INTERNATIONAL POLITICAL
ECONOMY (IPE)
Prof. Amado Mendoza, Jr.
Department of Political Science
University of the Philippines
Outline of presentation
What is ipe? What is IPE?
Post-World War II ipe
IPE theories
5/3/2012
Mendoza--International Political
Economy--Pol Sc 180
2
International Political Economy
‘Material reality’; ‘object’ of study (ipe)
and theory (IPE)
A field of study bridging economics and
political science (and several other
social sciences such as sociology,
geography, among others)
Concerned with interaction between
states, markets, and societies
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Economy--Pol Sc 180
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The state and the market: key
categories in old IPE
The state (political component of IPE)—a
sovereign territorial unit with a
government and a population; involved
in the pursuit of POWER
The market (economic component of
IPE)—coordinating mechanism where
supply and demand determine prices,
output and methods of production;
involved in the pursuit of WEALTH
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Economy--Pol Sc 180
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State-market relations I
Opposing institutional logics
State logic--exclusion, national
sovereignty, territorial bounded-ness
Market logic--inclusion, expansion,
economic openness, breaking down of
state barriers
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Economy--Pol Sc 180
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State-market relations II
Complementary and symbiotic relations
States protect property rights, provide
infrastructure to facilitate market
transactions
Internationally, states conclude
agreements/form organizations to
promote economic openness
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Economy--Pol Sc 180
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State-market relations III
State power is largely defined by level
of economic development
State-market interactions—core issue in
the study of old IPE (late 1960s-early
1990s)
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Economy--Pol Sc 180
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Society and social groups
in the new IPE
State and society interactions
Market-society interactions
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Economy--Pol Sc 180
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State-society interactions
Individuals and social groups may make
demands on the state for protection
against the vagaries of international
economy
States enter into treaties for the same
purpose
Individuals employed abroad increase
state’s foreign exchange reserves
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Economy--Pol Sc 180
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Market-society interactions
Market-society relations are based on
supplier-consumer relations
Consumer demand (generated by a
number of variables) stimulates supplier
activity and even product innovation
and vice versa
Market crisis induces social backlash
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Economy--Pol Sc 180
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Key relations for consideration
in IPE
Between state and market and society
Between economic and political and
social
Between domestic and international
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Economy--Pol Sc 180
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Fundamental premises of modern
IPE
Political and economic and social
domains cannot be separated in any
meaningful sense
States and markets and societies—not
necessarily contrasting principles of
social organization; co-existence of
opposing and complementary logics
Intimate connection between domestic
and international
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Economy--Pol Sc 180
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Rough schema to understand the
post-WW2 ipe
Dimensions
Period I
Period II
Strategic
environment
Cold War
Post Cold War
--pre 9/11
--post 9/11
Strategic concern
‘High’ politics
‘High’ & ‘Low’ politics
Secular economic
trends
Kondratieff
expansion
Kondratieff
contraction; greater
fluctuations in
business cycle
Institutional
architecture
Bretton Woods
institutions
Post Bretton Woods
institutions
IR theory esp.
IPE theory
Theory
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Mendoza--International Political
realism
Economy--Pol Sc 180
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The inter-war years
The Great Depression led governments
to adopt protectionist measures;
deepened crisis and ultimately led to
international war
After WWII, the challenge is to set up a
system that would prevent the repeat of
these occurrences
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Economy--Pol Sc 180
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Necessary features of post-war order
Stable exchange rate system
Control of international capital flows
Availability of short-term loans for
countries with BOP problems
Rules to keep economies open to
international trade
A reserve asset or unit of account (such
as the gold standard)
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Economy--Pol Sc 180
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The Bretton Woods system:
anchored on fixed exchange rates
IMF: to provide BOP support
World Bank: to provide longer term
financial support for development
GATT: to help negotiate lower tariffs
and encourage international trade
Negligible LDC participation or voice in
BW institutions; non-participation of
Soviet bloc
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Economy--Pol Sc 180
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Breakdown of the BW system
Increased US spending under LBJ for
domestic programs and Vietnam war
financed without tax increases
Competitiveness of US products and
confidence in the US dollar dropped
Nixon shock of 1971: suspension of the
dollar’s convertibility to gold at $35/oz.
