International Political Economy emerged as fallout of international studies during the 1973 oil crisis and the subsequent breakdown of the Bretton Woods System which led to suspicions about the efficiency of the world economic foundations. International relations with too much emphasis on law and politics and neoclassical economics being too ahistorical; international political economy was a marriage between economic and political analysis drawing heavily from both historical sociology and economic history.
International Political Economy (IPE) is mainly defined as a combination of international relations and the political economy. It stresses on the interaction between the state and the market at an international level.
International Political Economy primarily concerns itself about the relations between different nation states and how trading and financial policies undertaken by each of them affects the other. The key issues falling in the domain of IPE at present are regularization of Trade-Related Intellectual Property Rights (TRIPS), the issues relating Trade-Related Investment measures and the burning discussion about granting patents to pharmaceutical companies in the third world.
The surge of globalization or integration of the world economy, polity and culture is in many ways causing an increasing divide between the rich and poor. The rapid fall of the Argentine Peso against the dollar combined with increased levels of unemployment and a downward pressure on workers’ real wages is a vivid example of fanatic liberalization policies. We can see a negative impact on workers’ wages and increase in capital shares in income wherever excessive policies of liberalization are adopted. This effect is more pronounced in the less developed nations of Asia and Africa. The North American Free Trade Agreement or NAFTA is also an example.
International Political Economy or IPE becomes critical in this era of globalization of the political economy. The proper understanding of the different schools of economics and politics is essential to shape measures of growth and efficiency with social equity. National policies influenced by domestic politics and economics should not be oblivious of the social dimension of excessive globalization. IPE can deal with issues such as international trade, trade in agriculture among countries, and policies adopted by international organizations such as WTO, World Bank and IMF.
Though it has been often alleged that global economic foundations function according to the whims of the global economic superpowers and are dependent on their economics and political dimensions, International Political Economy has a defining role to play here. It can not only give a detailed insight into the functioning of the world economy but also provide with remedial measures to bring the whole world on a path of sustained development.
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