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Area and International Studies: Political Economy
Area and International Studies: Political Economy Ian Robinson, University of Michigan, Ann Arbor, MI, USA Ó 2015 Elsevier Ltd. All rights reserved. This article is reproduced from the previous edition, volume 2, pp. 719–723, Ó 2001, Elsevier Ltd., with revisions made by the Editor.
Abstract Modern ‘political economy’ explores relationships among economic and political organizations, institutions, policies, and outcomes. There has never been a consensus on the theories and methods that should structure the exploration of these relationships and the debate over how best to understand these matters has evolved over time. The interpretation offered here simplifies both of these dimensions of difference. It distinguishes two periods of postwar history – the Fordist and Neoliberal eras – based on the dominant paradigm of economic organization prevailing in the rich capitalist democracies of the global North. For each period, the most important theoretical approaches to political economy, the regions of the world to which they were applied, and the social science departments in which they were based are identified. It is argued that, in the second or neoliberal era, political economy analyses can be broadly grouped into those that took a critical stance on existing economic paradigms, institutions, and policies, and those which accepted the core assumptions of neoclassical economics and the neoliberal policies and institutions that this approach to economics has legitimated. The relationship between area and international studies and political economy varies, both by period and, to some degree, by the type of political economy in question.
Modern ‘political economy’ explores relationships among economic and political organizations (e.g., states, corporations, and unions), institutions (e.g., laws and practices regulating trade and competition), policies (e.g., restrictions on international capital mobility), and outcomes (e.g., rates of economic growth, political regime stability). Political economists differ along several important dimensions, as discussed below. This article offers an overview of the evolution of competing versions of political economy, and their relationship to Area and International Studies, since World War II.
The Fordist Moment The classical political economists of the late eighteenth and nineteenth centuries – Smith, Ricardo, Malthus, Marx, and J.S. Mill – addressed fundamental questions such as the appropriate economic role of the state, the implications of trade liberalization for the economic fortunes of different economic classes, the ecological constraints on continuous economic growth, and the economic and political contradictions of different modes of production, including capitalism. In the first quarter-century after World War II, some of these questions remained at the center of debates between modernization theorists (Rostow, 1960) and dependency theorists (Cardoso and Faletto, 1979) who argued about the logics of, and possibilities for, economic and political development in what the Cold War framed as the Third World. Marxist versions of political economy became the new orthodoxy in the Second World, which soon encompassed most of Eastern Europe and much of Asia. In the First World, however, most students of market dynamics within economics departments began to abandon political economy approaches. Prior to World War II, when institutional economics remained the dominant tendency in the economics departments of the United States, this break with the core assumptions and research agendas of
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political economy had gone furthest in the United Kingdom. However, after the war, British neoclassical microeconomics and Keynesian macroeconomics gained ground rapidly in the United States. In the Cold War context, the dominant theoretical orientations of the US hegemon exerted a powerful gravitational pull on social science in the academies of the First World. The new mainstream economists had a much narrower intellectual agenda. At the micro level, they drew on the pioneering work of Marshall and Pareto in an effort to demonstrate by formal, mathematical means the superiority of competitive markets as efficient allocators of resources. Arguments for trade liberalization and critiques of most forms of state intervention in market allocation processes were developed in this spirit. At the macro level, in First World economies, the new mainstream drew on Keynes in an effort to theorize how best to employ fiscal and monetary policies to reduce the amplitude of business cycle fluctuations. There were significant tensions between these micro- and macroeconomic agendas; however, they only became salient toward the end of this period. Most of the new mainstream economists – whether micro or macro in focus – sought quasinatural laws governing market dynamics regardless of time and place. They paid little attention to the political and institutional parameters within which markets existed or to the balance of power among social forces that shaped these parameters. There was an irony here. The divorce between politics and economics in First World academic economics was possible because a new kind of political economy – sometimes called ‘Fordism’ (Lipietz, 1987) – was developed after World War II. The institutional and political details of Fordist regulation varied from country to country but everywhere it represented a fundamental shift away from wage regulation through competitive labor markets maintained by the repression of worker rights, to form democratic unions and engage in collective bargaining. Fordist
International Encyclopedia of the Social & Behavioral Sciences, 2nd edition, Volume 1
http://dx.doi.org/10.1016/B978-0-08-097086-8.10109-6
Area and International Studies: Political Economy
institutions linked national real wage growth to the expansion of national labor productivity through some combination of collective bargaining (e.g., pattern bargaining in the United States) and state regulation (e.g., minimum wages) (Piore and Sabel, 1984). Fordist regulation generated higher rates of economic growth and distributed the gains from that growth more broadly among the workforce than any form of economic regulation before or since (Marglin and Schor, 1990). These successes contributed to the depoliticization of economic policy, which could more easily be seen as an administrative matter to which there were technical answers. This facilitated the shift away from political economy’s focus on the reciprocal relationship between political power and economic outcomes. Non-Marxist versions of political economy remained a significant current within the comparative politics subdiscipline of political science in this period. In the Cold War struggle, a great deal of public research funding was made available to those pursuing such studies (Gendzier, 1985). Area studies encompassed the countries of the Second and Third Worlds, where the influence of Marxist political economic analysis was strong among state elites, academics, and organizations such as unions and cooperatives. Hence, First