Theoretical Perspectives in International Political Economy

Andre Broome, Issues and Actors in the Global Political

Economy, Chp. 2

John Ravenhill, Global Political Economy, Chp. 2

Theoretical perspectives in IPE employ different epistemeological
positions on how knowledge about the global political economy
is produced and begin from different ontological starting points
about what there is to know about the global political economy.

Ontology: concerned with the nature of being and centres on

questions about what there is to know about particular objects to
study.

Epistemology: refers to the nature of knowledge, how it is

acquired and to what extent a subject or phenonomena can be
known.

Methodology: how one goes about the business of knowing the

procedures& principles for investigating a particular subject or
issue.
Realist IPE has a statist ontology that is drawn from the
rational choice theory.

What is rational choice theory? The founding assumption

is that all action is self-interested.

The rational choice theory method dictates that it is

unnecessary to ask how states will form their interests in
any particular set of circumstances because those
interests will be an existential given.
 Background to rational choice theory:

The emergence of neoclassical economist through the Marginalist Revolution of the 1870s:

Neoclassical economic focuses almost all its attention to instances in which behaviour can have a rational
calculus of costs and benefits imposed upon it.

The aim is to use this calculus to offer an ostensibly detached, objective description of economic events
that matches the standards of scientific rigour by being cleansed of the disruptive influence of
philosophical debate.

The analyst should be able to comment on economic affairs from beyond the boundaries of his/her own
particular world view.

Such concerns relegate the significance of clear normative position-taking, thus providing economic
enquiry with a technical veneer.

Marginalist Revolution of the 1870s : (William Stanley Jevons, Carl Menger, Leon Walras)

Their common denominator: all emphasized distinctively economic behavioral characteristic of

maximization.

They each used the technique of trying to isolate economic decisions taken at the margin.

Marginalist Revolution: with this change that happened in 1870, the abstract maximizing individual
replaced evolving concrete social formations as the underlying subject matter of the field.
Formalist Revolution in the 40s and 50s

This was the time when the leading edge of economics initially began explicitly to be modelled
as a mathematical science, with the mathematical tractability of the implied economic
relationships considered to be more important than whether or not those relationships had
genuine economic meaning.
Realist International Political Economy

Realist perspective understands the global political economy as centred

on the roles and activities of states and dynamics of inter-state
competition.

From a realist perspective the study of the IPE centres on three

assumptions:

The state is the central actor in the international system, should

comprise the primary unit of analysis.

International dynamics are shaped by the calculated (rational) pursuit by

states of their national interests.

The international environment is an anarchic system/ in which states

interact and compete to maximize their interests in the absence of an
overarching authority which could constrain, regulate and sanction state
behaviour.
 Difference between:

System-centric realism focuses

State-centric realism
sees the nature of the states
as the key driver of their
behaviour
e.g Morgenthau
on the distribution of material
capabilities among states as
the key driver of state
behaviour and international
political outcomes.
e.g Waltz56
 In the state-centric variant, national political and economic
elites are the main determinants of state interests whereas
the systemic perspective concentrates on how state interests
shift in response to changes in the international distribution
of material capabilities among other states.

3 main approaches commonly grouped together as a cluster

under the realist label in IPE:

Economic Nationalism
Mercantilism
Statism
Mercantalism (17th cc).

Economic nationalism (19th cc):

concentrate on the role of the state in governing domestic economic
activity and how a state’s domestic economic capabilities impact upon
its external role and influence in relation to other states in the global
political economy.

Friedrich List’s: National System of Political Economy (1841)

According to List, free trade was wrong for Germany at the time he
was writing. Germany, he wrote, would seek a better position to
engage in free trade alongside Britain only once it had developed into
Britain’s equal.
 In contrast to economic nationalism and
mercantilism, statist approaches to IPE emerged
from the discipline of IR during the 1970s.

Statist approaches to IPE focus on the

interactions and rivalries between states and
why certain tools of economic statecraft are
more or less effective as instruments of power
in a given situation.
Statist approaches are the predominant perspective with the
realist cluster.

The objective of national economic policy is to enhance a

state’s relative power in the international realm in pursuit of
these national interests/ which means that economic
relations simultaneously are shaped by impact upon state
power.

As states compete to maximize their gains in relation to

other states, realist approaches understand international
economic interactions as constituting a zero-sum game
where one actor’s gain is another’s loss.
In realist IPE, states are suspicious of international cooperation
and do not assign an independent role to IOs.

Rather, IOs and international regimes are regarded as structures

that have been created by hegemon and major power states in
order to suit their own national economic interests and constrain
the autonomy of weaker states while enhancing the material
capabilities of major powers.
Liberal International Political Economy

-International system is characterized by interdependence and

cooperation.

-In addition to states/individual actors and interest groups are

primary units of analysis.

-Bargaining and competition between actors can result in positive-

sum outcomes where all participants can gain benefits.

-States are likely to cooperate through IOs and favour the

formation of international regimes in order to achieve mutual
benefits, even if major powers benefit more than weaker states.
Most principles of economic liberalism considered to benefit all states
through reducing the motivation for international economic disputes to spill
over into inter-state conflict.

