INTERNATIONAL POLITICAL
ECONOMY
EXAM NOTES
Red
foundational knowledge (theories/analytical building blocks) – inside looking out
Week 1: Introduction and Analytical Perspectives in IPE
Week 2: Analysing international politics - conflict and Cooperation
Week 3: Analysing International Economics: Supply and Demand
Week 4: The Political Economy of Trade Liberalization
Week 5: Exchange Rates and the Balance of Payments
Green
Systemic features of IPE, “the outside looking in”, are often related to the
previous theoretical week
Week 8: Introduction to Global Governance and the Liberal (Dis)Ord
Week 10: Africa and Global Economic Governance (The WTO)
Week 12: Africa and Global Economic Governance (The IMF and World
Bank)
Blue
Thematic issues – outside looking in
Week 6: Colonialism and Economic Development in Africa
Week 9: Africa and the Geopolitics of “Critical Mineral
Week 13: The dark underbelly of Globalisation
Inside lookout out – within countries, who are the who are the “winners” and
“losers” of different policies?
The focus was on the analytical building blocks of IPE and problem-solving
skills.
Outside looking in - International institutions like the WTO and IMF have
implications for domestic policymaking.
, The Political Economy and Economic Policy
Understanding political economy
Definition and History: Historically, thinkers like Adam Smith and
David Ricardo did not view politics and economics as separate fields.
John Stuart Mill’s Principles of Political Economy (1848) was a foundational
text for the discipline.
The Great Divide: In the early 20th century, the fields became separate
disciplines as governments reduced direct control over the economy and
new political forms emerged.
Re-convergence: Since the 1970s, economic and political matters have
become increasingly intertwined due to events like the collapse of the
Bretton Woods monetary order, oil price shocks, and stagflation.
Modern Crises: Recent events like COVID-19 highlight how political
realities, such as prioritizing upcoming elections over long-term expert
advice, can lead to policy failures.
The Bidirectional Relationship
Politics Affects the Economy: Voters and interest groups influence
economic policy decisions. Governments may intentionally boost the
economy before an election to create a "political business cycle".
Economy Affects Politics: Macroeconomic trends, such as growth and
inflation, are often strong predictors of election results, particularly in the
U.S. presidential race.
Economic Tools in Politics: Political economists often view politicians as
analogous to firms, while voters are treated as consumers.
The Conflict of "Winners and Losers"
Distributional Struggles: Economic policy is rarely about what is best
for the whole of society; instead, it is a battle over who wins and who
loses.
The Compensation Problem: A core principle is that winners typically
resist being taxed to compensate the losers of a policy change.
Case Study - The Sugar Industry: In the U.S., consumers pay higher
prices for sugar because a small, highly organized group of sugar
farmers successfully lobbies for subsidies and trade barriers. Because the
cost is only a few cents a day for the average consumer, there is little
public protest.
, Industrial Conflicts: Policy battles often occur between groups, such as
steelmakers wanting trade protection and automakers (steel users)
wanting free trade to keep costs low.
The Role of Institutions
Institutions determine how political pressure is managed and which groups
successfully influence policy.
Social Institutions: These refer to how groups like workers or farmers
organize themselves. For example, farmers in rich countries are often
well-organized and subsidized, while those in poor countries are often
unorganized and taxed.
Political Institutions: These mediate pressure on leaders. Even in
authoritarian regimes, rulers must consider a "selectorate" (the portion
of the population that matters to them, such as the military or economic
elite).
Electoral Institutions: This influence how politicians behave. Political
parties tend to have longer-term horizons to protect their reputations,
whereas individual politicians may focus only on the next election.
o Example: The U.S. Electoral College makes "middle of the road"
voters in Midwestern industrial states pivotal, often leading to
protectionist policies for manufacturing.
Legislative Institutions: Centralized systems allow national
governments to rule unchallenged, whereas federal systems (like in
Australia, Canada, or the USA) grant significant power to provincial or
state governments.
