Naeem Inayatullah and David L. Blaney
Heterodox work in Global Political Economy (GPE) finds its motive force in challenging the ontological atomism of International Political Economy (IPE) orthodoxy. Various strains of heterodoxy that have grown out of dependency theory and World-Systems Theory (WST), for example, emphasize the social whole: Individual parts are given form and meaning within social relations of domination produced by a history of violence and colonial conquest. An atomistic approach, they stress, seems designed to ignore this history of violence and relations of domination by making bargaining among independent units the key to explaining the current state of international institutions. For IPE, it is precisely this atomistic approach, largely inspired by the ostensible success of neoclassical economics, which justifies its claims to scientific rigor. International relations can be modeled as a market-like space, in which individual actors, with given preferences and endowments, bargain over the character of international institutional arrangements. Heterodox scholars’ treatment of social processes as indivisible wholes places them beyond the pale of acceptable scientific practice. Heterodoxy appears, then, as the constitutive outside of IPE orthodoxy.
Heterodox GPE perhaps reached its zenith in the 1980s. Just as heterodox work was being cast out from the temple of International Relations (IR), heterodox scholars, building on earlier work, produced magisterial studies that continue to merit our attention. We focus on three texts: K. N. Chaudhuri’s Asia Before Europe (1990), Eric Wolf’s Europe and the People Without History (1982), and L. S. Stavrianos’s Global Rift (1981). We select these texts for their temporal and geographical sweep and their intellectual acuity. While Chaudhuri limits his scope to the Indian Ocean over a millennium, Wolf and Stavrianos attempt an anthropology and a history, respectively, of European expansion, colonialism, and the rise of capitalism in the modern era. Though the authors combine different elements of material, political, and social life, all three illustrate the power of seeing the “social process” as an “indivisible whole,” as Schumpeter discusses in the epigram below. “Economic facts,” the region, or time period they extract for detailed scrutiny are never disconnected from the “great stream” or process of social relations. More specifically, Chaudhuri’s work shows notably that we cannot take for granted the distinct units that comprise a social whole, as does the IPE orthodoxy. Rather, such units must be carefully assembled by the scholar from historical evidence, just as the institutions, practices, and material infrastructure that comprise the unit were and are constructed by people over the longue durée. Wolf starts with a world of interaction, but shows that European expansion and the rise and spread of capitalism intensified cultural encounters, encompassing them all within a global division of labor that conditioned the developmental prospects of each in relation to the others. Stavrianos carries out a systematic and relational history of the First and Third Worlds, in which both appear as structural positions conditioned by a capitalist political economy. By way of conclusion, we suggest that these three works collectively inspire an effort to overcome the reification and dualism of agents and structures that inform IR theory and arrive instead at “flow.”
Regional integration theory seeks to explain the establishment and development of regional international organizations. Key questions are why and under which conditions states decide to transfer political authority to regional organizations; how regional organizations expand their tasks, competencies, and members; and what impact they have on states and societies in their regions. Whereas regional integration theory started with a broad comparative regional and organizational scope in the 1950s and 1960s, it has since focused on European integration and the European Union.
The main (families of) theories explaining the development of European integration—rather than decision making and policy making in the EU—are intergovernmentalism, neofunctionalism, and postfunctionalism. The key debates in regional integration theory have taken place between variants of intergovernmentalist and neofunctionalist integration theory. Intergovernmentalism assumes national governments to be the key actors in regional integration. Governments use regional integration to maximize their national security and economic interests in the context of regional interdependence. Integration outcomes result from intergovernmental bargaining and reflect the regional preference and power constellations. Governments delegate authority to regional organizations to secure their bargaining outcomes but remain in control of regional organizations and the integration process. By contrast, neofunctionalism disputes that governments are able to control the integration process. Transnational corporations and interest groups as well as supranational actors are empowered by the integration process and shape it in their own interest. In addition, integration creates a variety of “spillovers” and path-dependencies that push integration beyond the intergovernmental bargain. More recently, postfunctionalism has enriched and challenged the theoretical debate on regional integration. In contrast to neofunctionalism, postfunctionalism assumes a backlash mechanism of integration. As regional integration progresses and undermines national sovereignty and community, it creates economic and cultural losers who are mobilized by integration-skeptic parties. Identity-based and populist mass politicization constrains regional integration and may even cause disintegration.
