CSS IR-I: International Political Economy (IPE)

Topics Covered:

• International Political Economy 
• Theories of IPE: Mercantilism, Economic Liberalism, and Neo-Marxism
• Theories of Imperialism: Dependence and Interdependence, World System theory

International Political Economy

International Political Economy

IPE is the study of inter-relationship between economic and politics and between states and markets. It explains how politics is used to gain economic goals and vice versa. Susan Strange is considered to be founding mother of IPE. She founded IPEG at the Royal Institute of International Affairs at Chatham House in 1971. It is relatively new sub discipline of IR whose first text book was published in 1977. But its history dates back to 17^th century when modern nation states after (TOW, 1648) developed their economic policies and overall economic system – Mercantilism. During that time economic relations were carried in context of Imperialism – small number of states controlled most of the world both politically and economically. But the age of enlightenment and peace and diplomatic cooperation in 19^th century put an end to mercantilism by promoting economic liberalism. Military conflicts and two world wars put an end to economic liberalism in 20^th century and prompted the nationalism – acquiring resources for themselves (Mercantilism).

The great depression of 1930s and word war – II affected world trade a lot. Therefore, three institutes were envisaged at Bretton woods to bring new world economic order. 1) IMF 2) IBRD – the world bank and 3) GATT.

Understanding IPE's theoretical perspective

Theories in IPE: Mercantilism, Economic Liberalism, and neo Marxism

Mercantilism Pre-dominant between 16^th and 19^th century. It’s realist school of thought, says: world economy is arena of competition among states seeking to maximize relative strength and power.  It says: States has to do what it can do to survive. So, aim of every state is to maximize wealth.

Mercantilism suggests 1) state should involve itself in international trade 2) international economy is competition not cooperation 3) self-sufficiency, and 4) protectionism.

Economic Liberalism did not occur until the 19^th century. Endorses the concept of free market economy for common gains. Prohibits government interference in international trade. It says: By building international institution and norms states can benefit mutually from economic exchanges.

Adam Smith [Scottish] (1723-1790) and John Keynes (1883-1946) are behind economic liberal thought. Adam Smith wrote Wealth of Nation in 1776 and described why free trade was a good thing and ultimately advantage to all. Liberalist justifies that trade brings peace and comparative advantage such as in case of Europe.

Marxism Argues Capitalism is evil because the workers (proletariat) produce all the value of goods through their labor while the owners (bourgeoisie) get most of the money. Capitalism created the class struggle between the factory owners and workers. One day workers will win the class struggle permanently. The theory was given by Karl Marx [German] (1818-1883) and Friedrich Engels [German] (1820-1895).

Neo-Marxism It is amendment and the criticism of the Marxism developed after WW-II it was result of failure of working class-revolution in western Europe. One of the most widely accepted form of neo-Marxism is Frankfurt School of thought given by Max Horkheimer. Human history is not only a class struggle, but a race struggle, a gender struggle, etc. and these various struggles involve an oppressive class and a subjugated class.

Neo-Marxists produced the dependency and modern world system theories as clear illustrations as to how neo-liberal capitalism has brought increased inequality to the global economy. Dependency and World System Theories both share the idea that the Global North and South are in a structural relationship with one another.

Imperialism and theories

Theories of imperialism: Dependence and Interdependence

Imperialism policy which aims at creating, organizing and maintaining an empire that is a state of vast size composed of various more or less distinct units and subjects to a centralized will. It is a relation system in which weaker is exploited politically, economically, or socially by strong nation. Imperialism can be an economic (I.e. of the Europe), political (i.e. USA and USSR in cold war), cultural (i.e. European art and African craftsmanship) and militarily (i.e. USA and Russia). 

Dependency Theory first proposed in 1950s by Raul Prebisch he was director of UNEC for Latin America. A situation in which the economy of certain countries is conditioned/dependent on development and expansion of another economy. Economic growth in advanced countries depends on developing countries Such as the theory claims that the impoverishment of the South is a direct outcome of their exploitation by the advanced countries in the age of imperialism, which led to the superior development of the North.

Interdependence Theory was given by Interdependence theory was first introduced by Harold Kelley and John Thibaut in 1959 in their book, The Social Psychology of Groups. Relations between the states is struggling because capital accumulation is more in focus than other aspects of relationship building. Interdependence between countries reduces the chance of them engaging in conflict. It argues that reward and cost are linked with two-way collaboration, and the closeness and friendship are solution to all problems. Ex: China is flourishing even it is not following Capitalism.

World Systems Theory underdevelopment is actually a problem of dependency, arising within a world system operating as a whole. According to it, underdeveloped societies are not in the position they are in due to internal inadequacies, but because of an ongoing history of dependency, economic exploitation, political subordination and military violence.