A Game of Thrones

A Game of Thrones:
Economic Power in the Hands of States

No theory of international relations has yet to provide a definition of economic power
that scholars can agree on. This essay revisits the debate with radical lens and an
innovative approach to understanding the controversial term by offering its own
interpretation based empirical evidence. The foundation of the argument will first address
why economic power is defined in this way, and secondly, why this definition can be
used to identify the actors with the least and most economic power within the
international political economy. In an effort to illustrate and test the arguments put
forward, the essay will then use a relevant comparative approach to extend the dynamics
of the international political economy and its actors onto a modified chess game. This
technically sound, but generalised conceptual model, will attempt to prove that strategic
positions of influence combined with efficient use of resources, allow states to
manipulate the forces that shape the international political economy, in which all other
actors operate.

Power, in its simplest definition is the ability to “get B to do something that B would
not otherwise do”, meaning that bargaining power refers to the resources available to
carry out such a purpose (Dahl, 1957). However, the concept of power highlights an
asymmetrical relationship between two or more figures, and is thus seen as relational
since it exists only through interactions between actors or groups (Pustovitovskij, 2011:
4). The above-proposed definition describes economic power as: efficient control over
resources and international political economy structure (the set of laws and economic
policies regulating the IPE market), in a way that advances an actor’s objectives despite
the interests of another (Frieden, 1995: 3). Viewed from this perspective, economic
power becomes applicable to a wider range of scenarios that govern and direct
macroeconomic shifts on the IPE; its presence, becomes apparent behind decisions and
negotiations among players in the international political economy as: the physical
manifestation of their bargaining power.

To understand the relevance of this essay’s definition of economic power, a
misconception must be clarified and preexisting definitions expounded on. The meaning
of the word ‘economic’ is a misleading starting point when trying to understand

2

economic power: it is closely associated with the creation of wealth, pertaining to
financial matters and profitability (Dictionary, 2012). In this light, economic power could
mistakenly be understood as the possession of a significant amount of wealth from which
power is derived. This is not the case. “In the field of bargaining theory, on a case-to-case
basis, empirical studies have shown that the outcomes of bilateral and multilateral
negotiations frequently do not directly correspond to the distribution of resources
between the negotiating parties” (Pustovitovskij, 2011: 5). Clearly then, the simple
definition of wealth as economic power fails to include a variable conducive to its
subsistence. Referring back to the aforementioned definition of relational power, if the
economy is the “system of producing, distributing, and using wealth”, in order to possess
economic power and maximise potential gains or outcomes, one must hold control over
both the resources and goods that circulate within the market, as well as the structures
that govern the system (Frieden, 1995: 1). This amended definition of economic power
can now be used to identify the actors with the most and least economic power in the
international political economy; but the environment in which they fall must first be
examined.
Economic power is defined under the blanket of international trade. Trade is the
transfer of goods and finances across the international political economy between its
various actors (Frieden, 1995: 9). James A. Carpaso defined this ability to govern the
rules that determine and shape bargaining power [during trade decisions or negotiations]
as: structural power (Pustovitovskij, 2011: 4). Through his definition, trade becomes
constrained by a set of laws that confine actor behaviour. Hence, structural power, which
according to Carpaso refers to the ability to manipulate these restrictions in order to gain
a better strategic position from which to produce, distribute or influence global
consumption patterns of goods, is a necessary component to the acquisition of economic
power.
To illustrate the fact that monetary resources are insufficient to acquire and maintain
dominance in the IPE, this essay will point out the shortcomings of this popular
conception using a case study below.
The United States possesses enough capabilities “to shape outcomes such that they match
their preferences in international politics, as the power-as-resources/hard power approach

3

would assume, [however] empirical research has shown that over the last decades the
USA have had increasing difficulties satisfying their preferences unilaterally. Especially
in spheres like global economics.”1 (Pustovitovskij, 2011: 5).
This example demonstrates that the United States’ success, when exerting political will,
depends not only on their economic leverage, but an isolated external factor: control over
the formation of structures that make up the international political economy.

As shown above, the international political economy takes into account the
sociopolitical dynamics of actors when judging the extent of their respective economic
power. This is relevant because it shows that economic power stems from more than a
single force. It acknowledges factors such as the state’s level of involvement in the
market actors’ available productive resources (Land, labour forces, technology, capital),
and again its strategic position within the international political economy (Silbiger, 2010:
328). An actor within the IPE is only as competitive as its economic power; hence only as
competitive as the combination of individual forces that together form the latter. Keeping
in mind the arguments above explaining how economic power is defined in terms of
international trade as well as the given definition of economic power, this essay holds
that states bear the most by making use of international institutions to influence the
macroeconomics of the international political economy. They do so in a way that
advances their interests and places them in strategic positions that increase their long-
term bargaining power, and thus, economic power.
According to Neoliberals who advocate freedom from government, Multinational
Corporations should have possessed the highest degree of economic power within the
IPE; their numbers rose simultaneous to increased trade liberalisation and regionalisation
after 1970 (Frieden, 1995: 8). The argument claimed: “ the increasing sensitivity of
national governments to the rising economic expectations of their societies […] made
them dependent upon the benefits provided by a liberal world-economic system” (Gilpin,
1975: 40). However, what happened instead was a restructuring of state forces post-
reforms leading to the increased privatisation of industries circa 1973 (Frieden, 1995: 8).