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Economy--Pol Sc 180
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Ups and downs of US hegemony
Creation of liberal world economy coincided
with Cold War
Long ‘post-war’ boom
Marshall Plan and similar efforts aimed
towards Soviet containment
The eventual resurgence of Europe and Japan
undermine US economic predominance
End of Cold War does not result in US
economic hegemony
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Economy--Pol Sc 180
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Key features of the Kondratieff downturn
and beyond
Rise of OPEC and crude oil prices; the petrodollar phenomenon
‘Stagflation’ and new protectionism among
industrial states
Assertion of developing country interests
through NIEO and UNCTAD
Rise in interest rates and Third World debt
crisis
Washington consensus as policy prescription
Emergence of anti-globalization movements
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Current state of BW agencies
World Bank: development agency
making loans to developing countries
IMF: gained greater role in defining
economic policy of developing countries
with the 1980s debt crisis
GATT: transformed into WTO which
could better enforce trade rules and
settle disputes
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Economy--Pol Sc 180
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Overall economic trends in the post war
period I
International trade has grown more
than global economic output; increased
competition; drop in trade barriers
Significant increase in trade in services
More goods become trade-able with
decreasing costs of transport (container
van and RORO technology) and
miniaturization
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Economy--Pol Sc 180
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Overall trends II
Increased integration of global financial
markets due to financial deregulation,
new financial goods and advances in
ICTs; greater chances for contagion
during crises; financial flows dwarf real
economy
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Economy--Pol Sc 180
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Overall trends III
Rise of new industrial economies
Greater frequency of crises
Increased inequality within and
between nations
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Forms of capitalism
Enterprise (Anglo-Saxon) capitalism
Social (market) capitalism (Germany)
State capitalism (China)
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Rise of IPE theory: big changes
in world economy
Decline of US economic preponderance and
challenge to traditional notions of power and
security posed by US failure in Vietnam
New economic challenges : OPEC, demands
for NIEO, NICs, EU, emerging economies
End of the Cold War and globalization further
underline the centrality of IPE in the study of
international relations
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Economy--Pol Sc 180
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Major theoretical clusters in IPE
theory
Realist/statist theories
Varieties of liberalism
Marxist/critical theories
Other IPE perspectives
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Mercantilism
Praxis that accounts for need to create
wealth and sustain national power
Context: Nation-state building,
international war & colonial rivalry in
Europe (15th-18th centuries); caveat:
Euro-centrism
Zero-sum nature of international trade
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Economy--Pol Sc 180
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Mercantilism, 1st version
Accumulation of wealth (preferably
precious metals)
Wealth buys weapons and finances
armies & navies
Wealth is a proxy measure of national
power (understood as military might)
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Mercantilism, 2nd version
Promotion of exports
Suppression of imports & other forms of
protectionism (e.g. Corn Laws &
Navigation Act in England)
Colonialism: monopolization of markets
for raw materials, cheap labor, and
consumer goods
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Economic nationalism
American version: Alexander Hamilton
(1755-1804)
German version: Friedrich List (17891846)
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Mercantilism vs. economic nationalism
Mercantilism seeks power & wealth
through unequal trade
Economic nationalism focused on
internal development of national
economy
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Common belief
Unregulated participation in
international markets leads
to dependency and weakens
national power
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Alexander Hamilton
Prescribed that for the US to have a
strong manufacturing & industrial base,
the state must provide trade protection
for the country’s infant industries
Proposed measures: subsidies for US
products and tariffs to limit imports
This is now known as strategic
industrial policy
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Friedrich List
Exalted the power to produce than
wealth itself
Agreed with Hamilton that the state
was needed to boost productive power
(education, technology, industry)
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Short history of contemporary IPE
Early intervention and abdication of
economists
Enter political scientists and IR scholars
The economists return
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Early efforts of economists
Jacob Viner (1948). “Power and plenty”
Richard Cooper (1968). The Economics
of Interdependence.
Charles Kindleberger (1970). Power and
Money.
Raymond Vernon (1971). Sovereignty
at Bay.
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IR and political scientists
Robert Gilpin. The Political Economy of
International Relations
Robert Keohane and Joseph Nye. Power
and Interdependence.
Susan Strange. “International
Economics and International Relations:
A Case of Mutual Neglect.”
