International political economy

International political economy has its historic roots in the discipline of political economy; the study of the national economy and its interactions with governance and politics. Adam Smith's publication of The Wealth of Nations profoundly influenced the development of the field of political economy. While the newly founded discipline of economics; which studies economic phenomena absent of political and social considerations; began to diverge from political economy studies in the late 19th century, political economy continued to live as an academic tradition within political science departments, as well as within modern economics as a pluralist approach. While notable works from John Maynard Keynes' General Theory and Karl Polanyi's The Great Transformation published in the early 20th century are still written in the tradition of political economy, economics in its narrower form was dominating economics departments from the 1920s and onward. The emergence of international political economy can be traced to the late 1960s and early 1970s, when deepening economic interdependence prompted by the growth of post-war economic institutions such as the International Monetary Fund, World Bank, and General Agreement on Tariffs and Trade, drew increasing attention within international relations scholarship towards the study of these institutions, and more broadly, to the study of governance of the world economy. The need for a more comprehensive understanding on global economic governance within political science circles became increasingly apparent through the crises of the 1970s; with the end of the gold standard, the 1973 oil crisis, 1973-1975 recession and calls for greater trade protection. IPE has since become a key pillar in political science departments as well as a major subdiscipline of international relations, alongside traditional international relations scholarship centred on material security. == Topics of enquiry ==

International Finance International finance and monetary relations is one of the core areas of study in IPE. The IPE of international finance is characterized by political network effects and international externalities, such as beggar-thy-neighbour effects and contagions. A key concept in IPE literature on international finance is the impossible trinity, derived from the Mundell–Fleming model, which holds that it is impossible to simultaneously pursue all of the following three economic policies: • a fixed foreign exchange rate • free capital movement; absence of capital controls • an independent monetary policy Another key dilemma in monetary policy is that governments have to balance the inflation rate (the price of money at home) and the exchange rate (the price of money outside the home market). In 1971 President Richard Nixon ended the convertibility of gold that had been established under the IMF in the Bretton Woods system. Interim agreements followed. Nonetheless, until 2008 the trend has been for increasing liberalization of both international trade and finance. From later 2008 world leaders have also been increasingly calling for a New Bretton Woods System. Topics such as the International Monetary Fund, Financial Crises (see 2008 financial crisis and 1997 Asian financial crisis), exchange rates, Foreign Direct Investment, Multinational Corporations receive much attention in IPE. International Trade There are multiple approaches to trade within IPE. These approaches seek to explain international bargaining between states, as well as the foreign economic policies that states adopt. In terms of domestic explanations for the foreign economic policies of states, the two dominant approaches are the factor model and sector model, both of which build on David Ricardo's theory of comparative advantage. The factor model (which has been called the H-O-S-S model) is shaped by the Heckscher-Ohlin model and the Stolper-Samuelsson theorem. According to the Heckscher-Ohlin model of trade, the comparative advantage of countries in trade stems from their endowments of particular factors of trade (land, labor, capital). This means that a country abundant in land will primarily export land-intensive products (such as agriculture), whereas a country abundant in capital will export capital-intensive products (such as high-technology manufacturing) and a country abundant in labor will export labor-intensive products (such as textiles). Building on this model, the Stolper-Samuelsson theorem holds that groups that possess the factors will support or oppose trade depending on the abundance or scarcity of the factors. This means that in a country which is abundant in land and scarce in capital, farmers will support free trade whereas producers in capital-intensive manufacturing will oppose free trade. Building on these insights, influential research by Ronald Rogowski argued that factor endowments predicted whether countries were characterized by class-conflict (capital vs. labor) or urban-rural conflict. A 2023 study by Milner and Lindsay R. Dolan found that factor endowments help explain trade preferences in Africa. Research has substantiated the predictions of the Stolper-Samuelsson theorem, showing that trade openness tends to reduce inequality in developing countries, but exacerbate it in advanced economies. The sectors model of trade, the Ricardo–Viner model (named after David Ricardo and Jacob Viner), challenges the notion that factors are key to understanding trade preferences. As a result, the Ricardo-Viner model predicts that class conflict over trade is more likely when factors are highly mobile, but that industry-based conflict is more likely when factors are immobile. Adam Dean has challenged the economic assumptions in both models, arguing that workers' wages do not consistently correspond to increases in productivity in a given industry (contradicting Ricardo-Viner) nor do workers consistently benefit from import restrictions when labor is the scarce factor of endowment (contradicting Heckscher-Ohlin). The degree to which Ricardo-Viner and Heckscher-Ohlin are correct is conditioned by whether workers have profit-sharing institutions or are unionized (which helps them to bargain for higher wages amid productivity increases). Studies by Dani Rodrik and Anna Mayda, as well as Kenneth Scheve and Matthew J. Slaughter have found support for the factor models, as they show that there is greater support for trade openness in developing countries (where labor is abundant and thus benefits from trade openness). Other studies find no support for either model, and argue that the models have limited explanatory value. A 2022 study in the Journal of Politics found that comparative advantage predicts attitudes on free trade among individuals and legislators. According to a 2017 assessment by Thomas Oatley, there are "no strong conclusions" in IPE scholarship as to which of these models better characterizes the sources of individual trade policies. Economic geography approaches explain trade policies by looking at the regions that benefit and lose on globalization; it predicts that large cities support trade liberalization and that left-behind regions push back on liberalization. Other alternative models to the factor and sector models may explain individual preferences through demographic data (age, class, skills, education,), as well as ideology and culture. Some studies have raised questions about whether individuals understand the effects of trade protectionism, which puts doubt on theories that assume that trade policy preferences are rooted in economic self-interest. Influential studies by David Cameron, Dani Rodrik and Peter Katzenstein have affirmed the insights of the Double Movement, as they show that greater trade openness has been associated with increases in government social spending. In terms of how preferences get aggregated and reconciled into foreign economic policies, IPE scholars have pointed to collective action problems, regime types, veto points, the nature of the legislative trade policy process, the interaction between domestic and international bargaining, and the interactions between political elites and epistemic communities. Some IPE scholarship de-emphasizes the role of domestic politics and points to international processes as shapers of trade policy. Some scholars have argued for a "new interdependence approach", which restores insights from the complex interdependence of the 1970s, but emphasizes network effects, control over central nodes, and path dependence. Economic development IPE is also concerned with development economics and explaining how and why countries develop. ==Historical IPE approaches==

