How Did American International Political Economy Become Reductionist? A Historiography of a Discipline
W. Kindred Winecoff
First-wave international political economy (IPE) was preoccupied with the “complex interdependencies” within a world system that (it believed) was rapidly devolving following the 1971 collapse of the Bretton Woods system of fixed exchange rates. The original IPE scholars were more dedicated to theorizing about the emergence and evolution of global systems than any strict methodology. As IPE developed, it began to emphasize the possibility that institutions could promote cooperation in an anarchic environment, so IPE scholarship increasingly studied the conditions under which these institutions might emerge.
Second-wave IPE scholars began to focus on the domestic “level of analysis” for explanatory power, and in particular analyzed the role of domestic political institutions in promoting global economic cooperation (or conflict). They also employed a “second-image reversed” paradigm in which the international system was treated as an explanatory variable that influenced the domestic policymaking process.
In opening up the “black box” of domestic politics, in particular as it pertained to foreign economic policy, the “American school” of IPE thoroughly explored the terrain with regression-based statistical models that assume observational independence. As a result, complex interdependencies in the global system were increasingly ignored. Over time the analytical focus progressively shifted to micro-level units—firms and individuals, whenever possible—using neoclassical economic theory as its logical underpinning (with complications for political factors). This third wave of IPE, “open economy politics,” has been criticized in the post-crisis period for its narrow focus, rigid methodology, and lack of systemic theory. Leading scholars have called modern IPE “boring,” “deplorable,” “myopic,” and “reductionist,” among other epithets.
A “fourth-wave” of IPE must retain its strong commitment to empiricism while re-integrating systemic processes into its analysis. A new class of complex statistical models is capable of incorporating interdependencies as well as domestic- and individual-level processes into a common framework. This will allow scholars to model the global political economy as an interdependent system consisting of multiple strata.
First-generation research in International Political Economy focused considerable attention on the relationship between hegemony and global economic stability. This focus was the result of a confluence of scholarly and policy concerns about the impact that the apparent decline of U.S. hegemony would have on international trade and investment regimes. Interest in this hegemonic stability hypothesis waned, however, as deeper explorations of the theoretical logic indicated that hegemony was not a necessary condition for international economic openness, and as the collapse of the Soviet Union and the consequent “unipolar moment” suggested that American hegemony was hardly in decline.
Interest in hegemony resurfaced in the wake of the 2008 financial crisis. The crisis triggered many scholars to proclaim the end of the era of American global hegemony. Scholars argued that the U.S. government’s attachment to a large budget and trade deficits and the resulting growth of foreign debt were likely to weaken foreign confidence in the dollar and encourage the shift to an alternative reserve currency such as the Euro. At the same time, China’s rapid industrialization and emergence as a large creditor nation was creating a new pole in the international economy that constituted a meaningful alternative to a global economy organized around the United States’ economy. Thus, a shift toward a Beijing hegemony was all but inevitable.
The predicted decline of American hegemony has yet to materialize. The U.S. economy remains the world’s largest, and the U.S. government continues to play the leading role in system making—creating new rules to govern international economic cooperation—and in privilege taking—manipulating these rules in ways that advantage U.S. public and private sector actors. Moreover, the U.S. government plays this role in all three economic subsystems: finance, knowledge, and production. Empirical scholarship conducted over the last decade encourages one to conclude by paraphrasing Mark Twain: Recent reports of the death of American hegemony are premature.
To what extent is the “Euro-crisis” a problem for the EU’s international standing and role? A conceptual framework has been developed based on the five distinct analytical categories: (a) financial resources, (b) changes in the internal political structure and balance of the European Union, (c) shift of priorities, (d) output and effectiveness of EU foreign policy, and (d) soft power and normative dimension. These categories reveal that in Europe, the crisis led to an erosion of the financial and budgetary basis of foreign policy—even if it is more pronounced on the national than the European level. It also accelerated a trend toward the economization of political priorities resulting—among other things—in deepening conflicts among EU member states. These developments have, in turn, eroded both the effectiveness and the soft power of EU foreign policy. The crisis is therefore not only a strain on the European integration process but also a central challenge for the European Union as an international actor.