Regional integration theories have closely followed and adapted themselves to the development of European integration. They cover the establishment and progress of supranational policies and institutions but also the recent crisis of the EU. An exemplary review of their explanations of major development in European integration shows that they are more complementary than competing.
Mary Anne Madeira
International trade and state efforts to liberalize or restrict trade generate very contentious politics. Trade creates winners and losers at the individual level, firm level, industry level, national level, and even regional level. It also generates conflict among transnational social groups, such as environmental advocacy organizations, human rights organizations, and transnational business alliances. Because of this complexity of the politics of international trade, scholars of international political economy (IPE) can focus on different levels of analysis and a variety of stages of the political decision-making process. Scholars agree that not only societal preferences but collective action problems, domestic institutions, and international factors all affect trade politics and policy outcomes. These aspects of trade politics together form the key influences on trade policy and whether it is liberal or protectionist in nature.
Societal preferences constitute the initial inputs into the trade policy-making process. Understanding how different groups of economic actors within society win or lose from trade liberalization or protection is the first step toward understanding trade politics and trade policy outcomes. Once societal trade preferences are formed, they must be aggregated into cohesive pressure groups or grass-roots movements whose purpose is to influence trade policy. This is easier for some groups of actors to achieve than others. In lobbying government actors on policy, interest groups find that domestic institutions play an important role translating societal inputs into policy outputs. Policy-making institutions vary in the degree to which they are susceptible to special-interest lobbying versus the preferences of broader societal coalitions, and electoral rules and party structures also affect policy outcomes, with certain configurations creating a bias toward more protectionism or liberalization.
In addition to these domestic-level influences on trade policy, IPE scholars have extensively studied the ways that international factors also affect trade policy outcomes such as the extent of liberalization and the content of what is liberalized (e.g., manufactures versus agricultural goods versus services). International factors such as the distribution of power, the character of international institutions and trade agreements (e.g., multilateral versus bilateral), transnational civil society and diffusion processes may be thought of as inputs into the policy-making process as well. Systemic conditions may constrain the types of policies that governments can adopt, or they may open the door to a range of possible policy outcomes that are nevertheless limited by the preferences of domestic societal actors.
Studies of Western development assistance conclude that aid is effective only when recipients have good governance, measured as pro-investment policies, democratic institutions, and political stability, or when recipients lack strategic importance to donors. Underlying the theoretical frameworks in these studies is a common mechanism: compliance with conditions on aid agreements, which, in turn, depends on recipient incentives to comply. With the exception of donors’ emphasis on the quality of governance in the early 2000s, donors generally overlook recipient incentives to comply with aid agreements and thus fail to capitalize on opportunities for aid effectiveness suggested by the academic studies. A paucity of data has limited direct analysis of compliance with conditions, but studies have relied on their own data collection or have leveraged data from the World Bank to assess determinants of compliance with conditions. Importantly, these studies of compliance support the findings from the aid-effectiveness literature, indicating that the initial incentives to comply with aid agreements are the driving force in agreement compliance and therefore aid effectiveness.
Based on these findings, future research on compliance with conditions on aid is encouraged, beginning with study of the direct influence of compliance on economic development. In addition, future research should analyze whether certain types of aid influence compliance with Western aid agreements, including tied aid and aid from non-Western donors. The implication for policy is that donors should enthusiastically support recipients who face incentives to comply because compliance drives aid effectiveness. When recipients lack such incentives, donors should try to change the underlying incentive structure of recipients rather than adding conditions on aid.
China’s economic rise has been accompanied by the maturation and increasing professionalization of academic disciplines in China, including the discipline of international relations. The emergence of an indigenous international relations discipline in China has led to an intense debate about the development of a distinctive “Chinese School” that draws on China’s intellectual traditions and historical record to inspire the development of new international relations theories. While the debate continues, the outlines of a Chinese School are becoming clear. The Chinese School of international relations theory draws on Confucian concepts of relationality and hierarchy to theorize the character of the relations between countries rather than focus on the attributes of countries themselves. It also highlights the historical existence of interstate systems organized in a hub-and-spoke pattern around a single, central state.
The premodern East Asian world-system in which China was embedded and classical Chinese scholars developed their ideas was a central state system. Premodern China was always by far the dominant state in East Asia, with the result that international relations in the East Asian world-system exhibited a hub-and-spoke pattern centered on China, as in the tributary system of the Ming and Qing Dynasties. Moreover the Confucian worldview that ultimately came to be China’s state ideology served in effect as the governing moral code of the system as a whole. The combination of a central state structure with a universal moral code created what in Chinese is called a tianxia (“all under heaven”), a world-embracing system of governance centered on a particular state, in this case China.