Historically, three prominent approaches to IPE were the liberal, economic nationalist (mercantilist), and marxist perspectives. Political economist Thomas Oatley traces the development of these economic ideologies, from mercantilism in the 1600s, which emphasizes competition among states for economic dominance, through liberalism in the 1700s, which emphasizes maximizing productivity through comparative advantage, to Marxism in the 1800s, which emphasizes competition among groups for economic dominance. Economic liberals commonly adhere to a political and economic philosophy which advocates a restrained fiscal policy and the balancing of budgets, through measures such as low taxes, reduced government spending, and minimized government debt. To economic nationalists, markets are subordinate to the state, and should serve the interests of the state (such as providing national security and accumulating military power). The doctrine of mercantilism is a prominent variant of economic nationalism. Economic nationalism tends to emphasize industrialization (and often aids industries with state support), due to beliefs that industry has positive spillover effects on the rest of the economy, enhances the self-sufficiency and political autonomy of the country, and is a crucial aspect in building military power. In popular culture, the book Trekonomics by Manu Saadia examines the science fiction multiverse of Star Trek through the lens of individual-centered liberalism that arises in the American context, commercial republicanism. Both academic and popular perspectives converge on universal basic income as an important focus for future research in international political economy that integrates, synthesizes, and extends the mercantilist, liberal, and Marxist perspectives. == Modern IPE approaches ==

There are several prominent approaches to IPE. The dominant paradigm is Open Economy Politics. Other influential approaches include dependency theory, hegemonic stability theory, and domestic political theories of IPE. Robert Jervis wrote in 1998, "the IPE subfield, after a marvelous period of development in the 1970s and 1980s seems to be stagnating." The first wave of IPE scholarship focused on complex interdependence and the evolution of global systems of economic exchange. OEP adopts the assumptions of neoclassical economics and international trade theory. It strongly emphasizes microfoundations. • Interests: "OEP begins with individuals, sectors, or factors of production as the units of analysis and derives their interests over economic policy from each unit's position within the international economy." • Domestic institutions: "It conceives of domestic political institutions as mechanisms that aggregate interests (with more or less bias) and structure the bargaining of competing societal groups." • International bargaining: "It introduces, when necessary, bargaining between states with different interests. Analysis within OEP proceeds from the most micro- to the most macro-level in a linear and orderly fashion, reflecting an implicit uni-directional conception of politics as flowing up from individuals to interstate bargaining." Thomas Oatley has criticized OEP for an overemphasis on domestic political processes and for failing to consider the interplay between processes at the domestic level and macro processes at the global level: in essence, OEP scholarship suffers from omitted variable bias. According to Peter Katzenstein, Robert Keohane and Stephen Krasner, scholarship in this vein assumes that actors' preferences and behavior are derived from their material position, which leads to a neglect of the ways in which variation in information may shape actor preferences and behaviors. Mark Blyth and Matthias Matthijs argue that OEP scholarship essentially black boxes the global economy. Dependency theory and world systems theory are not mainstream economic theory. Hegemonic stability theory Early IPE scholarship was focused on the implications of hegemony on international economic affairs. In the 1970s, US hegemony appeared to be on the fall, which prompted scholars to consider the likely effects of this falling. Robert Keohane coined the term Hegemonic stability theory in a 1980 article for the notion that the international system is more likely to remain stable when a single nation-state is the dominant world power, or hegemon. American vs. British IPE Benjamin Cohen provides a detailed intellectual history of IPE identifying American and British camps. The Americans are positivist and attempt 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. A special edition of New Political Economy has been issued on The 'British School' of IPE and a special edition of the Review of International Political Economy (RIPE) on American IPE. ==Journals==

The leading journal for IPE scholarship is the generalist international relations journal International Organization. International Organization played an instrumental role in making IPE one of the prominent subfields in IR. The leading IPE-specific journals are the Review of International Political Economy and New Political Economy. Examples of journals within the historical study of IPE are Economic History Review and History of Political Economy. ==Professional associations==

• British International Studies Association - International Political Economy Group (BISA-IPEG) • International Studies Association - International Political Economy Section (ISA-IPE) • ISA-IPE Mailing List ==Notes and references==