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Jackson & Sørensen: Introduction to International Relations 3e

Chapters 07 & 08

Theory in Practice: An IPE Scholar Studying the World

We want to conduct an IPE-study of some aspect of the real world. What would be an appropriate research question? We know that IPE is a very large field with several different theoretical traditions. At the same time, there is a common core of IPE: the relationship between politics and economics, between states and markets. There are three different classical approaches to that relationship: Mercantilism for whom economics is a tool of politics, a basis for political power. Liberalism for whom the market economy is an autonomous sphere of society which operates according to its own economic laws; and Marxism for whom the capitalist economy is based on two antagonistic social classes. Economics comes first and politics second for Marxists; economic production is the basis for all other human activities, including politics.

In sum, at the core of IPE is the relationship between politics and economics. So an appropriate research question in IPE would address some aspect of that relationship. Empirically, that would help us sort out the concrete interplay between politics and economics in the real world. Theoretically, it would speak to core issue of how to precisely understand that relationship; this is exactly the issue at the centre of the debate between the three classical approaches to IPE.

There are countless candidates for a research question in this area. One important example concerns the so-called 'Asian crisis' a few years ago (1997-1999). In the course of a short period of time, several countries in Southeast Asia, including Thailand and Malaysia, came in severe financial trouble: the value of their national currencies was dramatically reduced and their financial reserves all but disappeared. Many companies had to shut down and unemployment increased dramatically.

This chain of events is a concrete example of the interplay between economics and politics, both in the domestic and in the international arenas. There were at least four types of actors involved in the crisis: the major players of the global financial markets attempting to make profits by moving financial assets in and out the countries; the local banks and the other financial actors within Thailand and Malaysia; the governments of the two countries who set the rules of the game for financial transactions across their borders but in doing so were also under heavy influence both from the finance sectors in their own countries and the international finance markets; and finally, the international financial institutions, especially the International Monetary Fund, who supervises and to some extent regulates international financial transactions.

A very interesting IPE-research question now emerges: who was really responsible for the Asian crisis? Was it the politicians or the economic actors in the financial market - what was the interplay between politics and economics? If the politicians were responsible, how was that responsibility distributed between the local governments and the international financial institutions? If the markets were responsible, how was that responsibility distributed between the national financial sectors and the players in the international financial markets?

It would be a surprise if we could place all responsibility with only one of the four types of actors identified here. They were probably all involved somehow (see Haggard 2000). The point here is that the disentangling of the Asian crisis in terms of who did what and who is primarily responsible for the course of events will tell us much, not merely about the Asian crisis as such, but about the interplay between politics and economics that is at the core of IPE.

Most probably, our analysis will lead to a rejection of the most extreme claims of all three classical approaches (see box 6.15). Politics is not in full control of economics, as some Mercantilists claim; economics does not fully determine politics as some Marxists claim; and the market is not an autonomous sphere of society as some liberals claim.

But at the same time, the study of the Asian crisis will surely give us information that confirms the core claims of the classical approaches (i.e. the 'true claims' set forth in box 6.15). The point is that our concrete study of the crisis will give us much more precise information about the nature of the interplay between politics and economics. Given that political regulation creates a framework for economic activity as Mercantilists rightly claim, how did that political regulation affect the course of events? Were there phases where it was decisive and phases where it was unimportant? Given that economics affects and influences politics as Marxists rightly claim, how did that play out in the Asian situation? Which economic players did what in order to achieve some political outcomes and did they or did they not succeed? Given that the market has a dynamic of its own as liberals rightly claim, how did such autonomous market dynamics affects the course of events in the Asian crisis?

So having completed a study of the Asian crisis we have indisputably made a contribution to the study of IPE. By sorting out the complex interplay between politics and economics in that concrete case we are better informed about the precise nature of political regulation and its consequences for economic activity, of the way in which economics affects politics, and of the precise nature of autonomous market dynamics. We have not discovered any final truth of course. Other scholars will have studied different events and some of them will surely have come up with results that do not in every respect match our own. But we can surely claim that we have added one element of clarification to the large and complex study of International Poltical Economy.

Assignments:

  1. Present your evaluation of the Asian crisis, based on the empirical information your are able to retrieve.

  2. Indicate what the crisis tells us about the interplay between politics and economics.

  3. Evaluate the three classical perspectives on IPE in the light of your results.

  4. Try to formulate other case-studies in the field of IPE.

References

Haggard, Stephan (2000). The Political Economy of the Asian Financial Crisis, Washington: Institute for International Economics.