6. IPE

Detailed Summary of Chapter 6: International Political Econ-
omy (IPE)
Chapter 6 delves into International Political Economy (IPE), an interdisciplinary
field that examines the intersection of economics and politics in the global arena. IPE
explores how states, markets, and institutions interact, influencing wealth distribution,
trade, development, and power dynamics. This chapter outlines the theoretical ap-
proaches to IPE, key concepts, and the evolution of the global economic system, highlight-
ing the complexities and competing interests that shape international economic relations.
1 Introduction to IPE
• IPE addresses the interplay between political and economic forces in shaping global
outcomes.
• Key questions include:
– How do states and markets interact in the global system?

– What role do international institutions play in managing economic relations?
– How is wealth and power distributed across nations?
• The field of IPE emerged in the 1970s as scholars recognized the need for an inte-
grated approach to understanding globalization and interdependence.
2 Theoretical Approaches to IPE

Three main theoretical frameworks dominate the study of IPE: Mercantilism, Economic
Liberalism, and Marxism.
2.1 Mercantilism
• Focuses on state power and the role of the state in controlling economic resources.
• Core Principles:
– Wealth and power are closely linked.

– States prioritize national security and economic independence.
– Trade is a zero-sum game, where one state’s gain is another’s loss.
• Examples: Protectionist policies such as tariffs and subsidies; colonial exploita-

tion.
• Critiques: Fosters conflict and ignores the benefits of trade and cooperation.
1
2.2 Economic Liberalism
• Rooted in the ideas of Adam Smith and David Ricardo, emphasizing free mar-
kets and limited state intervention.
– Trade is a positive-sum game, benefiting all participants through comparative

advantage.
– Economic interdependence fosters peace and cooperation.
– Markets, not governments, should allocate resources efficiently.
• Key Thinkers: Adam Smith’s Wealth of Nations and David Ricardo’s theory of
comparative advantage.
• Critiques: Overlooks inequality and assumes ideal market conditions that rarely
exist in practice.
2.3 Marxism
• Critiques both Mercantilism and Economic Liberalism, focusing on class struggle
and inequality.
– Capitalism generates inequality, exploitation, and underdevelopment.

– The global economy is dominated by powerful states and corporations (core)
at the expense of weaker ones (periphery).
– Imperialism extends capitalist exploitation globally.
• Key Thinkers: Karl Marx’s Capital and Vladimir Lenin’s theory of imperialism.
• Critiques: Overly deterministic and neglects the agency of states and individuals.
3 Evolution of the Global Economic System

The chapter examines key developments that shaped the contemporary global economy.
3.1 Bretton Woods System (1944–1971)

• Established after World War II to create a stable international economic order.
• Key Features:
– Fixed exchange rates pegged to the US dollar.

– Creation of international institutions like the IMF and World Bank.
– Promotion of free trade through the GATT.
• Collapsed in 1971 when the US abandoned the gold standard.
2
3.2 Post-Bretton Woods Era
• Transition to a system of floating exchange rates.
• Growth of globalization and financial interdependence.
• Rise of regional economic blocs like the European Union and NAFTA (now USMCA).
3.3 Contemporary Global Economy

• Dominated by neoliberal policies promoting deregulation, privatization, and free
trade.
• Rise of emerging economies like China, India, and Brazil.
• Challenges include economic inequality, climate change, and financial crises.
4 Key Issues in IPE

4.1 Trade and Globalization
• Trade liberalization drives economic growth but exacerbates inequalities.
• Debates around free trade agreements (e.g., TPP, RCEP) and their impact on
sovereignty and workers’ rights.
4.2 Development and Inequality

• The divide between developed (Global North) and developing (Global South) coun-
tries remains a central issue.
• Critiques of development aid for perpetuating dependency.
4.3 Financial Crises

• Increased financial interdependence has made the global economy more vulnerable
to crises, such as:
– The 1997 Asian Financial Crisis.

– The 2008 Global Financial Crisis.
• Critiques of neoliberal policies for fostering instability.
4.4 Environmental Sustainability

• The global economy’s reliance on fossil fuels poses significant environmental chal-
lenges.
• Calls for a green economy and sustainable development are growing.
3
5 The Role of International Institutions
• Institutions like the IMF, World Bank, and WTO play a crucial role in managing
the global economy.
• Criticisms include:
– Favoring powerful states.

– Imposing austerity measures on developing countries.
– Failing to address inequality and environmental concerns.
6 Critiques of IPE
• IPE faces critiques for:
– Its Western-centric perspective.

– Lack of engagement with cultural and historical specificities.
– Overemphasis on states and markets while neglecting non-state actors and
informal economies.
Conclusion
Chapter 6 provides a comprehensive overview of International Political Economy, examin-
ing the interplay between politics and economics in shaping global outcomes. It explores
the theoretical foundations of IPE, the evolution of the global economic system, and
key contemporary issues such as trade, inequality, and financial crises. While IPE offers
valuable insights into the complexities of the global economy, it also faces challenges in
addressing its Western-centric biases and evolving to accommodate new global realities.
Understanding IPE is crucial in today’s interconnected world.

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Detailed Summary of Chapter 6: International Political Econ-

• Key questions include:

– How do states and markets interact in the global system?

2 Theoretical Approaches to IPE

– Wealth and power are closely linked.

• Examples: Protectionist policies such as tariffs and subsidies; colonial exploita-

– Trade is a positive-sum game, benefiting all participants through comparative

– Capitalism generates inequality, exploitation, and underdevelopment.

3 Evolution of the Global Economic System

3.1 Bretton Woods System (1944–1971)

– Fixed exchange rates pegged to the US dollar.

• Collapsed in 1971 when the US abandoned the gold standard.

• Growth of globalization and financial interdependence.

3.3 Contemporary Global Economy

• Rise of emerging economies like China, India, and Brazil.

• Challenges include economic inequality, climate change, and financial crises.

4 Key Issues in IPE

4.2 Development and Inequality

• Critiques of development aid for perpetuating dependency.

4.3 Financial Crises

– The 1997 Asian Financial Crisis.

• Critiques of neoliberal policies for fostering instability.

4.4 Environmental Sustainability

• Calls for a green economy and sustainable development are growing.

– Favoring powerful states.

– Its Western-centric perspective.

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