The global political economy is a multilevel system of economic activities and regulation in which the domestic level continues to predominate—in other words, it is a global system comprising national capitalist economies. Nations differ in terms of the regulations and institutions that govern economic activity, an observation that is embodied in the so-called “varieties of capitalism” (VoC) literature. Contemporary VoC approaches highlight the significance of social and political institutions in shaping national economies, in stark contrast to neoclassical economics which generally ignores institutions other than markets or sees them as hindrances to the functioning of free markets. Three analytical premises inform the diverse conceptual frameworks within the VoC literature: the firm-based approach, national business systems approach, and the governance or “social systems of production” approach. The VoC literature offers three important contributions to our understanding of the global political economy. The first is that different sources of competitive advantage for firms and nations are institutionally rooted and not easily changed. The second contribution is that these distinct national arrangements give rise to different interests/preferences in how the global economy is constructed and managed. Finally, the VoC approaches provide a framework for analyzing long-term institutional changes in capitalist systems and the persistence of diverse forms of capitalism, including the global financial crisis of 2008–2009 that may usher in yet another epochal change in the “battle of capitalisms.”
John T. Picarelli
Transnational crimes are crimes that have actual or potential effect across national borders and crimes that are intrastate but offend fundamental values of the international community. The word “transnational” describes crimes that are not only international, but crimes that by their nature involve cross-border transference as an essential part of the criminal activity. Transnational crimes also include crimes that take place in one country, but their consequences significantly affect another country and transit countries may also be involved. Examples of transnational crimes include: human trafficking, people smuggling, smuggling/trafficking of goods, sex slavery, terrorism offences, torture and apartheid. Contemporary transnational crimes take advantage of globalization, trade liberalization and new technologies to perpetrate diverse crimes and to move money, goods, services, and people instantaneously for purposes of perpetrating violence for political ends. While these global costs of criminal activity are huge, the role of this criminal market in the broader international economic system, and its effects on domestic state institutions and economies, has not received widespread attention from an international political economy (IPE) or political science perspective. Given the limits on the exercise of extraterritorial enforcement jurisdiction, states have developed mechanisms to cooperate in transnational criminal matters. The primary mechanisms used in this regard are extradition, lawful removal, and mutual legal assistance.
William Biebuyck and Judith Meltzer
Cultural political economy (CPE) is an approach to political economy that focuses on how economic systems, and their component parts, are products of specific human, technical, and natural relations. Notwithstanding longer historical roots, CPE emerged as part of the “cultural turn” within the social sciences. Although it is often seen as countering material determinism and the neglect of culture in conventional approaches in political economy, the cultural turn was less about “adding culture” than about challenging positivist epistemologies in social research. For some, cultural political economy continues to be defined by an orientation toward cultural or “lifeworld” variables such as identity, gender, discourse, and so on, in contrast to conventional political economy’s focus on the material or “systems” dimensions. However, this revalorization of the nonmaterial dimensions of political economic life reinforces a sharp distinction between the cultural and the material, an issue which can be traced to the concept of “(dis)embedding” the economy and subordinating society. A more noticeable development, however, is the increasing orientation of critical (CPE) analyses of global development toward the “economization” of the cultural in the context of mutating forms of neoliberalism. Concomitant to the economization of the cultural in narratives of global development is the “culturalization” of the economic. Here attention is paid not just to the growth of cultural industries but to the multiple ways in which culture has been normalized in discourses of global and corporate development.
Donna Lee and Brian Hocking
Mainstream studies of diplomacy have traditionally approached international relations (IR) using realist and neorealist frameworks, resulting in state-centric analyses of mainly political agendas at the expense of economic matters. Recently, however, scholars have begun to focus on understanding international relations beyond security. Consequently, there has been a significant shift in the study of diplomacy toward a better understanding of the processes and practices underpinning economic diplomacy. New concepts of diplomacy such as catalytic diplomacy, network diplomacy, and multistakeholder diplomacy have emerged, providing new tools not only to recognize a greater variety of state and nonstate actors in diplomatic practice, but also to highlight the varied and changing character of diplomatic processes. In this context, two themes in the study of diplomacy can be identified. The first is that of diplomat as agent, in IR and international political economy. The second is how to fit into diplomatic agency officials who do not belong to the state, or to a foreign ministry. In the case of the changing environment caused by globalization, economic diplomacy commonly drives the development of qualitatively different diplomatic practices in new and existing economic forums. Four key modes of economic diplomacy are critical to managing contemporary globalization: commercial diplomacy, trade diplomacy, finance diplomacy, and consular visa services in relation to increased immigration flows. The development of these modes of economic diplomacy has shaped the way we think about who the diplomats are, what diplomats do, and how they do it.
