An Analysis of the Dominate Perspectives of International Political Ec

Topics: Economics, Adam Smith, Capitalism Pages: 5 (1557 words) Published: April 22, 2002
In the world of international political economy, three dominant perspectives have emerged over time. The differences and similarities between the realist/mercantilist, liberalism, and historical structuralism perspectives are significant. In this essay, I will compare and contrast these dominant perspectives. First, I will give a historical account of how each perspective originated. Then I will outline the actors involved in each perspective, explore those actors' interests, and outline which of those actors set economic and political policy. Lastly, I will explore how those political and economic actors relate to each other. History

Among the three dominant perspectives, realist/mercantilist is the oldest and some would argue the most important and comprehensive theory . It was developed in Europe during the 15th to 18th centuries and was based on the premise that what best-supported national power and wealth was increasing exports and collecting precious metals, such as bullion . The states would then establish colonies, a merchant marine, and develop industry and mining to attain a favorable balance of trade . In order for the states to be able to fund their expansion, pay for their increasingly large armies and cover the growing costs of their government they needed to accumulate wealth. The state became more involved in the economy favoring export-oriented policies because in order to accumulate the much-needed wealth, the state needed to sell more than it bought, or export more than it imported . Governments started to impose import duties to protect local businesses and provide a source of revenue. Production was also increasingly regulated by the state and economic treaties were struck between states. The problem was; what good was all the accumulated wealth if they cannot protect themselves from invaders? The states quickly learned that wealth and security were intrinsically related and that in order to have and keep one you must have the other . Security, and the accumulation of wealth to pay for the costs of the security, is therefore now considered to be the most important aspects of realism/mercantilism and states now use the economy as a way to generate more wealth and more power .

Liberalism was a reaction against the policies of realism/mercantilism. The French philosophers ‘The Physiocrats' condemned the interference of the government in the economy; they advocated a more ‘Laissez-faire' style economy with no government intervention . Adam Smith, now known to be the father of classical economics, later built on the theories put forth by The Physiocrats in his book ‘The Wealth of Nations' . He argued that when individuals were free to pursue self-interest ‘the invisible hand' of the market would be more effective than the state as a regulator of the economy . Although Adam Smith and his followers were concerned about the abuse of power that the state had under the mercantilist system, they did not argue for an absolute Laissez-faire system, they still found a role for government in places like building infrastructure, creating a legal system, coining money and some regulation of foreign commerce to protect local industries . Later, John Stuart Mill, took this Laissez-faire theory and modified it "advocating limited state action in areas, such as educating children and assisting the poor where individual initiative might be inadequate in promoting social welfare . John Maynard Keynes further adapted the Laissez-faire theory because he was skeptical of the invisible hand's ability to regulate the markets. He argued that government had to step in from time to time to regulate the economy, especially in times of chronic unemployment . Keynes' vision shaped the world economy when it became embedded in the Bretton Woods system of economics that was adopted by the Allied nations after World War Two . In this system, states had an important role within their own borders concerning...

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