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Building blocks of realist IPE
The state
The environment of international
anarchy
The national interest
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Realism vs. other IPE theories
The state & its interest is autonomous


Not sum of individual interests ala liberals
Not executive committee of capitalist class
In the world of anarchy, tension exists
between national and economic interest
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The state may decide, at times, to forego
economic gain in the name of national
security
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Economy--Pol Sc 180
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Economism and other objectives
Liberalism and Marxism share an
economistic perspective: individuals are
motivated by desire to maximize wealth
“Realists aren’t in it for the
money!”
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Re-assertion of realism
after Cold War
Failure to predict end of Cold War weakened
realism (even if this criticism was quite
unreasonable as all systemic theories cannot
and will not account for agency)
Did not lead to its demise as theory; stronger
assertions of relevance in PCW period
“In short, the real world remains a realist
world." (John Mearsheimer, The Tragedy of
Great Power Politics, 2001)
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Summary of realist IPE
Skepticism that interdependence will
reduce possibility of war
International politics will crucially shape
pattern of international economic
relations
States will monitor the engagement
with international economy with an eye
towards mediating dangers arising from
anarchy
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Keohane’s neoliberal institutionalism
Characteristics of ‘complex interdependence’
 Multiple channels connect societies (multilevel relationships)
 Multiple issues of concern; security issues
no longer dominate international agenda;
no ‘high’ politics
 States do not use military force against
others; limited potency of military power
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Outcomes of complex interdependence
States pursue different goals simultaneously;
transnational actors have own goals free from
state control
Power resources specific to issue area;
influence in one not transferable to another
International institutions gain greater
importance
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Arenas for political action by weak states
Animate coalition formation
Oversee the setting of international agenda
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Interdependence & institutions
High degree of interdependence move
states to set up institutions to deal with
common problems
States create institutions to better
achieve gains through policy
coordination and cooperation
States create institutions and delegate
power to them
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Role of international institutions
Permit states to define interests in a
more cooperative way
Foster compliance with mutually agreed
upon rules and standards; discourage
or punish cheating
Foster negotiations and info exchange
among states
Open up new reasons to cooperate
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Factors influencing cooperation
among states
Payoff structure: the greater the conflict of
interests between states, the greater the
likelihood of non-cooperation
Number of players: smaller number of
participants facilitates verification of
compliance and punishment of cheaters
‘Shadow of the future’: if relationships will
continue over a long period, the greater the
possibility of cooperation (since punishment
for cheating is always possible in repeated
transactions)
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Critique of liberalism
Economism


Improper downgrading of state and power
Unacceptable separation of markets and politics
More ideology rather than positive theory?
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
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Too much faith on markets?
Export of democracy leads to international war
(policy of Bush administration’s neoconservatives)
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Realist critique of international institutions
Institutions always reflect the interests
of dominant states
Institutions only accommodate interests
of weaker states if position of dominant
states is not threatened
States that cooperate through IIs do so
because of self-interest; IIs are not
important in their own right
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Historical structuralism
Focus on structural means of
exploitation (property relations, class
domination, inequality between states)
Historical approach to the study of IPE;
time- and space-boundedness; history
of class struggle and exploitation
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Historical structuralism
Classical Marxism
Dependency theory
World-system theory
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Key theorists
Marxism (Marx, Lenin)
Dependency (Frank, dos Santos,
Cardoso)
World-system theory (Wallerstein,
Chase-Dunn)
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Classical Marxism: key ideas
Class is key concept, not the individual
or the state
Class struggle main factor affecting
economic and political order & change
The state is an agent of the dominant
class
Capitalism is progressive (to some
extent) and its logic is expansion on a
world scale
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Imperialism
Means of capitalist expansion
World is hierarchically organized; some
societies control and conquer others
Under consumption and overproduction
are the economic impulses behind
imperialism
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Differing opinions re imperialism I
Marx predicted that growing misery will lead
to proletarian revolution in advanced
capitalist countries
Lenin argued that imperialism allowed
capitalists to earn super profits and bribe
workers in their home countries
