Columbia College International Political Economy Paper

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errzi23

Economics

Columbia College

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International Political Economy, the enormous thought process
The international political economy is primarily viewed as the mutual existence
and relationship between both the state and the market, or politics and economics, and
how it affects the world economy. The three significant ideologies of international
political economy- liberalism, nationalism, and Marxism, while are all very different,
have been practiced and debated for centuries with varying degrees of success. While
liberalism argues that the existence of politics and economics should be in various
spheres with a focus on the market, nationalism believes in the opposite and believes
politics and economics should exist together with the former being subordinate to the
latter with a focus on the state. On the other hand, Marxism rejects both of these
ideologies entirely and criticizes the capitalist order and calls for an overthrow of the
system through political revolution, with an emphasis on socioeconomic classes. None of
the three ideologies are close to perfect, and all certainly have their strengths and
abundances of weaknesses, however, while taking a closer examination of the three
ideologies, liberalism should undoubtedly be viewed as the strongest and most proficient
in the political economy of the world.

The ideology of liberalism places a high degree of focus on capitalism and the
market economy. Liberals believe that the spontaneous development of markets and
fostering of harmony among states are some of the advantages if an international division
of labor based on comparative advantage principle (Gilpin, 12). This belief has mostly
proven to be accurate, as trade does tend to lead to economic growth, which can be
enhanced by international flows of capital, technology, and labor. Also, liberalism is
based on the idea that politics and economics should exist separately and not interact with

one another, as a method to maximize efficiency, which would lead to further consumer
growth. By having the state separated from the market and little state intervention on
trade, liberals argue that individual equality and liberty would grow, which leads to
individuals making rational choices and maximizing their values at the lowest possible
costs. This would, in turn, lead to the growth of their interests and values, but also that of
society as over the long term the market would move towards stability and equilibrium,
which benefits both the producers and consumers. This is also well known as Adam
Smith’s “invisible hand” theory, the idea that with limited government interference on the
market, as individuals trade, the market will naturally “do as it may” and society will be
better off in the long run. By relying so heavily on laissez-faire based economy, liberals
contend that the government should only intervene after the existence of a market failure
or for provision of public or collective good like infrastructure or education (Gilpin, 29).
Liberals further believe in the assumption that since the basis of society is the individual
consumer or household, each has complete information about the economy to conduct
rational decisions to satisfy values at the lowest cost, also known as the laws of supply
and demand.
However, that is not to say there aren’t significant criticisms of liberalism that
should not be overlooked. Liberals believe that economics is a progressive measure,
while politics is rather retrogressive and in part because of this, critics have argued that
many of their assumptions are just unrealistic in a perfect liberal laissez-faire economy. A
major assumption of liberalism is that individuals are all rational in their decisions in the
market. Both Marxists and nationalists claim it is unrealistic for every individual in
society to make perfectly rational decisions. They also claim that as liberals artificially
separate economics from the rest of society, they, in turn, disregard the political sphere
that has a direct impact on the economy. Critics also contend that liberals ignore the
justice of economic activity itself; everyone gains but not in equal terms so as the rich get
richer the poor get poorer. However, this being said, when one takes a look at the other
two systems of international political economy, several, more prevalent faults also exist.
Nationalism, also known as mercantilism, places a strong emphasis on the values
of the state rather than the economy. The function of power in the continual rise of the
market and how economic trade and interdependence leads to conflict, vulnerability, and
exploitation of other nations is often stressed by economic nationalists. This was often
seen in the competitive mercantilist economic system used by the European powers in the
16th through 18th centuries as a measure to strengthen their own states’ power and
economy, which often lead to wars and colonialism of the non-European world.
Nationalists argue that the national economy is adversely influenced by world market
economy as trade leads to further economic decline and underdevelopment of nations,
and as a result the market should be subordinate to the interests of the state, such as its
interests on security of the country and the power of the military in how the international
system functions. Nationalists further believe that both wealth and power are
complementary in their existence and pursuits, however, in the long run, there should be
sacrificed for the good of the state to focus on industrialization, advanced technology,
and economic activities with the highest rate of profitability and unemployment as a way
to achieve self-sufficiency rather than economic interdependence and trade with other
nations. Nationalism also emphasizes the idea of acting as monopolists and to try and

change the rules of the international economic system “to benefit themselves
disproportionality concerning other economic powers” (Gilpin, 32). Economic
nationalism has been enacted numerous times in the history of the United States for
example, such as during and after the Industrial Revolution as expressed by Alexander
Hamilton to stress industry over agriculture and trade, and following both World Wars to
strengthen the nation’s domestic economy.
But despite that we have seen and will likely continue to see nationalism as a
major economic ideology throughout history, there are significant flaws in its system,
which prove it should not be regarded as superior to that of liberalism. Because it focuses
so highly on strengthening the state and pays more attention to politics than liberalism
does, it seems like a sure-fire system. However, the system displays weaknesses and a
misunderstanding of the economic system, such as the fact that it believes international
economic relations is always a zero-sum game when in reality there can be mutual gains
for both parties involved, as pointed out by liberalism. Adam Smith also points out that
weal...


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