PSCI 2223 Lecture Notes - Lecture 15: Economic Liberalism, Hegemonic Stability Theory, Hegemony

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Economic Regimes
Economic liberalism:
Stresses open markets and free trade.
Comparative advantage…
o David Ricardo, 1817.
Stresses that absolute gains are greater than relative gains (refer to Interdependence notes
for more on this).
Trade can benefit all and promote peace.
Economic peace theory…
o Countries will be less likely to go to war with each other if they engage in trade
with each other. Different perspectives view this differently (refer to War, Peace,
and Strategic Defense notes for more on this).
o Realism says that trade creates allies and therefore creates more power (also says
that trade may be more likely to lead to war).
o Liberalism says that trade creates trust and a need for each other.
o Constructivism says that repeated, positive interactions with each other leads to a
sharing of norms and values which increases trust amongst trading countries.
Realist critique…
o How are gains from trade divided?
o Says that relative gains are better than absolute gains.
o Says that interdependence may create conflict rather than mediate it because
countries become fearful that their well-being is dependent on another country
and that they have to give up some of their power to engage in trade.
o Sensitivity…
Do shifts in other’s policies require policy response?
o Vulnerability…
Amount of costs imposed on a state by shifts in other’s policies.
o Mercantilism…
Government regulates the economy to increase power and security.
o Neo-mercantilism…
Non-state actors (IGO’s and MNC’s) promote their national interests of
powerful states.
Capital is mobile.
o Decreased the control that states can have over their own currency.
o Increased level of financial interdependence among states.
Q. Where does capital go?
o Primarily developed economies.
o May be an issue of stability and risk, it is less risky to invest in developed
The birth of institutions:
o Reaction to wars.
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