Collage of Law and Governance Studies

School of Law

Bachelor of laws

Course: Global Affairs (GITr 1012)

Group Assignment on

THEORETICAL PERSPECTIVES IN INTERNATIONAL POLITICAL ECONOMY

Group Members

Name: ID. Number

1. Hayat Bikana LGE/1707/13

2. Matiyas Abera LGE/4880/13

3. Minda Tesga LGE/1357/13

4. Nebiyat Mamo LGE/5294/13

5. Nuri Aman LGE/2470/13

6. Ruth Bekele LGE/6373/13

Submitted to: Instructor Gashaw Ayferam

July, 2021

Addis Ababa, Ethiopia

THEORETICAL PERSPECTIVES IN INTERNATIONAL POLITICAL ECONOMY

Introduction
The field of international political economy highlights four dominant theories that provide
political-economists a rich understanding on how entities behave and interact with each other. The
theories stem from competing historical perspectives that are used to clarify not only political
objectives of state relations found today, but also their economic development objectives within
the global political economy. This paper will discuss the definition of international political
economy and the perspective theories of Liberalism, and the Critical Perspectives of Structural
Marxism and Mercantilism, all acting as pillars to modern ideologies.

What Is International Political Economy?

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. When it is used to refer to the latter, it usually focuses on political economy
and economics, although it may also draw on a few other distinct academic schools, notably
political science, also sociology, history, and cultural studies. IPE is most closely linked to the
fields of macroeconomics, international business, international development and development
economics.

The term political economy is derived from the Greek polis, meaning "city" or "state", and
oikonomos, meaning "one who manages a household or estate". Political economy thus can be
understood as the study of how a country—the public's household—is managed or governed,
taking into account both political and economic factors. Political economy is a very old subject of
intellectual inquiry.

There are three major theoretical perspectives: those are liberalism, Maxism and nationalism
(Mercantilism).

1. Economic Liberalism (often called Laissez-faire liberalism, or internationalism, or globalism).

The theories of liberalism were stated best by Adam Smith in The Wealth of Nations, 1776.
The key to national wealth and therefore national power is economic growth. The key to

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economic growth is free trade – the free flow of goods and services and investment across
borders. Political leaders should allow trade between nations to expand and deepen and keep
government intervention in that trade down to a minimum. This means that imports (products
from other nations’ companies that are sold in your nation) and exports (products from your
nations’ companies that you try to sell in other countries) should flourish with as little
restriction as possible.

Liberalism is a diverse body of thoughts, overlooking the anarchic realist approach of states as
the sole actors in the global economy (Smith, El-Anis, & Farrands, 2014). Instead, liberalists
focus on the behavior 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 (Smith, El-Anis, & Farrands, 2014). 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 labor for economic prosperity.
This further promotes globalization and market integration on an international and domestic
level.

Economic liberalism is a political and economic ideology based on strong support for a market
economy and private property in the means of production. Although economic liberals can also
be supportive of government regulation to a certain degree, they tend to oppose government
intervention in the free market when it inhibits free trade and open competition. Economic
liberalism has been described as representing the economic expression of classical liberalism.

Liberals want the marketplace to make the economic decisions, not the government. This may
not make sense yet, but it will further down the page. Just hold the thought for a moment.
Here’s the problem as liberals see it. Governments have several tools they use to interfere or

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 influence the flow of trade: tariffs, quotas, non-tariff barriers, and bans. Let’s talk about tariffs
first and explain their purpose.

As an economic system, economic liberalism is organized on individual lines, meaning that the
greatest possible number of economic decisions are made by individuals or households rather than
by collective institutions or organizations. An economy that is managed according to these
precepts may be described as liberal capitalism or a liberal economy.

2. Mercantilism (also called economic nationalism)

Mercantilism is an economic policy that is designed to maximize the exports and minimize the
imports for an economy. It promotes imperialism, tariffs and subsidies on traded goods to
achieve that goal. The policy aims to reduce a possible current account deficit or reach a current
account surplus, and it includes measures aimed at accumulating monetary reserves by a
positive balance of trade, especially of finished goods. Historically, such policies frequently
led to war and motivated colonial expansion. Mercantilist theory varies in sophistication from
one writer to another and has evolved over time.
Mercantilism was dominant in modernized parts of Europe, and some areas in Africa from the
16th to the 19th centuries, a period of proto-industrialization, before it fell into decline, but
some commentators argue that it is still practiced in the economies of industrializing countries,
in the form of economic interventionism. It promotes government regulation of a nation's
economy for the purpose of augmenting state power at the expense of rival national powers.
High tariffs, especially on manufactured goods, were almost universally a feature of
mercantilist policy.
It is most closely associated with the political philosophy of realism, which focuses on state
efforts to accumulate wealth and power to protect society from physical harm or the influence
of other states. In theory, the state is a legal entity and an autonomous system of institutions
that governs a specific geographic territory and a “nation.” Since the mid-seventeenth century,
the state has been the dominant actor in the international community based on the principle
that it has the authority to exercise sovereignty (final authority) over its own affairs. States use
two types of power to protect themselves. Hard power refers to tangible military and economic
assets employed to compel, coerce, influence, fend off, or defeat enemies and competitors. Soft

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 power comprises selective tools that reflect and project a country’s cultural values, beliefs, and
ideals.

