International Political Economy
Objective: To understand the different lenses of IPE
o What are the different ways of understanding the
relationship between economics and politics
o Why should you care?
What is the role of Capitalism?
o Capital should be free, allow industrial entities a
relatively free reign.
Is it a force for prosperity/peace
Is it a force for inequality/poverty
How do we understand?
Prosperity? The countries who abandoned to go to
capitalist did improve. Reduce barriers to trade
and finance in the International Economic System,
you can improve the prosperity of the entire
Liberal peace theory countries that are
functioning liberal democracies with open
capitalist systems do not fight other liberal states.
Structure of government ultimately determines if
there is war.
Soviet union example of a closed control
economic system that ultimately failed.
America culture of individualism. Means they
are the country that was most susceptible to
creating a capitalist system.
How do you measure and do research on culture.
o Acceptance of value of process
High Politics vs Low Politics Increasing Profile 1989-2010
Low Politics – looking at economics
Increasing Global Interdependence
o International system is becoming at the very least
perceiving it is becoming more interdependent.
Relative Decline of US economy
o China is making headway and could catch up.
Rise of other state economies
Rise (and for some – fall) of MNC o Seeing MNCs becoming equal partners/can no longer be
contained within state power.
o First one in 1973 – ongoing middle east war. Egypt and
Syria launched a surprise attack on Israel and was
almost defeated, but ended up defeating the other
Growing Awareness of difference
Collapse of USSR
Realism: Mercantilism and Economic Nationalism
Viewpoint that the economic system can in fact be controlled
by governments. Belief and founded that economics are
“Buy USA”; “those jobs going over there”
See the world economy as zero-sum
o Seen as a pie. As a nation, the more you got the less
o Occurred in the inter-war period, countries began
enacting protectionist measures to hold onto their share
of the pie.
Use of protectionism; tariffs; subsidies; quotas
o Interfered with trade. Was about the responses to the
Stock Market crash. Trade wars lead to worst
elements of depression. No trading, no demand, people
were let go, unemployment, social services could not
meet the demands.
o Demi gods are usually the worst solution don’t
understand economic system. Tend to be authoritative
in nature. Tend to want to be militarily aggressive.
Should GM be protected?
What of FTA?
Following great depression – mercantilism just isn’t working.
Liberal Approaches: Classical Liberalism, Keynesianism,
Rejects Zero-Sum assumption
o Economic system can continue to grow. How do we
ensure we can get enough pies to ensure everyone gets
o Argues that the market should be allowed to develop
All gain from improved economics o Mercantilism is a disaster. Take government out of the
o Accept there will be times of economic depression.
Market as readjusting themselves.
Laissez-faire Economics – allow the market to determine
o Can’t have a government back stopping or intervening.
Keynes calls for some market regulations
o State can have some minor elements of controlling the
overall economy. Have state levers that can help you
control the economic system. Provide a safety cushion
(not a large one). Whereabouts to provide social
assistance. Spend when times are rough, tax when
times are good.
Role of International Organizations
o Provide assistance to those countries that are
particularly challenged from an economic perspective
Main issue is control of Economy
Get cycles ebbs and flows. Productivity goes up and down.
Downside: Human cost. Stress onto any state.
United Nations favours Keynesian system. State was unable
to deal with the depression.
Keynesian: Effort to be able to control the economy.
Market should rule argue as to how much they should
Historical study of Transition from one mode of production to
o Looking primarily of the political control o