The diffusion of liberal economic ideas has been challenged by three global shifts: a bipolar tilt, nationalism, and climate change. One consequence is that policy norms are originating from new places and carry new content. To date, diffusion theory in International Political Economy (IPE) explains how liberal policy norms spread through ‘adaptation’ to local circumstances, but less why they diffuse from particular origins. The three global shifts make a focus on origins critical. I propose integrating Comparative Political Economy (CPE) into diffusion theory to capture the forces and conditions shaping policy norm ‘origination’. Analyzing the global proliferation of green finance policies, I show how China’s closed capital account and state-controlled financial system combined with a state-led and experimentation-prone governance system creates a top-down market-steering approach that makes China a pioneer of policy instruments. Second, I show how the EU’s global economic position, its independent central bank, and a negotiated and consultative governance system create a bottom-up market-facilitating approach that makes the EU a standard-setter of policy content. Adding origination creates a path forward for diffusion theory, exploring how certain political economy traits create roles in the diffusion process and how this impacts the diffusion mechanisms and adaptation processes emphasized today.
Bibliographical notePublished online: 24 April 2023.
- Diffusion theory
- Comparative political economy
- Green finance
- European Union