The Political Economy of International Relations

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11 Apr 2012
POL208Y1: Introduction to International Relations January 10th, 2012.
The Political Economy of International Relations
Gilpin, Robert. 1987. The Political Economy of International Relations. Princeton:
Princeton University Press. pp. 25-64
Three Ideologies of Political Economy
The three ideologies: liberalism, nationalism, and Marxism
Ideology: system of thought and belief by which [individuals and groups] explain
how their social system operates and what principles it exemplifies
Conflict among 3 moral/intellectual positions revolve around role and
significance of market in organization of society and economic affairs
Three ideologies differ on broad range of questions: what is the significance of
the market for economic growth and the distribution of wealth among groups and
societies? What ought to be the role of markets in the organization of domestic
and international society? What is the effect of the market system on issues of war
or peace?
Three ideologies are different in their conceptions of relationships among society,
states, and market
Every controversy in field of international political economy is reducible to
differing conceptions of these relationships
Economic liberalism, Marxism, and economic nationalism define the conflicting
perspectives that individuals have w/ regard to implications of market system for
domestic and international society
Term „ideology‟ is used rather than „theory‟ because each position entails a total
belief system concerning the nature of human beings and society and is thus akin
to what Thomas Kuhn has called a paradigm
Economic nationalism (originally called mercantilism), which developed from
practice of statesmen in early modern period, assumes and advocates the primacy
of politics over economics
It is a doctrine of states building and asserts that the market should be subordinate
to the pursuit of state interests
It argues that political factors do, or should determine economic relations
Liberalism, which emerged from Enlightenment in writing of Adam Smith, was
reaction to mercantilism and has become embodied in orthodox economic
It assumes that politics and economic exist, at least ideally, in separate spheres; it
argues that marketsin the interest of efficiency, growth, and consumer choice
should be free from political interference
Marxism, which appeared in mid-19th century as reaction against liberalism and
classical economics, holds that economics drives politics
Political conflict arises from struggle among classes over distribution of wealth
Political conflict will cease w/ elimination of market and society of classes
The Liberal Perspective
Liberal economic theory is committed to free markets and minimal state
Liberal political theory is committed to individual equality and liberty
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POL208Y1: Introduction to International Relations January 10th, 2012.
Liberal perspective on political economy is embodied in discipline of economics
Liberalism has assumed many formsclassical, neo-classical, Keynesian,
monetarist, Austrian, rational expectation, etc
These variants range from those giving priority to equality and tending toward
social democracy and state interventionism, to those stressing liberty and
noninterventionism at the expense of social equality
All forms of economic liberalism are committed to the market and the price
mechanism as the most efficacious means for organizing domestic and
international economic relations
Liberalism: a doctrine and a set of principles for organizing and managing a
market economy in order to achieve maximum efficiency, economic growth, and
individual welfare
Economic liberalism assumes that market arises spontaneously in order to satisfy
human needs and that, once it is in operation, it functions in accordance w/ its
own internal logic
Humans beings are by nature economic animals, and therefore markets evolve
naturally without central direction
To facilitate exchange and improve their well being, people create markets,
money, and economic institutions
The rationale for a market system is that it increases economic efficiency,
maximizes economic growth, and thereby improves human welfare
Although liberals believe that economic activity also enhances the power and
security of the state, they argue that the primary objective of economic activity is
to benefit individual consumers
Their ultimate defense of free trade and open markets is that they increase the
range of goods ad services available
Fundamental premise of liberalism is that individual consumer, firm, or household
is the basis of society
Individuals behave rationally and attempt to maximize or satisfy certain values at
the lowest possible cost to themselves
Rationality applies only to endeavor, not to outcome
Thus, failure to achieve an objective due to ignorance or some other cause does
not, according to liberals, invalidate their premise that individuals act on the basis
of a cost/benefit or means/ends calculus
Liberalism argues that an individual will seek to acquire an objective until a
market equilibrium is reached; until the costs associated w/ achieving the
objective are equal to the benefits
Liberalism assumes that a market exists in which individuals have complete
information and are thus enabled to select the most beneficial course of action
Individual producers and consumers will be highly responsive to price signals,
and this will create a flexible economy in which any chance in relative prices will
elicit a corresponding change in patterns of production, consumption, and
economic institutions; the latter and conceived to be the product rather than the
cause of economic behaviour
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