Mercantilism is A body of economic doctrine reflecting the interest of the mercantile capitalist,
giving dignity and importance to the merchant and trade, characterized by its promotion of
nationalism, a strong government and justification of a policy of economic and military expansion,
which is a manifestation of the less importance attached to market forces. It appeared between the
middle Ages and the period of the triumph of Laissez-Faire. It came with the ascendance of the
mercantile capitalist and trade in Western Europe. It was characterized by its promotion of
nationalism, giving dignity and importance to the merchant, justification of a policy of economic
and military expansion, belief in gold and silver as the most desirable form of wealth, emphasis
on export and restriction on import in the interest of the mercantile capitalist.

3. Structuralism Marxism
Structural Marxism The theory propounds on Marxism and Economic Structuralism. They are
understood to be synonymous in ideology and reactions to the liberal capitalist system.
Marxism views the economic society to be divided into two respective classes (D'Anieri,
2014). It does this by utilizing a ‘surplus-value extraction’ tactic (D'Anieri, 2014). The rich
(aristocrats) becomes richer by exploiting the poor through modes of production for maximized
capital (Ravenhill, 2017). In order to maximize capital, aristocrats concentrate on growing
labour forces and lowering wages which raises ethical concerns to labour treatment, given the
‘input-to-wage’ (capital) imbalances. Nonetheless, these provide aristocrats advantage of high-
profit margins with low-costs in production. Marxism therefore sees the capitalist system and
aristocrat’s dependent on the labour force to obtain their lucrative interests and growth.
Economic Structuralism links the global organization of states to Marxism (Viotti & Kauppi,
2010). States are seen unevenly dependent upon each other and are divided by class (Viotti &
Kauppi, 2010). This division emerges between the ‘centre’ richer states and the ‘periphery’
poorer states, where the latter is exploited and prone to limited capital from the former
(Ravenhill, 2017). The ‘periphery’ will trade a variety of commodities for low-capital, which
the ‘centre’ will buy for the manufacturing of goods using labour for further trading.
Manufactured goods are traded for a higher capital than what the commodities were bought
for, solely enriching centre states, similarly to the aristocrats.

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 It is rooted in Marxist analysis but not limited to it. It looks at IPE issues mainly in terms of
how different social classes are shaped by the dominant economic structure. It is most closely
associated with the methods of analysis many sociologists employ. Structuralisms emphasize
that markets have never existed in a social vacuum. Some combination of social, economic,
and political forces establishes, regulates, and preserves them. As we will see in the case of the
financial crisis, even the standards used to judge the effectiveness of market systems reflect
the dominant values and beliefs of those forces.

The socialist critics of classical economics preached dramatic reform; their objection to
capitalism and its alleged evils was moral. Karl Heinrich Marx (1818–1883), the leading
theoretician of “scientific socialism,” dismissed that approach. He sought to show that capitalism
had internal contradictions that would ensure its eventual demise. Marx believed that social
revolution was inevitable within advanced capitalist countries, and he and his compatriot
Friedrich Engels (1820–1895) advocated that the workers of the world unite to hasten this event.
Our objective in this chapter is to develop Marx’s ideas in a systematic way. After examining
biographical details and looking at intellectual influences, we develop Marx’s theory of history.
Then we take a detailed look at the components of his “law of motion” of capitalism. Finally, we
critically assess his thinking.
Karl Marx clearly interpreted the recent and current economic phenomena and foretold the future.
His appearance on the scene, therefore, marks a transition of socialism from 'utopian' to
'scientific.' The earlier socialists could not succeed in establishing what they wanted simply
because they appealed to sentiments to prove "the desirability of the aesthetic beauty of
socialism.'" They never endeavored "to prove, by economic reasoning, the inevitability of
socialism; to mingle together economic argument and an interpretation of history, and thereby to
show that, things being as they are, their consequences will be what they will be; and that the only
outcome, ineluctable and inescapable, is the establishment of the socialist state."

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References

1. D'Anieri, P. (2014). International Politics: Power and Purpose in Global Affairs

International 3rd Edition.Florida,USA:Wadsworth Cengage Learning.
2. O'Brien, R., & Williams, M. (2013). Global Political Economy Fourth Edition.
Hampshire:PALGRAVEMACMILLAN.
3. Ravenhill, J. (2017). Global Political Economy 5th Edition. University of Waterloo,
Canada.:OxfordUniversityPress.
4. Smith, R., El-Anis, I., & Farrands, C. (2014). International Political Economy in the 21st
Century: Contemporary Issues and Analyses. Kentucky, USA: Routledge Publication.
5. Viotti, P., & Kauppi, M. (2010, October 13). International Relations Theory. In Economic
Structuralism:Global Capitalism and Postcolonialism. New York, USA: Longman
Publications. Retrieved March 13, 2017, from
http://www.waynemclean.com/docs/notes/Viotti%20and%20Kauppi%20-
%20Economic%20Structuralism.pdf
6. von Ahn, P., & Willman, L. (2015). The EU-SAD Economic Partnership Agreement.
UMEA UNIVERSITET. Retrieved Febuary 21, 2017, from http://www.diva-
portal.se/smash/get/diva2:902928/FULLTEXT01.pdf

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