International political economy (IPE), also known as global political economy, is an academic discipline within the social sciences that analyzes international relations in combination with political economy. As an interdisciplinary field it draws on many distinct academic schools, most notably political science and economics, but also sociology, history, and cultural studies. The academic boundaries of IPE are flexible, and along with acceptable epistemologies are the subject of robust debate. This debate is essentially framed by the discipline's status as a new and interdisciplinary field of study.
Despite such disagreements, most scholars can concur that IPE ultimately is concerned with the ways in which political forces (states, institutions, individual actors, etc.) shape the systems through which economic interactions are expressed, and conversely the effect that economic interactions (including the power of collective markets and individuals acting both within and outside them) have upon political structures and outcomes.
IPE scholars are at the center of the debate and research surrounding globalization, both in the popular and academic spheres. Other topics that command substantial attention among IPE scholars are international trade (with particular attention to the politics surrounding trade deals, but also significant work examining the results of trade deals), development, the relationship between democracy and markets, international finance, global markets, multi-state cooperation in solving trans-border economic problems, and the structural balance of power between and among states and institutions. Unlike conventional international relations, power is understood to be both economic and political, which are interrelated in a complex manner.
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IPE emerged as a heterodox approach to international studies during the 1970s as the 1973 world oil crisis and the breakdown of the Bretton Woods system alerted academics, particularly in the U.S., of the importance, contingency, and weakness of the economic foundations of the world order. IPE scholars such as Eugene Low asserted that earlier studies of international relations had placed excessive emphasis on law, politics, and diplomatic history. Similarly, neoclassical economics was accused of abstraction and being ahistorical. Drawing heavily on historical sociology and economic history, IPE proposed a fusion of economic and political analysis. In this sense, both Marxist and liberal IPE scholars protested against the reliance of Western social science on the territorial state as a unit of analysis, and stressed the international system.
Academic courses, journals, and text books typically cover the various view points from which policy recommendations originate and will endeavour to provide an ideologically neutral presentation of the field of study. Following a precedent set by one of the founding text books of the discipline,[1] individuals and organisations engaged in promoting particular policies, as well as many scholars active in this field, are commonly grouped into one of three worlds views, all of which have existed long before IPE emerged as a distinct academic discipline. These categories are liberal, realist, and Marxist. Constructivism may be classed as a fourth high level view, although scholars such as Ravenhill have grouped it as a sub-class of the Marxist approach. The liberal category is relatively unified, while the realist and Marxist views capture a vast range of outlooks. Widely shared views are found only at the highest level of abstraction:
The 'liberal' view believes in freedom for private powers at the expense of public power (government). It asserts that markets, free from the distortions caused by government controls and regulation, naturally will harmonise demand and supply of scarce resources resulting in the best possible world for populations at large.
The 'realist' view (formerly commonly labelled "nationalist") accepts the power of free markets to deliver favourable outcomes, but holds that optimum conditions generally are obtained with moderately strong public power exerting some regulatory control.
The 'Marxist' view believes that only robust application of strong public power can check innate tendencies for private power to benefit elites at the expense of populations at large.
The 'constructivist' view assumes that the domain of international economic interactions is not value-free, and that economic and political identities, in addition to material interests, are significant determinants of economic action.
In economic terms, Liberalism is an approach associated with classical economics, neoclassical economics, Austrian School economics, and Chicago school economics.
Minimal or zero government control and regulation of trade is the favored liberal policy, which calls for the privatisation of any organisations producing exportable goods.
The Liberal approach often is wrongly traced to the work of Adam Smith. Economics, as we know it, has been viewed as dawning with the Smithian revolution against Mercantilism.[2] [3] The next major contribution to liberal theory was made by David Ricardo, whose theory of comparative advantage suggested that trade between different nations could benefit both parties even in circumstances where one would feel intuitively that one nation would benefit from trade at the expense of the other.
The liberal view point generally has been strong in Western accademia since it was first articulated by Smith in the eighteenth century. Only during the 1940s to early 1970s did an alternative system, Keynesianism, command wide support in universities. Keynes was concerned chiefly with domestic macroeconomic policy, however in IPE terms his mature views fall squarely into the Realist camp, in that Keynes called for a middle way between public and private power and favoured a managed system of global finance for which he was a contributing architect at Bretton Woods. The Keynesian consensus was challenged successfully with attacks launched by Friedrich Hayek's Austrian School and Milton Friedmans Chicago School as early as the 1950s, which by the 1970s had succeeded in displacing Keynes as the dominant influence.
Keynes's approach to international relations, including his thinking on the economic causes of war and economic means of promoting peace, has received further attention with the onset of the global financial crisis and recession since 2008, especially through the work of Donald Markwell.[4]
In policy making terms Western governments have generally pursued mixed agendas drawing on both the liberal and realist view point. This has been the case from the dawning of modern commerce to the present day, although there have been periods where one or the other school had gained temporary ascendency. Sometimes the period leading up to 1914 is described as a golden age of classical economics, but in practice governments continued to be partially influenced by mercantilist ideology, and following WW1 economic freedom was constricted. After World War II the Bretton Woods system was established, essentially a realist construct that allowed governments to manage international finance, while still allowing considerable freedom of action for private commerce. In 1971 President Richard Nixon began the rolling back of the Bretton Woods system and until 2008 the trend has been for increasing liberalization of international trade and finance. Domestically, the Atlantic nations since the 1970s and large Asian states such as China and India since the 1990s also have largely pursued a mixture of realist and liberal policies. The only close to wholesale implementations of the liberal viewpoint being carried out is by smaller developing nations, often with some degree of coercion by actors such as the U.S. treasury or IMF, who have been able to apply financial pressure when the developing nations faced various crises.[5] During 2008, liberal influences began to wane in the wake of the 2008–2009 Keynesian resurgence which the Financial Times described as a "stunning reversal of the orthodoxy of the past several decades".[6] From later 2008 world leaders have also been increasingly calling for a New Bretton Woods System.[7]
Within IPE the Realist approach was commonly labeled nationalism until the first decade of the twenty-first century. Historically the earliest distinct school of thought in this category was mercantilism. Contemporary examples of the realist approaches are statism and developmentalism.
