US Federal Reserve System
What is IPE?
Some shared assumptions among students of IPE: A connection between the political and
economic domains. A connection between the state and the market (and social forces, such as:
Farmers). A linkage between domestic and international spheres. Multidisciplinary field of study.
Effects of globalization
Its all about the Benjamins!
IPE Subject Matter:
Hegemonic Stability: End of American hegemony? End of the bread and wood system? Collapse
of the fixed exchange system. Concerns of the power of the United States in the late 1970s.
Transformation of global political economy: Globalization? (Are we experiencing an even
amount of globalization? What about the millions and millions of people in rural areas of
underdeveloped countries, do they experience globalization in the same way?) Global
Evolution of capitalism: Projection of Capitalism. Contending models of capitalism.
Effects of Capitalism
Should we trade based on a moral framework or compass?
Hegemonic stability = end of American hegemony
Transformation of global political economy = globalization, global governance
Evolution of capitalism = projection of capitalism, contending models History of the Field
Roots in classical political economy
Mercantilist thinking (17 and 18 century)
Liberal challenge in the late 18 century (Smith)
Marx and his critique
Decline due to academic specifications
Not Homogenious: Contending theories/approaches. American school vs. British schools
Internal competition and diversity: Mainstream vs. Critical IPE. Imbalanced interest/emphases
Continental traits of classical IPE
In economics: works that incorporate historical, political, or social dimension (Keynes)
Outside economics: radical political/social theories
Other kind of division
American school: Shared theoretical foundation in rationalism, utilitarianism as neoclassical
economics. Inclined toward scientific method. Policy-oriented studies, practical solutions.
British school: Normative, interpretive method. Interested in effects of social structures, ideas
on interactions between actors. Gives importance to history.
3 connections: Politics and economics. State and market. Domestic and international
Take note of the different views/approaches and their biases Whats missing? Whats being
Try to take into consideration views of the less powerful and marginalized
Understanding IPE theories
Not mutually exclusive
Variations within each school of thought
Theories evolve over time
Characteristics of Economic Nationalism
Major actors and emphases: States as dominant actors (realist IR). National economies. Goal of
states pursue national interests (how national interests are formed). States are rational actors
seeking to maximize interests (neoclassical influence) and power.
Nature of international economic relations (realist IR influence): Conflictual, competitive, a
struggle for power and wealth. Relative gains, zero-sum. Most powerful states shape rules
governing global political economy.
Relationship between politics and economics:
o Closely intertwined. o Concerns for national interests (such as national competitiveness) drives economic
o The state has a role to protect and promote national economy, which can take many
forms (ie: regulating private industries (List), protectionist policies, or liberalize the
Characteristics of Liberalism
Major actors: Multiple actors both state and non-state. International level MNCs,
international organizations. Domestic level consumers, enterprises, economic sectors or
industries. Actors are rational and in pursuit of their interests (neoclassical economics
Nature of international economic relations: Mutually beneficial or positive-sum (in his critique,
List referred to the prosperity of all human beings). Interdependence and cooperation among
states for mutual gains.
Relationship between politics and economics: Should separate between the two. Markets will
function efficiently when free from political intervention [Smith saw negative effects of
conflict of interest of state intervention (use of state power for private gains)] (Neoliberalism
state intervention distorts market efficiency). Domestic role of state provide market-friendly
environment. International role establish rules and regulations.
Evolution of economic nationalism and liberalism:
Liberalism: Classical liberal IPE led by Smith and Ricardo challenged mercantilist dominance.
Questions role of politics and state intervention (Smith conflict of interest, use of power for
private gains). Argued for free trade and free market (But with some reservation). Dominated
the field late 19 century. Context of industrial revolution and rise of Britain.
Mercantilism: Challenged by liberalism in 19 century. Seen in economic policies of new comers,
eg: U.S and Germany. 19 century key writers: Alexander Hamilton and Fredrick List.
Liberalism Post WW2: Keynes a revision of classical liberal IPE. Calls for government
intervention to prevent economic downturn and unemployment. Promotes international
economic cooperation Bretton Woods institutions. Context of the great depression and
Liberalism After 1970s: Concept of interdependence. Interconnectedness of international
economies reshapes politics. Complex interdependence (Keohane and Nye 1977).
Concept of interdependence: Multiple channels. Multiple issues absence of hierarchy. Military
force cannot be used in every situation.
Decline of Keynesianism and rise of Neo-Liberalism (since 1980s): free market system, trade
and financial liberalization, minimal government intervention. Hegemonic Stability Theory
Hegemonic stability theory: offered by three major schools of IPE. Shared perception: an open
international economy with a concentration of political and economic power in a single state.
Hegemonic stability theory Liberal version: Kindleberger hegemonic power as provider of
international public good. Keohane international institutions can help play this role in an
absence of hegemon.
Hegemonic stability theory Neo Mercantilist IPE version: Rise of a hegemon is a result of a
change in a distribution of power. International economic order serves the interest of the most
powerful states. When a hegemon in decline, self-interested behaviour resumes.
Cross fertilization: Shared assumptions (an open world economy needs a hegemonic,
superpower, to help maintain stability).
Lists infant industry protection argument:
The state is not merely justified in imposing, but bound to impose, certain regulations and
restriction on commerce for the best interests of the nation...
... we have imposed restrictions on the competition (with foreign countries)... to give those
among us who invest their capital in these new branches of industry... the requisite guarantees
that they shall not lose their capital and shall not miss their vocation in life...
The critical perspective:
Marxism/Structuralism, Critical/Radical theories, Historical Structuralism.
Marxism, Dependency theory, World-Systems theory, Gramscian analysis, Constructivism,
Feminism, and Environmentalism.
Nature of International Economic Relations:
Conflicts stem from exploitation and competition
Economics dominates politics: political system helps facilitate economic structure.
Governments are subservient to capitalism.
Critical theories seek to challenge and change it.
Theory is for someone and some purpose (Robert Cox, 1995)
Focused on domestic capitalist society
Capitalism breeds class struggles (capitalists vs. Workers).
The need to find more markets led to capitalist expansion abroad (colonialism).