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Black Swans, Lame Ducks, and the mystery of IPE's missing macroeconomy

Pages 203-231 | Published online: 17 Apr 2017


Britain's BREXIT vote and Trump's victory in the US presidential elections sent shockwaves through the Western liberal establishment, including academia. Both events suggest yet another ‘rethinking’ of International Political Economy (IPE). Yet we have been here before. After the global financial crisis of 2008, ‘Open Economy Politics’ (OEP) was criticized for being unable to either anticipate or adequately explain the global financial crisis. Now that IPE has been caught short twice in a decade, any rethinking must go beyond critique and beyond OEP. To stop being surprised, we argue that IPE needs to shift its focus from micro-foundations back to macro-effects. IPE today strangely lacks an appreciation for the global macroeconomics that drives the outcomes it has such difficulty explaining, such as recurring financial bubbles, increasing levels of inequality, and the global rise of populism. Bringing the global macroeconomy back into the IPE, we argue, is a necessary corrective.


The authors would like to thank the many helpful comments and suggestions from the anonymous reviewers and the RIPE editorial board, who helped us strengthen this article. The usual disclaimer applies: any and all errors remain our own.

Disclosure Statement

No potential conflict of interest was reported by the authors.


1. See The Guardian, “Pound slumps to 31-year low following Brexit vote,” June 24, 2016. Online available at: https://www.theguardian.com/business/2016/jun/23/british-pound-given-boost-by-projected-remain-win-in-eu-referendum.

2. See The New York Times’ Josh Katz, “Who Will Be President?” The Upshot, November 8, 2016. Online available at: https://www.nytimes.com/interactive/2016/upshot/presidential-polls-forecast.html?_r=0. See also New York Times Live Presidential Forecast at: http://www.nytimes.com/elections/forecast/president.

3. There is an ongoing debate in academia, as well as in the mainstream quality press, whether the main drivers of both the Brexit referendum and the victory of Donald Trump were either ‘socioeconomic’ or ‘cultural-identity’ based. See, for example, Inglehart and Norris (Citation2016). This piece suggests primacy for the former perspective.

4. The GATT/WTO's multilateral trade rounds had taken progressively longer to conclude: the Kennedy Round had taken almost four years to complete (1964–1967), the Tokyo Round more than six years (1973–1979), and the Uruguay Round more than eight years (1986–1994). Therefore, most international trade experts expected the Doha Round to take maybe up to 10 years to be successfully concluded, given the increased complexity of the negotiations. Launched in the autumn of 2001, the talks were originally scheduled to conclude in 2005. But the ‘Doha Development Agenda’ gained new momentum after the annual meeting of the World Economic Forum in Davos in January 2007. Pascal Lamy, the Director-General of the WTO, felt confident to declare a few days later that ‘the political conditions are now more favorable for the conclusion of the Round than they have been for a long time’. See online at https://www.wto.org/english/news_e/news07_e/gc_dg_stat_7feb07_e.htm.

5. For an overview, see, for example, Eichengreen (Citation2006), Kirshner (Citation2008), Helleiner (Citation2008) and Helleiner and Kirshner (Citation2009).

6. For the original thesis of the ‘Great Moderation’, see Bernanke (Citation2004).

7. See, for example, the chapters by David Calleo, and especially by Marcello de Cecco, in Helleiner and Kirshner (Citation2009). For a more skeptical view of the euro's future, see Matthijs and Blyth (Citation2015).

8. See Moravcsik (Citation1998) and Dinan (Citation2010); for a critique, see Parsons and Matthijs (Citation2015).

9. Total IMF credit outstanding for all members reached an all-time low of SDR 9.8 billion by December 31, 2007. Source: IMF (2017), online available at https://www.imf.org/external/np/fin/tad/extcred1.aspx.

10. See Nadkarni and Noonan (Citation2012). For the BRICs’ relationship to the Washington Consensus, see Blyth and Ban (Citation2013).

11. See OECD (2007), International Migration Outlook (Paris). Online available at: http://www.oecd.org/els/mig/internationalmigrationoutlook2007.htm.

