International Relations and Heterodox Economics: Exploring Global Dynamics Through Alternative Economic Theories

International relations (IR) and economics are deeply interconnected, with economic theories playing a critical role in shaping foreign policy, trade, and diplomatic strategies. While mainstream economic theories like neoclassicism often dominate discussions on global economics, heterodox economics offers alternative perspectives that challenge conventional ideas. Heterodox economics encompasses a variety of schools, including Marxism, institutional economics, post-Keynesianism, and ecological economics, each offering unique insights into global power structures, inequality, sustainability, and the role of the state. Integrating heterodox economics into IR allows for a richer understanding of the complex factors influencing international relations and global economic systems. This article explores key theories from heterodox economics and examines how they enhance our understanding of IR.

1. Marxist Theory of Capitalism and Imperialism

The Marxist theory views capitalism as an inherently exploitative system that drives imperialism, as powerful states seek new markets and resources to maintain their economic dominance. In IR, this theory explains how economic interests fuel conflicts and inequalities between developed and developing countries. The Marxist perspective helps explain how powerful nations often exert control over weaker states through economic pressure, creating dependency and perpetuating inequality on a global scale.

2. Dependency Theory
Emerging from Marxist thought, dependency theory posits that underdeveloped nations remain economically dependent on developed countries, reinforcing global inequalities. According to this theory, developed nations control the global economy by extracting resources and labor from peripheral nations, which hinders the economic growth of these countries. In IR, dependency theory provides insight into the persistent power imbalance between the Global North and South and highlights the structural obstacles that developing nations face in achieving economic autonomy.

3. World-Systems Theory
Developed by Immanuel Wallerstein, world-systems theory divides the world economy into core, semi-peripheral, and peripheral nations, with wealth and resources flowing from the periphery to the core. This hierarchy fosters unequal relationships and perpetuates global disparities. In IR, world-systems theory illuminates how economic dominance by core nations impacts trade, foreign aid, and international policies, leading to a system in which peripheral nations struggle to achieve development independent of core nations’ influence.

4. Institutional Economics and Path Dependency

Institutional economics examines the role of institutions—laws, social norms, and policies—in shaping economic behavior and outcomes. The concept of path dependency, central to this school, suggests that historical events and institutional decisions create enduring effects on economic development. In IR, institutional economics underscores how historical relations, such as colonialism, continue to affect international power dynamics, influencing trade agreements, alliances, and development policies.

5. Post-Keynesian Theory of Effective Demand and Economic Stability

Post-Keynesian economics emphasizes the role of effective demand—demand that sustains full employment—in economic stability. Unlike neoclassical models that assume markets naturally reach equilibrium, post-Keynesians argue that aggregate demand drives economic growth. In IR, this theory explains why countries may engage in trade policies or economic alliances to stimulate demand and maintain stability, highlighting the importance of government intervention in achieving global economic stability.

6. Feminist Economics and Gender Relations

Feminist economics critiques the traditional exclusion of gender analysis from economic theory, arguing that unpaid labor and gender inequality significantly impact economic systems. This approach highlights the invisible contributions of women’s labor and advocates for economic policies that address gender disparities. In IR, feminist economics provides a framework for analyzing how gender inequalities shape economic policies, trade agreements, and development initiatives, emphasizing the need for inclusive policies that promote social equity.

7. Ecological Economics and Sustainability

Ecological economics integrates environmental considerations into economic analysis, recognizing that economies are embedded within ecological systems. It challenges the notion of infinite economic growth, arguing that sustainability requires a balance between economic activity and environmental limits. In IR, ecological economics underscores the importance of sustainable development in global policies and highlights the environmental implications of trade, resource extraction, and international agreements on climate change.

8. Behavioral Economics and Decision-Making

Behavioral economics examines how psychological factors influence economic decisions, challenging the assumption of rational behavior. Concepts like bounded rationality and loss aversion illustrate how emotions and cognitive biases shape choices. In IR, behavioral economics provides insights into how world leaders, diplomats, and policymakers make decisions, revealing that economic and political actions are not always rational but are influenced by psychological factors that impact global negotiations and alliances.

9. Modern Monetary Theory (MMT) and Sovereign Currency

Modern Monetary Theory (MMT) posits that governments that issue their own currency can create money to fund public spending without the risk of default. This theory challenges conventional views on debt and deficit, suggesting that currency-issuing nations have greater fiscal flexibility. In IR, MMT offers a new perspective on debt diplomacy, as powerful nations with sovereign currencies can use monetary policy as a tool of influence, while developing nations with limited fiscal sovereignty face financial constraints that impact their foreign relations and economic independence.

10. Structuralist Development Economics

Structuralist economics focuses on the structural challenges developing countries face, such as limited industrialization and technological dependency. This theory advocates for state-led industrial policies to build self-sufficiency and reduce dependency on developed countries. In IR, structuralist development economics highlights the need for policies that support industrialization and technological advancement in developing countries to achieve economic resilience and independence from global powers.

