal integration within a given region,
including the undirected processes of social and economic interaction among the units (such
as nation-states; see Hurrell 1995a). As a dynamic process, it can be best understood as a
continuing process of forming regions as geopolitical units, as organized political cooperation
within a particular group of states, and/or as regional communities such as pluralistic security
communities (Whiting 1993). Similarly, the term regionalism refers to the proneness of the
governments and peoples of two or more states to establish voluntary associations and to pool
together resources (material and nonmaterial) in order to create common functional and
institutional arrangements. Furthermore, regionalism can be best described as a process
occurring in a given geographical region by which different types of actors (states, regional
institutions, societal organizations and other non-state actors) come to share certain
fundamental values and norms. These actors also participate in a growing network of
economic, cultural, scientific, diplomatic, political, and military interactions (Mace and
Therien 1996).

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The occurrences of regionalism have mushroomed across all parts of the world. In contrast,
the theories to explain these developments are limited (Soderbaum 2003). Most of the
theories have been developed under the dominant European contexts. This is due largely to
the location of regionalism and its successful story has been in the specific context of Europe.
Later, we experienced the successful regional grouping in North America. By and large, these
developments are considered as Western approaches to regionalism. As a result, these
theories are hardly relevant to the development of regionalism outside the West including the
region of Southeast Asia (Hurrell 1995). Therefore, this section is an attempt to demonstrate
theories that explain the possibilities of the formation of regional grouping as much as
possible. While it does not avoid the influence of the Eurocentric approaches, it seeks to book
beyond the European success to include other aspects as well.
4.6.1. The Old Regionalism

For many scholars, regionalism, as a voluntary and comprehensive process, is predominantly

a post-World War II phenomenon. It emerged in Western Europe in the late-1940s,
subsequently spreading to the developing world. Old regionalism lost much of its dynamism
in Europe in the early 1970s and gradually, also in the developing world. As will become
evident below, it is relevant to try separating the European-centered debate from the debate in
the developing world.

Regional Integration in Europe and Beyond

Old regionalism has its roots in the devastating experience of inter-war nationalism and
World War II. It is therefore closely linked to the discussion about ‘regional integration’ in
Europe, in particular to the formation of the European Communities. In contrast to earlier
discussions that centered on mercantilism and competing alliances, post-War scholars usually
viewed the (Westphalian) nation-state as the problem rather than the solution, and the
purpose of regional integration was to achieve and consolidate peace and stability.
Immediately after the Second World War, there was a lot of discussion about European
regionalism, not least about reconstruction and reconciliation between France and Germany.
A series of initiatives were launched, which resulted in the European Coal and Steel
Community (ECSC) in 1951. The long-term goal was more ambitious, and in 1958 the
European Economic Community (EEC) and the European Atomic Energy Community
(EAEC) were integrated into the EC through the Treaty of Rome. The influence of EU goes

63
beyond being successful experiment in regionalization and came to dominate the discourse on
regionalization.
As Breslin et al. (2002: 2) point out, they “used the European experience as a basis for the
production of generalizations about the prospects for regional integration elsewhere”. This
resulted in difficulties in identifying comparable cases, or anything that corresponded to their
definition of ‘regional integration’. The treatment of European integration as the primary case
or ‘model’ of regional integration still dominates many of the more recent studies of
regionalism and regional integration,

Regional Integration in Africa

There was also an old (or classical) debate in the developing world, especially in Latin
America and Africa, but to some extent also in Asia and other developing regions. As
previously indicated, the discussion about regionalism in the developing world was closely
linked to colonialism/anti-colonialism and the quest to facilitate economic development in the
newly independent nation-states. Many of the discussions about regionalism in the
developing world were heavily influenced by the structuralist tradition of economic devel-
opment, pioneered by Gunnar Myrdal, Arthur Lewis, and Raúl Prebisch. In sharp contrast to
the European debate, which focused heavily on regional integration, the keywords here were
development, state-promoted industrialization and nation-building, first and foremost through
protectionism and import-substitution.

The Latin American structuralist discussion about underdevelopment reflected specific

economic experiences in various countries, particularly in terms of trade problems. The
depression of the 1930s also had severe impact on Latin American development, creating
pressure for change. Encouraged by the United Nations Economic Commission for Latin
America (ECLA) and its dynamic Executive Secretary, Raúl Prebisch, the vision was to
create an enlarged economic space in Latin America in order to enhance import substitution
regionally when it became exhausted at the national level. Liberalized intra-regional trade in
combination with regional protectionism seemed to offer large economies of scale and wider
markets, which could serve as stimulus to industrialization, economic growth, and investment
(Prebisch 1959).

