International political economy

International Trade and Finance is a major topic in IPE. Economics, as some may claim, has been viewed as dawning with the Smithian revolution against Mercantilism.[2][3]

The liberal view point generally has been strong in Western academia since it was first articulated by Smith in the eighteenth century. Only during the 1940s to early 1970s did an alternative system, Keynesianism, command wide support in universities. Keynes was concerned chiefly with domestic macroeconomic policy. The Keynesian consensus was challenged by Friedrich Hayek and later Milton Friedman and other scholars out of Chicago as early as the 1950s, and by the 1970s, Keynes' influence on public discourse and economic policy making had somewhat faded.

After World War II the Bretton Woods system was established, reflecting the political orientation described as Embedded liberalism. In 1971 President Richard Nixon ended the convertibility of gold that had been established under the IMF in the Bretton Woods system.[4] Interim agreements followed. Nonetheless, until 2008 the trend has been for increasing liberalization of both international trade and finance. From later 2008 world leaders have also been increasingly calling for a New Bretton Woods System.

Topics such as the International Monetary Fund, Financial Crises (see Financial crisis of 2007–2008 and 1997 Asian financial crisis), exchange rates, Foreign Direct Investment, Multinational Corporations receive much attention in IPE.

IPE studies International trade theory such as the Heckscher–Ohlin model and Ricardian economics. Global trade, strategic trade theory, trade wars, the national balance of payment and trade deficits are topics that IPE scholars are interested in.

The mercantilist view largely characterised policies pursued by state actors from the emergence of the modern economy in the fifteenth century up to the mid-twentieth century. Sovereign states would compete with each other to accumulate billion either by achieving trade surpluses or by conquest. This wealth could then be used to finance investment in infrastructure and to enhance military capability.

The post Washington consensus view regards international trade as a win-win phenomenon where firms should be allowed to collaborate or compete depending on market forces. After WWII a notable success story for the developmentalist approach was found in South America where high levels of growth and equity were achieved partly as a result of policies originating from Raul Prebisch and economists he trained, who were assigned to governments around the continent.

IPE is also concerned with development economics and explaining how and why countries develop.

Benjamin Cohen provides a detailed intellectual history of IPE identifying American and British camps. The Americans are positivist and attempt to develop intermediate level theories that are supported by some form of quantitative evidence. British IPE is more "interpretivist" and looks for "grand theories". They use very different standards of empirical work. Cohen sees benefits in both approaches.[5] A special edition of New Political Economy has been issued on The ‘British School' of IPE [6] and a special edition of the Review of International Political Economy (RIPE) on American IPE.[7]

One forum for this was the "2008 Warwick RIPE Debate: ‘American’ versus ‘British’ IPE" where Cohen, Mark Blyth, Richard Higgott, and Matthew Watson followed up the recent exchange in RIPE. Higgott and Watson in particular, queried the appropriateness of Cohen's categories.[8] The contemporary view is that IPE is composed of niche groups for research while teaching follows a common tradition with distinct leanings towards explanations that favor economic theory or political and sociological insights.[9]