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International political economy (IPE) is a discipline in the social sciences that is mostly concerned with understanding the dynamic relation between the state and the market. Originally a subfield of international relations, today IPE is an independent and vibrant field that draws on an array of contributions from political scientists, historians, economists, sociologists, and anthropologists. Despite their heterogeneity, IPE theorists all share the notion that political, economic, and social factors cannot be analyzed separately. On the contrary, they stress the intertwined nature of the relationship between the state and the market and advocate a holistic approach to the issue.

Until the 1970s, with a few exceptions (i.e., Charles Kindleberger’s study on hegemony and Kenneth Waltz’s 1959 book Man, the State, and War), mainstream studies in politics and economics treated the state and the market as two independent and separate entities. The state was mostly associated with the pursuit of power, whereas the market was mostly associated with the pursuit of wealth. However, following the 1973 oil crisis and the end of the Bretton Woods monetary system, events led scholars and policy makers to acknowledge the fact that to provide answers to practical and theoretical questions emerging from these two crises, economics and politics should be analyzed together.

The 1973 oil crisis, the decision of the Nixon administration to abandon the Bretton Woods fixed exchange rate, and the disastrous military campaign in Vietnam instilled in the American elite and public the fear that the United States could lose its preponderant economic and military supremacy to other countries. These events inspired the first wave of IPE theorists interested in determining which factors would favor the stability of the international economy. Mostly drawing from the realist tradition in international relation, scholars such as Robert Gilpin and Stephen Krasner reached the conclusion that the answer was in the redistribution of power among states. The hegemonic stability theory, first introduced by Kindleberger, argued that the overwhelming economic and military preponderance of a country was necessary to guarantee a stable and open world economy. Based on the historical experiences of Great Britain (1815–1873) and the United States (1945–1971), IPE theorists such as Helen Milner (1998) reached the conclusion that a hegemon was indispensable “to coordinate and discipline other countries so that each could feel secure enough to open its markets and avoid beggar-thy-neighbor policies. Conversely, the theory asserted that the decline of the hegemon tends to be associated with economic closure, instability, and the creation of competing regional blocs” (pp. 113–114).

Although IPE theorists’ most important contribution during the cold war was the formulation of the hegemonic stability theory, IPE research took many other directions, some of which gained even more relevance with the end of the confrontation with the Soviet Union. International trade, international finance, North-South relations, multinational corporations, and globalization are some of the most important topics in IPE. Today, despite their heterogeneity, IPE scholars address mostly two underlying issues. First, economic and technological changes have problematized structures and practices governed by the sovereign nation-state, with the result’s being a sense of fatalism and chronic insecurity due to the perceived (real or not) incapacity of national governments and institutions to deal with such a challenge. In this regard, Anthony McGrew (1998) identifies three positions in the literature. First, there are those he calls “hyperglobalists.” They believe that the emergence of global markets has ultimately undermined the very foundations of the state. In their view, the relation between market and state is a zero-sum game, in which the expansion of the market has determined the withdrawal of the political influence over every aspect of social action. On the other side of the spectrum, McGrew locates the skeptics. These are scholars who instead share the opinion that international markets have strengthened, rather than weakened, the nation-state. Their conclusion mostly derives from the notion that the international economy is based on a political system of sovereign nation-states, which have instrumentally used the economy to implement their political agendas. Last, scholars such as Anthony Giddens and David Held embody the transformationalists. Transformation lists argue that the nation-state has been sensibly influenced by global markets. However, they do not dismiss completely the role of the nation-state, as hyper globalists do. They assert instead that the nation-state is experiencing an overall transformation that is redefining its traditional role.

The second issue that has attracted the attention of many IPE theorists is the relationship between the politics and the institutional framework of social and economic development. As we move deeper into a new century, it is clear that development achievements have come short of meeting global needs. Models of development based on neoliberal economic theories and embraced by global financial institutions, such as the World Bank, the World Trade Organization, and the International Monetary Fund, have become the object of severe scrutiny by scholars and policy makers. Neoliberal economic principles, such as market liberalization, privatization, economic stabilization, and deregulation, have been challenged, and this has sparked a new interest in understanding the interaction between the national and international contexts to set constraints on development and determine possible avenues of growth. As a result, the IPE has expanded its research interests to areas traditionally neglected or only marginally studied, such as democratization, governance, poverty, human rights, gender, environmental issues, and armed conflict, legitimizing once more the interdisciplinary nature of IPE.

In the past three decades, IPE has been able to grow into a true interdisciplinary field of study. Its strong empirical foundation and capacity to draw from different academic traditions have allowed IPE to flourish and provide a vital insightful contribution to the never-ending issue of the relationship between the state and the market.

Bibliography:

Giddens, Anthony. The Consequences of Modernity. Stanford, Calif.: Stanford University Press, 1990.
Gilpin, Robert. Global Political Economy: Understanding the International Economic Order. Princeton, N.J.: Princeton University Press, 2001.
Held, David. Democracy and the Global Order. Cambridge, UK: Polity, 1995.
Hirst, Paul, and Grahame Thompson. Globalization in Question: The International Economy and the Possibilities of Governance. Oxford, UK: Polity, 1996.
Keohane, Robert O. After Hegemony: Cooperation and Discord in the World Political Economy. Princeton, N.J.: Princeton University Press, 1984.
McGrew, Anthony. “Globalization: Conceptualizing a Moving Target.” In Understanding Globalization:The Nation-state, Democracy and Economic Policies in the New Epoch, edited by John Eatwell, Elizabeth Jelin, Anthony McGrew, and James Rosenau, 7–30. Stockholm:Tryckeri AB Småland, 1998.
Milner, Helen. “International Political Economy: Beyond Hegemonic Stability.” Foreign Policy 110 (Spring 1998): 112–124.
Strange, Susan. States and Markets. New York: Pinter, 1994.
Waltz, Kenneth M. Man, the State, and War. New York: Columbia University Press, 1959.

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