1
Take for example the problems of the U.S. to achieve its preferences in the North Korea and Iran

4

States kept their hegemony in economic power and Multinational Corporations
potentially fell short of such a moniker for the following reasons:
In a market structure, competition between actors determines supply, demand and prices
(Silbiger, 2010: 297). Governed by market logic, firms are vulnerable to forces of supply
and demand while seeking to maximise their profits (Silbiger, 2010: 200). Without
government subsidies or accommodating policies created to foster their growth,
economic power within Multinational Corporations remains volatile (Frieden, 1995: 4).
To expatiate, keeping to their objective of maximising wealth, firms invest minimally in
areas conducive to structural power and reinvest most of their revenues towards
production of assets destined for selling (Silbiger, 2012: 227). However, lack of corporate
planning against unforeseen drops in demand can transform these assets into significant
liabilities2 The final key distinction to make lies in The Quantity Theory Equation of
Money, where monetarists consider money to be the main driver of GNP and economic
growth (Silbiger, 2010: 306). It should then be counter-argued that this essay disregards
the translation of economic wealth as economic power, focusing instead on the efficient
use of resources and control over structural power in the IPE.

Although firms have little or no say over major policies of macroeconomics, they do
possess what this essay will coin as: ‘negative economic power’. Firms may have little
influence over the structure of the international political economy and a volatile
bargaining power due to their large resource-base, but it should be nevertheless conceded
that they form an integral part of the international political economy’s structure. In that
sense, states constantly revise their economic policies to accommodate the flow of capital
that firms generate and on which they are dependent. To highlight this point and provide
a critique to the claim of states as principal holders of economic power, the international
economic [theoretical] perspective emphasises “the importance of constraints external to
individual nations” in terms of socioeconomic factors, by affecting the “setting within
which national governments make policy” (Frieden, 1995: 9). When a firm’s economic
activities suffer, its stakeholders are negatively impacted and costs must be subsidised to
buoy the corporation’s net revenues above its margin of safety (Silbiger, 2010: 70). States

2
Consider
the
1980
debt
crisis
caused
by
the
unforeseen
spike
in
petrol
prices
(Cohen,
2005:
195).

5

thus have influence but also responsibilities over microeconomics and macroeconomics,
on which the former is dependent upon for stability and predictability (Silbiger, 2010:
298).

The chief mechanism for creating prosperity in the IPE is the expansion of trade
relations through either free trade or regulating price of currency (Frieden, 1995: 9).
However, another critique undermining state economic power may be the latter’s validity
when talking about regional blocs. Formations of regional blocs such as the European
Union force states to give up some of their sovereignty over their own macroeconomic
policies (ex: interest rates) (Goldstein, 2012: 362). This could be argued as loss of control
over both structural power and competitive advantage vis-à-vis a loss of monopoly over
expertise, technology and goods, due to the free flow of labor and goods among EU states
enforced by the Treaty of Rome (Goldstein, 2012: 359). Although a logical critique, the
long-term benefits the agreement engenders relative and equal gains for the members of
this multilateral agreement. It safeguards the international political economy’s long-term
productive capacity through sustainable development and the EU’s mutual protection of
their resources (Land, labour forces, technology, capital). Placing them in a position of
self-sufficiency, they develop less incentive to trade and contribute to the decline of
Multinational Corporation economic power by centralising the latter within a charter
(Goldstein, 2012: 357-60).

Having argued the case for states as principal bearers of economic power, this essay
will now use a relevant comparative approach to extend the dynamics of the international
political economy and its actors onto a modified chess game. This example will strive to
prove that strategic positions of influence combined with efficient use of resources, allow
states to manipulate the forces that shape the international political economy in which all
other actors operate.
1. Rules
Keeping to this essay’s definition of economic power and recognising the need for a
multi-dimensional chess games in order to adequately mimic the dynamics of the IPE, the
chessboard used in the example will represent a model of the international political

6

economy as the playing field of its converging markets. The chess game will be played
between states and replicate the scenario of Canada’s creation of the Dispute Settlement
Mechanism. The pawns will represent MNCs3, Institutions, policies and interests as the
main forces present in this case study, as part of the IPE.
The sole object of the game is strategic advancement of interests while incurring
minimum losses; every pawn-movement exerts pressure, furthers state objectives and
represents a shift in macroeconomics. Interactions between the different pieces will be
resolved using basic game theory4, taking into account the individual interests/capacities
of the pieces, thus consequential strategies available to them based on their resources and
structural power.
2. Background of Case Scenario
LDC members of the WTO wanted to be protected from excessive dumping in the
agricultural sector. Faced against the Developed Countries’ large-scale economies,
resources and resulting control of the WTO, they were in no position to leverage a deal.
Their ill combination of minimal resources and structural power meant that the
Developed Countries had naturally, all of the competitive advantage and no incentive to
negotiate.
Canada broke the deadlock by manipulating the macroeconomic structures and creating
the Dispute Settlement Mechanism, where states with smaller economies now had greater
leverage over DCs through a new strategic position: The DSM thus heightened the LDCs
economic power by increasing their structural power (Srinivasan, 2005). This power,
albeit small since the DSM’s rule of law was disproportionately against them, was their
only recourse in securing bargaining power and the rationale behind the general
consensus.
3. Chess Dynamics and Game Theory Rationale
On the chessboard, any shift in position changes the strategy available to the actor and
thus the outcome available to him. Canada’s manipulation of the WTO’s structure
provided LDCs with a new position and strategy, resulting in their consequent gain of

