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


Mark Blyth and Matthias Matthijs in Review of International Political Economy:

Like the Bourbons of old, who learned nothing and forgot nothing, the narrow loss of right-wing populist Norbert Hofer in the Austrian presidential elections, or the defeat of Prime Minister Matteo Renzi's constitutional reforms in Italy just a month after Trump's victory, failed to register as important, let alone connected to prior events. At the time of writing, the spread between German Bunds and French Trésors has steadily widened as financial markets began to price in the real possibility that Marine Le Pen, leader of the extreme-right Front National, may actually win the French Presidential elections in May 2017. Contemporary International Political Economy (IPE) theory has pretty much nothing to say about these events. Sadly, this is nothing new, since it was no different a mere decade before.

Back in early 2007, both scholarly and elite conventional wisdom agreed on the following. The ongoing multilateral Doha round of the World Trade Organization (WTO) was going to take some time to negotiate, but it would be completed in the not too distant future. Unsustainable global macroeconomic imbalances were thought to increase the risk of a US dollar crash. The world economy was blessed by a ‘Great Moderation’ in volatility wrought by the technocratic competence of independent central bankers. The euro was going to be the new international reserve currency of choice and a beacon of monetary stability. Further economic and political integration was still the choice for Europe despite temporary setbacks around the adoption of a proposed constitutional treaty. The IMF looked like it would soon have to shut down its operations because there were no more financial crises lurking around the corner. The ‘BRICs’ were going to substantially increase their overall clout in global economic governance. And finally, international migration flows would only continue to intensify. So what actually happened?

More here.