International Political Economy (IPE), Essay Example

In this paper I will provide some basic definitions related to IPE, and summarize the origins, assumptions, and goals that shape this particular discipline.

David Lake is a leading scholar in the field of IPE. His 2004 essay International Political Economy: A Maturing Interdiscipline provides his own overview of the study of international trade and international politics. In that paper, Lake states that IPE is a “maturing interdiscipline.” (Interdiscipline is defined as combining or involving two or more academic disciplines or fields of study.) Lake doesn’t say that it is a mature discipline, and this is a key point. He means that IPE is mature enough to have developed different schools and viewpoints and that it is still developing new ones. It is a growing and open field. For example, early viewpoints dating from the late 1960s (called the “old IPE” by Princeton’s Robert Keohane in a 2009 paper) have been replaced by a new approach, called Open Economy Politics (OEP). Bridging the gap between economics and politics, a gap that dates from the late 19^th Century, remains the goal.

Just as there are new theories to come, IPE is yet old enough to contain ideas that have not stood the test of time, such as dependency theory. It stated that developing economies are trapped into subservience by their international trade with larger economies (like the U.S.), and must develop new economic models to follow in order to prosper. Lake writes that this theory, although retaining some elements of credibility, failed to develop a consistent and testable basis, and was at least partially disproven by the growth of strong export-led developing economies in the 1970s. Hegemony theory is another IPE theory that failed to develop, based on the curious belief that large states prefer free trade and coerce smaller states into opening their markets, ignoring both the mercantilist history of England, and that of the former Soviet Union. It predicted, with America’s apparent decline from supreme hegemony, that the international economy would break into blocks of protectionism. However, that did not happen. Finally, there is still much disagreement within IPE  about its future. Thomas Oatley, in his 2009  paper, The Reductionist Gamble: Open Economy Politics in a Global Economy, claims that OEP theorists focus far too much on domestic politics’ affects on international trade while increasingly ignoring international politics. He calls this a “reductionist” approach that risks IPE’s relevance.

IPE was born of the post–World War II (WWII)  growth in international trade. Such trade is called globalization. IPE’s chief concern: the roles of economics and politics in that trade. Its premise is that of neoclassical economics (a 20th century update on Adam Smith), that the free exchange of goods, nationally and internationally, benefits the greatest number of people. (Obviously its study of both economics and political science is what makes it interdisciplinary.) IPE began in the late 1960s, when the assumptions built into contemporary economics and politics and their effects on international trade were beginning to conflict with each other. In a nutshell, Bretton Woods succeeded so well that it failed. IPE set out to document exactly why.

Bretton Woods, the name of the 1944 agreement among America’s WWII allies, replaced gold as the currency of international trade with the dollar, and set exchange-rates of different currencies each at a fixed rate. It set the price of gold at $35 per ounce, meaning that a foreign bank (say, in France) holding dollars it had accumulated by exporting goods to America and accepting dollars in payment (instead of requiring those buyers to purchase French francs) could demand gold in exchange for those dollars. Under this regime, international trade grew to unprecedented heights. (As of 2004, imports/exports amounted to nearly 49% of developing nations’ output.) With such trade came interdependence. But inflation rendered the fixed rates obsolete, and in 1971 U.S. President Richard Nixon ended convertibility of dollars into gold, also ending the long reign of Bretton Woods. International trade then relied on floating rates, with the value of currencies determined by market forces alone. By 1973 the dollar was steeply devalued, and in response the Organization of Petroleum Exporting Countries (OPEC) cut production and quadrupled their prices. This was a critical period in Middle East politics, and several of the members of OPEC were openly hostile to Israel. It was understood that economics and politics were at play in international trade. As might be imagined, IPE had a interdisciplinary field day that has not ended yet, expanding further into International Relations and Comparative Politics.

International Relations is defined as a branch of political science concerned with relations between nations and primarily with foreign policies. By contrast, Comparative Politics is defined as the systematic study and comparison of the world’s political systems. When Thomas Oatley criticized OEP in his paper I noted earlier, he said it was becoming “indistinguishable from comparative political economy”, which we may take to be the same as “comparative politics.” By that he meant that OEP adherents were neglecting the international relations defined above and focusing on non-international ones instead.

Economics is my final definition: a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services. In his paper, Lake notes that IPE is not just a methodology (a set or systems of methods, principles, and rules for regulating a given discipline). It is a social science in its own right, based on observation, prediction, experiment, and conclusion. IPE’s biggest contribution will be to bring some objectivity to the political stew that currently governs globalization. But I won’t hold my breath.