Explain the emergence of International
Political Economy as a field, and why, if at all, it is relevant today?
International Relations (IR) has traditionally focused on
questions of war and peace and conflict and co-operation between states.
International Political Economy (IPE) is a conscious shift towards
understanding issues of wealth and poverty; of who gets what in the
international system. The emergence of the discipline will be examined to
establish why the period necessitated a new approach within IR. By examining
key perspectives of IPE theory, its usefulness and relevance to explaining
issues of poverty and wealth and deepening understanding of international
relations will then be ascertained.
The very definition of IPE is a contentious issue in
itself. Depending on the theoretical perspective subscribed to, different
elements of IPE become important. This is why it is important to examine
different theoretical perspectives of the field. Whilst some writers perceive
IPE as a branch of international relations, others believe that IR should be
considered part of political economy. Each theoretical approach defines what
constitutes ‘political’ and the ‘economic’ and thus this affects how they fit
into the model of ‘political economy’.
The academic discipline of IR arose at the beginning of
the twentieth century with the goal of understanding questions of war and peace
and making the world a more peaceful place. This focus was maintained as a
central aspect of the discipline until the 1960’s as it was relevant to the
period; the Second World War and Cold War seemingly highlighted the importance
of the focus for the study. “International relations asked the question why
nation-states continued to go to war when it was already clear that the
economic gains made in war would never exceed the economic costs of doing so…
International political economy today…asks why do states fail to act to
regulate and stabilize an international financial system which is known to be
vitally necessary to the ‘real economy’ but which all the experts in and out of
government now agree is in dangerous need of more regulation for its own
safety?”[1]
With America
Gill & Law suggest there are two reasons for the
upsurge in interest in the field of IPE during the 1970’s. The first of these,
in 1971, was the changes to the system in the world economy, essentially due to
the collapse of the Bretton Woods System and the oil crisis. The system that
politicians had established to ensure global economic growth and trade after
World War II had been seriously compromised. “Politically weak and economically
poor recently decolonized countries were unhappy with their subordinate
position in the international economic system.”[2]
Consequently, proposals from the UN during the 1970’s called for a ‘New
International Economic Order’ to address the imbalance and disparity of wealth
between developed and developing countries and improve the economic position of
third world countries. This emphasised the interconnectedness of politics and
economics. Political measures were taken that changed the rules of the game for
the economic marketplace. Secondly, it is suggested that “changes in the
academic community which occurred partly as a response to the ‘real’ changes in
economic conditions”[3]
Growing economic interdependence was significantly affecting US
The important relationship between politics and
economics, states and markets has been IR neglected by traditional IR. IPE provides
theoretical approaches to understanding the relationship between these issues
of wealth and poverty. Scholars generally regard mercantilism, economic
liberalism and Marxism as the main theories of IPE. Mercantilism maintains a
largely realist perspective focussing on the nation and interaction between
states. Economic liberalism can be considered an addition to liberal theory
focussing on the individual in the market place. Marxism maintains its own original
theoretical perspective focussing on production and class conflict. These can
be considered the main theories of the discipline insofar as they provide the
core assumptions and values from which IPE as a discipline can be approached.
Mercantilism is connected to the establishment of the
modern, sovereign states arising during the sixteenth and seventeenth
centuries. Mercantilism is also referred to as statism, protectionism, and
economic nationalism. Mercantilists believe that economics should be
subordinate to the establishment of a strong state, with political elites at
the forefront of the establishment of building the modern state. “Economics is
a tool for politics, a basis for political power.”[4]
For mercantilists, the international economy is an arena of conflict between
opposing national interests, rather than an area of cooperation and mutual
gain. The economic competition between states is thus regarded as a ‘zero sum
game’; one state’s gain is another’s loss. Additionally, states are wary of
other state’s relative economic gain as the material wealth accumulated could
be used for establishing military-political power to be used against other
states. This clearly reflects much of the neorealist ideology of competition
between states. “Its central idea is that economic activities are and should be
subordinate to the goal of state building and the interests of the state”[5]
Gilpin suggests that the economic rivalry between states
can take two forms; ‘benign’ or ‘malevolent’ mercantilism. Benign mercantilist
states take a generally defensive position, attempting to look after their
national economic interests in order to ensure their national security without
having any overtly negative effects on other states. “Some nationalists
consider the safeguarding of national economic interests as the minimum
essential to the security and survival of the state.”[6]
Conversely, ‘malevolent’ mercantilist states attempt to
exploit the international economy through expansionary policies for example,
colonisation. “There are those nationalists who regard the international
economy as an arena for imperialist expansion and national aggrandizement.”[7]
For mercantilists, economic strength and military political power are two
important complementary goals for a state.