12. President Trump later seemed to backtrack, calling the EU ‘wonderful’ and saying that he was ‘totally in favor of it’. See Reuters, 24 February 2017. Online available at: http://www.reuters.com/article/us-usa-trump-eu-idUSKBN1631PM.

13. See Caporaso and Levine (Citation1992), Chapter 6, for an overview. See also Cohen (Citation2008). Note that Marxist IPE theorists, out of the mainstream, especially in the United States, are not so blind to global macro-events and have a definite theory of the global macroeconomy. See, for example, Cox (Citation1986). Their focus also tends to be a ‘systemic’ one where internal contradictions drive collapses. We differ insofar as we are neither historical materialists nor class theorists per se.

14. Compare Frieden (Citation1991) and Frieden and Rogowski (Citation1996), with Mackenzie (Citation2005).

15. For purposes of space, we concentrate on OEP-type approaches, but intend our critique to be broader in scope than a single school. Also, we do acknowledge how ‘macro’ approaches were always at the forefront in the IPE literature on the Global South – unlike the Global North – probably due to the existence of systemic debt crisis. See, for example, Wallerstein (Citation2004) and Hardie (Citation2011).

16. Of course, there were exceptions. For an overview of them, see Helleiner (Citation2011).

17. McNamara (Citation2009, p. 81) feared that: ‘If the real world of IPE is overtaken by future challenges in the world economy, it is not clear that a top flight, highly productive American IPE academy that has rewarded a single narrow orthodoxy will be prepared to respond’. See also Keohane (Citation2009).

18. Oatley's sentiments were echoed by a recent review of the state of the IPE of money for RIPE by Jerry Cohen (Citation2016). Cohen (Citation2016, p. 1) stated that ‘research has become increasingly insular and introspective, largely detached from what goes on in the real world’. Cohen partly blamed what he called the ‘steep decline of interest in broader systemic issues’.

19. Again, see Helleiner (Citation2011) for exceptions. See also Drezner (Citation2014), Kirshner (Citation2014) and Helleiner (Citation2014) for ‘systemic’ IPE accounts of the GFC of 2007/2008 and subsequent ‘Great Recession’.

20. We note later in this article that the ‘New Interdependence Approach’ is different, as it does take into account interdependence, cross-national layering and the shifting system-level boundaries of political contestation. See Farrell and Newman (Citation2014, Citation2015, Citation2016,CitationForthcoming), as well as Moschella (Citation2016).

21. A notable recent exception here is the work by Gabor and Ban (Citation2015) on repo markets, as well as the 2016 special issue on shadow banking in RIPE. See Ban, Seabrooke and Freitas (Citation2016), Gabor (Citation2016) and Helgadóttir (Citation2016).

22. For an overview of the ‘regulation school,’ see Boyer (Citation1990). See also Jessop and Sum (Citation2006), especially part I. The original approach to the ‘varieties of capitalism’ school can be found in Hall and Soskice (Citation2001).

23. For a neo-Polanyian approach to capitalist ‘diversity’, as opposed to homogenizing responses to globalization à la Thomas Friedman, see Bohle and Greskovits (Citation2012).

24. Keohane and Milner (eds.) (Citation1996).

25. Friedman (Citation2000), pp. 101–11.

26. See, for example, Keohane and Milner (eds.) (Citation1996).

27. Meidner (Citation1980), p. 349.

28. Blyth (Citation2002), pp. 79–84.

29. Labour Party (UK) (Citation1945).

30. See Blyth (Citation2002) and Matthijs (Citation2011).

31. Our contribution parallels the recent work by Baccaro and Pontussen (Citation2016) in their rethinking of comparative political economy (CPE). They too build on Keynes’ insights, and especially on Kalecki's, focusing upon the macroeconomic effects of different ‘Growth Models’ and their derivation. Where we differ is that we emphasize not what such models produce, but how they change over time endogenously and systemically. See Bacarro and Pontusson (Citation2016). For a critique of their ‘growth models’ approach, see Hope and Soskice (Citation2016).