World academic analysts found it necessary to engage questions of class power, organization, and institutions in studying these countries. To this task most brought Weber and Durkheim, as interpreted and synthesized by Talcott Parsons, under the rubric of modernization theory (Leys, 1996). Area studies thus helped to preserve political economy when it was marginalized in the economics departments of the First World countries in which it had originated. In turn, political economy offered a coherent basis for distinguishing among different areas. Latin America, for example, made sense as a region to be contrasted with others because most of its states shared a particular kind of political economy. In the nineteenth century, the countries in this region were characterized by primary commodity production for export, and republican regimes that secured their independence from Iberian empires. In the crisis of the 1930s, most of these countries embraced a particular kind of economic development strategy – import-substitution industrialization – that gave rise to parallel economic and political dynamics, including the rise of a significant industrial working class and the formation of corporatist political systems. There was no parallel symbiosis between political economy and the International Relations (IR) subdiscipline as it existed in US political science in this period. IR was dominated by international security debates between those who supported a realpolitik firmly rooted in a narrow account of national selfinterest and those who asserted that international cooperation rooted in shared liberal values was a surer guide to national security and world peace. IR paradigms, particularly as they were formalized by Waltz and his followers, took it as axiomatic that states were highly autonomous from the domestic societies in which they were embedded, at least as regards the formation of foreign policy (Waltz, 1959). On this view, the international distribution of state power resources (e.g., concentrated in two rival superpowers versus dispersed more evenly among leading countries organized into alliances), and differences in state elite strategies for realizing their power maximizing objectives were the main explanations for
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variations in state behavior and resulting international dynamics (Krasner, 1976). States might liberalize trade as part of their grand strategies for enhancing their power relative to their rivals, but there was little reciprocal causality in this model. That is, neither international economic dynamics nor classes defined in economic terms had much impact on state goals or strategies. Beyond IR as practiced in the United States, International Studies in these years was roughly equivalent to diplomatic history. Greater methodological and theoretical eclecticism created more space for recognizing the significance of domestic factors in international relations. A few approached these matters from standpoints that paid greater attention to the kinds of factors highlighted by political economy. Still, most studies of international diplomacy remained in the realm of ‘high politics,’ and so had only passing contact with the methods and concerns of political economy.
The Neoliberal Moment As the Fordist economic order began to disintegrate in the late 1960s, many argued that both the causes of the crisis and the remedies for it lay in changes in the balance of economic and political power among nations, between labor and capital within nations, or both (e.g., Gourevitch, 1986). Economics and economic policy were thus repoliticized as an intense political struggle over how to understand and respond to the crisis of Fordism under way. In this context, rival strands of political economy emerged, each associated with advocates of a different response to the crisis. Critical political economists – a diverse group influenced in varying degrees by Marx, Weber, and Polanyi – were concentrated in political science and sociology departments. This strand of political economy was strongest among area specialists who focused on Latin America, Asia, and Western Europe and among students of peasant rebellion and social revolution. Their diagnoses of the crisis tended to support policies that would reinforce and extend the basic principles of Fordist regulation, or a move beyond capitalism to some form of democratic socialism. Neoclassical political economists began from the premise that neoclassical accounts of economic dynamics were basically sound, as were capitalist economies. The problem as they saw it was how to develop an equally sound science of political dynamics, a science that would explain why state intervention could seldom improve on market outcomes, even when market failures were acknowledged. Some sought to build a new political science on the ‘rational choice’ premise that all individuals and organizations are instrumentally rational, selfinterested actors (Alt and Shepsle, 1990). Others were less programmatic, turning traditional analytic tools to the service of policy goals deriving from neoclassical economics. The first strategy generated theories of ‘rentier’ states and ‘political failure’ paralleling the theory of market failure that justified Fordist regulation on efficiency grounds (Kruger, 1974; Bates, 1988). These analyses, together with neoclassical microeconomic doctrines, provided the intellectual rationale for ‘neoliberal’ policy prescriptions – that is, redefinition as the primary economic role of the state as the creation and maintenance of competitive markets. The second strategy generated
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Area and International Studies: Political Economy
(among other things) assessments of strategies for implementing structural adjustment policies successfully in democracies where popular opposition to such policies was widespread. The neoclassical strand of political economy was concentrated in economics and political science departments (particularly in the United States). The neoclassical approach to political economy was very much in tune with the neoliberal response to the crisis of Fordism championed by the United States under Ronald Reagan and the United Kingdom under Margaret Thatcher. The Third World debt crisis soon facilitated the export of neoliberal policies, via conditions imposed on debtor nations in return for assistance in restructuring their loans. In this context, neoclassical political economy became the more prominent of the two approaches, particularly among policy elites and in the United States. However, there were important intellectual innovations within both tendencies. The result was a renaissance of political economy analysis in the neoliberal era, with both the form and the implications of that analysis intensely contested. World systems theory was an important strand of the critical political economy analysis that emerged in this period (Wallerstein, 1976). While influenced by earlier dependency theories, world systems theory was distinctive in two ways: the degree to which it treated the international economy as a system governed by its own systems-level logic, and the degree to which that logic