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An Analysis of The Dominate Perspectives of International Political Economy

In the world of international political economy, three dominant perspectives have emerged over time. The differences and similarities between the realist/mercantilist, liberalism, and historical structuralism perspectives are significant. In this essay, I will compare and contrast these dominant perspectives. First, I will give a historical account of how each perspective originated. Then I will outline the actors involved in each perspective, explore those actors interests, and outline which of those actors set economic and political policy.

Lastly, I will explore how those political and economic actors relate to each other. History Among the three dominant perspectives, realist/mercantilist is the oldest and some would argue the most important and comprehensive theory . It was developed in Europe during the 15th to 18th centuries and was based on the premise that what best-supported national power and wealth was increasing exports and collecting precious metals, such as bullion . The states would then establish colonies, a merchant marine, and develop industry and mining to attain a favorable balance of trade .

In order for the states to be able to fund their expansion, pay for their increasingly large armies and cover the growing costs of their government they needed to accumulate wealth. The state became more involved in the economy favoring export-oriented policies because in order to accumulate the much-needed wealth, the state needed to sell more than it bought, or export more than it imported . Governments started to impose import duties to protect local businesses and provide a source of revenue. Production was also increasingly regulated by the state and economic treaties were struck between states.

The problem was; what good was all the accumulated wealth if they cannot protect themselves from invaders? The states quickly learned that wealth and security were intrinsically related and that in order to have and keep one you must have the other . Security, and the accumulation of wealth to pay for the costs of the security, is therefore now considered to be the most important aspects of realism/mercantilism and states now use the economy as a way to generate more wealth and more power . Liberalism was a reaction against the policies of realism/mercantilism.

The French philosophers The Physiocrats condemned the interference of the government in the economy; they advocated a more Laissez-faire style economy with no government intervention . Adam Smith, now known to be the father of classical economics, later built on the theories put forth by The Physiocrats in his book The Wealth of Nations . He argued that when individuals were free to pursue self-interest the invisible hand of the market would be more effective than the state as a regulator of the economy .

Although Adam Smith and his followers were concerned about the abuse of power that the state had under the mercantilist system, they did not argue for an absolute Laissez-faire system, they still found a role for government in places like building infrastructure, creating a legal system, coining money and some regulation of foreign commerce to protect local industries . Later, John Stuart Mill, took this Laissez-faire theory and modified it advocating limited state action in areas, such as educating children and assisting the poor where individual initiative might be inadequate in promoting social welfare .

John Maynard Keynes further adapted the Laissez-faire theory because he was skeptical of the invisible hands ability to regulate the markets. He argued that government had to step in from time to time to regulate the economy, especially in times of chronic unemployment . Keynes vision shaped the world economy when it became embedded in the Bretton Woods system of economics that was adopted by the Allied nations after World War Two . In this system, states had an important role within their own borders concerning domestic economic policy while free markets regulated trade among states.

The Bretton Woods system dominated the international political economy for decades, and many of its policies are still in place today . As liberalism had emerged in response to the realist/mercantilist perspective, historical structuralism emerged as a critique of liberalism and its capitalist ideals. Karl Marx, the grandfather of historical structuralism, critique of liberalism had two main points. First, he criticized the premises on which the liberal political economy is based.

Second, he criticized the liberal notion that the modern economy must be founded on the private property of the means of production . Marx focused most of his analysis on the national economies of the state and how the class structure that was present lead to exploitation, conflict and crisis with nation states . Vladimir Ilyich Lenin built on Marx theories of imperialism and the exploitive nature of the relationship between industrial countries and their colonial possessions .

The perspective was further expanded upon by theorists such as Immanuel Wallerstein, Theotonio Dos Santos, Andre Gunder Frank, and put to the test in, among other places, Russia, China and Cuba . The perspective has changed a great deal over the decades since its first inception but the central tenets remained intact; that the capitalist system and the structures it supports are inherently biased towards certain classes of people and states . The Actors Each perspective believes that different actors are the most relevant ones within international political economy.

Realism/mercantilism believes that states are the most important actors in the international system. They feel that in our system of anarchy and self-help that power is the ultimate arbiter of conflict and since there is no over-arching authority above states, then states are the most important actors because they hold the most power . Realism/mercantilism asserts that the states interest is security, and that while this security is intertwined with the strength of the economy, they feel that the economy must be controlled somewhat by the government of the state to ensure security.

The world view of the main actors in realism/mercantilism is purely political. . Liberalism on the other hand does not believe that states are the main actors in the international system. It is the liberals belief that the most important actors are individuals and in the world of political economy, that belief is extended to firms . Liberals assert that firms and individuals are self-interested acting to maximize their utility through the free market.

Although they feel there is a place for government, they are highly critical of any state intervention in the economy. The world view of the main actors in liberalism is economic. In the historical structuralism perspective it is the belief that neither the state nor individuals are the most important actors in the international system, they affirm that it is the different social classes, created by the dominance of one class over another, which is inherent in the capitalist system, that are the most important actors .

In fact, within the Gramscian paradigm of historical structuralism, they believe that the role of the corporate sector is instrumental in guiding the policies of states . Their world view is that due to the way economics and politics intertwine, they are equally important. Interaction of the Actors The view of each of these perspectives regarding how the different actors interact and who sets economic policy is as diverse as the theories themselves. Realism/mercantilism believes that due to a system of anarchy that is inherently conflictual, it is the state that must set economic policy.

Because of its emphasis on national power, realism/mercantilism asserts that governments must exert control over the economy to maximize the wealth of the nation in order to build and strengthen national security. Contrary to the realism/mercantilism perspective, liberalism posits that the economy should be free of all but a very few government policies. Liberals argue that it is the invisible hand that controls the market within a state and that the government should not interfere but merely set international economic policy according to where the market is headed within the state.

It views the relationship of the actors as one in which the economy dictates to government the economic policies it should set. Historical structuralism views these relationships between actors in a completely different manor altogether. They contend that the relationship between politics and economics is inherently intertwined and that neither dictates policy or is dominant over the other but instead both work together to form economic policy.

They maintain that the corporate sector guides the economic policies of the state and the state in turn regulates the corporate sector with favorable intervention. In summary, after examining the origins of each perspective, and exploring the main actors, which set policy and how they relate, it has become clear that while each theory has been put into practice and have all failed and succeeded to some extent, no one theory can accurately sum up the incredibly complex world of international political economy.

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