11. Evolutionary Economics and Innovation

Evolutionary economics views the economy as an evolving system where innovation and adaptation drive growth. Economic change is seen as a continuous process shaped by competition and technological advancement. In IR, evolutionary economics explains how technological innovation impacts global power dynamics, as countries that lead in technological advancements gain a strategic advantage in trade, military power, and influence. This theory highlights the importance of innovation in maintaining economic and geopolitical competitiveness.

12. Social Economics and Well-Being
Social economics integrates social and ethical considerations into economic analysis, focusing on well-being rather than just profit. This approach advocates for policies that promote social welfare, reduce inequality, and enhance quality of life. In IR, social economics provides a framework for understanding how economic policies impact social welfare across nations, encouraging a shift toward international agreements and trade policies that prioritize human well-being over profit maximization.

13. Bioregional Economics and Localism

Bioregional economics emphasizes the importance of local production and consumption, advocating for economic systems that are tailored to specific regional ecological and cultural conditions. This approach challenges globalization, arguing that decentralized, localized economies are more sustainable and resilient. In IR, bioregional economics suggests that countries can reduce dependency on global supply chains by strengthening local economies, promoting self-reliance, and reducing environmental impact through localized production.

14. Radical Political Economy and Class Struggle

Radical political economy draws from Marxist and neo-Marxist theories, focusing on the role of class struggle and power dynamics within capitalism. This perspective argues that economic policies often reflect the interests of the ruling class rather than the needs of the population. In IR, radical political economy provides insight into how global power structures and economic policies serve the interests of powerful nations and multinational corporations, often at the expense of the working class and developing nations.

Integrating Heterodox Theories into International Relations Analysis

The inclusion of heterodox economic theories in IR offers a multi-dimensional view of global relations, one that goes beyond traditional market-focused perspectives. These alternative theories provide critical insights into the power dynamics, inequalities, and environmental challenges that shape international relations. Rather than assuming rationality, efficiency, or equilibrium as givens, heterodox economics encourages a more critical and human-centered approach to IR, accounting for complexities that mainstream economics may overlook.

For example, dependency theory and world-systems theory underscore the structural challenges faced by developing nations in the global economy, providing a basis for understanding why certain countries struggle to achieve economic independence. Feminist economics brings attention to gender disparities in global economic policies, highlighting how international agreements and trade policies can perpetuate inequality. Ecological economics stresses the environmental consequences of global economic activities, urging policymakers to consider sustainability in trade and diplomatic decisions.

Applying Heterodox Theories to Contemporary Issues in International Relations

Heterodox economic theories offer valuable frameworks for analyzing contemporary global challenges, from climate change to economic inequality.

1. Climate Policy and Ecological Economics

As the global community grapples with climate change, ecological economics provides a framework for understanding the need for sustainable policies in international agreements like the Paris Agreement. This approach encourages nations to prioritize environmental protection over economic growth, emphasizing the interconnectedness of ecological and economic systems.

2. Trade and Dependency Theory

Dependency theory sheds light on the unequal terms of trade that keep developing nations reliant on developed economies. This perspective can inform discussions on fair trade policies, foreign aid, and economic sovereignty, emphasizing the need to create a more balanced global economy that supports the development of under-resourced nations.

3. Technological Innovation and Evolutionary Economics

As technological advancements shape the global economy, evolutionary economics explains how innovation drives power dynamics. Countries that invest in research and development gain economic and geopolitical advantages, impacting trade, military strength, and international influence.

4. Debt Diplomacy and Modern Monetary Theory

MMT challenges conventional ideas on national debt, providing insight into debt diplomacy and how powerful nations use debt as leverage in foreign relations. This perspective is particularly relevant to understanding the financial constraints facing developing countries and the role of monetary policy in international power dynamics.

Conclusion: A Holistic Approach to International Relations By integrating heterodox economic theories

into IR, we gain a more comprehensive understanding of global relations, recognizing the economic, social, and environmental dimensions that shape international dynamics. Heterodox economics challenges us to look beyond profit and market efficiency, encouraging a focus on equity, sustainability, and well-being. In a world facing complex challenges like climate change, economic inequality, and technological disruption, these alternative theories provide valuable frameworks for shaping policies that promote a more just and sustainable global order. By considering a broader range of perspectives and values, heterodox economics can help international relations scholars and policymakers better address the root causes of conflict, inequality, and environmental degradation. The inclusion of these alternative approaches fosters a more inclusive, empathetic, and adaptable understanding of global interdependence. Ultimately, embracing heterodox economic theories in international relations can contribute to the creation of more effective and equitable solutions to the pressing challenges of our time, leading to a more harmonious and resilient global community.