11.4 International Political Economy

International political economy explores the complex interplay between global politics and economics. It examines how states, markets, and power dynamics shape economic policies and outcomes worldwide, considering different theoretical approaches like realism, liberalism, and Marxism.

The global economy is marked by intricate relationships between states and markets, with power dynamics influencing their interactions. Trade, finance, and development policies contribute to global inequalities, while economic crises highlight the need for effective institutional responses to maintain stability and address disparities.

Theoretical Foundations and Key Concepts

Approaches to international political economy

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• International political economy (IPE) examines the interaction between politics and economics on a global scale, focusing on how political factors influence economic policies and outcomes and vice versa
• Realism emphasizes the role of states and power in shaping the global economy, viewing states as the primary actors driven by national interests and the pursuit of power
• Liberalism emphasizes the role of markets, institutions, and cooperation in the global economy, highlighting the benefits of free trade, economic interdependence, and international institutions for promoting peace and prosperity
• Marxism emphasizes the role of class struggle and the unequal distribution of power in the global economy, viewing it as a system of exploitation and inequality perpetuating the dominance of powerful states and corporations over weaker ones

States, markets, and global power

• States and markets are closely intertwined in the global economy, with states creating the rules and institutions that govern economic activities and markets operating within this framework
• Power dynamics shape the interactions between states and markets, with powerful states using their economic and political influence to shape global economic policies and outcomes, and multinational corporations exerting significant influence through their economic power
• The relationship between states, markets, and power is complex and multifaceted, with cooperation and conflict coexisting in the global economy and the balance of power shifting over time depending on economic and political circumstances (Cold War, post-Cold War era)

Global Economic Structures and Inequalities

Trade, finance, and global inequalities

• International trade can contribute to global inequalities, with developed countries often having a comparative advantage in high-value-added goods and services (technology, financial services) and developing countries relegated to exporting low-value-added, resource-based products (agricultural commodities, raw materials), perpetuating economic disparities through unequal terms of trade
• International finance can exacerbate global inequalities, with capital flows favoring developed countries with well-established financial markets (New York, London) and developing countries facing challenges in attracting foreign investment and accessing international credit markets, leading to increased poverty and debt during financial crises (Asian financial crisis, Latin American debt crisis)
• Development policies and practices can shape global inequalities, with foreign aid and development assistance helping to reduce poverty and promote economic growth in developing countries (Marshall Plan, Millennium Development Goals) but also creating dependencies and reinforcing unequal power relations, while structural adjustment programs imposed by international financial institutions (IMF, World Bank) can prioritize economic efficiency over social welfare and exacerbate inequalities

Economic crises and institutional responses

• Global economic crises, such as the 2008 financial crisis, can have far-reaching impacts on the global economy, leading to job losses, reduced economic growth, and increased poverty and inequality, with developing countries often disproportionately affected
• States and international institutions play a crucial role in responding to global economic crises, with national governments implementing fiscal and monetary policies (stimulus packages, quantitative easing) to stimulate economic recovery and international institutions (IMF, World Bank) providing financial assistance and policy guidance to countries in crisis
• The effectiveness of crisis responses can vary depending on the specific context and actions taken, with coordinated international action helping to mitigate the impacts of crises and promote global economic stability (G20 summits), but responses can also be shaped by political considerations and power dynamics, leading to uneven outcomes and potential conflicts of interest (austerity measures, bailouts)