From this perspective, the rationale of regional cooperation and integration among less
developed countries was not to be found in functional cooperation or marginal economic
change within the existing structure, but rather, through the fostering of ‘structural

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transformation’ and the stimulation of productive capacities (industrialization), whereby
investment and trading opportunities were being created. The structuralist school thus shifted
its focus away from economic integration as means for peace and political unification, to one
of regional economic cooperation/integration as means for economic development and state-
formation. The dependent variable, as well as the underlying conditions for regionalism, was
so different that it called for a different theory, according to which Europe and the developing
world were not comparable cases (Axline 1994: 180).
This type of regionalism resulted in the creation of the Latin American Free Trade
Association (LAFTA) in Montevideo in 1960. LAFTA was a comprehensive and continental
project and included all countries on the South American continent plus Mexico. However, in
spite of some early progress and lively theoretical discussion, which has become
internationally known as central to the history of economic thought the old regionalism in
Latin America made little economic impact and was never implemented on a larger scale.
Regionalization in Latin America during 1960s and 1970s did not materialized because of
conflict and military dictatorship. Yet, at discourse level it was robust that it had ample
include on the dynamics of regionalization in Africa. The debate between the Federalist
Casablanca and Monrovia groups had also its own influence. The major ideological influence
on regional cooperation and integration, however, is embodied in the founding principles of
OAU and later AU such as Lagos Plan of Action (1980) and the Abuja treaty (1991). The
major purpose of regionalization was to resist colonial and post-colonial influence,
protectionism and realizing import substitution. Among the various state led regional
organizations in Africa were the CFA (Community of French Africa), East African
Community (EAC) and SACU (Southern African Community Union). The SADCC (The
Southern Africa Development Coordination Conference, a predecessor of the SADC) was
established to against the influence of Apartheid and external dependency (Söderbaum,
2015).

4.6.2. New Regionalism

The prospects of the fall of the Berlin Wall together with the 1985 White Paper on the
internal market and the Single European Act resulted in a new dynamic process of European
integration. This was also the start of what has often been referred to as ‘new region alism’ on
a global scale. The new regionalism referred to a number of new trends and developments,
such as the spectacular increase in the number of regional trade agreements, an externally
oriented and less protectionist type of regionalism, an anti-hegemonic type of regionalism

65
which emerged from within the regions themselves instead of being controlled by the
superpowers, the rise of a more multi-dimensional and pluralistic type of regionalism, which
was not primarily centered around trading schemes or security cooperation and with a more
varied institutional design, and the increasing importance of a range of business and civil
society actors in regionalization.
Activities:
 What do the terms ‘Regionalism’ and ‘Regional integration mean?
 Discuss the difference between Old regionalism and New regionalism
 Compare the European and African experiences of regional integration
Many scholars emphasized the fact that the new wave of regionalism needed to be related to
the multitude of often inter-related structural changes of and in the global system in the post-
Cold War era, such as the end of bipolarity, the intensification of globalization, the recurrent
fears over the stability of the multilateral trading order, the restructuring of the nation-state,
and the critique of neoliberal economic development and political systems in developing as
well as post-communist countries (cf. Gamble/Payne 1996; Hettne et al. 1999).
According to Söderbaum, the difference between old and new regionalism can be
summarized as provided in the table below:
Old Regionalism New Regionalism
World Order World order context Bipolar world Cold War
Context
Links between Taming nationalism (in Resisting, taming or advancing
National, Regional, Europe) or Advancing economic globalization
and Global modes nationalism (in South)
of governance
Sectors, Actors & Sector specific State-centric Multi-sectoral State vs. non-state actors
Forms of Formal regionalism Hard Regionalism vs. regionalization Formal
Organization regionalism vs. informal Hard vs. soft
Ontology Regional integration Ontological pluralism, confusion and
Regional organizations (& disagreement Regionalism
subsystems) Clear regional Regionalization Regional organizations
boundary lines
Epistemology Dominance of positivism & Rationalism vs. constructivism vs.
rationalism & materialism critical theory Materialism vs.
(and some structuralism in ideas/identities Epistemological
the South) conflict
Methodology Europe-focused Rigid Regional specialization (parochialism)
comparison vs. false universalism (Eurocentrism)
Comparison as parallel case studies or
quantitative studies Little dialogue