was seen to determine the development possibilities of the nations whose system functions marked them as peripheral or semi-peripheral. World systems theory took hold primarily in sociology departments, where Marx enjoyed more equal status with that of Durkheim and Weber. A second strand of critical political economy, with institutional roots in sociology and political science, emerged under the banner of ‘bringing the state back in’ (Evans et al., 1985). This strand explored the significance of national differences in state characteristics and relations between the state and societal actors, factors that were treated as secondary in most world systems analyses. Within the Third World, critical political economists began to explore the social and political consequences of structural adjustment policies in Africa and Latin America in the wake of the debt crisis (e.g., Bierstecker, 1995). There was also increased interest in the role of ‘developmental states’ in enabling a small number of countries – concentrated in Asia’s Newly Industrializing Countries – to escape the travails of the debt crisis and successfully reorient national economies to an export-driven model of industrialization (e.g., Evans, 1995). Finally, a literature emerged on the export processing zones created in many countries subject to neoliberal restructuring, and on the international supply chains that linked them to First World corporate producers and retailers (Gereffi and Korzeniewicz, 1994). A strand of neoclassical political economy also focused on the world system. Most important here was the ‘hegemonic stability’ theory advanced by the self-styled neorealists and their neoliberal interlocutors. These analysts, located within international relations sections of political science departments, mainly in the United States, debated the extent and significance of the decline of US economic hegemony evident by the late 1960s. Hegemonic stability theories asserted that, without disproportionate US economic power, the international
monetary system created at Bretton Woods and multilateral trade liberalization under the auspices of GATT (General Agreement on Tariffs and Trade) would not have been possible (Gilpin, 1987). They interpreted the collapse of fixed exchange rates and an alleged shift toward protectionism in the form of ‘nontariff barriers,’ as evidence that the postwar international economic regimes constructed by the United States were indeed unraveling. Neoliberals such as Keohane drew on game theory to argue that states qua rational actors might choose to support and extend trade liberalization and other aspects of international regulation out of an enlightened sense of self-interest, even in the absence of a hegemon, under certain conditions (Keohane, 1984). Other neoclassical political economists took a different tack, identifying a variety of societal, institutional, and ideological factors that might explain why the US state maintained its trade-liberalizing trajectory in the 1970s and 1980s, despite declining US economic hegemony and rising social costs (e.g., Goldstein, 1993). Among neoclassical political economists focusing on the global South, attention was devoted to explaining the wave of democratization that began in the late 1970s, particularly to possible links between economic liberalization and democratization. In the 1990s, the end of the Cold War and the acceleration of the economic globalization – by which analysts generally meant increased international trade and capital mobility, and sometimes also neoliberal policies such as privatization and deregulation – shifted the focus of research and the terms of debate. The concepts of the Second and Third Worlds were rendered obsolete; many analysts began dividing the world into the ‘global North’ (i.e., rich capitalist democracies) and the ‘global South’ (i.e., all others). An important debate developed concerning whether there was anything sufficiently novel about the international economy of the 1990s to warrant the use of the term globalization (Held et al., 1999). There was also great interest in the causes and consequences of economic globalization. Neoclassical political economists tended to take a positive view of economic globalization and often treated that the process as natural and/or inevitable. Critical political economists typically saw the shift as the product of power politics within and among nations and its negative affects as more substantial (Cox, 1994). There was great interest in whether this new economic order was significantly narrowing state policy autonomy, forcing governments toward a more laissez-faire model of economic organization regardless of their political stripe and the preferences of voters (e.g., Rodrik, 1997). There was also interest in the implications of economic globalization for the power of organized labor (e.g., Kitschelt et al., 1999). Finally, there was growing interest in the origins and character of organized resistance to the neoliberal model of globalization, a discussion leavened with the insights of social movement theory (e.g., Castells, 1997), as well as more traditional political economy approaches (Arrighi et al., 1989). These developments had important implications for the evolution of area and international studies. The resurgence of political economy strongly legitimated international studies’ supranational and interdisciplinary character and added another important approach to how such work might be organized. As to area studies, political economy may afford new grounds for drawing area boundaries. For example, since
Area and International Studies: Political Economy
the passage of the North American Free Trade Agreement (NAFTA) in 1993, Canada and Mexico have become much more integrated with the US economy. For many of the questions of interest to political economists, it now makes sense to treat North America as a region to be studied as a unit. This contrasts with the old area study practice of studying the United States in splendid isolation, Mexico as part of Latin America, and largely ignoring Canada. Similarly, as East European countries have joined the European Union (EU), it remains sensible to frame many political economy questions in terms of a new EU region that straddles what were once regions in the First and Second Worlds. This said, this last statement depends on whether the EU will survive the shocks of the 2008 global economic crisis and the subsequent crisis in the euro. While the Greek crisis raised the specter of the collapse of the euro or its reduction to a ‘northern euro’ (centered on Germany and northern Europe), the stabilization of the European economy (albeit without hoped-for growth, given continuing austerity measures) reduced the threat that the EU would fall apart (although as of this writing it is unclear whether the United Kingdom will retain its ties with the EU). After the shocks of 2008 threatened EU implosion, Vladimir Putin’s takeover of Crimea and sponsored civil war in eastern Ukraine might be the stimulus to bring EU countries closer together. However, the years since 2008 have been a period of geopolitical instability, and at this moment it would be foolish to presume either EU expansion or collapse.
