What is ipe? Terms, Labels, and Interpretations

'International political economy' is a label for a certain way of thinking about analysing interna­tional relations. It has a number of distinct mean­ings generally linked to competing perspectives, but there is no one generally agreed definition of the term or any accepted perspective because, as we shall see, any definition will reflect certain values and preferences, and we simply do not all agree on those values and preferences. The process of resolv­ing differences in values and preferences is the process of politics itself, and different views of IPE reflect different political positions and political judgements.

Within the study of international relations, IPE is primarily a way of thinking about the world that asserts two major interconnections. One interconnection is that politics and economics are inseparable—politics can only be understood if economics is taken into account and, vice versa, economics can only be understood if politics is taken into account. Politics constructs economics at the same time as economics constructs politics. This means that IPE does not accept the idea that the processes which have brought about forms of globalization have 'politicized' (made political) a previously non-political international economy organized on a purely rational 'economic' basis. For IPE the inter­national economy has always been political in that it concerns the processes of 'who gets what, when and how' — and this is politics. As Paul Hirst and Grahame Thompson argue in an important new analysis, 'the term "international economy" has always been shorthand for what is actually the product of the complex interaction of economic relations and politics, shaped and reshaped by the struggles of the Great Powers' (1996: 14). The other assertion of an interconnection comes from the observation that for international polit­ical economy the distinction between what is 'international' (i.e. outside of the state) and what is 'national' (i.e. inside the state) is no longer valid. The argument is that the extent and depth of interdependence (mutual dependence but not nec­essarily equal)—created through transnational eco­nomic processes that cut across state boundaries, increased trade, membership of regional economic groupings, and the processes of globalization—has effectively joined national societies and economies together to the extent that no national policy can be purely 'domestic' any more (see Case Study 1, Box 11.1).

The condition leading to the blurring of the boundaries between politics/economics and national/international is principally the creation of high levels of interdependence between national political economies. High levels of interdepen­dence effectively connect national economies, so that each national economy becomes more sensitive, and sometimes highly vulnerable, to changes in other national economies. For example, a change in monetary interest rates in the US (a US national decision) can have far-reaching effects on other national financial conditions and policies (which are supposed to be controlled by the government of that country), and this brings changes both to 'domestic' policies and conditions in other states, by forcing a lower interest rate, and to international relations as other countries respond, either directly or through existing international institutions. Or, in the extreme, because of the extent to which the industrialized economies are linked together (inter­dependent) the disruption of world-traded oil sup­plies would have immediate and serious effects on a number of energy-dependent economies and on the world economy as a whole, and would bring about an instant and major intervention from those with the power to respond—as did the pre­sumed threat both to world oil supplies and to global financial stability posed by the Iraqi invasion of Kuwait.

Box 11.1. Case Study 1: 'International' and 'National'

'Ideas of national and international, of domestic and foreign, of exterior and interior, and of frontier limits that used to define the existence of an international economy, are losing their validity. The outline of nation-states is becoming blurred and the power of the state over economic activity is lessened.' (Charles-Albert Michalet 1982)

'For developed economies, the distinction between the domestic and the international economy has ceased to be a reality, however much political, cultural or psychological strength remains in the idea.' (Drucker 1993: 104)

Interdependence then, acts as a transmission belt for these kinds of influences, and a key issue associ­ated with the process of globalization is that this transmission belt between national (political) economies is transmitting more and more economic influences into and away from the national political economy, with greater potential effect. However, because national governments every­where now take responsibility for managing their national economies, the changes transmitted by interdependence/globalization have significant political implications: governments find it increasingly difficult to achieve their national pol­icies if changes generated from outside the bound­aries of the state alter the conditions of economic (and hence, political) activity inside the boundaries of the state. Partly in response to this problem, states have over the past hundred years attempted to construct ways of managing industrial change within the context of the international economy that help them to achieve their national policies (Murphy 94). This has involved creating a large number of international institutions and agreements for the collective management of the inter-national economy. In this way what could be seen previously as 'national economics' becomes rapidly translated into 'national polities', and 'national' politics and economics become the con­cern of 'international' actions and a major focus of international relations.

Hence, the combination of these two claimed interconnections means that IPE looks at what hap-pens when the boundaries between politics and eco­nomics, and between the international and the national are broken down (see Box 11.2)—and it is one of the key claims of those who argue that globalization has had important consequences that these bound­aries are now almost irrelevant to our understand­ing of IPE.

Different perspectives of IPE put the cells of Box 11.2 in different 'driving' positions in order to pro­vide explanations, judgements and prescriptions. For instance, the liberal theory of IPE identifies the economic logic of the market as the proper driving force of IPE, whilst realist theory puts the state and politics in that position. Other explanations start from the international level, either politics or eco­nomics, or the national level, and argue that this

Box 11.2. What is Included in IPE?

national politics international politics national economics international economics

IPE argues that the boundaries between politics and economics and what is national and what is interna­tional are dissolving. Level is the starting point for explaining the IPE. However, it is clear that the dominant world view of the moment throughout the industrialized world is that of 'neo-liberalism' which asserts the values and preferences of the market above other ways of orga­nizing society. In Box 11.2 this puts a particular kind of national economy—one in which market forces are dominant and limitations on market-based economic activity are minimal—as the dri­ving idea and objective. It is this view which has become the basis of the changes in the world econ­omy that we have come to call 'globalization'. Because ideas are used to bring about and justify particular distributions of economic and political power we cannot separate 'neo-liberalism' from the broad interests of those who wield economic/polit­ical power in a globalized economy. You could usefully at this stage check back to Chapters 6 and 8 on 'Realism' and 'Liberalism' to confirm your understanding of the claims of these two theories and think about how they relate to the issues of IPE.