66
 between EU studies and IR/IPE
regionalism
Table 1: The Difference between Old and New Regionalism
Source: (Söderbaum, 2015)
The historical dynamics of the old and the new regionalism at global level can be summarized as
follows:
Two Waves of Regionalism (Selected Organizations)
First Wave: 1950s-1970s
Europe and Soviet Bloc Latin America
-NATO (1949-) -OAS (1948-)
-WEU (1955-) -RIO Pact (1947-)
-Warsaw Treaty Organization (1955-1991) -Central American Common Market ( 1961-)
-Council of Europe ( 1948-) -Andean Community (1969-)
-ECSC (1952-) -CARICOM (1973-)
-EEC and -Euratom (1958-1992) -LAFTA (1969-1980)
-COMECON (1948-1991) Middle East
West and East Asia -League of Arab States (1945-)
-CENTO (1950s) Africa
-SEATO (1954-1975) -OAU (1964-2002)
-ASEAN (1967-)
Second Wave: 1980s-1990s
Europe Latin America
-CSCE (1975-) -Mercosur (1991-)
-EU (1992) -FTAA (1994-)
-CIS (1991-) -NAFTA (1993-)
Asia and Asia-Pacific Africa
-APEC (1989-) -ECOWAS (1975-)
-ARF (1994) -SADC (1992-)
Middle East -CoMESA (1994-)
Gulf Cooperation Council (1984) AU (2002-
Table 2: The Two Waves of Regionalism
Source: Margaret P. Kans and Karen A. Mingst (2005: 152)

4.7. Major Theories of Regional Integrations

4.7.1. Functionalism
Functionalist viewed regionalism as a functional response by states to the problems that
derived from regional interdependence. It was seen as the most effective means of solving
common problems. Regionalism has started from technical and non-controversial issues and
has spilled over into the realm of high politics and redefinition of group identity around the
regional unit (Hurrell 1995). According to functionalism, the task of policy makers is to
encourage the states to peacefully work together. The like-minded states would spread the

67
web of international activities and agencies in which and through which the interests and life
of all states would be gradually integrated from one activity to others (Mitrany 1946).
Regional organization was then built up to cope with one common problem and spill over to
other problems and areas of cooperation, which will deepen integration among member
states. Therefore, 'spillover' is the key explanation of _functionalist regionalism. According to
fiurrell (1995), there were two sorts of spillover. First, functional spillover whereby
cooperation in one area would broaden and deepen further areas; and second, political
spillover whereby the existence of supranational institutions would set in motion a self-
reinforcing process of institution building. The end-result would be a shift in loyalties from
nationalism towards regionalism, a new center whose institutions possesses or demands
jurisdiction over the pre-existing national states (Ernst 1958; Hurrell 1995). Accordingly, the
functionalist and neo-functionalist approaches presume that cooperation across national
borders particularly in the economic field spreads out to other sectors. This spillover effect
leads finally to the formation of supranational institutions and to the diminishing role of the
nation-state (Palmujoki 2001).
Karns and Mingst (2005) argue that functionalism is applicable at both regional and global
levels; and later mention that the overwhelming number of international governmental
organizations (IGOs) could be classified as functional. That is, they have specific mandates,
link to economic issues, and limited memberships, often related to geographic region.
Notably, their statement could be deliberately illustrated by Thomas George's (1997)
position. George states that functionalism is a global approach rather than a regional approach
and neo-functionalism is derived from the functionalist doctrine and was applied in a regional
context with some modifications. In this regard, the process and dynamics of cooperation
under neo-functionalist approaches will work automatically to cope with the facing issues. As
a result, political decisions are needed at any key point and these may or may not be taken
(Karns and Mingst 2005). Therefore, functional spillover has to be in tandem with political
spillover in order to reinforce each other.

4.7.2. Neo-functionalism
Neo-functionalism emerged in the 1960s based on the key works of Ernst Haas and Leon
Lindberg. The model of integration is based on the following basic principles. Neo-
functionalism included clear departures from transactionalism, federalism and functionalism,
which made it clearly a distinct and independent theoretical entity. First, the clearest
difference existed between neo-functionalism and transactionalism. Transactionalism had

