The political budget cycle—how elections affect government fiscal policy—is one of the most studied subjects in political economy and political science. The key theoretical question is whether incumbent governments can time or structure public finances in ways that improve their chances of reelection; the key empirical question is whether this in fact happens. The incentives of incumbents to engage in such electioneering are governed by political institutions, observability of political choices, and their consequences, as well as voter knowledge, and both theoretical and empirical studies on political budget cycles have recently focused on conditions under which such cycles are likely to obtain. Much recent research focuses on subnational settings, allowing comparisons of governments in similar institutional environments, and a consensus on the presences of cycles in public finances—and in the reporting of public finances—is beginning to emerge.
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Article
Desha Girod
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.
Article
Benjamin Helms and David Leblang
International migration is a multifaceted process with distinct stages and decision points. An initial decision to leave one’s country of birth may be made by the individual or the family unit, and this decision may reflect a desire to reconnect with friends and family who have already moved abroad, a need to diversify the family’s access to financial capital, a demand to increase wages, or a belief that conditions abroad will provide social and/or political benefits not available in the homeland. Once the individual has decided to move abroad, the next decision is the choice of destination. Standard explanations of destination choice have focused on the physical costs associated with moving—moving shorter distances is often less expensive than moving to a destination farther away; these explanations have recently been modified to include other social, political, familial, and cultural dimensions as part of the transaction cost associated with migrating. Arrival in a host country does not mean that an émigré’s relationship with their homeland is over. Migrant networks are an engine of global economic integration—expatriates help expand trade and investment flows, they transmit skills and knowledge back to their homelands, and they remit financial and human capital. Aware of the value of their external populations, home countries have developed a range of policies that enable them to “harness” their diasporas.
Article
International agricultural production has been transformed by the consolidation of the agribusiness model. Multinational chemical and trading companies leveraged their scientific and technological superiority over the producers to advance sales of agrochemical and biotechnological products at the same time that they integrated with traders and processors. By advancing financial scale advantages, international corporate actors established powerful buying positions, determined infrastructural developments, and established a globalized pattern of agricultural economic activity. This has been reinforced by converging demand trends of growing global population, a dietary transition in the emerging world that includes more animal products, a diversifying energy matrix that increasingly includes biofuels and the use of agricultural products as a financial asset class. The international political economy (IPE) of the soybean agribusiness model was articulated with the specific national political economies of Brazil, Argentina, and Paraguay. Differential institutional structures and different political economy coalitions and conditions processed these external conditions in different ways: coordination (Brazil), confrontation (Argentina), and colonization (Paraguay).
Article
Jacqueline M. Klopp and Jeffrey W. Paller
Africa’s growing slums are complex, diverse neighborhoods with their own histories. Currently, these places, characterized by spatially concentrated poverty and human rights abuses, are where large proportions and, in many cases, the majority of Africa’s growing urban populations live. These slums often have a politics characterized by clientelism and repression, but also cooperation, accountability, and political mobilization. Importantly, they must be understood within a wider political context as products of larger historical processes that generate severe inequalities in standards of living, rights, and service provision. Varied approaches (modernization vs. more critical historical and political economy approaches) attempt to explain the emergence, dynamics, and persistence of slums and the politics that often produces, characterizes, and shapes them in Africa. While raising important questions about the link between urbanization and democracy, modernization theories, which are typically ahistorical, do not fully explain the persistence and actual growth of slums in African cities. More historically grounded political economy approaches better explain the formation and dynamics of slums in African cities, including the complex, uneven, and inadequate service delivery to these areas. Whether the conditions of Africa’s slums and the social injustice that undergirds them will give birth to greater democratization in Africa, which, in turn, will deliver radical improvements to the majority, is a critical unanswered question. Will social movements, populist opposition parties, and stronger citizenship claims for the poor ultimately emerge from slum—and wider city—politics? If so, will they address the political problem of inequality that the slum represents? A focus on cities, slums, and their politics is thus a core part of growing concern for the future of African cities and democratic politics on the continent.
Article
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.
Article
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.
Article
Recent discoveries of oil in some African countries have rekindled a debate about its place in development and international politics. The debate has pitched those viewing oil as a catalyst for development and a more assertive Africa in global politics against others who point to the negative impact of oil on older established African oil-producing states. Oil as a highly priced geopolitical and strategic commodity will for the foreseeable future shape relations between African petro-states and other global actors, particularly international oil companies and energy-dependent established and emerging global powers. The structural position of specific African petro-states in the global political economy and history, and the nature of their leadership, are defining factors in the diverse aspects of local and international politics, including the prospects for development and a more assertive Africa in international politics.