Stefan H. Fritsch
Generally considered one of the central driving forces behind globalization, communication has provided the backbone for deep integration of global trade, finance, culture, and so on. Although the importance of knowledge, information, and communication has been widely accepted in contemporary economic and political thought, their economic function only became the subject of scientific interest from a variety of disciplinary perspectives during the 1930s and 1940s. From the early 1950s on, a growing body of scholarly work from various disciplines began to investigate the role of information and communication for the political economy of empires, states, business enterprises, and individuals. Aside from the generally growing economic significance of information and communication for the economic development of societies, the commodification of information itself has become the subject of investigation by political economists. And since various technologies form the basis of international communication, technology studies in recent decades have tried to explain processes of technological invention and innovation and the impact of new information and communication technologies (ICTs) on the architecture of international communication. A growing number of scholars have also analyzed the role of individuals, states, and multinational corporations in the political economy of communication and in a broader sense in international relations.
Peter M. Haas
The literature on the political economy of the global environment is a hybrid of political economy, international relations (IR), and international environmental politics, looking at the formal and informal institutional factors which give rise to unsustainable habits. The physical environment has long been the subject of social scientists, who recognized that patterns of social activity might contribute to environmental degradation. One of the most common formulations of environmental issues as a collective action is through the metaphor of the Tragedy of Commons, which argues that overpopulation worldwide would undoubtedly contribute to extensive resource depletion. Following the formulation of the core properties of environmental issues as lying at the interstices of a variety of human activities, implications followed for how to conduct research on international environmental politics and policy. Realist and neorealist traditions in international relations stress the seminal role of power and national leadership in addressing environmental problems. Neoliberal institutionalists look at the role of formal institutional properties in influencing states’ willingness to address transboundary and global environmental threats. On the other hand, the constructivist movement in international relations focuses on the role of new ecological doctrines in how states choose to address their environmental problems, and to act collectively. Ultimately, the major policy debates over the years have addressed the political economy of private investment in environmentally oriented activities, sustainable development doctrines, free trade and the environment, environmental security, and studies of compliance, implementation, and effectiveness.
Numerous crises have occurred since the beginnings of the modern economic system, from the Dutch Tulip Mania of 1636 and the South Sea Bubble of 1720 to the Dollar Crisis and Asian Financial Crisis. Scholars have written about the causes and remedies of financial crisis, resulting in a substantial amount of literature on the subject especially after the Great Depression. The writing on financial crisis declined between the end of World War II and the monetary crises in the early 1970s, but has become vibrant again since the 1980s. Some of the earliest voices that contributed to the intellectual history of studying financial crisis include Adam Smith, Karl Marx, David Ricardo, Walter Bagehot, and John Maynard Keynes. These men provided the foundation for understanding the central issues and questions about financial crisis and influenced the debates and scholarship that followed. One such debate involved monetarists vs. business cycle theorists. The monetarists argue that crises are caused by changes in the money supply, while those favoring a business cycle approach insist that expansions and contractions are part of economic interactions and so the economy will at times experience crises. As crises continue to affect both domestic and global financial markets, more perspectives are added to the discussion, including those that invoke rational expectations and economic models, along with those that draw from international political economy. There are also questions that remain unanswered, such as the issue of crisis response and that of financial fragility.
Marc D. Froese
Trade governance rests upon certain economic assumptions and the ensuing political compromises made possible by the growth of an incremental legal consensus. The main economic assumptions are that trade will deliver upon the objectives of socio-economic development, stable, long-term employment opportunities and poverty reduction. These assumptions are theoretically sound, but are increasingly challenged by the complex political realities of global trade. The study of trade in the field of international political economy (IPE) has deep roots in the postwar disciplines of economics and political science. The literature on the history of trade regulation places the current system, with its emphasis on the legitimizing imprimatur of political power and the significance of binding treaty, into a more nuanced context in which present practices, while sometimes novel, are frequently older than most policy makers realize. In the two decades since the finalization of the Uruguay Round and the creation of the World Trade Organization (WTO), a host of significant issues have arisen as scholars and policy makers attempt to implement the WTO’s mandate and navigate the political waters of trade regulation as it relates to domestic law and policy. These include the set of issues raised by the broadening of trade regulation post-Uruguay Round to include trade related intellectual property rights and trade in services, the contentious issue of trade and economic development, and the issue of WTO reform.
