Recent developments in Europe, and especially the ongoing meltdown in Ireland, should force political economists to reevaluate how well their theories can explain the perpetuation of current international regimes. The past twenty years of IPE theorizing has been exceptionally exciting and productive, but as Kathleen McNamara and others have argued the tendency toward intellectual monoculture may have left the discipline without a toolkit for understanding tectonic shifts in international actors’ behavior.

In the 1990s, the Washington consensus attained something of the status of divine writ. Good governance may have been difficult to establish, but it was at once straightforward and persistent. All governments had to do was let the rule of law take hold, establish some private property rights, and hold some elections and, presto, they would reach the end of history. In the past decade, each of these recommendations and a host of corollaries has been shown to be either vastly more difficult than assumed or actively counterproductive. To take just one example, international relations theorists now argue that although democratic countries are less likely to go to war among themselves, democratizing countries are much more bellicose than the run-of-the-mill authoritarian state. (This of course implies that the Friedman Conjecture–shared by both Milton and Tom–that an economically liberalizing China would be a politically liberalizing China may lead to an outcome of which neither of the Friedmen would have approved.)

During the past several years, IPE scholars have often chosen to focus more on the more-easily measured behavior of agents within existing institutions instead of the probably more substantively important behavior of agents seeking to revise or replace those organizations. Which draws us back to Ireland. Conventional political economists have sought to explain the Irish example by looking at past IMF interventions and focusing on the narrow (but important) questions of how such international institutions allow states to credibly bind themselves to necessary but draconian actions they would otherwise be unable to sustain. But this analysis is badly misguided, since it ignores the rather obvious point that the states now threatened by financial contagion have options that the Asian countries subjected to the currency crisis did not. European states are massively wealthier and more influential than Thailand or Indonesia; unlike Jakarta and Bangkok, Paris and Berlin can simply rewrite the rules to benefit the bulk of their citizens who are not international creditors.

Would they? I expect they will. An editorial from the Irish Times suggests why:

IT MAY seem strange to some that The Irish Times would ask whether this is what the men of 1916 died for: a bailout from the German chancellor with a few shillings of sympathy from the British chancellor on the side. There is the shame of it all. Having obtained our political independence from Britain to be the masters of our own affairs, we have now surrendered our sovereignty to the European Commission, the European Central Bank, and the International Monetary Fund. … The Irish people do not need to be told that, especially for small nations, there is no such thing as absolute sovereignty. We know very well that we have made our independence more meaningful by sharing it with our European neighbours. We are not naive enough to think that this State ever can, or ever could, take large decisions in isolation from the rest of the world. What we do expect, however, is that those decisions will still be our own. A nation’s independence is defined by the choices it can make for itself.

I would not be surprised if the Irish government at some point in the next six months breaks its most recent commitments to Brussels and M. Strauss-Kahn. (In doing so, they would be following Iceland’s brazen but apparently successful course.) Moreover, I fully expect that whatever “punishment” is meted out to Ireland to that transgression will be forgotten within a decade. Equally, I expect the eurozone to do what everyone believed was impossible as recently as seven or eight months ago: to shrink to the point where it is an actual optimal currency area, which is to say that it will probably be Germany, France, Benelux, and some German quasi-possessions on its borders (Austria, the Czech Republic, and Slovakia).

A social science that proceeds inductively from a limited wealth of experience will likely be unable to grapple with really important shifts in political behavior. Generalizing from the international arrangements that governed the world economy over the past sixty years to the actions we can expect influential actors to take in the next decade is wrong-headed. It is time, instead, to begin preparing both scholars and policymakers or a world in which debt defaults are once again policy tools, states reassert their primacy over economics, and protectionism and capital controls are put back on the table.