International political economy (IPE), also known as global political economy (GPE), refers to

either economics or an interdisciplinary academic discipline that analyzes economics, politics

and international relations between states, trade unions, corporations and financial institutions.

There are three main theoretical paradigms:

 Liberalism

Marxism

Mercantilism

These theories play a vital role in reshaping and integrating the international political economy
as it would be discussed below:

Marxism

Marxism is a social, political, and economic philosophy named after Karl Marx, which examines
the effect of capitalism on labour, productivity, and economic development and argues for a
worker revolution to overturn capitalism in favor of communism. Marxism posits that the
struggle between social classes, specifically between the bourgeoisie, or capitalists, and the
proletariat, or workers, defines economic relations in a capitalist economy and will inevitably
lead to revolutionary communism.

Karl Marx (1818-1883) was a German philosopher and economist who did not decry social
discrimination within the society but also explain how international political economy operates
in favour of the rich capitalist class. In his Communist manifesto and Das capital Marx explain
the struggle between various social classes in the society that is the rich capitalist and proliferate.
The rich exploit the poor to maximize profit thus create an uneven society. He advocate for
communism which he sees as the best alternative to capitalism. He equally voice out the notion
of the state being as an accomplice to the rich capitalists.

The fall of the USSR could not justify the end of Marxist doctrine but it equally produces and
reinforces other actors in the international political system like China, Cuba, Venezuela, Bolivia,
North Korea, Vietnam and Cambodia who have actually embraced communist aspirations to
their benefits.
International political economy is made up of three factors of production according to Karl
namely: Society (labor force), Machines (fix capital) and Capital (money) but the rich grabs the
biggest profit which does not constitute the main input of the production process.

In the economic world of today, Karl Marx ideas are still predominantly real.

He argued that the rich own most factors of production but the essential which is labour force
plays a vital role though being neglected by the rich bourgeoisies. Labour plays a vital role in
processing raw material to finish goods but little attention is paid to that respect which makes
society unequal and leads to the exploitation of the proletariat

According to statistics from the World Bank in 2018 the rich owns 89% of the world riches and
only 0.83% of the poor which occupies a population of 86% actually get access to average living
standard thus living the capitalists with absolute wealth over the majority poor.

Big corporations like Goldman Sachs, MTN, Credit Swiss, Gazprom, Amazon and so on are
often hot spot of international political economy where the rich concentrate their wealth and the
few who render their services in such corporations are not been well paid relatively to their
output which plays a vital role in respect to productivity as argued by Karl Marx.

Marx believe in the idea of state being a central player in the distribution of good and services in
international political economy which would aim at limiting the influence of the capitalists that
inflict an unjust justice on the poor thus making a society more equal in relationship within
states. He equally on the other hand affirms the position of the state as an actor which influences
the rich capitalists in International political economy.

Criticism of Marxism

However, Marxism has some criticism which capitalists claim notion is far more too obsolete.

1) Today the middle class have emerge and are investing in stock markets, buying market
shares and some engage in international trade thanks to capitalism and liberalism.
2) Karl Marx did not foresee liberalism as another alternative method in cooperation which
state could engage and create opportunity for the less privileged thus, create jobs that
benefit the common citizen without necessarily discriminate in favour of the capitalists.
In a nutshell, Marxism ideology cannot be rejected in our contemporary political economy due to
the visibility of a great China which has emerge as a strong actor in international political
economy with a solid political-marketing system based on communism. Marxism idea fought to
a certain extent against unequal or unjust society created by the capitalists and this further help
create theories like liberalism that help bridge the gap between the rich and the poor in
international economy with state having and immense control over wages, working hours and
services which a given economy can produce. However, the idea of a socialist state remain an
idea state which Marx envisioned to satisfy the unequal class differentiation in the society but
the answer remains open for any given Political economist to examine which context best
describe his ideologies in respect to a given society.

Mercantilism

Mechanism is an economic theory where the government seeks to regulate the economy and
trade in order to promote domestic industry often at the expenses of other countries.
Mercantilism is associated with policies which restrict imports, increase stocks of gold and
protect domestic industries.

Mercantilism stands in contrast to the theory of tree trade which argues countries economic
wellbeing can be best improved through the reduction of tariffs and fair free trade

Note three key points about mercantilism

- Mercantilism was an economic system of trade that spanned from the 16th century to the
18th century. Mercantilism was based on the idea that a nation’s wealth and power were
best served by increasing trade. Mercantilism arouse in France in the early 16th century.
Soon after the monarchy had become the dominant force in France politics.
- Mercantilism is based on the idea that a nation’s wealth and power were best served by
increasing exports and so involved increasing trade.
- Under Mercantilism, nations frequently engaged their military might to ensure local
markets and supply resources.

History of Mercantilism
First popularized in Europe during the 1600s mercantilism was based on the idea that a nation’s
wealth and power were best served by increasing exports in an effort to collect precious metals
like goal and silver.

Mercantilism replaced the feudal economic system in Western Europe. At the time England was
epicenter of the British Empire but had relatively few natural resources. To grow its wealth,
England introduced Fiscal policies that discouraged colonists from buying foreign products
while creating incentives to only buy British goods. For example the sugar Act of 1764 raised
duties on foreign refined sugar and molasses imported by the colonies, in an effort to give British
Sugar growers in the West Indies a monopoly on the colonial market.

