The Palgrave Handbook of Contemporary International Political Economy

Financial statecraft traditionally means the use, by incumbent national governments, of foreign assistance and financial sanctions to influence other countries. Armijo’s contemporary definition also includes state efforts, both bilateral and in coalition, to leverage national monetary and financial capabilities for greater voice and authority in global governance, markets, and multilateral regulation. The US’ postwar dominance, resting on economic and military might, established a world order founded in Western, mostly liberal, leadership. Today, China’s rise reflects high domestic savings, investment, and growth, while its persistent balance of payments surplus pushes towards capital outflows. Incumbents in China, and other emerging powers, now will exercise financial statecraft in service of their global and regional visions.

International Political Economy (IPE) scholars discussed market power in the past but not in the last couple of decades. Given the importance of both ‘market’ and ‘power’, this is a weakness that IPE should correct. This chapter reviews its past contributions as well as those of other disciplines and offers a set of concepts and theories of what market power is, what motivates which agents to use it, and how structure modifies or helps agency to exercise it. The chapter ends on the challenges to the study of market power represented by the evolving digital economy.

This chapter examines the place of international economic law (IEL) in the study of global political economy. Law is a primary feature of our research terrain, but scholars are only slowly coming to terms with a quiet revolution in which political economy increasingly takes place in a legal frame. I advocate for a cognitive shift conceptualized as an analytic move from the study of politics and law to the study of the politics of law. The first section examines this development. The second briefly lays out two somewhat counterintuitive hypotheses about the rise of new political actors in a legalized environment. The third section considers several implications related to the deployment of theory and method in this evolving terrain of rapidly advancing legal development.

Global governance is a term to describe the regulation and management of problems that cross sovereign state boundaries. Narrowly, the debate about global governance is one that revolves around fine-tuning of the status quo. In this usage, the concept has assisted technocrats and politicians in reducing the scope for disagreement by moving the focus away from overtly political issues. Although global governance has been deployed in this way, other participants in the discussion, notably dissident policy intellectuals and academics, have sought to debate the concept of global governance more widely. This chapter examines transnationalism, cosmopolitanism, and hegemonism as schools of thought, identifying their differences, commonalities, and contributions. These are broadly summarized in Table 5.1.

The new regionalism has been one of the mega-trends in the global economy since the 1990s. The Eurocentrism of classic integration theories is a problem for analysing new regional organizations, which develop in fundamentally different background conditions. With the turn of the millennium, many regional organizations of the Global South faced increasing obstacles to further integration. The rise of regional powers in the Global South did not lead to a renewed rise of regionalism. Only East Asia was able to resist the trend in declining regionalism, and Association of Southeast Asian Nations (ASEAN) became the nucleus of further integration efforts. Today, regionalism is also challenged in the Global North, where the European Union (EU) is stalled in crisis, and where the Trump administration renegotiates North American Free Trade Agreement (NAFTA).

Theories of domestic politics focus on ideational expectations, material interests, and regulatory institutions to explain governmental preference formation. While the possible relevancy of the international power, transnationalism, and regimes is not disputed, domestic politics theories argue that domestic actors and structures influence governmental preferences prior to international circumstances. The societal approach to International Political Economy (IPE) develops previous domestic politics theories further, especially by conceptualising the conditions under which either value-based ideas or material interests prevail in shaping governmental preferences and under which domestic institutions matter. This chapter discusses central domestic politics theories, presents the innovations of the societal approach, and exemplifies its explanatory power in a case study on the controversies between emerging and developed countries on global economic governance in the Group of 20 (G20).

Neoliberalism has become a common, if contested, frame of reference for International Political Economy (IPE) to understand the governance of the global economy. In examining such complex terrain, this chapter begins by offering four prominent starting points for the analysis of neoliberalism: (1) as a history of intellectual ideas; (2) as a system of enhanced capitalist power; (3) as a cultural examination of everyday conduct; and (4) as a more generic, post-Marxist expression to denote the current zeitgeist. The discussion proceeds to dissect neoliberalism via three major ‘acts’: (1) from the late 1970s to the early 1990s; (2) from the mid-1990s to the mid-2000s; and (3) from the late 2000s to the present. Significant contributions from IPE are discussed in relation to the wider empirical context.

Nölke provides a comprehensive overview on the application of the institutionalist Comparative Capitalism paradigm in international political economy. The paradigm is used to answer questions such as why do states interact in a certain issue area of the regulation of the global political economy in a specific way, what is the nature of capitalism in advanced and emerging economies, how can we explain that some economies can grow faster than others, how do international institutions and economic interdependencies affect national capitalist institutions, how can we explain the strategies of multinational corporations based on their national origin and what are the long-term tendencies with regard to the nature of the capitalist order?

