International Political Economy

International Political Economy (IPE)
It is a social science that attempts to understand international and global problems using
interdisciplinary tools and theoretical perspectives. Although it originally developed as a sub-
field of International Relations.
IPE is a result of the continuing breakdown of boundaries between economics, politics, and
other social science disciplines.
Theories of International Political Economy

Economic Liberalism
The theories of liberalism were stated best by Adam Smith in The Wealth of Nations, 1776. The
key to national wealth and therefore national power is economic growth. The key to economic
growth is free trade – the free flow of goods and services and investment across borders.
Economic liberalism promoted freedom of action for individual and the firm through the
doctrines of free trade, self-interest, private property and competition. According to this
philosophy, individuals were free to seek their own occupations, to enter any business, and to
act as they saw fit to improve their economic welfare.
This theory often called Laissez-faire liberalism, or internationalism, or globalism.
Economic Structuralism
The reason why Marxism and dependency are placed together under the heading of
structuralism is that both are concerned with the international division of labor created by
capitalism. Both theories see that division of labor as unfair, creating categories of rich and
poor people and rich and poor nations. The Marxist approach is to reject capitalism
completely. The Dependency approach is to reform it.
Marxism
After the revolution, the theory gets a bit uncertain. There would be several phases of
evolution until the development of Communism, a society which would have these
characteristics:
· A system in which there is no private property; all property is owned by everyone
and everyone shares
· There is no exploitation since workers are the owners
· Everyone gets what they need from the society as a whole
· Everyone contributes based on what they can contribute
Marxism looks at international political issues mainly in terms of class intrest. It is associated
with the method of analysis employed by most sociologist.
Dependency
Dependency also argues that the rich nations exploit the poor nations. But this is not
because capitalism is evil. It is because capitalism needs to be more regulated so it will be more
just. The problem is that poor nations remain dependent on rich nations. Even after
colonialism, when the poor nations became free, their economies remained dependent on the
economies and the technology of the rich nations.
Economic Nationalism
Economic nationalism developed theoretically as a criticism of liberalism. It is based on
three basic ideas:
1. States compete economically. This is very different from liberalism. Liberals
believe that companies compete economically, but states do not. Nationalists
see companies as elements of a state’s power
2. Free trade only benefits the wealthiest, most advanced nations. Free trade
helps the rich get richer and the less advanced stay less advanced.
3. For the less advanced nations there needs to be an alternative way of getting
rich. Free trade won’t lead to riches.
It is sometimes called Neo-Mercantilism.
Scope of IPE
The academic boundaries of IPE are flexible. Despite such disagreements, most scholars can
concur that IPE ultimately is concerned with the ways in which political forces [states,
institutions, individual actors etc] shape the systems through which economic interactions are
expressed, and conversely the effect that economic interactions [including the power of
collective markets and individuals acing both within and outside them] have upon political
structures [way in which a government is run] and outcomes.
IPE is a study of a set of related problems which includes the political economy of
1. International trade and global markets,

2. International finance,
3. North-South relations
4. Multi-state cooperation in solving trans-border economic problems,
5. The structural balance of power between and among states and institutions. Unlike the
broader field international relations, power is understood to be both economic and
political, which are interrelated in a complex manner.
Importance of international political economy

The most important aspect of international political economy is about different ideologies like
Socialist, Communist and Capitalist economies and their influence with each other.
Conclusion
As long as democratic processes such as elections are strongly tied to domestic political
communities, a still-evolving global market system built around liberal principles continues to
present a serious challenge. If for our own individual benefit we believe there should be an
element of control over this process, then regional and international organizations with the
power to devise and implement global rules are the natural place to look. Without denying the
impact of other factors such as philanthropic acts, or states acting alone, these are a second-
best solution in the absence of an effectively coordinated global economic policy.

International Political Economy

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International Political Economy

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International Political Economy (IPE)

Theories of International Political Economy

1. International trade and global markets,

Importance of international political economy

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