Liberalism maintains a greater degree of heterogeneity than most other

theoretical clusters.

Rational institutionalist approaches focus on how international institutions

can facilitate cooperation by national governments through the mutual
coordination or adjustment of state policies.

Social liberal approaches to political economy have a long intellectual

tradition of their own/ such as the work of John Hobson (potential for state
intervention that might improve the domestic distribution of wealth while
encouraging international economic prosperity.
Classical liberal Adam Smith: argued for the indispensability of
government to the way in which markets form and are reproduced in
everyday economic life.

Markets can function only in the presence of an institutionalized

system of property rights, he said, and that system requires the law-
making authority of the government to be credible.
Today most liberal approaches share the
basic premise that markets work best as
mechanisms for allocating resources (both
domestically and internationally) if state
intervention in market processes is kept to
a minimum.
Marxist Political Economy

Contributions in Marxist IPE are all united in their refusal to

take the social basis of capitalism for granted, as well as in
their determination to ask searching questions about the
likely effects of the capitalist system on those who have to
live their lives within it.

The whole of Marx’s political economy is grounded in the

opening premise:
that the capitalist system can only be a dynamic entity
when the needs of that system are forcibly prioritized over
the rights of individuals to live as autonomous human
beings.

The reproduction of the capitalist system overrides that

autonomy by turning individuals into a functional part of
the system.
 False consciousness: People think they work to provide for
themselves etc. But for Marx this is false consciousness ; an
inability to see things for what they really are and to form
interests accordingly.

According to Marx, within a capitalist system, people work

solely in order to preserve the
smooth running of the system itself through preserving the
momentum towards capital accumulation.

Marx argued that individual activities in the world change

both the world on which the individual acts and the
individual who does the acting.
It is the practical activities associated with the production
process that matter most in this respect.

Surplus value extraction:

In order to ensure the dynamism that guarantees its survival as

a system, employers under capitalism must require employees to
add more economic value in production than they are
compensated for in terms of wages.
Marx depicted society as riven into two classes relating to
their respective positions in the production process:
bourgeoisie and the proletariat.

According to Marx,
the concentration of capital through monopolization was
a simple system requirement.

One capitalist was necessarily in competition with all

others, and if this meant forcing the destruction of rival
capitals in a bid for survival then so be it.
Marxist approaches have three main assumptions:

1-Historical processes of change in society at the global level

reflect different modes of economic development and wealth
accumulation.

2-Capitalism is the main driving force in the global political

economy

3- Capitalist processes induce class conflict between the

owners and managers of economic wealth which form the
ruling elite and workers who are subordinate and explore
class.
 Four key research themes in Marxist approaches:

1) Commodification in capitalist social relations: studying the

mechanisms through which goods, ideas, services, or practices
that are not usually deemed to be economic goods are
transformed through market practices into commodities.

2)The articulation of class interests (how class interests are

politically articulated and inscribed in concepts of the national
interest/ how these become accepted across different social
classes).

3)Examining changing state-society relations

4)Constructing transnational hegemony as a form of class rule.

New generation of Marxists mention the development of
a transnational capitalist class as a byproduct of the
contemporary trend towards globalization.

Members of a transnational capitalist class have

allegiance to no state and are therefore able to escape the
impact of regulatory policies introduced by state
managers in the interests of workers’s rights.

Then, antagonism between bourgeoisie and proletariat is

likely to be expected within specifically international
production processes.
 Structuralist Marxists-
World Systems Theory or Dependency Theory

World Systems Theory: based on the assumption that the world divides
into economic regions of core, periphery and semi-periphery

Dependency Theory: based on the assumption that the continued distorted

development of poorer countries results from the need to defend the
conditions that have led to the developmet trajectory of more economically
advanced countries.
 Constructivist IPE

aims to understand the dynamic roles played by ideas/norms /values in

identities in processes and outcomes in the global political economy.

Ideas seen as an essential ingredient in the social construction of both:

1) who an actor thinks he or she is within a particular context (their identity)

2) what he or she seeks to gain through the performance of their social role
(their interests).
By shaping actors’ identities and their interests, economic ideas can influence
how actors view the world, what values they consider are important and which
strategic goals they select to pursue.
Much of the disagreement between constructivist IPE and
other theoretical perspectives such as liberalism/ realism and
Marxism centres on how much causal significance is attached
to the role of norms, identities or ideas in shaping actions and
outcomes.

Rather than by-products of strategic calculation by rational

actors, from a constructivist perspective social mechanisms are
understood to have a constitutive effect on norms, ideas and
identities.

In this view, norms ‘saturate the determination of material

interests’ rather than competing against interests as alternative
motivations for actors’ behaviour.
While liberal and realist approaches to IPE conceive of
theories as mental gaps that reflect material reality,
constructivist approaches highlight the ways in which
theory can also shape how state and societal interests
are articulated and defined by constituting social reality.
Feminist IPE:

All topics in the field from trade/ to money/ labour to the environment can
be analysed through examining how gender relations matter for the
constitution and causal dynamics of economic practices and concepts.