68
defined integration as a condition, and the attainment of integration was measured by the
existence of a 'security-community'. Neo-functionalists, on the contrary, defined integration
as a process:
'Political integration is the process whereby political actors in several distinct national
settings are persuaded to shift their loyalties, expectations and political activities towards a
new centre, whose institutions possess or demand jurisdiction over the pre-existing national
states. The end result of the process of political integration is a new political community,
superimposed over the pre-existing ones.'(Haas 1968, 16).
Another distinguishing principle of neo-functionalism, as identified by Ben Rosamond is the
emphasis on political agency in integration process (Rosamond, 2002). It considers
integration as a process with special focus on political integration. According to Lindenberg,
the following preconditions for the success of an integration process. These conditions
included according to him: 1) Central institutions and central policies should be established
and developed, because only they can assure that someone represents and promotes the
'regional view' as well as solves disputes between member states; 2) Their tasks and capacity
to implement those tasks should go well beyond the mandate of normal international
institutions; 3) Their tasks should be inherently expansive; 4) There should be some link
between the interests of member states and the process of integration. (Lindberg 1963, 7-13).
An important concept is spill over, originally coined by Haas, refereeing to the process of
integration from the political sphere into other aspects of life. Lindberg considers integration
as “inherently expansive task” that has to begin from the political sphere. The spill over
according to Lindberg is a condition that a given action leads to a certain goal and that
arranges a condition for the creation of a new action. Similarly, spill over in regional
integration follows the same logic of embarking a certain action that achieves a degree of
integration and creates a condition for integration at advanced and wider scale. In effect, it
deepens the process of integration.

Inter-governmentalism
Inter-govemenmetalism or liberal intergovernmentalism is a theory and approach that focus
on the state for integration to succeed. It approaches the question of the state in an integration
process from the perspective of traditional international relations. It thus considers the state
mainly as an actor in the international system and the integration process to be a process in
that system. According to Moravcsik integration can be considered as part of the rational
choice of state actors. This rationalist framework disaggregates the process of integration into

69
three stages: national preference formation, interstate bargaining and institutional choice. In
the first stage, the degree of integration depends on the interests of influential domestic
constituents exercising pressure over their governments. Moravcsik (1993) explains that “the
foreign policy goals of national governments vary in response to shifting pressure from
domestic social groups, whose preferences are aggregated through political institutions”. For
example, national governments may pursue international agendas in the fields of trade and
agriculture to satisfy domestic producer groups. Nevertheless, he argues that national
preference formation regarding cooperation in the field of foreign and defence policy is
subject to geopolitical interests, revolving around a state’s ideological commitment. The
problem with this approach is that international relations have not given much weight to the
domestic level or the society in the state’s foreign policy decisions.
Supra-nationalism
In order to understand the supranational perception of European integration, we must first
study the original theory from which this line of thought has been derived: Neo-
functionalism. The roots of Neo-functionalism lie most visibly in the works of Haas (1958)
on European integration (Rosamund, 2000), who has developed three mechanisms through
which he thought European integration progresses: first, positive spillover effects; second, a
transfer of allegiances from the national to the supranational political arena; and third, a
‘technocratic automaticity,’ referring to an increasingly autonomous role of supranational
institutions in promoting further integration. The spillover effect occurs when integration
between states in a particular sector incentivizes integration in other sectors too. One
incentive is, for example, that the optimization of common benefits of integration in the
original sector requires integration in other sectors (Lindberg, 1963). The second mechanism
refers to a process by which domestic interest groups shift their activities from the domestic
to the international realm. Oftentimes national institutions provide less effective ways for
interest groups to pursue their end goals than international institutions do. Finally, the third
mechanism is a process in which established supranational institutions develop an interest of
their own: encouraging deeper and broader integration. In the European case, the European
Commission, established to coordinate and implement integration strategies, has an intrinsic
interest to expand its competencies.
In sum, Haas first sees integration as a process led by elitist groups, like leaders of industry
associations or political parties, who recognize a lack of opportunities in pursuing a shared
interest at the domestic level and then push national governments to transfer policy
competence to a supranational body. Then, once supranational institutions are created,

70
international interdependence grows, and interest groups or political party leaders can shift
their loyalties away from national institutions by choosing to pursue their interests through
newly established international institutions.

Activity:
 Compare and contrast the major theories of regional integration based on their
assumptions, core propositions and policy prescriptions
4.8. Selected Cases of Regional Integration
Regional integration across the world followed divergent trajectories. Yet, it was mainly
influenced by the development in Europe. Owing to the ample influence of the European
experience, one can reasonable say that the idea of regional integration is Eurocentric. In this
section are briefly discussed three cases of regional integration namely the European Union,
Association of South East Asian States (ASEAN) and African Union.

