International political economy
"[1] A central assumption of IPE theory is that international economic phenomena do not exist in any meaningful sense separate from the actors who regulate and control them.
[15] Adam Smith's publication of The Wealth of Nations profoundly influenced the development of the field of political economy.
The need for a more comprehensive understanding on global economic governance within political science circles became increasingly apparent through the crises of the 1970s; with the end of the gold standard, the 1973 oil crisis, 1973-1975 recession and calls for greater trade protection.
[31] A key concept in IPE literature on international finance is the impossible trinity, derived from the Mundell–Fleming model, which holds that it is impossible to simultaneously pursue all of the following three economic policies:[32][33] Another key dilemma in monetary policy is that governments have to balance the inflation rate (the price of money at home) and the exchange rate (the price of money outside the home market).
[23] National exchange rate policies can be 1. fixed, floating, or a hybrid of the two, and 2. entail a strong or weak currency.
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.
[43][47][48] Building on these insights, influential research by Ronald Rogowski argued that factor endowments predicted whether countries were characterized by class-conflict (capital vs. labor) or urban-rural conflict.
[42][51] A 2023 study by Milner and Lindsay R. Dolan found that factor endowments help explain trade preferences in Africa.
[52] Research has substantiated the predictions of the Stolper-Samuelsson theorem, showing that trade openness tends to reduce inequality in developing countries, but exacerbate it in advanced economies.
[56] Adam Dean has challenged the economic assumptions in both models, arguing that workers' wages do not consistently correspond to increases in productivity in a given industry (contradicting Ricardo-Viner) nor do workers consistently benefit from import restrictions when labor is the scarce factor of endowment (contradicting Heckscher-Ohlin).
[57][58] The degree to which Ricardo-Viner and Heckscher-Ohlin are correct is conditioned by whether workers have profit-sharing institutions or are unionized (which helps them to bargain for higher wages amid productivity increases).
[64] A 2022 study in the Journal of Politics found that comparative advantage predicts attitudes on free trade among individuals and legislators.
[65] According to a 2017 assessment by Thomas Oatley, there are "no strong conclusions" in IPE scholarship as to which of these models better characterizes the sources of individual trade policies.
[83] Influential studies by David Cameron,[84] Dani Rodrik[85] and Peter Katzenstein[86] have affirmed the insights of the Double Movement, as they show that greater trade openness has been associated with increases in government social spending.
[87][88] In terms of how preferences get aggregated and reconciled into foreign economic policies, IPE scholars have pointed to collective action problems,[44][41] electoral systems,[89][90] regime types,[42][91] veto points,[92] the nature of the legislative trade policy process,[93][94] the interaction between domestic and international bargaining,[95] and the interactions between political elites and epistemic communities.
[96] Some IPE scholarship de-emphasizes the role of domestic politics and points to international processes as shapers of trade policy.
"[121] The first wave of IPE scholarship focused on complex interdependence and the evolution of global systems of economic exchange.
[116] According to Benjamin Cohen, "in terms of theory, consensus is often lacking on even the most basic causal relationships" in IPE scholarship.
[127] Mark Blyth and Matthias Matthijs argue that OEP scholarship essentially black boxes the global economy.
The accumulating body of scholarship in the OEP tradition has moved our understanding of world politics decisively forward.
[112] Erica Owen and Stephanie Walter similarly argue that "second-generation" OEP frameworks incorporate both material and ideational preferences.
[130] Keohane's 1984 book After Hegemony, used insights from the new institutional economics, to argue that the international system could remain stable in the absence of a hegemon.
[131] Benjamin Cohen provides a detailed intellectual history of IPE identifying American and British camps.