Feminist scholarship in IPE challenged how key concepts in the field are
understood as well as emphasizing the importance of behaviour.

In contrast to conventional approaches that focus on problems related to

economic production, distribution and consumption in global political
economy , feminist scholarship highlights how global markets operate
through structures of gendered social relations (e.g the connection of
women’s labour with household labour) .
Feminist research has shown how traditional concepts of income, wealth,
property and development are based upon gendered definitions of labour,
productivity, ownership and social progress.

These concepts are problematic because they refer to power relations in the
global political economy that cannot be understood without focusing on how
gender relations are embedded in, and reproduced through, practices of
defining what does and does not count as income and paid work, who owns
and manages wealth and property and how the agents, processes and goals
development are defined.

The conventional understanding of public-private divide in the study of the IPE

is problematic because household work and labour are relegated to the
private realm, while markets are conceived as gender-neutral processes for
the allocation of economic resources.
Postructuralist International Political Economy

They examine the role that economic discourses play in constraining how the
global political economy is understood and how the economic realms is
constituted.

They look, in particular, at how discursive practices produce disciplinary

effects on the identity of individuals as economic subjects.
 Postructuralist International Political Economy

Postructuralist perspectives in IPE examine the role that economic

discourses play in constraining how the global political economy is
understood and how the economic realm is constituted.

They look, in particular, at how discursive practices produce

disciplinary effects on the identity of individuals as economic
subjects.

Postructuralist approaches in IPE examine the role that economic

discourses play in constraining how the global political economy is
understood and how the economic realm is constituted.
 Postructuralist International Political Economy

They look in particular at how discursive practices produce disciplinary effects on the
identity of individuals as economic subjects.

Poststructuralist approaches to the economy emerged as a non-conventional strand of

economics in the late 1980s and early 1990s as scholars began to emphasize the power
relations that are embedded in economic language and concepts, which have constitutive
effects in shaping what the economy is and how it is understood.

From a poststructuralist perspective, the use of a foundational theoretical approach such

as liberalism, Marxism or realism entails the imposition of certain values, norms and
standards on objects of study, which limits and distorts how the social world is
understood.
The ideas and policy prescriptions of neoliberalism, for example, form
part of ‘a large discursive struggle over meaning and interpretation
about what the economy is, how markets work and what the role of the
state should be in governing economic activity.

Economic discourses are therefore conceived by poststructuralist

scholars as systems of knowledge which restrict what can be known,
while representing reality as a static object that is independent of the
particular knowing practices that are being employed in order to see,
interpret and construct what there is to know.
From a postructuralist perspective, knowledge strategies are
analysed as a form of power relations.

The relationship between power and knowledge is twofold.

On the one hand, power relations always constitute a field of
knowledge, on the other hand, the formation of knowledge
simultaneously presupposes and constitutes particular
relations of power.

Strategies of power and knowledge are therefore integrally

related and co-constitutive.
 Economic knowledge is understood as information that is
‘produced within specific discursive conditions’ which are
culturally inscribed and socially constructed.

In the study of economic phenomena, ‘Facts do not speak for

themselves, but are mediated by social products such as a
specific culture, paradigm and experience, which shape processes
of description and interpretation.

“Financial activities do not exist prior to, or independently from,

ideas and beliefs about them. Instead, financial discourses
themselves exercise a particular power, which is hidden under a
cloak of objectivity and neutrality.
 British vs American IPE
Benjamin Cohen distinguishes two traditions:

American School: Robert Keohane, Robert Gilpin, Charles Kindleberger, Stephen Krasner, Peter
Katzenstein

British School: Susan Strange and Robert Cox ( Cohen’s Magnificient Seven)
 British and American IPE different in terms of ontology and epistemology.

Ontology:
American IPE is state-centric, privileging sovereign governments above all
other units of interest.

The British school, by contrast, treats the state as just one agent among
many, if states are to be included at all.

For the American school, IPE is essentially a subset of IR, sharing the
political science discipline’s central preoccupation with public policy.
The core object of study is limited to questions of state behavior and
system governance.

The driving ambition is problem solving: to explore possible solutions to

challenges within the existing system.

 Epistemology:

In terms of epistemology, the American school remains wedded to the

principles of positivism and empiricism – the twin pillars of a hard science
model. Deductive logic and reasoning are used to seek out universal truths.
Formal research methodologies are put to work to test hypotheses and
promote the cumulation of knowledge.

The British school, by contrast, embraces more interpretive approaches and

less formal methodologies. Where the American school values “normal”
science, the British school identifies more with so-called “critical theory”.
American school authors (especially new generation of scholars):
embrace of rational choice theory.

British School scholars : much less sympathetic to the

encroachment of rational choice theory within GPE.

Why? They are concerned that rational choice theory attempts to

naturalize a specific conception of economic agency: one that is
institutionally suited only to life lived within generally free
market economies.

To adopt that approach, they argue, is akin to turning GPE into an

element of the free market hegemony.