A commodity chain refers to “a network of labor and production processes whose end result is a finished commodity.” The attention given to this concept has quickly translated into an expanding body of global chains literature. Research into global commodity chains (GCC), and later global value chains (GVC), is an endeavor to explain the social and organizational structure of the global economy and its dynamics by examining the commodity chains of a specific product of service. The GCC approach first emerged in the mid-1980s from world-system research and was reformulated in the early 1990s by development scholars. The development-oriented GCC approach turned the focus of GCC analysis to actor-centered processes in the global economy. One of the initial criticisms facing the GCC approach was its exclusive focus on internal conditions and organizational linkages, lacking systemic attention to the effect of domestic institutions and internal capacity on economic development. Other critics pointed to the narrow scope of GCC research. With the huge expansion in global chains literature in the past decade—not only in volume but also in depth and scope—efforts have been made to elaborate the global chains framework and to render it industry neutral, as partly reflected in the adoption of the term “global value chains.” Three key research themes surround these recent evolutions of global chains literature: GVC governance, “upgrading,” and the social construction of global value chains. Existing literature, however, still has theoretical and methodological gaps to redress.
Angus Cameron and Ronen Palan
Like many other social scientific terms, the exact meaning of globalization has always been unclear. It does not have a single point of origin, but emerged in the mid to late 1980s in several disciplines. In the general sense, globalization is the increasing interaction of people through the growth of the international flow of money, ideas, and culture. It first manifested in media and cultural studies as early as the 1970s—the spread of TV, telephones, information and communication technology (ICT), and other media provided an enduring image of the technological “shrinking” of space, a defining trait of globalization. Advances in the means of transport (such as the steam locomotive, steamship, jet engine, and container ships) and in telecommunications infrastructure (including the rise of the telegraph and its modern offspring, the Internet and mobile phones) have been major factors in globalization, generating further interdependence of economic and cultural activities. In connection to the study of globalization, global political economy (GPE), or international political economy (IPE), is an academic discipline that analyzes economics and international relations. As an interdisciplinary field, it draws on a few distinct academic schools, most notably economics, political economy, political science, sociology, history, and cultural studies. Other topics that command substantial attention among IPE scholars are international trade, international finance, financial crises, macroeconomics, development economics, and the balance of power between and among states and institutions.
Michael G. Hall
Political economy research in exchange rate policy generally focuses on three particular questions. First is the question of the exchange rate regime. The exchange rate regime is the rule a government uses to determine the value of an exchange rate. The issue here is what can determine the degree of government intervention in exchange rate policy. Second, political economy research investigates the choices concerning the value or level of the exchange rate. This raises the question of how and why policy affects the relative prices of foreign and domestic goods. Finally, political economy research also investigates the nature and causes of an international monetary regime—the international principles, norms, and rules concerning monetary relations that governments and market participants expect to see others practice. International monetary regimes can be global or regional in scope, and in practice contain four elements. First, states agree to rules concerning exchange rate regimes. Second, if those rules mandate a fixed exchange rate, states agree to fix to a common “anchor” currency. Third, the international regime emphasizes particular methods for adjusting balance of payments imbalances, described below. Fourth, states agree to common procedures for resolving interstate disputes over exchange rates, through either hegemonic leadership, negotiation, supranational organizations, or rules demanding automatic responses.
Feminist Gramscian international political economy (IPE) is an interdisciplinary intellectual project that has focused both on theoretical and empirical analysis of women and gender within the field. Feminist Gramscian IPE emerged from the confluence of an eclectic body of work over the last several years encompassing fields as disparate as international relations, IPE, feminist economics, the literature on gender and development, and feminist literature on globalization. As with feminist perspectives in other disciplinary fields, Gramscian feminists have largely embraced postpositivist, interpretivist, and relational analysis while trying to maintain the emancipatory potential of their work for women the world over. Current Gramscian feminist analyses are firmly grounded and draw from early Marxist/Socialist feminist interventions. They have also engaged with the three major categories of analysis in Gramscian thought—ideas, material capabilities, and institutions—in order to understand hegemonic processes that function to (re)construct and (re)produce both gendered categories of analysis and practice. Feminist revisions of Gramscian IPE have focused on international institutions, rules and norms, while simultaneously shedding light on contemporary states and how they are being transformed in this current phase of globalization. Three central tasks that feminist Gramscian scholars may consider in future research are: to be more engaged with the notion of hegemony, to revisit the political methodology employed by many feminist Gramscian analyses, and to devote more attention to non-mainstream perspectives.