“Whereas liberal writers generally view the pursuit of
power and wealth, that is, the choice between “guns and butter,” as involving a
trade-off, nationalists tend to regard the two goals as being complementary.[8]
Mercantilists suggest that because economic resources are essential to maintain
and assert national power, conflict is both political and economic.
Mercantilists would assert that the pursuit of wealth and power are
inextricable goals of states which inevitably overlap. Mercantilists pursue
power, self-sufficiency and economic independence rather than interdependence.
In contrast to the mercantilist perspective, economic liberals
dismiss theories and policies which subordinate economics to politics.
Conversely, economic liberals would suggest that markets are spontaneous;
arising to meet demand and the satisfaction of human needs -provided they are
free from state interference. “Liberal political theory is committed to free
markets and minimal state intervention…individual equality and liberty.”[9] Liberal ideology maintains the existence of
individual rational actors – people acting in the way most beneficial and
profitable for themselves, pursuing their own individual interests. Other
liberal ideas include the belief in progress and mutual gain from free trade.
Liberalism is committed to a free market and demand regulated by the market. “Smith
suggests the key notion that the economic marketplace is the main source of
progress, cooperation, and prosperity.” [10]
Political interference and state regulation is believed to be inimical to this
progress, creating conflict and reducing the efficiency of the system.
Economic liberals reject mercantilist notions of the
centrality of the state as a central actor in economic affairs; rather, they
suggest it is the individual and consumer who is in fact the central actor. In
the marketplace they suggest economic exchange is a positive sum game,
individuals and companies reap greater rewards than they input into production
due to increased efficiency. Liberals suggest this starting point is useful for
understanding market economics and also economics. Consequently, economic
liberals reject the mercantilist notion that one state’s economic gain necessarily
must be at the expense of another. The global economy is perceived as a as a
sphere of cooperation amongst states and individuals and the mutual benefit of
all and thus, the international economy should be based on this free trade
model. Although classic liberal theorists would argue against any form of state
interference, promoting instead a laissez faire economic system, neo-liberals accept
some state interference in the form of policy measures to manage the workings
of the economy can maximise the efficiency of the state. Keynesian ideas of a
market ‘wisely managed’[11]
by the state lent a positive perspective of the state as an actor who could
give direction and provide political management of the market. The liberal view
seems now to be shifting back towards an entirely laissez faire liberalist
model with the belief that unfettered economic globalization will be prosperous
for the whole world.
The Marxist approach to IPE is a fundamental critique of
economic liberalism, rejecting the notion that the economy is beneficial to all
as a positive-sum game. Rather, Marxists perceive the economy as a site of
class inequality and exploitation. Marxists apply the mercantilist zero-sum game
between states and apply it to class; one class can benefit but only at the
expense of another. “Marxists agree with mercantilists that politics and
economics are closely intertwined; both reject the liberal view of an economic
sphere operating under its own laws. But where mercantilists see economics as a
tool of politics, Marxists put economics first and politics second.”[12]
Marxists believe there to be two antagonistic social
classes within the economy; the bourgeoisie who own the means of production and
the proletariat who sell their labour to the bourgeoisie. By exploiting the
labour, the bourgeoisie generate capitalist profit. This is because the labour
puts in more work than it gets back in pay. Marx perceived capitalism as a
precursor to a social revolution where the means of production would be placed
under common ownership. Marxists suggest that economic production is the basis
for all other human activities, including politics. For Marxists, states are
controlled by the ruling class and driven by the interests of the bourgeoisie.