Global and Local Realities
Global Threats: Challenges like pandemics or financial crises require
global responses, yet nationalist pressures often lead countries to
hoard resources, which can worsen the situation.
Swing Voters: In democracies, politicians often tailor policies to swing
voters—those who are not strictly loyal to the left or right—to secure
election victories.
International Politics and International
Economics
Definitions and Core Concepts
Political Economy: The study of the interplay between economics and
politics.
, Economy: A system designed for the production, distribution, and use of
wealth.
Politics: The set of rules and institutions that govern social and economic
interactions.
Two Perspectives of Study:
o Political basis for economic actions: Investigates how
government policies influence the way markets operate.
o Economic basis for political action: Investigates how economic
forces shape and mold government policies.
Market Dynamics and Government Intervention
Market Clearing Equilibrium: In capitalist societies, markets ideally
function through price adjustments to reach a point where the number of
goods supplied equals the number demanded (the intersection of supply
and demand curves).
Non-Economic Influences: Market operations are not solely driven by
supply and demand; they are affected by changing technology, consumer
tastes, and the ability of producers or buyers to organize and influence
prices (e.g., OPEC and petroleum).
Political Influence: Political pressure groups, politicians, and bureaucrats
have a significant effect on economic outcomes. Governments use various
tools to alter economic variables, including:
o Taxation and government spending.
o Tariffs and rent controls.
o Wage and price controls.
Historical Evolution of the Field
The Integrated View: Early thinkers like Adam Smith, John Stuart,
and Karl Marx viewed the economy and politics as inherently tied to one
another.
The "Divorce" (19th to mid-20th Century): The two fields became
increasingly separated:
o Economists focused on mathematical models and the formalization
of the laws of supply and demand.
o Political Scientists focused on representative institutions, mass
parties, and bureaucracies in isolation from the economy.
The Re-Integration (Post-1970): Academics became dissatisfied with
abstract models that did not reflect actual behavior, leading to a renewed
focus on how the two realms are interrelated.
ECONOMY
EXAM NOTES
Red
foundational knowledge (theories/analytical building blocks) – inside looking out
Week 1: Introduction and Analytical Perspectives in IPE
Week 2: Analysing international politics - conflict and Cooperation
Week 3: Analysing International Economics: Supply and Demand
Week 4: The Political Economy of Trade Liberalization
Week 5: Exchange Rates and the Balance of Payments
Green
Systemic features of IPE, “the outside looking in”, are often related to the
previous theoretical week
Week 8: Introduction to Global Governance and the Liberal (Dis)Ord
Week 10: Africa and Global Economic Governance (The WTO)
Week 12: Africa and Global Economic Governance (The IMF and World
Bank)
Blue
Thematic issues – outside looking in
Week 6: Colonialism and Economic Development in Africa
Week 9: Africa and the Geopolitics of “Critical Mineral
Week 13: The dark underbelly of Globalisation
Inside lookout out – within countries, who are the who are the “winners” and
“losers” of different policies?
The focus was on the analytical building blocks of IPE and problem-solving
skills.
Outside looking in - International institutions like the WTO and IMF have
implications for domestic policymaking.
, The Political Economy and Economic Policy
Understanding political economy
Definition and History: Historically, thinkers like Adam Smith and
David Ricardo did not view politics and economics as separate fields.
John Stuart Mill’s Principles of Political Economy (1848) was a foundational
text for the discipline.
The Great Divide: In the early 20th century, the fields became separate
disciplines as governments reduced direct control over the economy and
new political forms emerged.
Re-convergence: Since the 1970s, economic and political matters have
become increasingly intertwined due to events like the collapse of the
Bretton Woods monetary order, oil price shocks, and stagflation.
Modern Crises: Recent events like COVID-19 highlight how political
realities, such as prioritizing upcoming elections over long-term expert
advice, can lead to policy failures.