32. For example, Thelen (Citation2004).

33. See Hall (Citation1986), Esping-Andersen (Citation1990).

34. See also Baccaro and Pontusson (Citation2016), pp. 181–84.

35. See Blyth (Citation2002), Matthijs (Citation2011) and Widmaier (Citation2016), among many others.

36. According to the New Palgrave Dictionary of Economics, the Lucas critique ‘criticizes using estimated statistical relationships from past data to forecast the effects of adopting a new policy, because the estimated regression coefficients are not invariant but will change along with agents’ decision rules in response to a new policy. A classic example of this fallacy was the erroneous inference that a regression of inflation on unemployment (the Phillips curve) represented a structural trade-off for policy to exploit’. See Ljungqvist (Citation2008).

37. As quoted in Goodhart (Citation1981), p. 116. The original paper appeared in 1975 under the Papers in Monetary Economics Series of the Reserve Bank of Australia.

38. On tight coupling, see Perrow (Citation1984), Guillen (Citation2015), Bookstaber (Citation2007) and Taleb (Citation2014). ‘Entrainment’ is a general property of nonlinear systems where second-order interactions among units create unintended synchronization. The classic example is pendulum clocks on a wall where the vibrations from the pendulums cause them to synch together regardless of their starting points. It is best explained visually, as in this YouTube video: https://www.youtube.com/watch?v=hRWzhQbgBew.

39. This account has some similarities to the endogenous institutional change literature associated with Thelen and Mahoney (eds.) (Citation2009) in terms of objectives, but differs fundamentally in terms of its explanatory apparatus. Rather than view ‘change agents’, ‘layering’, ‘drift’ and other such factors as explanations of change, this account sees such factors as descriptions of change. Ban (Citation2016) applies ‘editing’ and ‘grafting’ to ideas rather than institutions. His key point is that neoliberal ideas won out and then managed to survive multiple shocks because there was more capital behind those ideas, as well as institutional access, and later on, professional status.

40. Bloomberg (Citation2017)

41. For exceptions, see Krippner (Citation2012) and Verdier (Citation2009). See also Fuller (Citation2016).

42. See also Gabor and Ban (Citation2015), Gabor (Citation2016), Ban, Seabrooke and Freitas (Citation2016), and Helgadottir (Citation2016).

43. OECD (2017), Household Debt. Online available at: https://data.oecd.org/hha/household-debt.htm

44. On households, the process of ‘financialization,’ and policy responses in Britain, France and Germany, see Fuller (Citation2016). See also Baccaro and Pontusson (Citation2016), p. 193.

45. See Blyth (Citation2015a), Matthijs (Citation2016b) and Standard and Poor (Citation2016).

46. See Deutsche Welle, “Eurozone Inflation Exceeds ECB Target,” March 3rd 2017, available at: http://www.dw.com/en/eurozone-inflation-exceeds-ecb-target/a-37778774. For a supportive argument regarding the disconnect between money and inflation, see Hung and Thompson (Citation2016).

47. See Matthijs and McNamara (Citation2015).

48. On democracy without solidarity and political dysfunction in hard times, see Jones and Matthijs (Citation2017).

49. For example, Widmaier (Citation2016) offers a complimentary ideational explanation that in many ways acts as the constructivist micro-foundations for this macro-institutional framework.

Additional information

Notes on contributors

Mark Blyth

Mark Blyth is the Eastman Professor of Political Economy at the Watson Institute for International and Public Affairs and the Department of Political Science at Brown University. His research focuses upon stability and change in complex systems, particularly economic systems, and why people continue to believe stupid economic ideas, despite buckets of evidence to the contrary. He is the author of several books, including Great Transformations (Cambridge University Press, 2002), Austerity (Oxford University Press, 2013), and the co-editor (with Matthias Matthijs) of The Future of the Euro (Oxford University Press, 2015).

Matthias Matthijs

Matthias Matthijs is Assistant Professor of International Political Economy at Johns Hopkins University's School of Advanced International Studies (SAIS). His research focuses on the political economy of economic crises, the role of ideas in economic policymaking, the politics of inequality, and European integration. He is the author of Ideas and Economic Crises in Britain from Attlee to Blair (Routledge, 2011) and the co-editor (with Mark Blyth) of The Future of the Euro (Oxford University Press, 2015).

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