This chapter focusses on the status and role of small and least-developed countries (SLDC) in the International Political Economy against the backdrop of the structural changes associated with the rise of the Brazil, Russia, India, China (‘BRICs’) and other emerging economies. Although the dominant narrative of the changing global order is one of rapid change and transformation, I argue that the defining theme for SLDCs remains that of enduring vulnerability. In this context, I explore and critically assess different approaches to understanding SLDC agency. I illustrate two key strategies—‘internal’ and ‘external’ agency—which SLDCs have adopted, with varying degrees of success, to manage the vulnerabilities associated with global restructuring. I conclude by considering the overall position of SLDCs in the emergent global economic order.

Dayton-Johnson introduces economic definitions of the middle class appropriate to low- and middle-income countries based on income levels and occupational status. He assesses the link between middle-class growth and economic performance, particularly in developing countries. Different measures of the middle class help explain different dimensions of this link: a larger middle class can boost growth via consumption growth; a growing middle class can also fuel investment via reduced economic inequality; and middle-class politics, moreover, have complicated economic consequences. The middle class, however measured, has grown considerably in recent decades, particularly in Asia; but many such households remain vulnerable to falling back into poverty.

International migrations, diasporas, and remittances represent significant but poorly understood sources of reordering in contemporary International Political Economy (IPE). International migration patterns, diaspora social formations, and remittance transfers are diverse in their sources, channels, social composition, and social effects, which in relation to the IPE of development, pose unanswered questions and unaddressed policy challenges. These include questionable assumptions/classifications of migrants and the periodic alarms over purported ‘migration crises’, the conflation of ‘migrants’ and ‘diasporas’, and the treatment of the latter as homogenous bounded groups defined primarily by their nationality/ethnicity, and the arbitrary categories used to report remittances. While welcoming the increased attention paid to international migrations, diasporas, and remittances, this chapter cautions against overly optimistic and pessimistic assessments of their ability to produce positive development outcomes.

This chapter considers the prospects for middle powers to play a more influential role in the international political economy. Given that the international economy has been plagued by recurrent crises of late, this ought to be an arena in which policy innovation was welcome. The reality, however, is rather different: great powers continue to dominate and middle powers remain constrained by wider geopolitical constraints and considerations. These claims are illustrated in the case of Australia, a country that has been at the forefront of middle power activism and policy debates.

What, exactly, is an emerging power? While empirical scholarship-discussing states such as Brazil, India, or China have blossomed over the past 20 years, little attention has been paid to conceptualising these states. This creates confusion about emerging powers themselves as well as their impact on global affairs. I argue that systematic study of three factors—growing material (especially economic) capabilities, diplomatic ambitions, and peer recognition by others—will enable us to overcome the contemporary conceptual problems of coherence and differentiation. Doing so will require scholars of international political economy to re-evaluate theoretical assumptions embedded in today’s literature. It will also empower us to better contribute to policy discussions of emerging states. These arguments are illustrated in reference to emerging power activities in global economic governance.

This chapter discusses why the rise of emerging economies is important, through what lenses it can be viewed, what discussions it has generated, phases in the rise of emerging economies, what trends and transformations to watch, and their role in international finance.

The emergence of major economies like China, India, Russia, and Brazil will alter the shape of the world system for many years. The growing consumption of these countries has important implications for the production and use of natural resources, many of which are imported, as well as the associated social and environmental externalities. Using a heuristic framework, we assess the variegated impacts of China’s increased engagement with low- and middle-income countries (LMICs) around extraction of different and distinct types of natural resources. We conclude that the outcomes have less to do with the inherent characteristics of Chinese firms and finance packages and more to do with the host state’s resource regime.

This chapter reviews the sources and implications of international currency leadership by drawing lessons from the global financial crisis. The US dollar remains the world’s top currency because the United States continues to be the largest supplier of ‘safe assets’ in the global economy. Relatively accommodative macroeconomic policies and institutions in the United States have underpinned this role. At the same time, being the world’s predominant safe asset provider came at the expense of a ballooning deficit on the US external balance sheet after the crisis. However, there are no indications that the deterioration in the US external balance sheet has constrained the structural capacity of the United States to avoid the burden of macroeconomic adjustment—which remains the ultimate yardstick of international monetary power.