A Brief and Uncertain Postscript: Post-2008 Political Economy This brief discussion of the EU after the global crisis of 2008 highlights a more general issue of this moment in time: that the crisis might provide a potential moment of transition or retrenchment of models of political economy. The extent to which national economies were interconnected was laid bare once the American housing bubble burst and American financial institutions suddenly faced severe challenges to their very survival. At the same time, the degree of local autonomy was also revealed in how various actors went in different directions vis-à-vis responses to recessions: for example, from more state-centered responses in China and Russia, to austerity policies in the EU, to less austerity-oriented but still market-friendly policies in Barack Obama’s United States. Further, the degree to which public policies have reflected interests and ideologies deserves study that at this point in time remains to be done. As Paul Krugman argued repeatedly in his New York Times blog, austerity policies have been disastrous, and so the only reason they were adopted and persisted was a combination of particular elite interests and ideologies about the ‘normal’ way states approach political economy and economic crises. As Piketty (2014) revealed in his rigorous study, inequality has been a defining feature of modern economies, and while there are possible responses to improve equality and reduce risks of future shocks, it is unclear whether political and economic elites will accept these. For example, German politicians and public have been averse to allowing inflation to rise: while this might have a negative short-term impact on Germans themselves, it
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would benefit the EU, and Germany as well, in the medium to long term. Yet, in German political discourse, inflation is framed in terms of the catastrophic post–World War I economic situation, as well as morality play in which German productivity and frugality would appear to be punished for the sins of other European countries and societies that took on too much debt. As well, American elites for the most part have been willing to pursue austerity measures that ultimately have hindered the American recovery; circumstantial evidence suggests this is not only because of interests but also because relatively more Keynesian measures (such as fiscal stimuli and more equitable distribution of the tax burden) would contradict the hegemonic elite ideology in which the state is the source of economic troubles and the business elite the source of its solutions. Finally, the global economy has come under some scrutiny since 2008. While globalization still appears inevitable, actors from various social movements have asked whether that global order need appear as it does. The rise of the BRIC countries (Brazil, Russia, India, and China) presented a potential competitor to the hegemony of the United States and Europe, and while the 2008 crisis reduced BRIC growth, the idea of a new bipolar world – with power balanced between the United States and the EU on one side, and the BRICs on another – is a distinct possibility, especially as Russian leaders Vladimir Putin and Dmitrii Medvedev more than once proposed that BRIC countries plus South Africa form their own form of economic alliance to counterbalance ‘the West.’ The possible rearrangement of global relations and positions, and the problematic and contentious (and sometimes seemingly puzzling) nature of public policies in response to the 2008 crisis should force us to revisit what we mean by ‘political economy’ and how to analyze it. If the story since 2008 is anything to go by, Karl Marx and Max Weber would be happy, as their stresses on the centrality of elites, states, and especially power and contention to any analysis seem borne out by recent events.
See also: Dependency Theory; Development and the State; Nations and Nation-States in History; Political Economy in Anthropology; Political Economy, History of; State Formation, Theory of; World Systems Theory.
Bibliography Alt, J.E., Shepsle, K.A. (Eds.), 1990. Perspectives in Positive Political Economy. Cambridge University Press, New York. Arrighi, G., Hopkins, T., Wallerstein, I., 1989. Antisystemic Movements. Verso, London. Bates, R.H. (Ed.), 1988. Toward a Political Economy of Development: A Rational Choice Perspective. University of California Press, Berkeley, CA. Bierstecker, T.J., 1995. The “triumph” of liberal economic ideas in the developing world. In: Stallings, B. (Ed.), Global Change, Regional Response: The New International Context of Development. Cambridge University Press, New York. Cardoso, F.H., Faletto, E., 1979. Dependency and Development in Latin America. University of California Press, Berkeley, CA. Castells, M., 1997. The Power of Identity. The Information Age: Economy, Society and Culture, vol. 2. Blackwell, Cambridge, MA. Cox, R.W., 1994. Global restructuring: making sense of the changing international political economy. In: Stubbs, R., Underhill, G.R.D. (Eds.), Political Economy and the Changing Global Order. St. Martins Press, New York, pp. 45–59. Evans, P., 1995. Embedded Autonomy: States, Firms, and Industrial Transformation. Princeton University Press, Princeton, NJ.
