International Political

Economy (IPE): Classical Theo

ries

What is IPE
Mercantilism
Economic Liberalism
Marxism

What is IPE
International
Political Economy

IPE
If economics is about the pursuit of
wealth and politics about the pursuit
of power, the two interact in complic
ated and puzzling ways (Polanyi 195
7; Gilpin 1987; 2001). It is this compl
ex interplay in the international cont
ext between politics and economics,
between states and markets, which i
s the core of IPE.

IPE
There is a complex relationship between politics
and economics, between states and markets, that I
R has to be able to grasp. That relationship is the s
ubject of IPE.
We need different theoretical ways of approaching
the connection between politics and economics.
From the possible theories to choose from
(Caporaso 1993) we have selected three theories w
hich most scholars see as the main theories of IPE:
mercantilism, economic liberalism, and Marxism.

Classical Theories
Mercantilism
Economic Liberalism
Marxism
Others

Mercantilism
Classical mercantilism
Neo Mercantilism
East Asian Mercantilism

Mercantilism

Economics is a tool of politics, a basis

for political power. That is a defining
feature of mercantilist thinking.
Mercantilists see the international
economy as an arena of conflict betw
een opposing national interests, rath
er than an area of cooperation and m
utual gain.

Mercantilism
Economic rivalry between states can take two
different forms (Gilpin 1987: 32).
The first is called defensive or 'benign'
mercantilism: states look after their national ec
onomic interests because that is an important in
gredient in their national security
The other form is aggressive or 'malevolent'
mercantilism. Here states attempt to exploit the
international economy through expansionary po
licies

 Mercantilists maintain that the

economy should be subordinated to t
he primary goal of increasing state p
ower: politics must have primacy ove
r economics.
But the content of the concrete
policies recommended to serve that
goal has changed over time.

 Mercantilism posits the economy as

subordinate to the polity and, particularly, th
e government.
Economic activity is seen in the larger
context of increasing state power.
The organization that is responsible for
defending and advancing the national intere
st, namely the state, rules over private econ
omic interests.
Wealth and power are complementary, not
competing goals.

Economic Liberalism
Liberal economics has been called a
doctrine and a set of principles for organi
zing and managing economic growth, an
d individual welfare' (Gilpin 1987: 27).
It is based on the notion that if left to
itself the market economy will operate
spontaneously according to its own mech
anisms or 'laws'.

Economic Liberalism
David Ricardo argued that free
trade--i.e. commercial activities that
are carried on independently of natio
nal borders--will bring benefits to all
participants because free trade make
s specialization possible and /Thus
Specialization increases efficiency
and thus productivity.

Economic Liberalism
Paul Samuelson summarized the
argument as follows: 'Whether or not one
of two regions is absolutely more efficient
in the production of every good than is the
other, if each specializes in the product in
which it has a comparative advantage (gr
eatest relative efficiency), trade will be m
utually profitable to both regions' (Samuel
son 1967: 651)

 Economic liberals thus reject the mercantilist

view that the state is the central actor and fo
cus when it comes to economic affairs.
The central actor is the individual as a
consumer and a producer.
The marketplace is the open arena where
individuals come together to exchange goods
and services.
Individuals are rational in pursuing their own
economic interests, and when they apply that
rationality in the marketplace, all participants
gain.

Economic Liberalism
According to Keynes the market economy is a
great benefit to man, but it also entails
potential evils of 'risk, uncertainty and ignoran
ce'.
That situation could be remedied through
improved political management of the market.
Keynes thus argued in favor of a market which
was 'wisely managed' by the state (Keynes
1963: 321).

 Economic liberals argue that the market

economy is an autonomous sphere of society w
hich operates according to its own economic la
ws.
Economic exchange is a positive-sum game
and the market will tend to maximize benefits f
or the rational, self-seeking individuals, the hou
seholds, and the companies that participate in
market exchange.
The economy is a sphere of cooperation for
mutual benefit among states; as well as among
individuals.

Economic Liberalism
Forms of Liberalism varies by time and
place
Liberalism, which can be divided into:
A) Anglo American individualistic- co
mpetitive form, and B) European soci
al market form.