Article
Jonas Pontusson and Lucio Baccaro
The comparative study of advanced capitalist political economies emerged as a distinct subfield of political science in the late 1970s. A number of early contributions to this subfield sought to explain cross-national variation of macroeconomic performance, but the subfield increasingly focused its attention on other issues—the consequences of welfare states, industrial relations, and skill formation for innovation, competition, and the distribution of income—in the 15–20 years prior to the global crisis of 2007–2009. The crisis and its aftermath has ushered in renewed interest in macroeconomic management among comparative political economists. As in the past, this theme is linked to that of interdependence among capitalist economies and the room for partisan differences in macroeconomic policy priorities. In addition, recent contributions to comparative political economy distinguish growth models in terms of the role played by different components of aggregate demand and explore the distributive implications of divergent growth trajectories in countries that have traditionally been conceived as belonging to one or another variety of capitalism.
With economic growth re-emerging as a central concern in the wake of the crisis, the New Keynesian tradition features prominently in recent efforts to put macroeconomics back into comparative political economy. However, comparative political economists also ought to engage with the Post-Keynesian tradition, which assigns a more important role to policy choices than the New Keynesian tradition. Positing that distributive conflict and power relations are critical to macroeconomic dynamics, the Post-Keynesian tradition provides useful analytical foundations for understanding the political foundations of divergent growth trajectories among advanced capitalist political economies.
Article
The 2008 Global Financial Crisis (GFC) and subsequent European Debt Crisis had wide-sweeping consequences for global economic and political stability. Yet while these twin crises have prompted soul searching within the economics profession, international political economy (IPE) has been relatively ineffective in accounting for variation in crisis exposure across the developed world. The GFC and European Debt Crisis present the opportunity to link IPE and comparative political economy (CPE) together in the study of international economic and financial turmoil. While the GFC was prompted by the inter-connectedness of global financial markets, its instigators were largely domestic in nature and were reflective of negative externalities that stemmed from unsustainable national policies, especially those related to financial regulation and household debt accumulation. Many in IPE take an “outward looking in” approach to the examination of international economic developments and domestic politics; analysis rests on how the former impacts the latter. The GFC and European Debt Crisis, however, demonstrate the importance of a (CPE-based) “inward looking out” approach, analyzing how unique policy and political features (and failures) of individual nation states can unleash economic and financial instability at the global level amidst deepened economic and financial integration. IPE not only needs to grant greater attention to variation in domestic politics and policies in a time of closely integrated financial markets, but also should acknowledge the impact of a wider array of actors beyond banks and financial institutions (specifically more domestically rooted actors like households) on cross-national variation in the consumption of foreign credit.
Article
Margaret E. Peters
Immigration has largely been neglected as part of the study of International Political Economy (IPE) until recently. Currently, IPE scholars have focused on two questions regarding immigration: what explains variation in public opinion on immigration and what explains variation in immigration policy.
The scholarship on public opinion on immigration has largely been divided into two camps, those who argue that economic factors drive opinion and those who argue that cultural factors are the driver. Those who study the role economic factors have played in shaping opinion on immigration often start with the Stolper-Samuelson theorem. The Stolper-Samuelson theorem shows that while immigration increases the overall size of the economy, it has different distributional effects. Immigration increases the size of the labor pool and, thus, should increase the returns to capital while decreasing wages. As such, those who derive most of their income from capital should favor immigration while those who derive most of their income from wages should oppose immigration. Additionally, the Stolper-Samuelson model shows that openness to trade should have the same effects as open immigration; thus, people should oppose or favor both trade and immigration. Early scholarship examined these predictions and found that opposition to immigration was much higher than opposition to trade and that those who derive much of their income from capital also oppose immigration at high rates. In response, one set of scholars focused on the additional costs that immigration, but not trade, brings. Immigrants, unlike goods, may place a burden on the social welfare system and thus, opposition to immigration especially by the wealthy may be driven by these costs. Other scholars noted that immigrants work in many industries that are unaffected by trade—most notably the service sector—and this may explain opposition to immigration. Finally, a third group has argued that opposition to immigration is largely driven by cultural concerns and xenophobia. Currently, this debate continues with both sides examining more nuanced survey data.
