International political economy Essay

International political economy


This paper aims to discuss the core arguments of mercantilism, economic liberalism, and Marxism and determine which among these theories is the better one. It also aims to discuss what measures hegemony and how it is measured in international political economy alongside the role of large states and international institutions in the governance of the international economy. The kinds of political responses that globalization triggered shall likewise be an aim of this paper, whether globalization leads to universal “Americanization” and whether it brings peace or instability in the world.

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Mercantilism, economic liberalism, and Marxism are economic concepts that dwell on the economic policies of a state. It goes on to say that a complex relationship exists between politics and economics, as well as between states and markets and this relationship is necessarily interconnected.

The Core Arguments of Mercantilism, Economic Liberalism, and Marxism

            The core arguments of mercantilism is geared towards government intervention in the economy in order to prevent imports of goods that allow trade surplus to run and accumulate gold. This concept is exercised today in governments’ pursuit to prevent imports in order to increase workers’ job security. The mercantilist concept dwells on the argument that a fixed stock of wealth (gold) is possessed by the world, which nations should gear on obtaining at the expense of their neighbors. This is reflected in the idea that if a particular country such as the United Sates would halt itself from trading with other nations,  it will be ahead by several billions than the others (Hetzel, 1994). The theory of mercantilism sees no contradiction between accumulating gold and individual well-being, which is seen today as lack of contradiction between measures in limiting competition, and individual well-being (Hetzel, 1994).  The theory of mercantilism has in its core concept the positive trade balance whose aim is to propagate a protective trade policy, including import duties and tariffs. Adam Smith himself describes this nature of mercantilism as having a gigantic conspiracy on the part of master manufacturers and merchants in order to lure consumers and the public and cheat them. The mercantile theory is hence, viewed as a rent-seeking policy developed by special interests. It is structured behind the idea that trade among nations allows others to gain in which others lose. It holds on to the concept of protectionism in its aim to support a special interest alongside a positive balance of trade. The 17th century saw the resurgence of this concept in which the benefits drawn were however used as a state -making in which it expresses the economic interest of the state and looks at economic wealth as a rational means ton extend the state’s political power. It suggests that economics is a tool of the state, which is also a basis of political power.  This is a defining feature and one of the core arguments of the mercantilist thinking. It indicates that states should be bothered about economic gains of other states, since that material wealth may be tantamount to serve as a basis for military-political power that can be used against other states.

            On the other hand, the core arguments of economic liberalism is dwelt on its linkage with the neoclassical analysis of competitive markets and rejects the mercantilist view of the state being a central actor and focus of economic affairs. The core arguments of economic liberalism lies on the construct that the individual is the central actor, being a consumer or a producer, of economic activity. The marketplace serves as the open arena in which individuals can participate as either a consumer or a producer with the application of rationality in which everybody gains. This is opposed to the argument posited by mercantilism, which holds that states that gain more material wealth would tend to gain over the others, and such gain is an equivalent loss to them. Due to increased efficiency, everybody gains more than what they have shared, as opposed to the theory of mercantilism in regard to market system. Economic liberalism is posited along with rational choice of individuals in the roles that they play being a consumer and/or a producer. Laissez faire is the emergent  economic concept of this construct, in which the market has freedom from any forms of political constrictions and regulation. It does not suggest the absence of political regulation over markets, but rather a minimal control in order for an efficient and proper functioning of the market to take place. The classical laissez faire doctrine is the primary feature of this concept, geared towards the rational competition among individuals. A market that is wisely managed by the state is hence possible under the theory of economic liberalism. Economic globalization is a concept that resurged from economic liberalism.

            Meanwhile, the core arguments of Marxism dwells on the idea that the economy is a sphere of human exploitation and the existence of class inequality, thus, contradicting the theory of economic liberalism. The zero-sum argument put forward by Mercantilism is viewed as applying to relations of classes rather than relations of states. There are certain degrees of agreement between mercantilism and Marxism, particularly on the idea that economics and politics are loosely related; however, Marxism rejects the idea that economic is the tool of politics and argues that politics is the tool of economics. The idea of a free-market economy put forward by economic liberalism is rejected by Marxism,  arguing that one class – the bourgeoisie – owns the means of production, while the proletariat needs to sell its labor force to the bourgeoisie in which a surplus value, an expression of exploitation, is appropriated by the bourgeoisie. Marxism extends its argument from just mere market system into relations of production, in which an old one is destroyed by another, such as feudalism, a more exploitative system than capitalism,  which is destroyed by capitalism itself. The inequalities among the relations of production is destroyed through a socialist revolution, which puts forward the welfare of the proletariat as the one that should manage the state system and should put a control  on the market in order for exploitation not to transpire.