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Evans, P., Rueschemeyer, D., Skocpol, T., 1985. Bringing the State Back in. Cambridge University Press, New York. Gendzier, I., 1985. Managing Political Change: Social Scientists and the Third World. Westview Press, Boulder, CO. Gereffi, G., Korzeniewicz, M. (Eds.), 1994. Commodity Chains and Global Capitalism. Greenwood Press, Westport, CT. Gilpin, R., 1987. The Political Economy of International Relations. Princeton University Press, Princeton, NJ. Goldstein, J., 1993. Ideas, Interests and American Trade Policy. Cornell University Press, Ithaca, NY. Gourevitch, P., 1986. Politics in Hard Times: Comparative Responses to International Economic Crises. Cornell University Press, Ithaca, NY. Held, D., McGrew, A.G., Goldblatt, D., Perraton, J., 1999. Global Transformations. Stanford University Press, Stanford, CA. Keohane, R., 1984. After Hegemony. Princeton University Press, Princeton, NJ. Kitschelt, H., Lange, P., Marks, G., Stephens, J.D. (Eds.), 1999. Continuity and Change in Contemporary Capitalism. Cambridge University Press, New York. Krasner, S.D., 1976. State power and the structure of international trade. World Politics 28 (3), 317–347.
Kruger, A., 1974. The political economy of the rent-seeking society. American Economic Review 64, 291–303. Leys, C., 1996. The Rise and Fall of Development Theory. Indiana University Press, Bloomington, IN. Lipietz, A., 1987. Mirages and Miracles: The Crises of Global Fordism. Verso, London. Marglin, S., Schor, J. (Eds.), 1990. The Golden Age of Capitalism: Reinterpreting the Post-War Experience. Clarendon Press, Oxford, UK. Piketty, Thomas, 2014. Capital in the Twenty-first Century. Harvard University Press, Cambridge. Piore, M., Sabel, C., 1984. The Second Industrial Divide: Possibilities for Prosperity. Basic Books, New York. Rodrik, D., 1997. Has Globalization Gone Too Far? Institute for International Economics, Washington, DC. Rostow, W.W., 1960. Stages of Economic Growth: A Non-communist Manifesto. Cambridge University Press, New York. Wallerstein, I., 1976. The Modern World-System. Academic Press, New York. Waltz, K.N., 1959. Man, the State, and War: A Theoretical Analysis. Columbia University Press, New York.
Abstract Modern ‘political economy’ explores relationships among economic and political organizations, institutions, policies, and outcomes. There has never been a consensus on the theories and methods that should structure the exploration of these relationships and the debate over how best to understand these matters has evolved over time. The interpretation offered here simplifies both of these dimensions of difference. It distinguishes two periods of postwar history – the Fordist and Neoliberal eras – based on the dominant paradigm of economic organization prevailing in the rich capitalist democracies of the global North. For each period, the most important theoretical approaches to political economy, the regions of the world to which they were applied, and the social science departments in which they were based are identified. It is argued that, in the second or neoliberal era, political economy analyses can be broadly grouped into those that took a critical stance on existing economic paradigms, institutions, and policies, and those which accepted the core assumptions of neoclassical economics and the neoliberal policies and institutions that this approach to economics has legitimated. The relationship between area and international studies and political economy varies, both by period and, to some degree, by the type of political economy in question.
Modern ‘political economy’ explores relationships among economic and political organizations (e.g., states, corporations, and unions), institutions (e.g., laws and practices regulating trade and competition), policies (e.g., restrictions on international capital mobility), and outcomes (e.g., rates of economic growth, political regime stability). Political economists differ along several important dimensions, as discussed below. This article offers an overview of the evolution of competing versions of political economy, and their relationship to Area and International Studies, since World War II.
The Fordist Moment The classical political economists of the late eighteenth and nineteenth centuries – Smith, Ricardo, Malthus, Marx, and J.S. Mill – addressed fundamental questions such as the appropriate economic role of the state, the implications of trade liberalization for the economic fortunes of different economic classes, the ecological constraints on continuous economic growth, and the economic and political contradictions of different modes of production, including capitalism. In the first quarter-century after World War II, some of these questions remained at the center of debates between modernization theorists (Rostow, 1960) and dependency theorists (Cardoso and Faletto, 1979) who argued about the logics of, and possibilities for, economic and political development in what the Cold War framed as the Third World. Marxist versions of political economy became the new orthodoxy in the Second World, which soon encompassed most of Eastern Europe and much of Asia. In the First World, however, most students of market dynamics within economics departments began to abandon political economy approaches. Prior to World War II, when institutional economics remained the dominant tendency in the economics departments of the United States, this break with the core assumptions and research agendas of
938
