hInternational Political Economy
IPE is about interplay of economics and politics in world affairs. The core question of IPE is: what drives and explains events in the world economy? For some peoplethis comes down to a battle of ‘states versus markets’. The ‘markets’ for world economy are not like local Street bazaars in which all items can be openly and competitively traded and exhanged. Equally, politicians cannot rule the global economy. World markets and countries, local firms and multinational corporations that trade and invest within them are all shaped by layers of rules, norms, laws, organizations an deven habits. Political scientists like to call all these features of the system institutions. The relationship between states and markets was highlighted by the fact that some states failed to restrain their financial markets. Relations between so called North and South were transforment as emerging economies carved out a new position for themselves in international institutions including in the new G20, while other developing countries remained marginalized. Perhaps suprisingly, the international economic institutions used to manage the crisis were those created in the aftermath of the WWII, in spite of widespread agreement that they needed updating. Liberal vs. Merchantalist Tradition
The liberal perspective suggest that the world economy has the potential to be a seamless global Marketplace in which free trade and the free movemet of capital shape the policies of govts. And economic actors. Order would be achieved by the ‘invisible hand’ of competition in the global market place. Free trade is crucial, for it permits countries to benefit from their comperative advantages. In other words, each country can exploit its own natural advantages, resources and endowments and gain from specialization. The economy is oiled by freely exchangable currencies and open markets that create a global system of prices which like an invisible hand ensures an efficiend and...
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