Historically aggressive trade tariffs were employed to advantage domestic industry at the expense of competitors based in foreign nations. Colonial powers also encouraged trade with their own colonies. Contemporary advocates tend to favour the use of tariffs to protect infant industries in developing nations and sometimes specific sectors (e.g. agriculture) in developed ones. Some advocates within this approach come fairly close to the Liberal point of view, and stipulate conditions where all market controls should be dropped once certain development thresholds are exceeded (this is true even as far back as the late nineteenth to early twentieth century, in the work of influential scholars such as Friedrich List and Alexander Hamilton).
The mercantilist view largely characterised policies pursued by state actors from the emergence of the modern economy in the fifteenth century up to the mid-twentieth century. Sovereign states would compete with each other to accumulate bullion either by achieving trade surpluses or by conquest. This wealth could then be used to finance investment in infrastructure and to enhance military capability.
The contemporary realist view generally agrees with liberals in viewing international trade as a win-win phenomenon where firms should be allowed to collaborate or compete depending on market forces. The chief point of contention with liberals is that realists assert national interests can be served best by protecting new industries from foreign competition with high tariffs until they’ve built up the capability to compete on the world market. One of the earliest formal expressions of this view was found in Alexander Hamilton’s ‘Report on Manufacturers’ which he wrote for the U.S. government in 1791.
After WWII a notable success story for the developmentalist approach was found in South America where high levels of growth and equity were achieved partly as a result of policies originating from Raul Prebisch and economists he trained, who were assigned to governments around the continent. After the liberal view re-established its ascendancy in the 1970s, it has been asserted that high levels of growth resulted from generally favourable international conditions rather than the Realist policies.
A contemporary statement of the Realist view is strategic trade theory, and there has been much debate as to whether the policies it suggests could be effective in solving some of the issues with globalisation, such as persistent north/south inequality divide.
This category has been used to group together an array of different approaches which sometimes have very little in common with Marx’s focus on class, but which all believe in a strong role for public power. Labels for approaches within this category include: feminist, radical, structuralist, critical, underdevelopment and 'world systems'. Broadly the Marxist approach is associated with Heterodox economics.
The Marxist view generally favours strong protection from market forces by means of high tariffs and other controls. At the extreme a preference for centrally directed trade with ideologically similar trading partners – that is the command economy as opposed to markets.
Marx’s Das Kapital was published in 1867 and an economic system based on his ideas was implemented after the Russian Revolution of 1917. Since the collapse of the Soviet union and the COMECON trading bloc in 1991 no major group of trading partners or even single large economy has been run along Marxist lines. Problems with a Marxist command economy are seen as including the very high informational demands required for the efficient allocation of resources and corruptive tendencies of the very high degree of public power need to govern the process.
Few academics currently promote classical Marxist views, especially in America, but there are a few exceptions in Europe. More popular perspectives include feminist, environmental and radical – developmentalist. The social – constructivist view is an unusual school of thought sometimes grouped into this category. Rather than focus on the tradition factors affecting trade such as distribution of resources, technology, and infrastructure, it emphasises the role of dialogue and debate in determining future developments in international trade and globalisation.
Critics [8] have asserted there is now too much variation in the different view points grouped into each category, especially those under the Nationalist and Marxist headings. Also, the names can be considered misleading for the general public. The labels nationalist and Marxist have negative connotations, with many of the perspectives grouped under the Marxist label have very little to do with the classical Marxist position. Many advocates within the nationalist tradition, being themselves strongly opposed to nationalism in the commonly understood fascist or racist sense, and some professors, have replaced the label "nationalist" with "realist" in their most recent books and courses.[9]
Constructivism is an emerging field in international political economy. In general, the constructivist view propounds that material interests, which are central to liberal, realist, and Marxist views, are not sufficient to explain patterns of economic interactions or policies, and that economic and political identities are significant determinants of economic action. Jalal Alamgir's works [10] are examples of constructivist applications in political economy. In his book India's Open-Economy Policy, Alamgir argues that India's economic reforms since 1991 have been fueled in strong part by policymakers' interpretation of India's own identity vis-a-vis the identity of its rivals, such as China.
Benjamin Cohen provides a detailed intellectual history of IPE identifying American and British camps. The Americans being positivist and attempting to develop intermediate level theories that are supported by some form of quantitative evidence. British IPE is more "interpretivist" and looks for "grand theories". They use very different standards of empirical work. Cohen sees benefits in both approaches.[11] A special edition of New Political Economy has been issued on The ‘British School' of international political economy [12] and a special edition of the Review of International Political Economy (RIPE) on American IPE.[13]
This characteristion of IPE has been hotly debated. One forum for this was the "2008 Warwick RIPE Debate: ‘American’ versus ‘British’ IPE" where Cohen, Mark Blyth, Richard Higgott, and Matthew Watson followed up the recent exchange in RIPE. Higgott and Watson in particular querrying the appropriateness of Cohen's categories.[14]
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