political economy had gone furthest in the United Kingdom. However, after the war, British neoclassical microeconomics and Keynesian macroeconomics gained ground rapidly in the United States. In the Cold War context, the dominant theoretical orientations of the US hegemon exerted a powerful gravitational pull on social science in the academies of the First World. The new mainstream economists had a much narrower intellectual agenda. At the micro level, they drew on the pioneering work of Marshall and Pareto in an effort to demonstrate by formal, mathematical means the superiority of competitive markets as efficient allocators of resources. Arguments for trade liberalization and critiques of most forms of state intervention in market allocation processes were developed in this spirit. At the macro level, in First World economies, the new mainstream drew on Keynes in an effort to theorize how best to employ fiscal and monetary policies to reduce the amplitude of business cycle fluctuations. There were significant tensions between these micro- and macroeconomic agendas; however, they only became salient toward the end of this period. Most of the new mainstream economists – whether micro or macro in focus – sought quasinatural laws governing market dynamics regardless of time and place. They paid little attention to the political and institutional parameters within which markets existed or to the balance of power among social forces that shaped these parameters. There was an irony here. The divorce between politics and economics in First World academic economics was possible because a new kind of political economy – sometimes called ‘Fordism’ (Lipietz, 1987) – was developed after World War II. The institutional and political details of Fordist regulation varied from country to country but everywhere it represented a fundamental shift away from wage regulation through competitive labor markets maintained by the repression of worker rights, to form democratic unions and engage in collective bargaining. Fordist
International Encyclopedia of the Social & Behavioral Sciences, 2nd edition, Volume 1
http://dx.doi.org/10.1016/B978-0-08-097086-8.10109-6
Area and International Studies: Political Economy
institutions linked national real wage growth to the expansion of national labor productivity through some combination of collective bargaining (e.g., pattern bargaining in the United States) and state regulation (e.g., minimum wages) (Piore and Sabel, 1984). Fordist regulation generated higher rates of economic growth and distributed the gains from that growth more broadly among the workforce than any form of economic regulation before or since (Marglin and Schor, 1990). These successes contributed to the depoliticization of economic policy, which could more easily be seen as an administrative matter to which there were technical answers. This facilitated the shift away from political economy’s focus on the reciprocal relationship between political power and economic outcomes. Non-Marxist versions of political economy remained a significant current within the comparative politics subdiscipline of political science in this period. In the Cold War struggle, a great deal of public research funding was made available to those pursuing such studies (Gendzier, 1985). Area studies encompassed the countries of the Second and Third Worlds, where the influence of Marxist political economic analysis was strong among state elites, academics, and organizations such as unions and cooperatives. Hence, First World academic analysts found it necessary to engage questions of class power, organization, and institutions in studying these countries. To this task most brought Weber and Durkheim, as interpreted and synthesized by Talcott Parsons, under the rubric of modernization theory (Leys, 1996). Area studies thus helped to preserve political economy when it was marginalized in the economics departments of the First World countries in which it had originated. In turn, political economy offered a coherent basis for distinguishing among different areas. Latin America, for example, made sense as a region to be contrasted with others because most of its states shared a particular kind of political economy. In the nineteenth century, the countries in this region were characterized by primary commodity production for export, and republican regimes that secured their independence from Iberian empires. In the crisis of the 1930s, most of these countries embraced a particular kind of economic development strategy – import-substitution industrialization – that gave rise to parallel economic and political dynamics, including the rise of a significant industrial working class and the formation of corporatist political systems. There was no parallel symbiosis between political economy and the International Relations (IR) subdiscipline as it existed in US political science in this period. IR was dominated by international security debates between those who supported a realpolitik firmly rooted in a narrow account of national selfinterest and those who asserted that international cooperation rooted in shared liberal values was a surer guide to national security and world peace. IR paradigms, particularly as they were formalized by Waltz and his followers, took it as axiomatic that states were highly autonomous from the domestic societies in which they were embedded, at least as regards the formation of foreign policy (Waltz, 1959). On this view, the international distribution of state power resources (e.g., concentrated in two rival superpowers versus dispersed more evenly among leading countries organized into alliances), and differences in state elite strategies for realizing their power maximizing objectives were the main explanations for
939
variations in state behavior and resulting international dynamics (Krasner, 1976). States might liberalize trade as part of their grand strategies for enhancing their power relative to their rivals, but there was little reciprocal causality in this model. That is, neither international economic dynamics nor classes defined in economic terms had much impact on state goals or strategies. Beyond IR as practiced in the United States, International Studies in these years was roughly equivalent to diplomatic history. Greater methodological and theoretical eclecticism created more space for recognizing the significance of domestic factors in international relations. A few approached these matters from standpoints that paid greater attention to the kinds of factors highlighted by political economy. Still, most studies of international diplomacy remained in the realm of ‘high politics,’ and so had only passing contact with the methods and concerns of political economy.
