EXAM 1 - Personal.psu.edu

Aaron Dodson
PL SC 083t
First Examination, Prompt #1
Paradigms of IPE
Money talks. Economics is the language in which everyone understands. It is the
determining factor in many, if not all, political decisions, the connection between domestic and
international relations, the backbone of strong alliances, the determining factor in quality of life,
and the striking force of a strong military. If you take economics, the language of the world, add
politics, what I would call the culture of the world, you get the magic mirror that can look into
the inner workings of how the world functions.
International political economy (IPE) offers three basic paradigms on how the world
works. The first is neo-Mercantilism. Neo-Mercantilism is the international and economic based
theory of Realism. To understand the ideals of neo-Mercantilism, we must first understand
Realism. Realists believe that the state is principle and economic actors are agents of the state.
By this I am saying the government controls, and should control, the actions of the market.
Realism has the goal of increasing the relative capabilities of the state in order to protect itself
from the anarchic world of self-interested states. (Frieden and Lake, 2000: 11) It was found
during the early 1900’s that industrialized nations were the strongest and most economically
sound countries in the world. With security being of utmost importance, neo-Mercantilism,
developed off of its domestic partner, Mercantilism, focuses on growing and strengthening the
economy of a country through national industries (Balaam and Veseth, 2001: 32). Going back to
the idea of the state controlling economic actors, Realists and, in turn, neo-Mercantilists believe
in temporary protectionist tariffs on foreign goods to develop domestic infant industries until
they are strong enough to support their countries’ economies in a competitive international level.
The developing of economy is so important because a strong economy means a strong military
force and higher levels of security, the goal of Realism. The political theory of Realism could not
exist in this world without the foundation of its economic sister-theory of neo-Mercantilism.
Liberalism is the next IPE paradigm. As Realists believe the state controls the economic
actors, Liberals believe that the state and economic actors should have no interactions with each
other whatsoever. Liberals believe that through completely free trade and free markets, people
will naturally engage in trade between each other that will result in larger benefits for both
trading partners (Frieden and Lake, 2000: 10). One main argument in Liberalism is that
specialization and comparative advantage will result in higher rates of production and more
goods for both countries engaged in trade. In, The Economist, on trade, a perfect description of
comparative advantage is described under the, “Gains from Trade,” section (The Economist,
1997: 85). This idea of supporting and encouraging free trade is much different than what
Realists say. Whereas Realists would argue these liberal interdependences make states more
vulnerable in the world, Liberals say it creates more security. If countries are dependent upon
each other for trade and economic stability, they are much less likely to defect from trade
agreements because there is no economic advantage to being autarkic and not engaged in trade.
Also, Francis Fukuyama argues that the world is Liberal and that all competing theories to
Liberalism have died out. He believes that if the world isn’t already, it is trending towards a
purely Liberal world system. (Fukuyama, 1989: 5-18) Now, whether you believe in this or not,
he predicts a world of growing interdependences. With growing interdependencies, countries
become less and less likely to engage in military conflict and more likely to engage in trade due
to the fact that military conflicts are so expensive and trade offers economic prosperity.
Liberalism lately has evolved slightly out of this Laissez Faire Liberalism that I have just
been talking about. It now supports small regulations on the market because of Liberalist
support for human rights and equality standards throughout the world. This evolution is, in my
opinion, what creates this wide spread support for Liberalism across the world because it makes
citizens happy with high quality of life while pleasing world leaders with strong
interdependencies for heightened world security.
The final paradigm is neo-Marxism. Neo-Marxism is under the belief that the economic
actors are principle and the state is the agent of the economic actors. This is an interesting
perspective because it directly backs up a statement that I made earlier in this paper when I said
that economics is the determining factor in many, if not all, political decisions. Traditional
Marxism said that capitalism is leading the world into a race to the bottom and that capitalism at
its strongest would fail. However, when capitalism wasn’t failing in the world, Lenin came up
with the reason why. He found that capitalism was surviving due to imperialism which brought a
sense of patriotism to the citizens of the capitalistic states and distracted from the fact that they
had poor quality of life. He called for workers of the world, who were being oppressed by the
capitalistic economic powers, to rise up and overturn the Liberal/capitalistic government.
(Frieden and Lake, 2000: 12) In today’s world, transnational corporations or TNCs are the
vehicle that drives capitalism across the globe. They avoid government regulations because of
their mobility. If one country decides to impose strict regulations on a TNC, that TNC can
simply move to another country with less regulations. These differences in regulations will make
developing nations lower their regulations to attract business and strengthen their economies.
The lower the regulations a country has means the more exploited the workers of that country are
and therefore the lower the social quality of life for their workers. This is the race to the bottom
that Marx and Lenin were talking about. This inevitable problem with capitalism can only be
solved through world-wide regulations or a more popular term, world government. Lenin also
realized that it had to be international revolution because no single country could defeat
capitalism since it would simply spread to the rest of the world. The economic powers, according
to neo-Marxist, control the world.
In comparing and contrasting the three major paradigms of IPE, I noticed the idea of a
world government was a reoccurring theme. In some form or another, all three paradigms call for
some governing international body or force to keep the world in line. For Realists (neoMercantilists) it’s the HST (Hegemonic Stability Theory) that says there needs to be one country
who takes the position of a reluctant leader in the world. (Frieden and Lake, 2000: 12) This
leader is who watches over the world and keeps security and peace. Liberals share this belief that
there needs to be a leader in the world that governs the interactions between states. Whereas
Realists (neo-Mercantilists) believe a hegemon should take this role, Liberals differ slightly in
believing that international institutions should take this role. A possible difference could be that
institutions often are sovereign over their states and a hegemon is only sovereign over itself.
Either way they both believe a governing force is necessary. Neo-Marxist stand right alongside
Realists and Liberalists in their belief that a global government is the only thing that can keep
security and equality in the world. Even though neo-Marxist are fighting against the free market
of Liberalism and disagree with neo-Mercantilists in that the economic actors don’t control the
state, they still call for world government. It’s interesting to see such differing theories be united
under a single idea.
Whether you call yourself a neo-Mercantilist, a Liberalist, or a neo-Marxist, economics
play a strong role in the politics of decision making. In a world with a shaky future due to
environmental issues, possible trade wars, nuclear proliferation, and as some would argue, the
decline of American hegemony, the importance of political and economic relations throughout
the world is more important than ever. Understanding these theories and the international
relations associated with them will help us predict and/or decide where our world is headed.
Frieden, Jeffry A., and David A. Lake. "Introduction: International Politics and International
Economics," in International Political Economy: Perspectives on Global Power and Wealth, 4th
edition, edited by Jeffry A. Frieden and David A. Lake. Boston: Bedford/St. Martin's 2000, pp.
"Trade Winds." The Economist, 8042, No. 345, November 8, 1997, pp. 85-86.
Balaam, David, and Michael Veseth. "Wealth and Power: Mercantilism and Economic
Nationalism," "'Laissez-Faire, Laissez-Passer': The Liberal IPE Perspective", and "Marx, Lenin,
and the Structuralist Perspective," in Introduction to International Political Economy, 2nd
edition. Upper Saddle River, NJ: Prentice Hall, 2001, pp. 25-44, 45-66, 67-86.
Fukuyama, Francis. Conflict After the Cold War: Arguments on Cause of War and Peace, “The
End of History?” Macmillon Publishing Co., 1989, pp. 5-18.