Competition among capitalist countries leads
to interimperialist wars and revolutionary
advance (Lenin)
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Differing opinions re imperialism II
Marx saw imperialism as ‘necessary evil’ so
backward societies can move to dynamic
capitalist mode
Lenin noted capitalist states will oppose
industrialization in colonies (source of raw
materials and market for finished goods);
capitalist expansion leads to unintended
problems; imperialism as moribund stage of
capitalism
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Dependency theory
Latin American in origin
First IPE theory from the Third World (TW)
Became dominant approach to development
among Latin American intellectuals
Will gain adherents all over Third World
Stress on relations between countries rather
than classes
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Theoretical bases of
dependency theory
Latin American structuralism (Raul
Prebisch)
Marxism (esp. Paul Baran of Monthly
Review)
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Latin American structuralism
Declining terms of trade between core
and peripheral states


Relatively constant demand for TW exports
Capacity of core states to develop
substitutes for TW raw materials
Prescribed import-substitution policies
for TW countries
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Dependency and Marxism
Similar focus on capitalist development
Adoption of Marxist concepts and
language
Common commitment to political
action; replacement of capitalism with
socialism
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Differences between
dependency and Marxism
Class relations are key to Marxists;
relations between North and South
countries are key to dependency theorists
Dependency writers stressed that capitalist
development in the core states occurred at
the expense of autonomous development
in the peripheral states; industrialization
was impossible in backward states
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Basic tenets of dependency
Unequal exchange between core and
peripheral states
Capitalist states ally with peripheral
elites to prevent TW industrialization or
to allow only dependent development
Delinking/socialist revolution as real
solutions to dependence
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Critique of dependency
Vague key concept (dependence) and
prescriptions for change
Too much emphasis on external
constraints
Failure to account for NICs (Bill
Warren’s critique of Lenin and support
for Marx; imperialism as pioneer of
capitalism, not its last stage)
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World-system theory
Unit of analysis is the world system
instead of national economies or states
World system: a unit with a single
division of labor and multiple cultural
systems
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
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World empire: world system with common
political system
World economy: world system without
common political system
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The modern world system
Emerged in Europe during long 16th
century (1450-1640)
Essential feature: production for sale in
a market for profit
Capitalism also involves appropriation of
surplus of the world economy by core
areas
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The semi-periphery
Semi-peripheral areas have more
capital-intensive industries than
peripheral areas but less than core
states
Areas can ascend/descend across the
three zones of the world system
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Effects of semi-peripheral
existence
Has dual role as exploiter and exploited
Contributes to greater political stability
of capitalist world-economy; lessens
political polarization
Weakens periphery and strengthens
dominance of core areas
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Future of capitalist world
system
Contradictions will threaten its longterm survival
Crisis indicates inability of system to
reproduce itself
Wallerstein believes system is now in
crisis which could lead to its demise and
replacement
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Critique of world system
theory
Marxist critique: too much emphasis on
relations of exchange
Vagueness of future prospects
Eurocentric view of the emergence of
world system; European world system is
offshoot of an older world system based
on the Middle East
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Imperialism
‘Open Marxism’
Dependency and World
Systems Theory
Marxism
Objectives
• understand the meaning of
‘critical theory’ when applied to
the study of IPE
• understand how ‘critical’
approaches to IPE relate the other
traditions we have studied so far
• outline and evaluate the main
ideas of Robert W. Cox as they
apply and to assess their
influence and usefulness
• consider the emergence of
Gramsci
Critical theory /
Frankfurt School
‘Critical’ / Gramscian /
Coxian / transnational
historical materialist IPE
MuchPolitical
more prominent in ‘British/nonMendoza--International
transnational historical
American’ rather than ‘American’ IPE
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materialist/neo-Gramscian
IPE Economy--Pol Sc 180
What is critical about these critical
approaches?
‘Theory is always for someone and for some purpose.
All theories have a perspective. Perspectives derive
from a position in time and space. The world is seen
from a standpoint definable in terms of nation or
social class, of dominance or subordination, of rising
or declining power, of a sense of immobility or of
present crisis of past experience, and of hopes and
expectations for the future … The more sophisticated
a theory is, the more it reflects upon and transcends its
own perspective; but the initial perspective is always
contained within a theory and is relevant to its own
explication. There is accordingly, no such thing as a
theory in itself, divorced from a standpoint in time and
space’. Robert W. Cox ‘Social forces, states and world
orders: beyond international relations theory’,
Millennium 10(2), 1981.