The Bidirectional Relationship
Politics Affects the Economy: Voters and interest groups influence
economic policy decisions. Governments may intentionally boost the
economy before an election to create a "political business cycle".
Economy Affects Politics: Macroeconomic trends, such as growth and
inflation, are often strong predictors of election results, particularly in the
U.S. presidential race.
Economic Tools in Politics: Political economists often view politicians as
analogous to firms, while voters are treated as consumers.
The Conflict of "Winners and Losers"
Distributional Struggles: Economic policy is rarely about what is best
for the whole of society; instead, it is a battle over who wins and who
loses.
The Compensation Problem: A core principle is that winners typically
resist being taxed to compensate the losers of a policy change.
Case Study - The Sugar Industry: In the U.S., consumers pay higher
prices for sugar because a small, highly organized group of sugar
farmers successfully lobbies for subsidies and trade barriers. Because the
cost is only a few cents a day for the average consumer, there is little
public protest.
, Industrial Conflicts: Policy battles often occur between groups, such as
steelmakers wanting trade protection and automakers (steel users)
wanting free trade to keep costs low.
The Role of Institutions
Institutions determine how political pressure is managed and which groups
successfully influence policy.
Social Institutions: These refer to how groups like workers or farmers
organize themselves. For example, farmers in rich countries are often
well-organized and subsidized, while those in poor countries are often
unorganized and taxed.
Political Institutions: These mediate pressure on leaders. Even in
authoritarian regimes, rulers must consider a "selectorate" (the portion
of the population that matters to them, such as the military or economic
elite).
Electoral Institutions: This influence how politicians behave. Political
parties tend to have longer-term horizons to protect their reputations,
whereas individual politicians may focus only on the next election.
o Example: The U.S. Electoral College makes "middle of the road"
voters in Midwestern industrial states pivotal, often leading to
protectionist policies for manufacturing.
Legislative Institutions: Centralized systems allow national
governments to rule unchallenged, whereas federal systems (like in
Australia, Canada, or the USA) grant significant power to provincial or
state governments.
Global and Local Realities
Global Threats: Challenges like pandemics or financial crises require
global responses, yet nationalist pressures often lead countries to
hoard resources, which can worsen the situation.
Swing Voters: In democracies, politicians often tailor policies to swing
voters—those who are not strictly loyal to the left or right—to secure
election victories.
International Politics and International
Economics
Definitions and Core Concepts
Political Economy: The study of the interplay between economics and
politics.
, Economy: A system designed for the production, distribution, and use of
wealth.
Politics: The set of rules and institutions that govern social and economic
interactions.
Two Perspectives of Study:
o Political basis for economic actions: Investigates how
government policies influence the way markets operate.
o Economic basis for political action: Investigates how economic
forces shape and mold government policies.
Market Dynamics and Government Intervention
Market Clearing Equilibrium: In capitalist societies, markets ideally
function through price adjustments to reach a point where the number of
goods supplied equals the number demanded (the intersection of supply
and demand curves).
Non-Economic Influences: Market operations are not solely driven by
supply and demand; they are affected by changing technology, consumer
tastes, and the ability of producers or buyers to organize and influence
prices (e.g., OPEC and petroleum).
Political Influence: Political pressure groups, politicians, and bureaucrats
have a significant effect on economic outcomes. Governments use various
tools to alter economic variables, including:
o Taxation and government spending.
o Tariffs and rent controls.
o Wage and price controls.
Historical Evolution of the Field
The Integrated View: Early thinkers like Adam Smith, John Stuart,
and Karl Marx viewed the economy and politics as inherently tied to one
another.
The "Divorce" (19th to mid-20th Century): The two fields became
increasingly separated:
o Economists focused on mathematical models and the formalization
of the laws of supply and demand.
o Political Scientists focused on representative institutions, mass
parties, and bureaucracies in isolation from the economy.
The Re-Integration (Post-1970): Academics became dissatisfied with
abstract models that did not reflect actual behavior, leading to a renewed
focus on how the two realms are interrelated.
