Identify and discuss the reasons why it is important to study the IPE.
Introduction:
“IPE concerns the social, political and economic arrangements affecting the global system of
production, exchange, and distribution and mix of values reflected therein. Those
arrangements are not divinely ordained, nor are they the fortuitous outcome of blind change.
Rather they are the result of human decision taken in the context of mass made institutions
and sets of self-set rules and customs”, are according to Susan Strange.
Strange’s definition gives equal weight to social, political and economic arrangements. It
stresses the role played by certain institutions and the values that govern them.
IPE looks at the interaction or tensions between states and markets at an international level
that cannot be satisfactorily addressed by traditional economics, political or sociological
analysis.
IPE deals with cross-national issues and actors, as it has a political element. It also focuses
on the economy. These three concepts (international, political and economic) are in constant
and dynamic interaction in an increasing globalised world.
Manifestations of globalisation has influenced IPE in the sense that the various spheres of
domestic, economic, local and international politics seem to become increasingly
interdependent in a world that is fast becoming borderless.
Body:
The development of the IPE
A study of IPE cannot be separated from an investigation into its causes, the effects of the
IPE on the states, corporations and individuals from today have been shaped by the IPE of
yesterday. It is therefore impossible to understand the contemporary IPE without discovering
its roots. The following paragraphs will provide a brief outline of the historic development of
the IPE.
1. Origin of the international economy
The earliest economic activities consisted of primitive barter: individuals who had a surplus
of a particular commodity traded it for others that they lacked. Later, straightforward barter
was replaced by payment for a commodity with a medium of exchange that was in popular
demand.
2. Medieval trade and commerce
In medieval Europe, the church which exercised secular and spiritual authority, prescribed in
minute detail the circumstances under which trade and business transactions could take
place. When the church waned, it was the guilds which determined the ground rules.
, As a result of the extensive regulation, international trade remained low until the end of the
Middle Ages. Later the conditions became more favourable for a tremendous increase in
international trade and commerce.
3. Seventeenth-century mercantilism
The greater use of the seaways in the 17th century brought a rapid increase in trade between
Europe and the Orient. European states introduced controls over trading activities,
governments organised their domestic and international trade to achieve the balance which
they needed to accomplish their goals.
Firstly quotas and tariffs on imports were introduced and goods that competed directly with
domestic industries were completely excluded, in attempt to protect domestic enterprises.
Secondly, the state started to participate in paying grants or subsidies to certain export
industries and import substitution industries, and luring away trained artisans and inventors
from other countries.
In order to maintain a trade surplus the acquisition of colonies were encouraged, as colonies
provided cheap natural resources.
Lastly, control measures were introduced to regulate the movement of precious metals.
4. Free trade versus mercantilism
By the 18th century the restrictive practises associated with mercantilism led to a revolt of the
American colonies, which would end in their independence from Britain.
5. The 19th century and the economy of imperialism
Mercantilism survived deep into the 19th century as the dominant philosophy of international
trade, despite Smith’s works. Imperial possessions had become the prominent symbol of
national power and status by the end of the 19th century. Scholars viewed this in economic
terms and regarded it as a consequence of capitalism.
6. 1918-1944
WW1 destroyed the structure of international trade and resulted in shocks to the system. In
the era of the Great Depression, economic nationalism along with high tariffs, import quotas
and so on, led to economic disorder and was one of the reasons for the rise of Fascism.
7. Bretton Woods
In 1944 Bretton Woods established a new international economic system for the post-war
period.
There was a consensus that one of the main factors contributing to the collapse of the pre-
war system was that the USA had not taken lead, therefore it was believed that the USA
would have to play a leading role in the formation of new international economic institution.
Secondly, the founders felt that the damages followed by the WW1 in 1920 had to be
avoided. The third objective was to limit war debts which was made possible by the USA’s
use of lend leases.
