It is hard to imagine a world without International Political Economy because the mutual interaction of International Politics [ or international relations] and International Economics is today widely appreciated and the subject of much theoretical research and applied policy analysis. The political actions of nation-states clearly affect international trade and monetary flows, which in turn affect the environment in which nation-states make political choices and entrepreneurs, make economic choices. It seems impossible to consider important questions of International Politics or International Economics without taking these mutual influences and effects into account
Nation-states clearly affect international trade and monetary flows, which in turn affect the environment in which nation-states make political choices and businesses make economic decisions.
Yet scholars and policy-makers often think about International Economics without much attention to International Politics and vice versa.
Economists often assume away state interests while political scientists sometimes fail to look beyond the nation-state.
Two noteworthy Cold War era exceptions to this rule stand out: economist Charles Kindleberger’s work on hegemony and political scientist Kenneth Waltz’s attempt to integrate economics into politics in his path-breaking book “Man, the State, and War”.
It has been predominantly considered by authors such as Benjamin Cohen (2008) that IPE emerged as a heterodox approach to international studies during the 1970s.
Dramatic events in the 1970s made plain how tightly international economics and politics were intertwined.
as the 1973 world oil crises and the breakdown of the Bretten woods monetary system were key events in IPE’s development as a field of study. . This alerted academics, particularly in the U.S., of the importance, contingency, and weakness of the economic foundations of the world order.
Moreover, subsequent events such as the Third World debt crisis, the fall of communist regimes, the rise of the Newly Industrialized Countries (NICS), the expansion of the European Union, and the financial crises in Mexico, Russia, and East Asia made showed that simple divisions between state and market, domestic and international, and politics and economics were no longer tenable. An increasingly complex world required a complex approach to analysis, which IPE provided.
IPE scholars such as Susan Strange asserted that earlier studies of international relations had placed excessive emphasis on law, politics and diplomatic history. Similarly, neoclassical economics was accused of abstraction and being ahistorical.
Drawing heavily on historical sociology and economic history, IPE proposed a fusion of economic and political analysis.
In this sense, both Marxist and liberal IPE scholars protested against the reliance of Western social science on the territorial state as a unit of analysis, and stressed the international system.