The Neoliberal Moment As the Fordist economic order began to disintegrate in the late 1960s, many argued that both the causes of the crisis and the remedies for it lay in changes in the balance of economic and political power among nations, between labor and capital within nations, or both (e.g., Gourevitch, 1986). Economics and economic policy were thus repoliticized as an intense political struggle over how to understand and respond to the crisis of Fordism under way. In this context, rival strands of political economy emerged, each associated with advocates of a different response to the crisis. Critical political economists – a diverse group influenced in varying degrees by Marx, Weber, and Polanyi – were concentrated in political science and sociology departments. This strand of political economy was strongest among area specialists who focused on Latin America, Asia, and Western Europe and among students of peasant rebellion and social revolution. Their diagnoses of the crisis tended to support policies that would reinforce and extend the basic principles of Fordist regulation, or a move beyond capitalism to some form of democratic socialism. Neoclassical political economists began from the premise that neoclassical accounts of economic dynamics were basically sound, as were capitalist economies. The problem as they saw it was how to develop an equally sound science of political dynamics, a science that would explain why state intervention could seldom improve on market outcomes, even when market failures were acknowledged. Some sought to build a new political science on the ‘rational choice’ premise that all individuals and organizations are instrumentally rational, selfinterested actors (Alt and Shepsle, 1990). Others were less programmatic, turning traditional analytic tools to the service of policy goals deriving from neoclassical economics. The first strategy generated theories of ‘rentier’ states and ‘political failure’ paralleling the theory of market failure that justified Fordist regulation on efficiency grounds (Kruger, 1974; Bates, 1988). These analyses, together with neoclassical microeconomic doctrines, provided the intellectual rationale for ‘neoliberal’ policy prescriptions – that is, redefinition as the primary economic role of the state as the creation and maintenance of competitive markets. The second strategy generated
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Area and International Studies: Political Economy
(among other things) assessments of strategies for implementing structural adjustment policies successfully in democracies where popular opposition to such policies was widespread. The neoclassical strand of political economy was concentrated in economics and political science departments (particularly in the United States). The neoclassical approach to political economy was very much in tune with the neoliberal response to the crisis of Fordism championed by the United States under Ronald Reagan and the United Kingdom under Margaret Thatcher. The Third World debt crisis soon facilitated the export of neoliberal policies, via conditions imposed on debtor nations in return for assistance in restructuring their loans. In this context, neoclassical political economy became the more prominent of the two approaches, particularly among policy elites and in the United States. However, there were important intellectual innovations within both tendencies. The result was a renaissance of political economy analysis in the neoliberal era, with both the form and the implications of that analysis intensely contested. World systems theory was an important strand of the critical political economy analysis that emerged in this period (Wallerstein, 1976). While influenced by earlier dependency theories, world systems theory was distinctive in two ways: the degree to which it treated the international economy as a system governed by its own systems-level logic, and the degree to which that logic was seen to determine the development possibilities of the nations whose system functions marked them as peripheral or semi-peripheral. World systems theory took hold primarily in sociology departments, where Marx enjoyed more equal status with that of Durkheim and Weber. A second strand of critical political economy, with institutional roots in sociology and political science, emerged under the banner of ‘bringing the state back in’ (Evans et al., 1985). This strand explored the significance of national differences in state characteristics and relations between the state and societal actors, factors that were treated as secondary in most world systems analyses. Within the Third World, critical political economists began to explore the social and political consequences of structural adjustment policies in Africa and Latin America in the wake of the debt crisis (e.g., Bierstecker, 1995). There was also increased interest in the role of ‘developmental states’ in enabling a small number of countries – concentrated in Asia’s Newly Industrializing Countries – to escape the travails of the debt crisis and successfully reorient national economies to an export-driven model of industrialization (e.g., Evans, 1995). Finally, a literature emerged on the export processing zones created in many countries subject to neoliberal restructuring, and on the international supply chains that linked them to First World corporate producers and retailers (Gereffi and Korzeniewicz, 1994). A strand of neoclassical political economy also focused on the world system. Most important here was the ‘hegemonic stability’ theory advanced by the self-styled neorealists and their neoliberal interlocutors. These analysts, located within international relations sections of political science departments, mainly in the United States, debated the extent and significance of the decline of US economic hegemony evident by the late 1960s. Hegemonic stability theories asserted that, without disproportionate US economic power, the international
monetary system created at Bretton Woods and multilateral trade liberalization under the auspices of GATT (General Agreement on Tariffs and Trade) would not have been possible (Gilpin, 1987). They interpreted the collapse of fixed exchange rates and an alleged shift toward protectionism in the form of ‘nontariff barriers,’ as evidence that the postwar international economic regimes constructed by the United States were indeed unraveling. Neoliberals such as Keohane drew on game theory to argue that states qua rational actors might choose to support and extend trade liberalization and other aspects of international regulation out of an enlightened sense of self-interest, even in the absence of a hegemon, under certain conditions (Keohane, 1984). Other neoclassical political economists took a different tack, identifying a variety of societal, institutional, and ideological factors that might explain why the US state maintained its trade-liberalizing trajectory in the 1970s and 1980s, despite declining US economic hegemony and rising social costs (e.g., Goldstein, 1993). Among neoclassical political economists focusing on the global South, attention was devoted to explaining the wave of democratization that began in the late 1970s, particularly to possible links between economic liberalization and democratization. In the 1990s, the end of the Cold War and the acceleration of the economic globalization – by which analysts generally meant increased international trade and capital mobility, and sometimes also neoliberal policies such as privatization and deregulation – shifted the focus of research and the terms of debate. The concepts of the Second and Third Worlds were rendered