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Do you agree?
Is value-free,
‘objective’
theory
impossible?
If we accept
Cox’s dictum,
how should we
think about
important
‘conventional’
theories of IPE
such as
liberalism and
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realism?
Theory
Problemsolving
Puzzle solving
within the
terms set by a
particular
perspective;
non-historical
or a-historical;
‘assumption
of fixity’;
conservative
5/3/2012
Critical
Reflective on
process of
theorising and
does not take
for granted
existing
institutions /
ideas; historical
change;
possibilities for
changeMendoza--International Political
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Gramsci and the reconceptualisation of
hegemony
Gramsci’s problem:
… or how is class rule maintained
Why has there not been an
overthrow of capitalism in
the most advanced
capitalist states?
in capitalist society?
coercion
Hegemony
- Not brute domination
Implications for
IPE?
Strategic implications
– counter-hegemony
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- Intellectual and moral
leadership
- Cognitive dominance
via the dispersion of
capitalist ideas …
- … which come to be
regarded as commonsensical/normal
- Class rule via consent
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The neo-Gramscians: Cox and Gill
The Canadian scholar, Robert Cox, is
particularly responsible for introducing
Gramsci to the study of world politics
through the essays


5/3/2012
“Social forces, states and world orders:
Beyond international relations theory”
(1981)
“Gramsci, hegemony and international
relations” (1983)
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Theoretical approach
The state is ontologically central in
mainstream approaches
Neo-Gramscian theory uses an
approach which identifies state
formation and interstate politics as
moments of the transnational dynamics
of capital’s accumulation and class
formation
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Robert Cox’s research
programme in IPE
Historical structures
‘persistent social practices,
made by collective human
activity, and transformed
through collective human
activity’ Robert W. Cox
Production, Power and World
Order, Columbia University
Press, 1987, p. 4
Intersubjective
meanings
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Interaction of …
Ideas
Material
capabilities
Collective
images of
Mendoza--International Political
social order
Economy--Pol Sc 180
Institutions
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Implications of Cox’ claims
There can be no simple separation between
facts and values
All theorists inevitably bring their values to
bear on their analysis, consciously or not
Cox argued that existing IR theory (esp.
realism) are for those who prosper under the
prevailing order; it reinforces and legitimates
status quo by making the current
configuration of IR appear natural and
unchangeable
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Problem-solving vs. critical theory
Problem-solving theory accepts the
parameters of the present order and
helps legitimate an unjust system
Critical theory attempts to challenge the
prevailing order by seeking out,
analyzing and, where possible, assisting
social processes that can lead to
emancipatory change
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Nature of critical theory
Critical theory contributes to
emancipatory goals by developing a
theoretical understanding of world
orders that grasps


5/3/2012
the sources of stability in a given system
the dynamics of processes of change
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Cox’s use of hegemony
Cox transposes Gramsci’s notion of hegemony
to the international realm arguing that
hegemony is as important for maintaining
international order
Successive dominant powers have shaped a
world order that suits their interests
Dominance was result both of coercive
capabilities and broad consent for the world
order even among those who are
disadvantaged by it
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‘Free trade’ as hegemonic idea
For the two hegemons that Cox
analyzed (UK & US), the ruling
hegemonic idea has been ‘free trade’
The claim that free trade benefits
everybody has been so widely accepted
that it has attained common sense
status
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World hegemony accdg. to Cox
Not merely an order among states
An order within the world economy with
dominant mode of production which
penetrate all countries and links into
subordinate modes of production
Also a complex of international social
relationships which connect social
classes of different countries
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World hegemony & Cox II
World hegemony can be described as social,
economic and political structure
World hegemony is expressed further in
universal norms, institutions and mechanisms
which lay down the general rules of behavior
for states and civil society forces that act
across national boundaries; rules which
support the dominant mode of production
(capitalism)
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Prospects for counter-hegemony
To Cox, a significant structural change
in world order is most likely to come
from changes in social relations and
political orders in states
The task of changing the world order
begins with the long and laborious
process of building new historic blocs
within national boundaries
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Transnational historic bloc and
neoliberalism
Cox and Gill see the development of a
transnational historic bloc in the age of
globalization
Mobility of international finance
threatens national labor and business
groups and diminishes state sovereignty
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Key notions of Gill
The notion of ‘disciplinary neoliberalism’: the
market imposing discipline on economic and
