International Political Economy Case Study

Some of the major questions that are addressed in International Political Economy (IPE) are questions surrounding the debt crisis. Many people want to know how it happened, what made the crisis worse than it originally was, the factors that contributed to worsening it and the plans implemented to improve the situation. To answer this, the role played by Least Developed Countries (LDC) and Developed Countries (DC’s) needs to be evaluated.

The different approaches of IPE are similar to the theories of International Relations. The first approach is Liberalism, they believe that the individuals are the main actors, the main aim of the individual is to gain their own freedom. With the debt crisis, liberalists claim that the developed countries and their behaviour is to blame for the debt crisis. Liberalists say that developed countries should take responsibility (Cohn, 2005: 184). They should do so

The government then was put under pressure and felt a burden due to all of the money that it was owed by LDCs. LDC’s were mostly funded by private banks. These countries declared that they could no longer pay the debt that they needed to pay to these private banks. This resulted in a debt crisis because the countries that were owed money then did not have enough foreign exchange or interest payments when it came to debt (Cohn, 2005: 181).The first LDC to declare that it could no longer pay the debt that it owed was Mexico. It is said that the initial signs that were meant to warn the developing countries were ignored. A vast number of other LDC’s were taking part in talks that were aimed at getting the banks to reschedule debt negotiations (Cohn, 2005: 182). The debt was increasing at a rapid pace. Most LDCs were unable to pay back the debts because they lacked the political capacity and knowledge on economic