Hegemony emerged as an analytical term to conceptualize different historical periods out of the combined post-1945 historical context of two key events: the dissolution of an international political order founded upon European colonial empires, and the establishment and evolution of a postwar liberal international economy under U.S. leadership. Within the subdiscipline of International Political Economy (IPE), the genesis of the concept of “hegemony” or “leadership” has two sources: the idea of hegemonic order or dominance within the world economy as articulated in Immanuel Wallerstein’s World-Systems Theory in the early 1970s, and the publication of Charles Kindleberger’s analysis of the Great Depression that initiated a debate involving neorealist and liberal-oriented scholars around what subsequently become known as “hegemonic stability theory.” John Ikenberry also articulated a nuanced understanding of hegemony from a liberal-institutionalist perspective with regard to the post-1945 international order. There exists a substantial amount of literature on the theory and history of hegemony within IPE, and much of this discussion has been fueled by ongoing developments in the world economy. Critics of hegemony situate and embed state power and behavior within the socioeconomic structure of capitalism, and also focus on class agency as central to the establishment and evolution of hegemonic orders. To varying degrees these scholars have drawn on the theory of hegemony developed by Antonio Gramsci.
Information and communications technologies (ICTs) constitute a potentially transformative force in world politics. The industries associated with these technologies are growing rapidly, and some have argued that their importance in the overall economy at both the national and global levels increased in recent decades. ICT industries include both goods producers and service providers. ICT manufacturing includes all the goods-producing industries that use semiconductor components, such as consumer electronics, the computer industry, the telecommunications equipment industry, and industrial and military electronics. Within each of these groups, there are sub-industries that specialize in particular segments of the market. The services side of ICTs is also very large in terms of revenues and employment, and is growing rapidly. ICT services include, among others, the software industry, telecommunications services, data processing, and web-based information services. Many scholars argue that the importance of ICT industries goes beyond the revenues and employment generated in the industries themselves, however. ICTs may also be transformative in that they reduce transaction and communications costs in the overall economy. They make possible new forms of organization of human activity, especially as globalization and digitalization is progressing rapidly in the recent decades. Such processes have attracted the attention of international relations scholars, as they have been focusing on international regimes governing ICT-related activities in the past decade.
The international financial institutions (IFIs) have adapted and changed their policies over time to focus on global justice and poverty alleviation. This evolution is explored, with close attention to the role of political economy scholars and international events that increased the pressure on the IFIs to change their policies. Events such as the failure of structural adjustment policies, and the increasing role of nongovernmental organizations after the end of the Cold War were strong forces advocating for both debt relief policies and efforts designed to alleviate poverty. Problems surrounding the deadline for the Millennium Development Goals in 2015 and the increased role of the IFIs during the 2008 global financial crisis are also discussed.
The concept of international political economy (IPE) encompasses the intersection of politics and economics as goods, services, money, people, and ideas move across borders. The term “international political economy” began to draw the attention of scholars in the mid-1960s amid problems of the world economy and lagging development in the third world. IPE was later replaced by the term “global political economy” (GPE) in recognition of the fact that what happens in the world is not only about interactions between states, and that the global political economy includes many different kinds of actors. In general, GPE better suits the reality of a globalizing world. Early works that explored the relationship between economic activities and state interests originated long before the term “political economy” was coined. Examples are those by Aristotle, Kautilya, Ibn Khaldun, and Niccolò Machiavelli. Adam Smith used the word “mercantilism” to describe the various theories and policies on how states should intervene in markets in order to increase wealth and power. “Mercantilism” was supplanted by “economic nationalism” in the twentieth century, followed by classical liberalism, neoliberal institutionalism, and neoclassical liberalism. Whereas both mercantilism and economic nationalism emphasize state power and state interests, liberal writers such as John Locke and Immanuel Kant argue that possessive individualism and the individual are the bearer of rights. Other major schools of thought that have conceptualized important concepts, relationships, and causal understandings in IPE include Marxism and its variants, feminist approaches, and communitarianism.
