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Lecture

POL208Y1 Lecture Notes - Barter, Joseph Goebbels, High Politics


Department
Political Science
Course Code
POL208Y1
Professor
Lilach Gilady

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The Political Economy of International
Relations by Robert Gilpin 12/07/2013
CHAPTER 2 – THREE IDEOLOGIES OF POLITICAL ECONOMY
Ideology – “systems of thought and belief by which [individuals and groups] explain…how their social
system operates and what principles it exemplifies” (Heilbroner, 1985, p.107)
Liberalism, Nationalism, & Marxism are based on different ideas about the role/importance
of ‘the market’ in organizing society/economy
Can be used to conceptualize and study international political economy
The three ideologies are based on different theories about relationships between society, state, and
market
Gilpin uses the word ideology rather than theory to describe the three because the former “allege[s]
to prove scientific descriptions of how the world does work while they also constitute normative
positions regarding how the world should work”
Nationalism: Assumes that politics are more important than economics. “A doctrine of state-
building”; the market is subordinate to the state. Argues that politics should influence economic
relations.
Liberalism: Assumes that politics and economics exist in “separate spheres”; markets should be
free from political interference (for efficiency, growth, and consumer choice in the economy).
Marxism: Assumes that economics drives politics. Political conflict is caused by a “struggle amongst
classes over the distribution of wealth”; political conflict will stop if there is no market or social classes.
The Economic Liberal Perspective
Liberal Political Theory – Individual equality and liberty
Liberal Economic Theory – Free markets and minimal state intervention
Liberal perspective on Political Economy is grounded in Economics as developed in Britain, U.S, and
Western Europe
Economic liberalism, no matter which form it takes, is committed to the market and price mechanism
(demand/supply) as the best way to organize domestic and international relations
Economic Liberalism can be defined as a doctrine and set of principles for organizing and managing a
market economy to achieve maximum efficiency, economic growth, and individual welfare
Economic Liberalism assumes that a market “arises spontaneously” to satisfy human wants and needs,
and it works with “its own internal logic”
Assumes that humans are “by nature economic animals” and markets evolve naturally with no central
direction

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People create markets, money, and economic institutions to better their own wellbeing
Argues that economic activity enhances state security but mostly advocate for it because it benefits
individual consumers; increases the range and quality of goods/services
Individual/consumer/firm/household is the basis of society; individuals act rationally so that they satisfy
wants and needs at the lowest cost to themselves – “rationality applies to only the
endeavor, not the outcome – failure to achieve an objective does not,
according to liberals, invalidate their premise that individuals act based on
cost/benefit or means/ends calculus
Individuals act until cost = benefit
Individuals “seek to acquire an objective until a market equilibrium is reached” – costs and benefits are
equal
Assumes that there is a market where consumers have “complete information” and can select the best
course of action for themselves
Price signals influence production, consumption, & economic institutions
“In a truly competitive market, the terms of exchange are determined by supply/demand, not by the
exercise of power and coercion” – voluntary exchange leaves both parties better off
Economics is assumed to be an EMPIRICAL SCIENCE of “maximizing behaviour” – economic laws are
impersonal and politically neutral, and so economics and politics can be separated; governments
should not interfere with the market
Law of Demand: market economy governed by this law, or assumption, which states that people
will buy more of a good if the relative prices fall, and will buy more if their relative incomes rise
Assumes that individuals pursue interests in a world of scarcity and resource constraints; every
decision involves an opportunity cost – “there is no such thing as a free lunch” – to get something you
have to give up something else
Assume that in the long-term, the market always equalizes and stabilizes, even if it is “thrown into a
state of disequilibrium” because of external factors like a change in consumer preferences or
technologies – key, key idea in liberal economics
The idea is that individual pursuit of self-interest in the market increases
social wellbeing because it leads to maximization and efficiency, and
economic growth that follows benefits all – everyone benefits, although not
equally because individual productivities are different
Society will be more wealthy but individuals are rewarded in terms of their marginal productivity and
relative contribution to the overall social product
Liberals believe in progress (growth of the economy) – even when something like war/revolution/natural
disaster disrupts growth, it will go back to normal eventually

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Liberals don’t see a connection between politics and economics
– they are caused by different factors
(e.g they don’t believe that the rise of capitalism is connected to imperialism)
Believe that economics is progressive, politics is retrogressive
Modern economics is based on liberal assumptions about the economy (as stated above) – economic
laws “are both contingent and normative”
“Liberals believe that trade and economic intercourse are a source of peaceful relations among nations
because the mutual benefits of trade and expanding independence among national economies will tend
to foster cooperative relations. Whereas politics tends to divide, economics tends to unite peoples. A
liberal international economy will have moderating influence on international politics as it creates bonds
of mutual interests and a commitment to the status quo”
Emphasize that while everyone gains absolutely with free trade, relative gains are different – this
is, according to the author, what has given rise to economic nationalism and Marxism as rival
ideologies
The Nationalist Perspective
Themes/attitudes “rather than a coherent and systematic body of economic or political theory”
Economics should be subordinate to state building/state interests
Primacy of the state, national security, and military power in the organization/functioning of the
international system
Two basic positions:
Benign Mercantilism: Believe that protecting national economic interests is the most basic thing
needed to ensure state security
Malevolent Mercantilism: View international economy as “an arena for imperialist expansion
and an increase of national power
Core beliefs as stated by Jacob Viner:
a. Wealth is an essential means of power
b. Power is essential/valuable as a means to the acquisition/retention of wealth
c. Wealth and power are acceptable “end” goals for a national policy
d. The pursuit of wealth and power are complementary goals; sometimes, however, one must
make economic sacrifices for military security (and therefore long-term security and prosperity)
Stress the role of economics in international relations
View the struggle amongst states for economic resources as inherent in the
nature of the international system; every conflict is at once both economic and
political
Main objective: INDUSTRIALIZATION
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