This means war and conflict between states is the physical manifestation of
capitalist class competition between states and as capitalism expands around
the world, the competition between the capitalist classes follows. As such,
Marxists perceive the history of IPE as the history of capitalism expanding
across the globe.
Mercantilism, neo-Liberalism and Marxism all expose
different aspects of the complex relationship between politics and economics.
However, these theories in themselves have taken their arguments too far from
the logical conclusion. Mercantilists’ claim that politics is in full control
of economics is clearly incorrect. Although politics provides the framework for
economics to function, the market has an important effect on the political
agenda. However, the extent of this is not as far as Marxists would assert;
although it is influential, economics does not determine politics. Similarly,
although economic liberals would suggest the market is autonomous, this is not
entirely true. Yes, the market does have its own self regulating mechanisms,
but it is not completely independent of political control.
All three theories, mercantilism, economic liberalism and
Marxism have elements which are useful and relevant for today. Mercantilism
recognises the need for a strong state to allow the functioning of a liberal
economy by providing stability and enforcing liberal rules around the world;
the hegemonic stability theory. The most relevant Marxist debate concerns
development and underdevelopment in the third world. Marxists recognise
underdevelopment is often caused by external economic factors and exploitation
from the developed world. Economic liberals’ optimisitic and positive view of
globalization shifting towards a global economic system, bringing increased
prosperity yet undermining the nation state is an interesting and particularly
relevant debate. None of the theories in themselves can fully explain the
development of the world yet elements of each provide insights into the linkage
of politics and economics.
Whilst traditional IR questions of war and peace have partially
re-emerged since 9/11, the proliferation of asymmetric attacks is fundamentally
different from the inter-state conflict which consumed the world in the first
half of the twentieth century. The
danger of war between states, the traditional focus of IR, has declined. Conflict in the twenty-first century is
increasingly within states and often linked to issues of development and
underdevelopment, an important aspect of IPE. It could be argued that to some
extent the asymmetric, terrorist attacks are a result of the conflict of
ideology between the liberal economies of the West and Islamist states which
are threatened by the all consuming materialism and pursuit of profit sought by
capitalism. Although there are other important deep underlying tensions, there
is a key link between economics and politics which cannot be ignored. The issues of wealth and poverty raised by
IPE are increasingly relevant in world politics
IPE theory can do a great deal in explaining the current
political and economic climate in the world and as such remains an invaluable tool
in understanding IR. Its relevance extends not only to explaining the political
and economic systems of the past, but can also provide indicators as to the
future of the world. Attempting to study and understand international politics
without consideration of the economic constraints is naïve and although
complex, by examining the economic motivations of states, their political
motives often become clearer.
[1] S. Strange, States and
Markets, Second Edition, Pinter, 1994, p.11
[2] R. Jackson & G.
Sorenson, Introduction to International Relations Theories and Approaches,
Oxford University Press, 2002, p.178
[3] S. Gill & D. Law, The
Global Political Economy – Perspectives, Problems and Policies, Harvester
Wheatsheaf, 1998, p.7
[4] R. Jackson & G.
Sorenson, Introduction to International Relations Theories and Approaches,
Oxford University Press, 2002, p.178
[5] R. Gilpin, The Political
Economy of International Relations, Princeton University Press, 1987, p.31
[6] ibid. p.32
[7] ibid. p32
[8] K. Knorr, British Colonial
Theories, 1570-1850, University
of Toronto Press
[9] R. Gilpin, The Political
Economy of International Relations, Princeton University Press, 1987, p.37
[10] R. Jackson & G.
Sorenson, Introduction to International Relations Theories and Approaches,
Oxford University Press, 2002, p.181
[11] J. Keynes, Essays in
Persuasion, Norton, 1963, p.321
[12] R. Jackson & G.
Sorenson, Introduction to International Relations Theories and Approaches,
Oxford University Press, 2002, p.184
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