obsolete; many analysts began dividing the world into the ‘global North’ (i.e., rich capitalist democracies) and the ‘global South’ (i.e., all others). An important debate developed concerning whether there was anything sufficiently novel about the international economy of the 1990s to warrant the use of the term globalization (Held et al., 1999). There was also great interest in the causes and consequences of economic globalization. Neoclassical political economists tended to take a positive view of economic globalization and often treated that the process as natural and/or inevitable. Critical political economists typically saw the shift as the product of power politics within and among nations and its negative affects as more substantial (Cox, 1994). There was great interest in whether this new economic order was significantly narrowing state policy autonomy, forcing governments toward a more laissez-faire model of economic organization regardless of their political stripe and the preferences of voters (e.g., Rodrik, 1997). There was also interest in the implications of economic globalization for the power of organized labor (e.g., Kitschelt et al., 1999). Finally, there was growing interest in the origins and character of organized resistance to the neoliberal model of globalization, a discussion leavened with the insights of social movement theory (e.g., Castells, 1997), as well as more traditional political economy approaches (Arrighi et al., 1989). These developments had important implications for the evolution of area and international studies. The resurgence of political economy strongly legitimated international studies’ supranational and interdisciplinary character and added another important approach to how such work might be organized. As to area studies, political economy may afford new grounds for drawing area boundaries. For example, since
Area and International Studies: Political Economy
the passage of the North American Free Trade Agreement (NAFTA) in 1993, Canada and Mexico have become much more integrated with the US economy. For many of the questions of interest to political economists, it now makes sense to treat North America as a region to be studied as a unit. This contrasts with the old area study practice of studying the United States in splendid isolation, Mexico as part of Latin America, and largely ignoring Canada. Similarly, as East European countries have joined the European Union (EU), it remains sensible to frame many political economy questions in terms of a new EU region that straddles what were once regions in the First and Second Worlds. This said, this last statement depends on whether the EU will survive the shocks of the 2008 global economic crisis and the subsequent crisis in the euro. While the Greek crisis raised the specter of the collapse of the euro or its reduction to a ‘northern euro’ (centered on Germany and northern Europe), the stabilization of the European economy (albeit without hoped-for growth, given continuing austerity measures) reduced the threat that the EU would fall apart (although as of this writing it is unclear whether the United Kingdom will retain its ties with the EU). After the shocks of 2008 threatened EU implosion, Vladimir Putin’s takeover of Crimea and sponsored civil war in eastern Ukraine might be the stimulus to bring EU countries closer together. However, the years since 2008 have been a period of geopolitical instability, and at this moment it would be foolish to presume either EU expansion or collapse.
A Brief and Uncertain Postscript: Post-2008 Political Economy This brief discussion of the EU after the global crisis of 2008 highlights a more general issue of this moment in time: that the crisis might provide a potential moment of transition or retrenchment of models of political economy. The extent to which national economies were interconnected was laid bare once the American housing bubble burst and American financial institutions suddenly faced severe challenges to their very survival. At the same time, the degree of local autonomy was also revealed in how various actors went in different directions vis-à-vis responses to recessions: for example, from more state-centered responses in China and Russia, to austerity policies in the EU, to less austerity-oriented but still market-friendly policies in Barack Obama’s United States. Further, the degree to which public policies have reflected interests and ideologies deserves study that at this point in time remains to be done. As Paul Krugman argued repeatedly in his New York Times blog, austerity policies have been disastrous, and so the only reason they were adopted and persisted was a combination of particular elite interests and ideologies about the ‘normal’ way states approach political economy and economic crises. As Piketty (2014) revealed in his rigorous study, inequality has been a defining feature of modern economies, and while there are possible responses to improve equality and reduce risks of future shocks, it is unclear whether political and economic elites will accept these. For example, German politicians and public have been averse to allowing inflation to rise: while this might have a negative short-term impact on Germans themselves, it
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would benefit the EU, and Germany as well, in the medium to long term. Yet, in German political discourse, inflation is framed in terms of the catastrophic post–World War I economic situation, as well as morality play in which German productivity and frugality would appear to be punished for the sins of other European countries and societies that took on too much debt. As well, American elites for the most part have been willing to pursue austerity measures that ultimately have hindered the American recovery; circumstantial evidence suggests this is not only because of interests but also because relatively more Keynesian measures (such as fiscal stimuli and more equitable distribution of the tax burden) would contradict the hegemonic elite ideology in which the state is the source of economic troubles and the business elite the source of its solutions. Finally, the global economy has come under some scrutiny since 2008. While globalization still appears inevitable, actors from various social movements have asked whether that global order need appear as it does. The rise of the BRIC countries (Brazil, Russia, India, and China) presented a potential competitor to the hegemony of the United States and Europe, and while the 2008 crisis reduced BRIC growth, the idea of a new bipolar world – with power balanced between the United States and the EU on one side, and the BRICs on another – is a distinct possibility, especially as Russian leaders Vladimir Putin and Dmitrii Medvedev more than once proposed that BRIC countries plus South Africa form their own form of economic alliance to counterbalance ‘the West.’ The possible rearrangement of global relations and positions, and the problematic and contentious (and sometimes seemingly puzzling) nature of public policies in response to the 2008 crisis should force us to revisit what we mean by ‘political economy’ and how to analyze it. If the story since 2008 is anything to go by, Karl Marx and Max Weber would be happy, as their stresses on the centrality of elites, states, and especially power and contention to any analysis seem borne out by recent events.
See also: Dependency Theory; Development and the State; Nations and Nation-States in History; Political Economy in Anthropology; Political Economy, History of; State Formation, Theory of; World Systems Theory.
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