The European Union began as European Economic Community underwent changes and
transformation creating common market, currency, institutional and policy harmonization
that at last became the European Union as one consolidated regional organization. It
continued to influence the experiment of regionalism in the rest of the world. AU evolved
from the Organization of African Unity, which expired after realizing the objective of
ensuring the decolonization of all African countries. The AU imitating EU was established to
realize the unification of African markets towards eventual political unification. Since its
establishment in 2002, the AU have achieved a lot in terms of opening African Free trade
Areas, the issuance of visas on arrival and the strengthening of regional organizations like
SADC, ECOWAS, COMESA and the EAC. The ASEAN was founded in 1967 and
established a preference area in 1977, and the Asian Free Trade Area in 1992.

In the first two decades after the Second World War (1945-1965) the region was shaped by
nationalism, decolonization, great power intervention and failed attempts at regional
cooperation. This resulted in the attainment of independence of states in the region namely
Vietnam in 1945, Indonesia in 1949, the Philippines in 1946, Myanmar in 1948, Cambodia
and Laos in 1953, Malaysia in 1957, Singapore in 1963, and Brunei in 1984 respectively. The
main motive was not economic goal rather than political and security motives for regional
solidarity. The economic achievements in the region were not induced by the integration,
though. After the economic crisis of 1997, the region has advanced its economic goals and
created APFTA in the region.

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4.9. Regionalization versus Globalization and State
The ways regionalization, globalization and the state interact have various forms based on the
issues under consideration. For instance, the nature of interaction among the three on issues
of economics and security greatly differ. Therefore, it is vital to differentiate the issues before
addressing the nature of interaction. For instance, when trying to assess the complex
relationship between regionalization and globalization, one might conclude that the trend
toward economic regionalism is perhaps more mixed than the trend toward security
regionalism: In the international economy, globalization and regionalization appear to be
pushing states in different directions, but there is today no major impetus toward
globalization in the security arena, perhaps with the exception of nuclear issues such as
nonproliferation (Lake 1997). Hence, the regionalization of security is not a universal trend
like the formation of economic regions.

4.10. The Relations between Regionalization and Globalization

There are three possible options regarding the mutual relations between regionalization and
globalization, especially in the economic dimension: (1) regionalization as a component of
globalization (convergent trends); (2) regionalization as a challenge or response to
globalization (divergent trends); (3) regionalization and globalization as parallel processes
(overlapping trends) (Mittelman 1996a).
Regionalization as a Component of Globalization: Convergence

Regionalism is emerging today as a potent force in the processes of globalization. If

globalization is regarded as the compression of the temporal and spatial aspects of social
relations, then regionalism may be understood as but one component, or ‘chapter’ of
globalization (Mittelman 1996a, 189). According to this view, by helping national economies
to become more competitive in the world market, regional integration will lead to multilateral
cooperation on a global scale, the adoption of liberal premises about cooperation, and the
opening of the local economies.
Thus, the process of regional integration can be interpreted as part of the international (or
global) economic order at the end of the twentieth century; if impelled by raw material forces
(of the market), then it becomes a result and a component of globalization (see Reynolds
1997, 1). Moreover, since globalization unfolds in uneven rather than uniform dynamic
patterns, it may reveal itself in processes that are less than geographically global in scope.
Therefore, globalization may be expressed through regionalization (Holm and Sorensen 1995,
6–7).

72
Regionalization as a Challenge or Response to Globalization: Divergence

Unlike the first trend, the impetus toward regionalization might stem in this case from a
reaction and challenge to the amorphous, undemocratic, and inexorable economic rules of
globalization. This reaction can be motivated by either nationalistic/mercantilistic or
pluralistic/humanistic concerns (in some cases, even by both). In the first place, by creating
trade blocs and integration frameworks based on mercantilistic premises, regionalism
opposes the neoliberal ‘harmony of interest’ view of the world economy in favor of national
(and regional) loyalties and frameworks.Conversely, the drive toward the formation of
regions might be also motivated by the denial of a single universal culture (and ideology) and
the promotion of alternative or pluralistic forms of social and political organizations other
than the nation-states at the regional level.
Regionalization and Globalization as Parallel Processes: Overlap