Transnational corporations (TNCs) are networks of related enterprises, composed of a parent in one country and subsidiaries or affiliates in other countries. They play a central role in the global economy, and have recently come into focus in international political economy (IPE) scholarship. Early studies on TNCs and foreign direct investment (FDI) took place in the late 1960s and the 1970s. FDIs are a type of cross-border investment in which a resident in one economy establishes a lasting interest in an enterprise in another economy, in order to ensure a significant degree of influence by the direct investor in the management of the direct investment enterprise. Both TNCs and FDIs were controversial in the field, as tensions arose between TNCs and host states and people began to question whether or not FDIs were beneficial for developing countries. By the 1980s and 1990s, the world fell into the grip of financial crisis, and the study of TNCs fell largely into neglect, only to witness a revival during the 2000s. Since then, while the field of IPE has returned to focus its research on FDI, the current literature has taken a different track from the earlier work, and the results have made important contributions to answering questions about the effects of FDI and about what affects firm–state bargaining or the governance of TNCs in the twenty-first century. Too much of the recent literature, however, still focuses narrowly on explaining investment flows.
M. Scott Solomon
Cross-border migration of people from one country to another has become an increasingly important feature of the globalizing world and it raises many important economic, social, and political issues. Migration is overwhelmingly from less developed to more developed countries and regions. Some of the factors affecting migration include: differences between wages for equivalent jobs; access to the benefits system of host countries plus state education, housing, and health care; and a desire to travel, build new skills and qualifications, and develop networks. On a more economic standpoint, studies show that labor migration provides various advantages. Migrants can provide complementary skills to domestic workers, which can raise the productivity of both. Migration can also be a driver of technological change and a fresh source of entrepreneurs. Much innovation comes from the work of teams of people who have different perspectives and experiences. Furthermore, a convenient way to accommodate individual actors in the global economy is to view them as economically dependent workers rather than as citizens capable of bringing about social change. The economic globalization process has modified this perspective to some extent, with greater recognition of the integration of a diverse, but nationally based, workforce into production patterns that can span several sovereign jurisdictions and world regions.
Darel E. Paul
Liberal international political economy (IPE) is the offspring of a marriage between mainstream international economics with its focus on markets and mainstream international relations with its emphasis on the state. While clearly involving the traditional disciplines of economics and political science, liberal scholarship in IPE tends to be housed almost exclusively in the latter. Liberal IPE has always maintained a special relationship with its absentee father economics, looking to it particularly as a source of theoretical and especially methodological inspiration. In its earlier phase, the “American school” of IPE, also known by its practitioners as Open Economy Politics (OEP), was strongly oriented toward studying the societal determinants of state trade policy and indeed continues to expand upon this terrain. OEP has moved into many diverse areas since then. Having roots in both neoclassical economics and realist international relations theory, OEP has a strong tendency to limit its empirical interest to observable behavior, define interest in strictly material terms, and assume the psychology of decision-making to be rational and therefore unproblematic. Unsurprisingly, OEP has little room for ideas as interesting and important objects of study, and in turn some of the early pioneers of the liberal approach in IPE have lamented its becoming “too materialistic.”
Economists have long been preoccupied with trying to understand the nature and causes of poverty. From Adam Smith to David Ricardo, Thomas Malthus, Karl Marx, and John Stuart Mill, a common belief among economists is that the benefits of economic growth are rarely experienced by the poorer sections of society. An important issue is how to measure global poverty accurately. International organizations such as the United Nations and the World Bank have endeavored to measure global poverty since the adoption of the Millennium Development Goals (MDG), stated in the UN’s Millennium Declaration which was adopted in 2000 by 189 nations. However, measuring global poverty is far from simple. Estimates of poverty and particularly of global poverty are very sensitive to the underlying assumptions, such as the notion of poverty itself, the choice of welfare indicator, the unit of measurement used, and purchasing power parity rates. One of the significant advances in global poverty studies was the World Bank’s introduction of a poverty line in the 1990 World Development Report (WDR). Despite these efforts, the precise number of poor in the world remains ambiguous. Nevertheless, emerging frontiers in poverty analysis indicate new interest in measuring poverty more broadly. Some ideas that may dominate the future of poverty research include multidimensional poverty, vulnerability to poverty, and chronic poverty.