political actors
The power of mobile international capital
forces national states and classes to accept
an international order that accepts free
markets as the hegemonic idea
The marketization and commodification of
human life (education, health care, etc) is the
consequence
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Sources of change
Threatened classes and groups (including
states) will resist the discipline of globalized
capital
Neo-Gramscians look favorably at the antiglobalization movements spawned by socalled global civil society as the core of
counter-hegemonic struggles
An important neo-Gramscian concern is
trasformismo, or the process of cooptation of
radical opposition by bourgeois forces
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Debates in IR theory since 1980s
The neo-(realist)-neo-(liberal) debate
Between critical theory and rationalist
IR
After Cold War:
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Between rationalists and constructivists
Between constructivists and critical
theorists
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The constructivist challenge
after the Cold War
Questioned the rationalism and
positivism of the two ‘neos’
Pushed critical theory away from grand
or meta-critiques to the empirical
analysis of world politics
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Assumptions shared by (almost)
all constructivists
Actors and structures are mutually
constituted or made
Identities are necessary in world politics since
they are the basis of interests
Power and material forces acquire importance
in world politics only due to ideas, beliefs
Change in the international system is difficult
but not impossible
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Constructivist approach to IPE
• Materialist/rationalist theory is
insufficient
• If international politics is a social
construct, so is the international
economy
• Economies might vary for non-material
reasons
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Consider GNP
Is GNP (simply) a material fact?
Can’t it be also considered a shared
norm?
The GNP idea did not exist before the
20th century
It is now an international norm to
measure economic growth
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• SO WHAT if the economy is a social
construct?
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SO WHAT?
Changes in commonly-held norms, beliefs
and institutions…
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Lead to…
…changes in economic practices and
changes in the international political
economy
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Abdelal’s caveat
Constructivist approaches to IPE cannot
replace materialist/rationalist
approaches
At best, they are complementary
Therefore, changes in norms cannot
account for all economic changes
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How do norms relate to
the economy?
Economic activity is future-oriented
Future outcomes are uncertain and
non-computable
The adoption of commonly held beliefs
and conventions reduces uncertainty
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Changing norms and changing
economic practices
From mercantilism & economic
nationalism to…
laissez faire capitalism to…
Embedded liberalism to…
Neoliberal globalization to…??????
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Laissez faire capitalism
Free markets and free trade
Non-intervention of the state in the
economy
State limited to provision of public
goods
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Embedded liberalism
(1940s-1970s)
Governmental autonomy from market
forces
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Fixed exchanged rates
Capital controls
Independent monetary policy (for full
employment and control of inflation)
Domestic welfare states (insurance against
risks of participation in international
economy)
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Neoliberal globalization
State intervention is anathema
Markets are not simply seen as
mechanisms for economic coordination;
they are considered intrinsically superior
to any other institution
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Summary of economic practice
Pendulum movement from state
intervention & activism to free markets
& liberalization and back
Is neoliberal globalization a permanent
human condition?
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Benjamin Cohen’s trans-Atlantic
divide (2007)
American IPE: hard science, positivist,
empiricist, formal modeling and
quantification, ‘problem solving’
orientation
British IPE: philosophical, normative,
eclectic, ‘big picture’ orientation
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The return of economics to
American IPE
New paradigm in American IPE: ‘open
economy politics’ (OEP)
Coined by Robert Bates and promoted
by David Lake
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The OEP paradigm
The analysis starts with individuals with
defined interests
It then proceeds to how political
institutions aggregate these individual
interests
The last step is to study how the
aggregated interests are translated into
government policy (say tariff policy)
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Caveats re IPE theories
Traditional presentation is stale and disregards
diversity and cross-fertilization
Availability of newer IPE perspectives such as
constructivism, feminism, etc.
Focus on competing ideological paradigms severs
connection between material interests of actors and
ideas they espouse or support (e.g. firms with strong
market position advocate for free trade while weaker
ones don’t)
IPE theories must be assessed not only on how they
deal with central theoretical issues but also on key
IPE problems
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Parting words
Thanks for your patience
All the best!
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