Scholarship on immigration policy has similar divides. Immigration policy has become more restrictive since the late 19th and early 20th centuries, when most countries had very few restrictions on immigration. To explain these restrictions, one school of scholars has argued that labor unions oppose immigration, as it hurts the wages of their members. As unions gain strength, immigration should become more restricted. Others focus on the rise of the welfare state, arguing that immigration has been restricted to keep costs low. A third group has argued that greater political rights in the early and mid-20th century for the generally xenophobic working class has led to the restrictions. Finally, new scholarship argues that increased globalization—in the form of increased trade and increased foreign direct investment—has sapped business support for immigration, which has allowed anti-immigrant groups to have more say. Using a wealth of newly collected data, scholars are testing these different theories.
Article
Kevin Narizny
Nearly everything a state does has distributional consequences, including grand strategy. Societal groups with different stakes in the international economy and defense spending often have conflicting strategic priorities, and these groups pursue their parochial interests by supporting the nomination and election of like-minded politicians. Thus, grand strategy is a product of political economy. An overview of American foreign policy over the last several decades illustrates this logic. In the 1980s, the Democratic and Republican coalitions had conflicting interests over the international economy, so the two parties diverged on grand strategy. The recovery of the Rust Belt in the 1990s and 2000s, however, brought increasing convergence. Political discourse over foreign policy was fiercely partisan, but, with the notable exception of George W. Bush’s decision to go to war in Iraq in 2003, the two parties shared essentially the same view of America’s role in the world. The disastrous outcome in Iraq led the Bush administration back to the middle ground in its second term, and Obama followed the same course. In contrast, the election of Donald Trump augurs change. Trump’s electoral coalition consists of a different balance of interests in the international economy than that of past Republican presidents, so he is likely to pursue different strategic priorities.
Article
Dominic Burbidge
Africa is a place of low social trust. This fact is significant for understanding the politics and economics of the region, whether for questions of national unity or economic coordination and growth. One of the central ways in which trust and social relations have come to be examined within the social sciences is through the notion of social capital, defined as the norms and networks that enable collective action. Use of the concept of social capital has mushroomed in popularity within academia since the 1980s and has been used within African studies to interpret the developmental effects of social relations. It is important to review how researchers have been synthesizing the study of African societies with the social capital approach, and offer suggestions on how this can be better achieved. Specifically, there is contradiction between the view that social capital is useful for economic development and the view that social capital means a community can decide its own economic goals. Students of social capital in Africa must accept that the cultural and normative diversity of the continent necessitates appreciation of the diverse aims of social networks. This means a rejection both of modernist theories of development and postmodern reduction of human relations to forms of power exchange. Future research on trust and social capital in Africa must give weight to community articulations of motivations to trust, what activities count as communal, and what new economic cultures are being formed as a result of present communal varieties.
Article
Robert J. Franzese
The basic economics of international trade imply that globalization will have driven in the developed democracies of the Western world an increasing divergence between the material advancement of human, physical, and financial capitalists—a minority of the population—and the material stagnation or even decline of labor—a majority. This article reviews that theory and the strong comparative-historical empirical record substantiating those effects, and explains how the rise of xenophobic, nationalistic, anti-elite populism has its complementary roots in these economic developments.
Article
On a continent where the majority of people are poor, do political parties represent class cleavages? Do parties have strong linkages to ordinary voters? Do economic policies address their needs? In the initial years following democratic transitions across the African continent in the 1990s, the answers to such questions were negative. Clientelism and patronage were the principal means by which parties interacted with their constituencies; elites and elite interests determined the objectives of political parties; voters in many African countries shifted parties frequently; and neoliberal economic policies largely reflected the preferences of foreign donors and international financial institutions. As parties and voters have adjusted to the institutional arrangements and political demands associated with democracy, a more heterogeneous political landscape has materialized since 2010. Party systems demonstrate distinct patterns of variation, from the more stable, institutionalized systems in Ghana and Botswana to fluid, inchoate configurations in Benin and Malawi. These variations in the degree to which party systems have institutionalized affect economic policy choices by parties and those who benefit from them. Furthermore, democratic politics has intensified pressures on ruling parties to provide goods such as electricity and education. Here too, patterns of goods provision show substantial variation over time and across countries, calling attention to the differences in the incentives and capacities of parties to respond to distributive demands by the electorate.