On 29 March 2019, the UK will cease to be a member of the EU. After more than four decades in the EU, Brexit will have wide-ranging implications for the UK, the EU, and third countries around the world. Uncertainty about the future EU-UK economic partnership and brinkmanship in the Brexit negotiations has started to impact the UK’s economic performance, while its post-Brexit geopolitical role and influence have come under scrutiny. But there may also be opportunities for the UK to reposition and rebrand ‘Global Britain’ in the world, including within the Commonwealth, and pursue its own independent trade policy. This chapter examines some of the key International Political Economy (IPE) implications of Brexit for the UK, the EU, and the wider global economy, including the world’s poorest nations.

This chapter reviews analyses of financial derivatives that have addressed market contingencies, crisis and control. Given the central role of financial derivatives in the Global Financial Crisis, International Political Economy (IPE) has understandably focused on speculation and asset price inflation. Concomitant to this has been a concern with regulatory privilege and capture. Recognising the significance of these engagements, this chapter draws attention to the longer-term significance of financial derivatives for IPE, identifying this significance in terms of a new form of ownership and relations between fiscal and financial systems.

This chapter examines the intersection of key recent debates about financial markets in the Global South: the implications of technological change and efforts to promote financial inclusion. It highlights a recent ‘turn to technology’, in which advocates of financial inclusion faced with uneven and limited progress of access to finance pin hopes on new financial technologies (‘fintech’) to remove barriers to access. The chapter situates this development in a longer and contradictory pattern of neoliberal development governance. It concludes by reflecting on the limits of fintech as tools for poverty reduction in light of this discussion.

This chapter aims to introduce the reader to the concept of risk in its widest sense and to demonstrate—through a critical engagement with risk and uncertainty—that ‘looking through a risk lens’ at actors and competing organisational and societal realities, that is, the risk triangle, provides us with a powerful analytical tool to unpack the political of economy of risk. The chapter, therefore, provides both a useful reference point and a framework to reflect on—and to critically evaluate—the contemporary political economy.

This chapter introduces the issue of tax avoidance, a problem produced by the tax system itself when it begins to distinguish between different categories of taxpayers. Tax avoidance becomes an international problem when taxpayers utilise the variance that exists between different national tax regimes to reduce their total tax obligation. After unpacking the terms involved, the chapter provides a brief historical context to situate the current issues of concern, which are exemplified in the public consciousness by the Panama Papers. The fact that measures to address tax avoidance are crafted in the Global North, for the benefit of their economies, is highlighted to emphasise that tax avoidance is yet another instance where global governance is established to satisfy the demands of the powerful states.

The United Nations Framework Convention on Climate Change (UNFCCC), one of the substantive outcomes of the 1992 Rio ‘Earth Summit’, entered into force in 1994 16. The Convention aims to “prevent dangerous anthropogenic interference with the climate system” (Article 2) (UNFCCC, Paris Agreement as Contained in the Report of the Conference of the Parties on Its Twenty-First Session, 2015). It is one of the most complex intergovernmental regimes, with over 270 institutional elements, which perhaps explains its complexity—and opacity—to both participants and the general public alike. This chapter describes the main elements of the regime, briefly outlines the history of some of its key mechanisms, notably the Kyoto Protocol and its policy instruments, the initiative referred to as ‘REDD+’, and the 2015 Paris Agreement, concluding with some observations on the Convention’s future and current developments.

This chapter critically analyses the global post-2015 development agenda and partnership. The text first characterizes the Sustainable Development Goals (SDGs) that shape the global agenda, describing the process through which they have been implemented. Differences in relation to and steps to move beyond the previous Millennium Development Goals are especially emphasized. We then identify critical thematic issues and concerns which are threatening the implementation of the SDGs. We conclude by focussing on SDG implementation, pointing out a few crucial actions for facilitating global development, and reflecting on the intrinsic ability of the SDGs to achieve these.

That agriculture contributes significantly to several sub-Saharan African (SSA) economies and provides livelihoods to a bulk of the rural poor, mainly smallholder farmers, is incontrovertible. Though agriculture in SSA is characterized by moderate-to-low productivity and offers depressed returns, it continues to be the vital sector for employment generation, food security, and poverty reduction. The slack performance of the agricultural segment has resulted in high levels of poverty and hunger in the region. This chapter posits an increase in public spending on agriculture and its prioritization in the development agenda of states. It acknowledges the proven capabilities of this critical sector for income generation, poverty reduction, and food security and thereby its ability to engender pro-poor growth in SSA.