3
MNCs
are
immune
to
direct
state
control
and
allowed
to
move
on
their
own.

4
Game theory is a method that explains strategies and outcomes of a potential choice and how it affects the
opponent’s interests and strategy.

7

greater outcome possibilities. That influence was exerted through state capacity,
manipulating the use of resources and structural positions – in other terms, was a
manifestation of state control of economic power. Taking into account the differing
bargaining positions that international actors hold, these macroeconomic shifts are
manifestations of economic power and are responsible for affecting the ever-changing
structure of the global political economy. It is important to note that the MNC pieces
could have exerted further pressure on the LDCs and exploited the DC’s position of
bargaining power and the existing economic interdependent structure. However,
governed by profits and driven by resources, MNCs only maintained their positions of
power due to the specific alignment of structural power present at the time; as was argued
above, resources alone cannot qualify as economic power nor do they secure sufficient
bargaining power without state and institution-shaped structural power. Therefore, MNC
structural power is directly dependent on state interest and can only exploit bargaining
power if permitted by state economic policies – Faced with ever-changing IPE dynamics,
they adapt their resources to IPE structural realignments and sporadically inherit
economic power rather than contribute to its creation.
4. Conclusion
Analysing the international political economy’s environment in terms of this essay’s
proposed definition of economic power, characteristics of the latter’s presence were most
significantly identified within states (using the example portraying the creation of the
Dispute Settlement Mechanism). To strengthen this claim, it disproved the ‘economic
power as wealth’ assumption by using as example the United States’ failure “to achieve
its preferences in the North-Korea and Iran conflicts, as well as in the sphere of
international trade (e.g. implementing the Singapore topics into the WTO regime)”
(Pustovitovskij, 2011: 14). Testing out the arguments put forward, the dynamics of the
IPE were then extrapolated to a model case study using a simplified chess game. Proving
that efficient management of resources and structural power are both necessary attributes
of economic power (and ensuing bargaining power), this essay maintains that by using
these two capacities in tandem, states manipulate the forces that shape the international
political economy in which all other actors operate, and are therefore the principal
holders of economic power within the IPE.

8

References:

- Carpaso, J. 1978. Introduction to the special issue of International Organization on
dependence and dependency in the global system. International Organization. 32(1): 1-
12.
- Cohen, T. 2005. The Global Political Economy. (3rd Ed.). New York: Pearson
Education Inc.
- Dahl, R. 1957. The concept of power. Behavioral Science. 2(3): 201- 215.
- Dictionary.com, LLC. 2012. Word Dynamo: Economic Power. Available:
http://dictionary.reference.com/browse/economic
- Frieden, J.A., Lake, D.A. 1995. International Politics and International Economics. In
International Political Economy: Perspectives on Global Power and Wealth. J.A. Frieden
& D. Lake, Eds. London: Routledge.
- Gilpin, R. 1975. Three Models of the Future. International Organization. 29(1): 37-60
- Goldstein, J., Pevehouse, J. 2012. International Relations. New York: Longman.
- Pustovitovskij, A., Kremer, J-F. 2011. Structural Power and International Relations
Analysis: Fill your basket, Get your preferences. Bochum: Institut für
Entwicklungsforschung und Entwicklungspolitik der Ruhr-Universität Bochum.

- Silbiger, S. 2010. The 10-Day MBA. London: Hachette UK Company.

- Srinivasan, T.N. 2005. The Dispute Settlement Mechanism of the WTO: A Brief
History an an evaluation from Economic, Contractarian, and Legal Perspectives.
Available: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=898904 [2012, September
30]

9

Figure
1.

Developed
Countries

White
pawns

King:
Piece
to
be
acquired
for
game
Least
Developed
Countries

to
end
Black
Pawns

LDC
states’
interest

Agricultural
sector’s
protection

from
DC’s
dumping

Assortment
of

pieces:

MNC

Strategic
1

pawn

alignment
Pawn

2
confrontation

protecting
the

King

DSM
Pawns
1/2:

DC
economic

resources
WTO

membership

N.B:
White has several possible offensive strategies:
- Attack E5 (WTO membership) using F3 (Loss of benefits)
- Attack D7 (Economies) using B3 (Economic sanctions)
Both strategies incur a risk of generating repercussions and losses.
Canada introduces a knight in C6 (DSM) in the form of the Dispute Settlement
Mechanism. Although still at disadvantage vis-à-vis B5 (Economic resources), the knight
protects E5 (WTO membership) and stabilises power through the illusion of increased
security and representation on the chessboard.

10

A Game of Thrones

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