Similarly, the Navigation Act of 1651 forbade foreign vessels from trading Along the British
coast and required colonial exports to pass through British control before being distributed
throughout Europe programs like the resulted in a favorable balance of trade that increased Great
national wealth.

Under Mercantilism, Nations frequently engaged their military might to ensure local markets and
supply sources were protected to support the idea that a nation’s economic health heavily relied
on its supply of capital. Mercantilist also believed that a nation’s economic health could be
assessed by its levels of ownership of precious metals like gold or silver which tended to rise
with increased new home construction, increase agricultural output and a strong merchant fleet to
provide additional markets with goods are raw materials

Mercantilism involves

- Restrictions on imports tariffs barriers, quotas or non-involved tariffs

- Accumulation of foreign currency reserves, plus goal and silver reserves (known as bulionism)
in the 16th and 17th century it was believed that the Accumulation of goal reserves (at the
expenses of the other country) was the best way to increase the prosperity of a country.

- granting of state monopolies to particular firms especially those associated with trade and
shipping

- Subsidies of export industries to give a competitive advantage in global markets.

-Government investment in research and development to maximize the efficiency and capacity of
the domestic industry

-Allowing copyright intellectual theft from foreign companies

-Limiting wages and consumption of the working classes to enable greater profits to stay with
the merchant class

- Control of colonies for example making colonies buy from empire country and taking control
of colonies wealth.

Criticisms of Mercantilism

1) Adam Smith “The wealth of Nations” 1776 argued for benefits of free trade and criticized
the inefficiency of monopoly.
2) Theory of comparative advantage (David Ricardo).
3) Mercantilism is a philosophy of a zero sum game where people benefit at the expense of
others. It is not a philosophy for increasing global growth and reducing global problems
trying to impoverish other countries will harm its own growth and prosperity. By
contrast, if we avoid zero sum game of mercantilism increasing the wealth of other
countries can lead to selfish benefits for example growth of Japan and Germany led to
increased export markets for United Kingdom and United States.
4) Mercantilism which stresses government regulation and monopoly often lead to
inefficiency and corruption.
5) Mercantilism justified empire building and the poverty of colonies to enrich the empire
country
6) The growth of globalization and free trade during the post war period showed
possibilities from opening markets and respective other countries as equal players.

Conclusion Mercantilism remains alive and well, and its continuing conflict with
liberalism is likely to be a major force shaping the future of the global economy. Today,
 Mercantilism is typically dismissed as an archaic and blatantly erroneous set of ideas
about economic policy.

Liberalism

Liberalism is a diverse body of thoughts, overlooking the anarchic realist approach of states as
the sole actors in the global economy instead, liberalists focus on the behaviour of individuals
(entities of corporations and interest groups) as contributing actors toward the interests of states
(Ravenhill, 2017). Liberals trust that individuals have the natural ability to avoid conflict of
interests through cooperation and interdependence.

This is supplemented with the use of democratic rights to pursue free, rational decisions that
maximizes economic interests with the absence of state control. Cooperation thus offers liberals
free movement and activity in the economy (production and consumption), as the capitalist
system is based on equality. This is significant to economic liberals and economic interests
showing support for equal, free trade under supply and demand chains, open markets, and
movements of profit and labour for economic prosperity. This further promotes globalization and
market integration on an international and domestic level.

The European Union (EU) is a strong supporting entity of economic liberalism. They provide
favourable trade agreements (like the EPA) to other states with mutual interests for development
(von Ahn & Willman, 2015). EPA’s aim to fuel free, unrestricted trade activity through
competing open markets between entities to advance export activity for capital, and thereby
growth. Other examples include the World Trade Organization as the parent institute for (global)
liberalized trade policies. The Critical Perspective These theories are critical because they
investigate the systemic nature of the world found today.

First and foremost, liberal international political economy (IPE) is the offspring of a marriage
between mainstream international economics with its focus on markets and mainstream
international relations with its emphasis on the state. While clearly involving the traditional
disciplines of economics and political science, liberal scholarship in IPE tends to be housed
almost exclusively in the latter.
Criticisms of liberalism

1) Liberalism has not fully address the problem of exploitation of the poor by the rich in
global political economy.
2) The rich still dominate the poor thus; create an unequal relationship as Karl Marx
explained.

3) Cooperation has infringed into state sovereignty thus creating loopholes for both
international political, economic actors and mechanisms to suppress the state.

However, liberalism has made enormous gains in the current political economy in addressing
poverty reduction through creation of jobs. They have equally encouraged cooperation through
the sharing of economic intelligence with the use of banking systems and industrial corporations
thus help improve living standards. In a nutshell liberalism remains a key factor towards the
development, cooperation and integration between states in international political economy.

In conclusively, the world today is an international political economy. Even though super power
or small and poor states are involving in international trade with the influence from politic.
International Political Economy is a conscious shift towards understanding issues of wealth and
poverty; of who gets what in the international system (Aston, 2004). Economic outcomes almost
always have political implications. Economic policies are determined by politic because different
policy choices generally have varying effects on the distribution of wealth or the economic
outputs (Walter & Sen, 2009). In short, IPE is the theory which best explain the world today.

References

https://www.e-ir.info/2010/05/18/theories-of-international-political-economy/

https://www.investopedia.com/terms/m/marxism.

https://www. britannica.com/topic/mercantilism
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