When we refer to the world economy, it encompasses the trends of both regionalization—i.e.,
the division of the international economy into the mega-regions of North America (or the
Americas), Europe, and East Asia—and globalization (see Wyatt-Walter 1995). Conversely,
in the international (global) security arena, it is more difficult to assess the (co)existence of
security communities and security complexes without an overall dimension of global
security, which is less evident. Thus, rather than reacting to each other, a third possibility is
that regionalization and globalization might act as parallel or overlapping processes in the
two issue-areas of economics and security.
4.11. Regionalization, Globalization and the State
Bringing the forces of nationalism and the possible role(s) of the nation-state into the
equation creates the following possible linkages: (1) nation-states oppose globalization
(divergent trends); (2) nationalism and the formation of new states are encouraged by the
forces of globalization (convergent trends); (3) nation-states oppose the forces of
regionalization (divergent trends); (4) nationalism and the nation-states can be strengthened
through regionalism (convergent trends); (5) regionalization coexists with nationalism and
with globalization (overlapping trends); (6) nation-states mediate between trends of
regionalization and globalization (overlapping trends); and (7) nation-states oppose
globalization through regionalization (divergent trends).
Nation-States and Nationalism as Rival Processes of Globalization
Processes of disintegration, fragmentation, autarky, and localization diverge from the overall
trend of globalization. For instance, the blossoming of statehood may be a response to the

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homogenizing forces of globalization (Holsti 1996a, 22). The persistence or resurgence of
nationalism can be regarded as a response to the alienating forces of the global market, by
relocating or bolstering legitimacy and loyalties at the national or even sub-national levels, in
direct contradiction to the transnational or supranational logic of economic globalization.
Globalization as a Force of Nationalism and the Formation of New States
Through a process of technological dissemination, globalization might actually promote
nationalism and the formation of new states. Hence, globalization and nationalism might
converge, through a new (global) revolution of ‘rising expectations,’ which encourages states
to cope with and to manage the forces of globalization. Here lies an interesting paradox:
Although forces of globalization seem to undermine state sovereignty, technological changes
might also improve the material conditions for the enhancement or resurgence of nationalistic
trends. Thus, globalization creates new strategies and roles for the nation-state (Drezner
1998, 210 and 218).
Nation-States as Rival Forces of Regionalization
Nation-states might oppose forces of regionalization that attempt to transcend the power (and
authority) of the state in a supranational direction by setting limits and constraints to the
development of a regional identity and supranational institutions. Thus, states will regard
regionaland sub-regional integration frameworks through the prism of international
organizations with a limited mandate in terms of intervention, domestic jurisdiction, and the
exercise of sovereignty.
Regionalism as a Force of Nationalism and the Nation-States
As mentioned above, regionalization in a given region might result from mercantilistic or
nationalistic tendencies of the member-states that see frameworks of regional integration as a
means to pool and increase their national power resources. In this sense, the logic of the ‘new
regionalism’ is not very different from that of the ‘old’ security alliances. In both cases, the
goal is to guarantee the bloc (region) members greater security in their international relations
in a context of increasing vulnerability of either the world economy or global security (Axline
1996, 199).
Coexistence between Regionalism, Nationalism and Globalization
In this case we have neither convergence nor divergence but rather coexistence—the three
processes are taking place simultaneously. Thus, there might be parallel processes of
globalization and continuing trends of fragmentation and disintegration. Historically, political
fragmentation, often manifested by the quest for national self-determination and the creation
of new states, has been a trend with as much significance as the (parallel) forces of economic

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globalization (Holsti 1996a, 21–22). In this perspective the effects of globalization upon
regionalization and especiallyon the nation-state are rather indeterminate: “the structural logic
of globalization and the recent history of the global economy can be read as providing
rationales for ‘high stateness’ as well as ‘low stateness” (Evans 1997, 64). Whether processes
of globalization might undermine the role and actions of the nation-state remains to be seen
and should be examined in particular regional contexts.
Nation-States as Mediators between Regionalism and Globalization
States are active players in the world arena, and their policies are probably the single most
important determinant of the scope and direction of both regionalization and globalization
(see Holm and Sorensen 1995, 7). The stronger the states, the more capable they are in
coping with theintricacies of the economic, political, social, technological, and cultural
dimensions of globalization. Conversely, the weaker they are, the more ‘penetrated’ or
exposed to the vulnerabilities of the world economy and the temptations of a shallow world
culture and ideology (see Evans 1997, 69–70).
Nation-States Opposing Globalization through Regionalism
Nationalism and globalization are linked dialectically. Globalization does not imply
necessarily the erosion of the nation-state’s authority but rather a needed change in state
strategies and redirection of state energies. Conversely, state strategies and state actions can
determine the future directions of globalization. One possible option open for states to cope
with globalization is by enhancing processes of regionalization, such as the creation of free
trade areas that recreate a double (and contradictory) logic of economic relations: liberal at
the intraregional level but protectionist/mercantilist toward other rival regions or ‘blocs.’

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