The globalisation debate has gone through three phases. In the first phase, the so-called sceptics, who questioned the very existence of the phenomenon, opposed the ‘globalists’ who firmly asserted that its existence was undeniable. In the second phase, the existence of globalisation became consensual and the debate moved into the streets, where anti-globalists violently opposed its advent. In the third phase, even the anti-globalists have come to terms with the inevitability of globalisation, and discussions have shifted to tackle the question of how to govern globalisation. Summing up, the debate moved from the questions, ‘Does globalisation exist?’ and ‘what are the consequences of globalisation? to ‘How to govern globalisation?’ This chapter answers these questions with reference mainly to theories of international political economy.

Funds owned by sovereign states for long-term investment existed for over a century before they drew global attention in the early twenty-first century. Sovereign wealth funds (SWFs) face serious challenges in developing resource-based economies. Should governments invest proceeds from natural resources for future use while domestic demands for capital are high? What institutional structures can ensure both public accountability and effective fund management for the long-term benefits of the public? There is no one global institution to regulate what, where, and how SWFs can invest and how they are managed. As long as SWFs are sovereign, it is difficult for the international community to develop rules to regulate their investment objectives, tax morality, and reporting practices, all of which are increasingly important as SWFs expand.

Competition policy seeks to constrain market power and safeguard market entry and contestability, mostly through legal and regulatory mechanism. It has traditionally been considered a domestic matter—warranting above all legal and economic analysis. I argue that competition policy is an important and inherently political emerging IPE issue. I identify three recent developments that make competition law and policy an important emerging issue for understanding international political economy: (1) a changing understanding of the political economy of trade as requiring competition law and policy as complements, (2) the rapid global diffusion competition law and policy, and (3) the resulting increased probability of cross-border conflicts—with corresponding incentives for increased transgovernmental cooperation. For each of these developments, I flag opportunities for research by IPE scholars.

There are signs of growing resistance to repressive approaches to crime prevention—so-called mano dura—in Latin America and the Caribbean. Faced with spiralling violence and comparatively high spending on public security, alternatives to mano dura started emerging in the late 1990s. Progressive mayors, industry leaders, scholars, and civil society groups have initiated a host of city-based interventions, building what are called “citizen security” strategies from the ground-up. This chapter considers the intended and unintended consequences of mano dura in Latin America and the opportunities for alternative approaches to preventing and reducing violent crime. In highlighting the costs and benefits of prevention, it makes a case for strengthening citizen security measures across the region.

Ocean piracy, common in different parts of the world throughout history, was, however, very rare in the Horn of Africa waters until the mid-1990s. This chapter discusses the political economy of piracy in the strategic maritime passageway of the Horn. It first draws on relevant international conventions to advance a definition of maritime piracy. Second, it documents the emergence of piracy off the Somali coast and then highlights the negative impact of piracy on local, regional, and global economies and the prescriptions for combatting this scourge. Finally, the conclusion calls for a shift from short-term to longer-term sustainable solutions for reducing or eliminating maritime piracy in this important strategic and economic waterway.

Water is essential to all aspects of human life. As such, water access, use, and management reflect society back to itself. Swatuk focuses on selected aspects of human water use, in particular water for development, cities, and agriculture. He highlights the discourses at play in determining who gets what kind of water and the centrality of economic and political power in determining social flows of water. Swatuk concludes that there is no “magic bullet” to solving the world’s water woes due to the multiplicity of stakeholders and their differential interests and capacities. As a result, a more socially equitable, economically efficient, and ecologically sustainable outcome will require citizens to be organized and active.

Gale’s chapter provides a timely critique of IPE’s limited theoretical engagement with the concept of sustainable development. He highlights how nationalist, liberal, and critical IPE as manifested in green mercantilism, liberal environmentalism, and eco-socialism employ pre-established theoretical categories that perpetuate anthropocentric understandings of the human-nature relationship. Combining ecological thought with governance, Gale identifies an emergent IPE approach in sustainability governance that emphasises multistakeholder deliberation across entrenched, differently conceptualised notions of economic value. Applied to international trade, the approach challenges the free trade-protectionism dichotomy so dominant in IPE policymaking with one that distinguishes free traders and general protectionists from fair traders, the latter seeking sustainably produced and labelled products regardless of country of origin.

This chapter examines how common international factors, namely the China-induced resource boom, shaped the rise of ‘resource nationalism’ in Latin America. A central feature of resource growth policies is the move to maximize and reinvest natural resource rents to improve productivity and support sectoral development. The chapter argues that governments were more successful at capturing windfall profits but less so in capital reinvestments and promoting structural transformation. Specifically, an emphasis on continuous extraction of resources rather than on enhancing human capital, innovation systems, and the manufacturing sector ultimately characterized this policy shift. Moving forward, the challenge is how to promote structural transformation through industrial policy especially when windfall profits are limited by fluctuating prices and uncertainty in the global resource industry.

