INTRODUCTION OF INTERNATIONAL POLITICAL ECONOMY

Over the past thirty years, the study of international political economy underwent a remarkable reappearance. It is virtually nonexistent before 1970 as a field of study, international political economy is now a popular area of specialization for both undergraduates and graduate students, as well as the source of much innovative and influential scholarship.

Karen A. Mingst (2008), Essential of International Relations, international political economy is the study of the interrelationship between politics and economics and between states and market. It also examines how politics can be used to achieve economics goals, and how economic instruments are utilized for political purposes.

Nature of Political Economy

Until a century ago, almost all thinkers concerned with understanding human society wrote about political economy. For individuals as diverse as Adam Smith, John Stuart Mill, and Karl Marx, the economy was extremely political and politics was obviously tied to economic phenomena. Adam Smith in The Wealth of Nations (1776), political economy was a branch of the science of a statesman or legislator and a guide to the prudent management of the national economy, or as John Stuart Mill, the last major economist, commented that political economy was the science that teaches a nation how to become rich. These thinkers emphasized the wealth of nations and the term of political was the significant as the term “economy”.

In the late nineteenth century, this broad definition of what economist study was narrowed considerably. Alfred Marshall in Principles of Economics (1890) substituted the term “economics” for “political economy”. In modern terminology economics is defined by economist as a universal science of decision-making under conditions of constraint and scarcity.

Around the turn of the century, however, professional studies of economics and politics became increasingly divorced from one another. Economic investigation began to focus on understanding more fully the operation of specific markets and their interaction; the development of new mathematical techniques permitted the formalization of, for example, laws of supply and demand. By the time of World War I, an economics profession was in existence and its attention was focused on understanding the operation of economic activities in and of themselves. At the same time, other scholars were looking increasingly at the political realm in isolation from the economy. The rise of modern representative political institutions, mass political parties, more politically informed populations, and modern bureaucracies all seemed to justify the study of politics as an activity that had a logic of its own.

With the exception of a few isolated individuals and rise of interest during the politically and economically troubled Depression years, the twentieth century saw an increasing separation of the study of economics from that of politics. Economists developed ever more elaborate and sophisticated models of how economies work, and similarly, political scientists elaborate ever more complex theories of political development and activity.

Study of Political Economy

The increasing importance of international political economy stems from several trends. First, economic transactions among states, including trade, investment, and lending have been rising dramatically. The number of interactions among states has grown both in absolute term and as a share of total economy activity. Second, there has been increasing expectations about the responsibilities of national governments for economic policies.

            A state must fulfill several social, economics, and political functions to preserve the loyalty of its citizens. James Mayall in Nationalism and International Society (1990) emphasized “the new economics nationalism”, economic welfare has become intimately joined to national citizenship in the modern world.

This last fact—the impact of policy and politics on economic trends—is the most visible, and the most important, reason to look beyond market-based, purely economic explanations of social behavior. Indeed, many market-oriented economists are continually surprised by the ability of governments or of powerful groups pressuring governments to disobey economic tendencies. When OPEC first raised oil prices in December 1973, some market-minded pundits, and even a few naive economists, predicted that such naked manipulation of the forces of supply and demand could last only a matter of months.

Three Alternatives of International Political Economy

In addition to the perspectives already mentioned, some scholars attempt to classify interpretations of global political and economic developments in a somewhat different manner. Many theories of international political economy can also be categorized into one of three perspectives: Liberalism, Marxism, and Realism.

            The Liberal emphasizes how both the market and politics are environments in which all parties can benefit by entering into voluntary exchanges with others. Marxism perhaps the severest critic of capitalism and its Liberal supporters. Marx saw capitalism and the market as creating extremes of wealth for capitalists and poverty for workers. Marxists see the political economy as necessarily conflictual, since the relationship between capitalists and workers is essentially antagonistic. Meanwhile realists believe all actors must be subordinate to it. Realists assert that the basis for this interaction is legislated by the nation-state. Thus, where Liberals focus on individuals and Marxists on classes, Realists concentrate on nation-states.

Analysis

As Frieden and Lake commented in International Political Economy (2000) International political economy is the study of the interaction of economics and politics in the world arena, I thought in the most general sense, the economy can be defined as the system of producing, distributing, and using wealth. Politics is the set of institutions and rules by which social and economic interactions are governed. It means which political economy has a variety of meanings. For some, it refers primarily to the study of the political basis of economic actions, the ways in which government policies affect market operations. For others, the principal preoccupation is the economic basis of political action, the ways in which economic forces mold government policies. The two focuses are, in a sense, complementary, for politics and markets are in a constant state of mutual interaction.

The study of political economy is now very much in vogue among historians, economist, and scientist. This interest reflects a growing appreciation that the worlds of politics and economics, once thought to be separate (at least as fields of academic inquiry), do in fact importantly affect one another.

References

Whynes, David K. 1984. What Is Political Economy?: Eight Prespectives. Oxford: Basil  Blackwell

Gilpin, Robert. 2001. “The Nature of Political Economy” dalam Global Political Economy: Understanding the International Economic Order. Princeton: Princeton University Press, pp. 25-45

Gilpin, Robert. 2001. “The Study of International Political Economy”, dalam Global Political Economy: Understanding rhe International Economic Order. Princeton: Princeton University

Frieden, Jeffry A & Lake, David A. 2000. International Political Economy: Perspectives on Global Power and Wealth. Routledge: Bedford/St. Martin’s