In a tianxia system international relations tend to be hierarchical because of the clear power differentials between the central state and other states. They can be either expressive (showing social solidarity) or purely instrumental, depending on the stance taken by the central state. Chinese School international relations theorists tend to assume that the “best” (most stable, most peaceful, most prosperous, etc.) world-system configuration would be a tianxia system dominated by expressive rationality and centered on China, but this is no more self-evident than the widely held Western preference for a liberal, rules-based order. What Chinese School international relations theory really offers the discipline is a new set of concepts that can be applied to the theorization and empirical analysis of today’s millennial world-system. This postmodern interstate system appears to be a central state system with a universal moral code, an American tianxia based on individualism. The historical Confucian Chinese tianxia may be the best precedent for modeling this system.
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.
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.
International relations scholars tend to differentiate between a state’s use of military and economic instruments of power and also between rewards and punishments. In conflict scenarios, leaders are typically depicted as facing a choice between using military versus economic forms of punishment to achieve desired political outcomes. The role of economic rewards is seldom analyzed within the context of adversarial relations or within combat operations. The U.S. military has used money in combat and noncombat operations to influence actors and shape the operational environment in a manner favorable to the troops. There has been some attention devoted to the military’s noncombatant role and to efforts to win hearts and minds. Little attention has been devoted to the use of money in kinetic operations. The military’s use of money in its operations, including counterinsurgency and stability operations, provides insight for international relations scholars interested in when economic inducements may be effective within adversarial relations or conflict situations. It represents a form of targeted sanctions, in the sense of applying positive inducements selectively at the micro level, to achieve macro-level objectives. The U.S. military has relied on a growing body of empirical research in persuasion science to inform its operations. The case and findings from persuasion science could contribute to understanding the problems and possibilities of harnessing the power of money to achieve political outcomes.
Austin P. Johnson and Quan Li
A debate exists in international political economy on the relationship between regime type and foreign direct investment (FDI). The central point of contention focuses on whether multinational firms generally prefer to pursue business ventures in more democratic or autocratic countries. A considerable amount of theory has been developed on this topic; however, the arguments in previous studies lack consistency, and researchers have produced mixed empirical findings. A fundamental weakness in this literature is that while FDI has largely been treated conceptually as a homogeneous aggregate, in reality, it features divergent characteristics on multiple dimensions. Three possible dimensions that FDI can be decomposed on are: greenfield vs. brownfield, ownership type (wholly owned vs. joint venture), and horizontal vs. vertical. The most relevant dimensions to the problem at hand are: greenfield vs. brownfield, and horizontal vs. vertical. Five propositions, based on the notion of asset specificity, other investment attributes, and host nation domestic factors, are derived to predict how regime type might affect four types of FDI: vertical-greenfield; vertical-brownfield; horizontal-greenfield; and horizontal-brownfield. Depending on the type of FDI, multinational corporations may have no regime preference, an autocratic preference, or a democratic preference. This research contributes to empirical international relations theory by providing a useful example on how to resolve a scholarly debate, theoretically, and by laying out testable propositions for future empirical research.
The recent global economic crisis has renewed interest in the nature and history of monetary policy, the distributional effects of central bank policy, central bank governance, and the personalities at the helm of major central banks. In modern times, a country’s central bank formulates, or, to a minimum, implements, a country’s monetary policy, or the process of adjustment of a country’s money supply to achieve some combination of stable prices and sustainable economic growth. Monetary policy depends heavily on a country’s exchange rate system. Under fixed exchange rates, the country’s commitment to keep the level of the currency at a certain level dictates monetary policy to a great degree. As the gold standard was unraveling after World War I, many countries experienced high inflation or even hyperinflation. A similar situation faced monetary policy after the collapse of the Bretton Woods system of fixed exchange rates in the 1970s. By the 1980s, however, countries turned toward central bank independence as an institutional arrangement to control inflation. The current issues surrounding monetary policy have emerged from the historical increase in central bank independence and the 2007 economic and financial crisis. In particular, the opacity of central bank decisions, given their autonomy to pursue stable prices without political interference, has increased the demand for transparency and communication with the government, the public, and financial markets. Also, the 2007 crisis pushed central banks toward unconventional measures and macro-prudential regulation, and brought back into focus the monetary policy of the euro area.