To explore the political and economic heterogeneity of contemporary Africa, scholars have combined well-established qualitative and comparative approaches with new analytical tools. The use of cross-national public opinion surveys, field and survey experiments, satellite imagery, and geo-coded data have enabled more systematic, fine-grained study of the economic determinants of party system competition, economic voting, the distribution of goods, and the management of private sector development by ruling parties in recent years. These empirical approaches enrich understanding of the relationship between parties and political economy in Africa and facilitate more fruitful comparisons with other regions of the world.
Article
Santiago Anria and Christopher Chambers-Ju
Since the dual transition to democracy and the market in Latin America, associational linkages or the exchanges between parties and interest associations representing different groups in society gained prominence for their crucial role in structuring political representation and framing policy processes. In the early 21st century, how do the relationships between political parties and interest associations vary across and within countries? The literature on party–voter linkages has begun to examine the distinct relations that emerge when political parties interact with interest associations that represent societal groups in order to incorporate those groups into party organizations or coalitions. Although associational linkages can be constructed when party leaders reach out to interest associations, they can also be constructed when interest associations negotiate the terms of their political support. One approach to analyzing associational linkages involves focusing on the diverse relationships that emerging societal actors established with political parties. Social movements have constructed movement-based parties. These parties are a particularly puzzling phenomenon because they incorporate social movements into their organizations without necessarily demobilizing them. Emerging sectors of organized labor have also established an array of relationships to parties, with unions engaging in contentious or electoral mobilization, with different degrees of support for political parties. There are major opportunities to advance a broad agenda for research on associational linkages that highlights cross-regional contrasts and changes in the political economy.
Article
Cameron McKenzie
An emerging critical theoretical framework, queer liberation theory attempts to understand the relationship between queerness and capitalism, and more specifically, anti-capitalist movements. It seeks to update and reinvigorate the structural analysis of the earlier gay/queer liberation movement (1960s and 1970s) with the benefit of the insights of queer theory and empirical queer experiences of neoliberal capitalism. Queer liberation theory recognizes and celebrates diverse sexual orientations and gender identities or expression, including essentialist identities such as gay, lesbian, and trans. Within a realist, structural framework, queer liberation theory is interested in how social movements can move beyond identity formation to produce progressive, structural change. To date, three main tenets of the theory have been noted: anti-assimilationism, solidarity across social movements, and the political economy of queerness. The use of the word “queer” signals a progressive, critical, sex-positive, anti-assimilationist, liberationist perspective as opposed to an assimilationist perspective that strives for respectability, acceptance, prestige, and monetary success on capitalism’s terms. The second tenet, solidarity across movements, is an attempt to transcend to the divisiveness of single-issue politics without sacrificing intersectionality. For example, queer liberation theory seeks to recognize, expose, and dismantle social structures that oppress all communities, albeit in different ways. The political economy of queerness refers to a class analysis of structural inequalities. A genealogy of queer liberation theory’s development shows where it reflects, incorporates, or rejects aspects of various theories including a social constructionist perspective, with its debates about essentialism and identities; social movement theory, with its political tensions between recognition and redistribution; queer theory, with its focus on fluidity and ambiguity; materialism, with the strengths and shortcomings of its class analysis; and intersectionality with its focus on a matrix worldview of interlocking systems of oppression; and feminist political economy, with its focus on social reproduction, but adequate recognition of queer sexuality. Indeed, feminist political economy offers something of a pink road map to discover what aspects of the economy will be important for queer liberation theory to explore. Feminist political economy is helpful in the development of queer liberation theory because it has long claimed sexuality and identity as legitimate, as opposed to frivolous, sites of scholarship and political struggle. Feminist political economy, like queer liberation theory, seeks to understand oppression based on sexuality in everyday life. However, the feminist political economy road map takes us only so far, because the focus of the analysis can be seen as gendered, and often cisgendered, lives. Queer liberation theory attempts to draw from these theories to better understand the relationship between queerness and capitalism and provide a basis for political action.