This chapter offers an overview and critique of how mainstream theories in IR and IPE have treated the question of energy. Assuming a critical political economy perspective, we make three arguments. First, traditional theories have an inadequate understanding of the relationship between fossil fuel energy and the development of global capitalism and a liberal world order. Second, the capital as power approach offers a more illuminating perspective than its theoretical rivals. Third, the source and supply of world energy and energy systems are just as foundational as conflict and war, the state and society, and labour and capital in the (re-)making of the capitalist world order. As such, scholars must incorporate an appreciation for the role of non-renewable fossil fuel energy into future discussions of modern capitalism.

This chapter reviews empirical and theoretical developments related to the political economy of commodities. It reflects on recent trends in international political economy (IPE) scholarship on commodities and demonstrates that global commodity politics are ripe for future research. The chapter first explores what the end of bipolarity and the rise of the BRICS mean for commodity production, trade and consumption, as well as for global development. It then explores new trends in contemporary IPE scholarship on commodities, including a renewed interest in illicit and informal commodity flows, research on the financialization of commodities and a growing body of work on transnational governance and commodities. Thereafter, several emerging areas of study are introduced before concluding with a brief discussion of topics warranting further attention from IPE scholars moving forward.

Managing migration has become an increasingly central aspect of international politics since the end of the Cold War. Along transit routes, trade and economic production have become dependent on easy access to inexpensive migrant labour. The influence of diasporas linking the politics of countries of settlement with the politics of countries of origin creates additional pressures for powerful states to remain a primary security actor across border regions. This chapter explores how surges in population movement are accelerating a securitisation of border control that is blurring the divide between foreign and domestic policy on a global scale.

The Antigua versus US dispute over Internet gambling offers many insights into IPE. In structural terms both the similarities and differences between the nature and treatment of gambling and offshore finance are highlighted. In terms of agency it reveals both the space and limits of creative strategies by smaller actors, and in doing so recalibrates our assessment of negotiating capacity and measures of success. Not only does the IG case counter the notion of the offshore being nebulous, it nuances the image of vulnerability of even a tiny Caribbean state. Still, in the end, as the IG case underscores, it is outcomes not processes that matter. Through the lens of power and interests, the case reinforces the image of classic asymmetry.

This chapter explores the main digital technological innovations currently associated with the Fourth Industrial Revolution—artificial intelligence, blockchain, and the Internet of Things—and their effects on the international political economy. It reviews some of their main benefits and challenges to established structures of the global economy, such as international trade and production, or the monetary and financial system. The chapter highlights that the complex coupling, interdependencies, and pervasiveness of these digital innovations disrupt the practice of international political economy on three dimensions: the established institutions that structure the international political economy, the distribution of authority between state and non-state actors, and the distribution of resources between and within developed and developing states.

This chapter traces a pathway through gender scholarship in and of the global political economy (GPE) to show how feminist and gender scholars are contributing exciting and imaginative work to the discipline of international political economy (IPE). It argues that feminist and gendered interventions in IPE have built significantly different kinds of knowledge about what bodies can and are made to do in the GPE, questioning assumptions about what is normal and natural as people interact with various political, economic, and social processes. Using examples drawn from ongoing and emerging debates concerning gender’s role in global governance and the rise of ‘empowerment’ discourse in and across development, this chapter illustrates how gender scholarship can be applied to the GPE in multiple and important ways.

Since the onset of the Cold War and the subsequent rise of neoliberalism, sport has become a focus of intense interest by governments and corporations alike. While competitive sport has long been infused by politics and commercialism, the rapid intensification and systematic co-mingling of these trends is relatively recent. Sport has become a vehicle through which political-economic interests and objectives are aggressively pursued. This chapter considers some principal explanations for the intensified relationship between sport and International Political Economy (IPE), highlighting the affinity between sport and globalization. It explores the relationship between sport and the branding of companies, localities, and nations. Finally, it considers why and how Sport Mega-Events (SMEs) have emerged as a coveted yet contested means to pursue political-economic interests and objectives.

Until the early twenty-first century, there was a virtual absence of health as a subject of inquiry in the field of international political economy (IPE). However, in recent years health has become one of the key emerging issues in the study of contemporary IPE. In this chapter, we set out the core themes that define this growing field of scholarship. We draw upon the existing literature, from the IPE and health fields, to illustrate these themes including our own research on the IPE of tobacco control. We conclude by assessing the current state of IPE and health scholarship and potential future directions for strengthening research.