The Formation of European Economic Community in the context of International Political Economy Theory

Term Paper, 2010

19 Pages, Grade: A



A. Introduction

B. International political economy theory (IPE)
B.1 What is IPE?
B.2. The aspects of IPE
B.3. Game theory and IPE

C. Introduction to European Economic Community (EEC)
C.1. The economic situation of the EEC member-states

D. Conclusion


A. Introduction

The European Union (EU) is considered as a unique institutional structure not only because of the transfer of the national sovereignty in a supranational level but mostly because of its long term existence and expansion. Although the institutional structure of the EU is much different and undoubtedly improved from the one of the European Economic Community (EEC) the study of the initiating process, namely the EEC, is essential in order to understand what the basis of the recent EU is. Hence, the research for the initiating process of the EEC and sequentially the international context in which the EEC was formed are of great importance not only for the academic scholars but mostly for the European citizens.

The concern of this study is the formation of the EEC under the International Political Economy theory (IPE), which emerged mainly after the Second World War and expanded in the decade of 70s. The cooperation of the leader European states in the formation of this institutional structure and its main task of European cooperation and adoption of common policies in order to achieve the demanded goal of economic development and prosperity is mainly based on the International Political Economy theory, since the last addresses the interaction of international relation and political economy.

The first part of this study is devoted to the analysis of the International Political Economy and forms the theoretical framework of the study. Moreover, it presents the variety of the IPE and stresses its main aspects. Following, there is an introduction of the formation of the EEC and a short analysis of the political economies of the member states, which is helpful in order to have an overview of the different economies and the possible implications for the formation of the EEC. Finally, the conclusion consists of the outputs of the theoretical framework combined with the analysis of the economic situation of the different countries and attempts to present the causal relation between IPE and the formation of EEC.

B. International political economy theory (IPE)

International political economy theory or as it is mostly called IPE introduced in the academic field of international relations in the decade of 70s and particularly after the oil crisis of 1973 and the breakdown of Bretton Woods system[1]. The emergence of this new subject was a response to developments in the world economy, in international security and in the study of economics and international relations[2].

B.1. What is IPE

International political economy (IPE) is not only a field of study in international relations and political economy but it is also considered as a set of global activities and conditions. Furthermore IPE can be interpreted as an ideology that characterizes the international system in distinctively modern, typically liberal terms[3]. IPE should mostly be defined by the particular subject that attempts to explain thus is not a concrete theory or methodology that describes and analyze existing policies and rather than this it seeks to answer why certain policies were implemented by whom and what are the potential benefits for whom. In the context of globalization there is an indisputable interconnection between interstate economies and politics that makes the new subject of IPE more and more necessary in the academic fields of political economy and international relations. Namely, it is becoming salient in the world the inter-relationship between public and private power in the allocation of scarce resources and the importance of different definitions of the term power, which can be seen not only as the capacity of one actor to change the behavior of another but also as the capacity of actors to set the agendas[4]. IPE can be also seen as the field of study between international economics and international relations and attempts to unite these fields or at least to lessen their gap.

The following figure helps us to understand the interconnection between politics and economy in the frame of international or national context. Many scholars have searched the importance of sovereignty in the modern world as the last was formed in the early of 20th century on the grounds of nation-state building. Nevertheless, there is no consensus whether the sovereignty for the modern nation-states is the key point of modern life (political or economical) but the horizontal and vertical premises in Figure 1 and the imagining or potential interconnection between them construct the categorical premise of modernity[5].

Figure 1

illustration not visible in this excerpt

(Source: Burch K., Constituting International political economy, p.21, 1997, Lynne Rienner Publishers)

As the globalization process continues to grow institutional developments in both of politics and international economies occur such as the integration process, which in to some extend consists of a clear proof of such developments. Trade policies, being implemented by domestic or international institutions, play an important role for the function- from an overall view- of global political economy and particularly of international markets. In the modern world is it essential to mention the importance of trade policies such as the imposition of tariff barriers to trade or the abolishment of such barriers between different countries. Moreover, free trade policies or protectionist policies for certain goods been addressed by certain countries are able to change the whole arena of international markets and sequential the whole base for global economy and international political economy. Indisputably the global aspects of finance, the modern financial systems and the labor and capital mobility in the global economy and the foreign direct investment are considered as key factors for the international political economy not only from a theoretical perspective but more from a practical one. In other words, international political economy is being affected and formed by the trade policies, which are being implemented in the context of the global economy.

B.2. The aspects of IPE

The study of IPE has been divided into three main categories, which are also being divided to various approaches. Although the three approaches of IPE are of great importance because each of them deal with different aspects of modernity in politics and in economics. In specific there is the Realist, the Marxist and the Liberal approach of IPE and each of these approaches are defined and contradict with the hidden ideologies that imply so as the separate positions in this trichotomy are often presented as ideologies (requiring true believers) rather than as theories (requiring constant reflections and reformulation)[6]. From this perspective there is a need of understanding the positions of this trichotomy and the different ideologies that these positions address.

Realist IPE

In this context realism is being divided into four distinct positions: the realist, the statist, the mercantilist and the nationalist so as this particular approach has been called as statist, mercantilist or nationalist approach as well. The main perception that all of these positions address is the strategies that are been designed by the individual states in order to 'serve' their individual interests. In other words, all of the distinctions of this approach focus on the optimal state and the potential enhancement of capitalistic accumulation of individual states in order to achieve their individual interests and sequentially to increase the power ± whatever this means ± in the international political and economical arena. The analysis of this category simply shows the importance of individual states in the international arena and their effort of having more and more shares in it ± in terms of power in politics and/or in economies. The pursuit of power and prestige of individual states is often considered as the key factor of developing changes in the global political economy. In addition, it is essential to understand that this specific aspect of IPE attempts to explain how nationalism and national identities affect the economic relations among states (Nationalist IPE) and focuses on the statism and the distribution of power (Realist IPE)[7], which are important factors for the pursuit of the individual interest in the international arena.


[1] Bretton Woods System is the first example of managing international finance by agreed rules upon the institutions that were established in the middle 40s.

[2] Ravenhill J., Global political economy, p.24, 2007, Oxford

[3] Burch K., Constituting International political economy, p.21, 1997, Lynne Rienner Publishers

[4] Ravenhill J., Global political economy, p.19, 2007, Oxford

[5] Burch K., Constituting International political economy, p.21, 1997, Lynne Rienner Publishers

[6] Ravenhill J., Global political economy, p.32, 2007, Oxford

[7] Kirshner J., Monetary order: ambiguous economies, ubiquitous politics, p.113, 2003, Cornell University Press

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The Formation of European Economic Community in the context of International Political Economy Theory
University of Flensburg
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Formation, European, Economic, Community, International, Political, Economy, Theory
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Stavroula Chrisdoulaki (Author), 2010, The Formation of European Economic Community in the context of International Political Economy Theory , Munich, GRIN Verlag,


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