136 Tom Conley globalization and the way it is commonly understood provides a significant challenge to the IPE agenda. Arguments about the ‘limits of politics’ and the ‘decline of the state’ pose the possibility that political factors will once again be downgraded in the discussion of ‘economic’ developments and analyses of the ‘economy’. The chapter contends, therefore, that a focus on the state as the mediator between the domestic and the world political economies should remain an essential, but not exclusive, component of IPE. Indeed, this is because of, not despite, contentions about a new era of globalization. The chapter also maintains that analytical distinctions between politics and economics, and between the global and the domestic, remain essential to understanding the world, despite pleas to remove dualisms or dichotomies in IPE and the assertion that such distinctions are now meaningless in light of globalization. I argue that the task of international political economy remains the investigation of these complex interrelationships and to maintain a focus on the significance of political action.
Defining political economy Scholars in IPE have varying views on the appropriate subject matter of their discipline. To make some sense of efforts to define IPE, it will be useful to begin by defining ‘political economy’. Caporaso and Levine (1992: 7) argue that ‘when we say that economics and politics are separate, we mean only that they are analytically distinct’. Such a conception requires a further digression to define what is meant by ‘politics’ and ‘economics’. Politics can be identified with government and governing, with what is public, or with the authoritative allocation of values. In contrast, the term ‘economic’ originates from the ancient Greek language, in which it refers to the management of the household. Today, most economists equate economic activity with the market, and see the market as the best mechanism for producing and distributing goods and services, both domestically and internationally. Hence economics and politics are alternative ways of making allocations regarding scarce resources. Politics refers not to the formal structures of government but to a distinctive way of making decisions about producing and distributing resources. Unlike economics, which emphasizes juridically voluntary exchange, the system of political allocation involves authority. (Caporaso and Levine 1992: 16) When considering economics and politics as alternative ways to allocate values (and thus separating them analytically), it is necessary to consider the ways that economic factors shape political factors, and vice versa. If we consider politics as the authoritative allocation of values and economics as involving voluntary exchange, it is essential to note that politics shapes the structures within which ‘free’ exchange takes place and that power derived from free exchange in turn affects the political process. In other words, the two domains of activity are analytically separable but inextricably intertwined. Each is shaped by continuing interaction with the other. It is also important to note that this definition of politics is a broad one, extending beyond association with what governments or states do. Politics defined as ‘what governments do’ often contributes to its negative image in public discourse. ‘Politics’ is often seen as a fundamental impediment to ‘the free market’, rather than its essential prerequisite. Electoral pressures and excessive societal expectations, many economists argue, impede