Article
Scott N. Siegel
Equal treatment for members of the lesbian, gay, bisexual, and transgender (LGBT) community has improved at a rapid pace around the world since the gay rights movement first rose up to become a salient global force for change. With important regional exceptions, laws criminalizing same-sex sexual relations have not only come down in multiple countries, but same-sex couples can now also construct families in many advanced industrialized countries. Public acceptance of homosexuality, even in some non-Western countries, has increased dramatically. Yet, within those general trends hides the remarkable unevenness in the spread and adoption of policies fostering legal, social, and economic equality for LGBTQ communities around the world. Policy change toward more equal treatment for sexual minorities is concentrated in the developed world and within the cisgender gay and lesbian communities in particular. The existing literature in policy change shows the importance of transnational activists, changing international norms, and increasing levels of secularization have made this possible. But the effectiveness of these factors rests on an underlying foundation of socioeconomic factors based on economic and social development that characterizes advanced industrialized states. There is an uneven distribution of resources and interests among pro and anti-LGBT activist groups alike, and the differing levels of economic development in which they operate that explains the decidedly uneven nature of how LGBTQ human rights have advanced in the past 50 years. In addition, new political parties and activist organizations have emerged to lead the backlash against LGBTQ rights, showing progress is neither inevitable nor linear. In addition, serious gaps in what we know about LGBT politics remain because of the overwhelming scholarly focus on advanced industrialized states and policies that benefit the cisgender, gay and lesbian middle class in primarily Western societies. The study of LGBT politics in non-Western and developing countries is woefully neglected, for reasons attributed to the nature of the research community and the subject area. In the developed world, greater attention is needed to inequality within the LGBTQ community and issues beyond same-sex marriage. Finally, issues of intersectionality and how different groups within the LGBT community have enjoyed most of the benefits of the gay rights movement since its takeoff more than 50 years ago.
Article
Lucy Barnes
All governments require revenue, and domestic taxes are the primary means for generating it. Yet both the size and shape of taxation vary significantly across countries and have been transformed over time. What explains variation in domestic taxation? To answer this question, recent scholarship on taxation has focused on the politics of taxation as a tool for redistribution. This has led to a wide body of research on the fiscal impact of taxation and on the introduction, evolution, and variation in direct and progressive tax regimes, particularly the income tax. Yet the focus on taxation as a redistributive tool yields a puzzle, as more progressive tax systems tend to be found where redistribution is in fact the lowest. Explanations of this paradox often center on the impossibility of high and progressive taxes on capital in the context of international economic integration. Not as well studied are taxes other than the taxation of income, and the deliberate politics of nonfiscal, regulatory, and incentive effects of different tax choices. Methodologically, problems of endogeneity are ubiquitous in the study of tax policy choices, but more sophisticated experimental work is well underway in research on individual preferences for taxation.
Article
Michael J. Lee
Since the 1970s, financial crises have been a consistent feature of the international economy, warranting study by economists and political scientists alike. Economists have made great strides in their understanding of the dynamics of crises, with two potentially overlapping stories rising to the fore. Global crises appear to occur highly amid global imbalances—when some countries run large current account deficits and others, large surpluses. A second story emphasizes credit booms—financial institutions greatly extend access to credit, potentially leading to bubbles and subsequent crashes.
Global imbalances are, in part, the product of politically contested processes. Imbalances would be impossible if states did not choose to liberalize (or not to liberalize) their capital accounts. Global political structures—whether international institutions seeking to govern financial flows, or hierarchies reflecting an economic power structure among states—also influence the ability of the global system to resolve global imbalances. Indeed, economists themselves are increasingly finding evidence that the international economy is not a flat system, but a network where some states play larger roles than others.
Credit booms, too, and the regulatory structures that produce them, result from active choices by states. The expansion of the financial sector since the 1970s, however, took place amid a crucible of fire. Financial deregulation was the product of interest group knife-fights, states’ vying for position or adapting to technological change, and policy entrepreneurs’ seeking to enact their ideas.
The IPE (international political economy) literature, too, must pay attention to post-2008 developments in economic thought. As financial integration pushes countries to adopt the monetary policies of the money center, the much-discussed monetary trilemma increasingly resembles a dilemma. Whereas economists once thought of expanded access to credit as “financial development,” they increasingly lament the preponderance of “financialized” economies. While the experimentalist turn in political science heralded a great search for cute natural experiments, economists are increasingly turning to the distant past to understand phenomena that have not been seen for some time. Political scientists might benefit from returning to the same grand theory questions, this time armed with more rigorous empirical techniques, and extensive data collected by economic historians.
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