E Pluribus Unum: Dollar Hegemony and Money Creation in IPE

1. The Institutionalist Approach William Dugger believes that when people study the market economy, they generally fall into three separate mindsets: 1) the Integrated, 2) the Alienated 3) the Existential.3 Integrated mindsets are generally at peace with the economy in which they are situated. When they examine the market economy, they see it in terms of multiple equilibriums, perfectly clearing markets, competition and take all non-measurable factors to be either externalities or exogenously determined variables. These mindsets form the majority and fall under the banners of neoclassical economists and liberal and neo-liberal analysts. Alienated mindsets are not at home in their economy: as a consequence, when they analyse the economy, they do so in terms of contradictions and dialectical processes. Dugger believes these analysts form the minority and he attaches the label of "Marxist" to these mindsets. In addition to being 'Marxist' they also can be tagged Gramscian, Environmental and Feminist. Finally, existential mindsets are not at home in either paradigm. Unsure of the economy in which they find themselves, existentialists borrow readily from diverse approaches in order to construct meaning. From these meanings and sets of experiences, existentialists attempt to uncover the processes that have shaped the way the economy was and is. Existentialists form the underground of market analysts along with Marxists; they are the 'Institutionalists'.

Dugger argues that the other paradigms (Marxist and neoclassical) already know that they want to find when they examine the economy; for this, Dugger accuses these approaches of conducting scientism (the use of science as a talisman or justification for what you think you already know (P.xxii)). 'Scientism is a prop; science is a probe" Dugger believes "propping up the old ideas that defend the social establishment has always been rewarded by the social establishment being served. Probing new ideas that may undermine the social establishment has not" (p.xxii). As a digression, one example of how this has played out in the social psychology of economic ideas is in the determination of Nobel Prize awards in the field of economics. Initially, Alfred Nobel did not fund a prize in the field of economics; the Bank of Sweden pushed to create this prize. As Institutionalists, we would have to consider the extent to which this has shaped and influence economic theories that undermine the preferred social orderings of the banking sector and its corresponding class factions.

As Dugger and Chang argue, Institutional political economy (IPE) has the edge over the dominant neo-liberal conceptions of states and markets because of Institutionalism's treatment of power.4 Power is conceived in terms of getting people to do what they would otherwise not, regardless of their will. Institutionalism stresses that an economy is more than the market system.5 Therefore, a key distinction between institutionalists and neo-liberals is in their conception of the market. To neoliberals, the market is the economy; it is separate from the state and determines it. Institutionalists, however, examine the 'capitalist system' as a "range of institutions, including the market as institutions of exchange, the firms as institutions of production and the state as the creator and regulator of the institutions governing their relationships (while itself being a political institution) as well as other informal institutions such as social convention" (Chang, p.546). By focusing on the market as 'economy' neoliberals exclude a much larger picture of the 'capitalist system', so whenever the market interacts with the spheres of social norms, politics, democratic voting rights, etc., neoliberals view this as an 'irrational intrusion' by an outside force - a distortion of the natural, immutable laws of the market. Finally, to clarify, Institutionalists might lean more towards a 'realist' assessment of the state-market relationship; however, the state-market relationship is symbiotic in the sense that states and markets are part of a larger 'capitalist system'.

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