Marxism
For Marxists, the capitalist economy is based on
two antagonistic social classes:
One class, the bourgeoisie, owns the means of
production; the other class, the proletariat, own
s only its labor power which it must sell to the b
ourgeoisie.
But lab or puts in more work than it gets back in
pay; there is a surplus value appropriated by
the bourgeoisie. That is capitalist profit and it is
derived from labor exploitation.

Marxism
Capitalism means progress for Marx,
in two ways:
First, capitalism destroys previous
relations of production,
Second, and most important for
Marx, capitalism paves the way for a
socialist revolution .

Marxism
Economic production is the basis for all
other-human activities, including politics.
The economic basis consists,
On the one hand, of the forces of production;
i.e. the technical level of economic activity ,
On the other hand, it consists of the relations
of production: i.e. the system of or social
ownership which determines the actual contr
ol over the productive forces

Marxism
First, states are not autonomous;
they are driven by ruling class intere
sts and capitalist states are primarily
driven by the interests of their respe
ctive bourgeoisies.
Second, as an economic system,
capitalism is expansive: there is a ne
ver-ending search for new markets a
nd more profit.

 Marx argued that the process of

capitalist expansion must always be
unequal or uneven, between countrie
s, industries, and firms.
Such disparities and conflicts will
always develop under capitalist condi
tions, argued Lenin. That is the 'law o
f uneven development.'

The difference between Marxist and

realist analysis should be brought to
attention. Both views agree on the p
erennial competition and conflict bet
ween states.

 Marxists argue that conflict between

states varies substantially across hist
ory. Conflict between capitalist states
--and ultimately between capitalist ru
ling classes--is of course connected t
o the capitalist historical era.

New Marxism
More recent Marxist analysis has conceded
this point. The state has some autonomy fro
m the ruling classes, but it is a relativeauton
omy: the basic function of the capitalist state
remains the safeguarding of the capitalist sy
stem. Yet within this general framework, the
state should not be reduced to a simple tool
of others (Carnoy 1984: ch.4). Current Marxis
t thinking has developed this view further.

Marxism
Cox begins with the concept of
historical structures, defined as 'a pa
rticular configuration of forces' (Cox
1996: 97). These historical structures
are made up of three categories of fo
rces that interact: material capabiliti
es, ideas, and institutions.

New Marxism
Cox's analytical framework
social forces

Forms of state

State order

 Social forces' are a shorthand for the

process of capitalist production. An a
nalysis of this aspect will inform us a
bout the present state of developme
nt of the capitalist economy on a glo
bal scale.

New Marxism
World orders' refers to the current
organization of international relations
including relations between major sta
tes and groups of states, the status o
f international law, and international i
nstitutions.

New Marxism
Cox theorizes a complex interplay
between politics and economics, spe
cified as the interaction between soci
al forces, forms of state, and world or
ders.

Neo Marxisim
Another recent neo-Marxist analysis
comes from Immanuel Wallerstein (19
74; 1979; 1983). His starting point is t
he concept of 'world system'. World s
ystems need not physically include th
e whole world; they are unified areas
characterized by particular economic
and political structures.

Neo Marxism
Wallerstein Idea:

Core
Semi Periphery
Periphery

Neo Marxism
In human history, there have been two basic
varieties of world systems: world-empires and
world-economies.
In world-empires, such as the Roman empire,
political and economic control is concentrated in
a unified centre.
World-economies, in contrast, are tied together
economically in a single division of labour, but p
olitically, authority is decentralized, residing in m
ultiple polities, in a system of states.

The capitalist world -economy was

established in 'the long 16th century'
(1450-1640). It was based on an inte
rnational division of labour that cover
ed Europe first, but soon expanded t
o the Western hemisphere and later t
o other parts of the world as well.

Neo Marxism /Wallerstein

A basic mechanism of the capitalist
world-economy is unequal exchange.
Economic surplus is transferred from
the periphery to the core. Surplus is
appropriated from low-wage, low-pro
fit producers in the periphery to highwage, high-profit producers in the co
re.

 There are some similarities between

Wallerstein's world systems analysis of capitalis
m and Waltz's neorealist analysis of the internati
onal system.
Both focus on the system rather than on the
single units or countries; what happens to countr
ies very much depends on their position in the sy
stem.
Both see the system as a hierarchy with strong
states in the top and weak states in the bottom.