The Better Theory

            This paper argues that Marxism is the better theory among the three. This stand lies in the fact that it is one that pertains to end the exploitation of the lower class, i. e. the workers who directly participate in the production process by selling their labor force, as well as ending the exploitation expended by a wealthier state over the poorer ones in the name of trade liberalism and an open-market economy. The economics of the state is not limited in understanding them only within the tenets of their markets, but also alongside the global economics in which capitalism has grown itself into world imperialism. We saw witnesses that first world states attempt to export their crises of overproduction to third world states in order not to succumb to economic instability, a task undertaken  through multilateral agreements under the usual parameters of  economic liberalization. This attempt is exemplified in economic globalization which emerged as a new laissez faire construct, opening domestic markets of nations for importations. This would mean a scenario almost similar to mercantilism, in which some states lose and some gain, with the latter true only to first world states to which economic globalization is served best.

What is and how do we measure “hegemony” in international political economy? Are we living in a hegemonic era?

Hegemony is measured in international political economy according to the influence of power by a powerful state over all the others, specifically non-cultural and non-military dominance. Political and economic influences are how it is measured, which are particularly held by strong states like the United States and the United Germany in 1870s to 1945. Specific measurements are seen in the use of institutions in formalizing power, the usage of bureaucracy to make appear that power is abstract, the inculcation of education, publications, advertising, and the mobilization of military personnel and the police force in order to subdue antagonism and resistance. All of these constitute the measures by which hegemony may be put forward and be accepted by the populace and other states.

We are currently living in a heterogenic era, not a hegemonic one although remnants of US hegemony can be seen in international currency in which the dollar is the leading currency used globally, whose decreasing value affects the international market and the world economy. It suggests that the United States economy has a strong influence in the global arena, affecting nations in its economic turmoil and difficulty in obtaining a stabilized price of oil. However, the resurgence of globalization allows other nations to share in the global influences, in which the United States does not alone occupy the current world domination. The existence of other powerful states such as the G8 witnesses this turn from hegemony to heterogenic functions. The European Union is able to benefit from the World Trade Organization (WTO) in the European sphere. Multilateral agreements like GATT-WTO give an opportunity to other first world states other than the United States to participate in a competitive globalized market economy.

Hegemony, for realist theory, is a necessary condition for international economic openness. Have we had periods of such openness in international history without hegemony?

There was no period of international economic openness in our international history without hegemony. This is because the very idea of hegemony itself rests in economic liberalization, which Marxism calls no real equitable gains among participating individuals and markets. This lack of beneficial mutual gains account for the domination of certain groups, which are able to gain more in the competition. Likewise, the United States emerged as a leading hegemonic force out of this competition. As more efficient and tactical businesses succeed in the competing markets, more efficient and powerful states are also able to dominate the world in a hegemonic manner. Thus, economic openness always suggest domination of one group over another, which leads to hegemony in international sphere. It is thus impossible to conclude that this economic openness can proceed not in hegemony or even heterogeny.

What is the role of large states in the governance of the international economy? What is the role of international institutions?

            Large states play various roles in the governance of the international economy. These roles are standardization of competition, stabilizing order, and constructing and managing policies that govern international market activities. State governments are able to do this through international policies that permit them to undertake these functions. International institutions also help in pursuing these functions, such as the NAFTA, AFTA, ASEAN, OECD, and the like, all aiming to pursue free trade within their own regions. The theory of economic liberalism is pursued by state governments and international institutions.  The United Nations is established in order to pursue order in the international activities and make nations pursue acceptable goals in relation to resolving their economic surpluses.

What kinds of political responses has globalization triggered?

            Globalization has triggered two kinds of political stances. One is in favor to it, and another one in the contrary. Those who favor globalization sees the international economy as improving due to the permission of more extensive domestic markets, receiving importations with limited tariffs and obtaining incomes as well due to more opportunities for exportations with lesser tariffs. Being within the construct of laissez faire, globalization is seen by those in favor to it as a beneficial concept that makes technology, communication, and even employment more accessible, the latter with the emerging concepts of off-shoring and outsourcing.

            On the other hand, a contrary political response against globalization is occurring, with the argument that globalization is only an attempt by large states to resolve their crises in over[production, and thus, trails from the usual seizing of territories which was the idea under the WWI and WWII, towards opening the world markets in their maximum capacity. Globalization is seen by those against it as benefiting only the larger states and leaving the coffers of poorer states into more impoverishment and dependency.

Will globalization lead to universal “Americanization”?

Since globalization is an outcome of economic liberalism from merely limiting the concept in domestic competition to global competition, it is seen to effect a more heightened empowerment among participating larger states. Thus, universal Americanization is not one currently seen by this concept as another leading nations such as Great Britain, Germany, France, Canada, and  Japan pursue global; activities in regard to this. As mentioned, heterogeny, not hegemony is not a result of the current concept of globalization and arguing that globalization would lead to universal Americanization is indicative of the former term. Globalization allows nations to participate in the global competition, in which first world states benefit the most, and hence see prospects in world dominance. In today’s condition of the United States being in economic degradation, universal Americanization is far from reality adding to the fact that globalization has not saved it into becoming a world dominant power.

Will globalization bring peace or instability in its wake?

            Globalization is seen in this paper as a better remedy than a world war in solving the problem of overproduction of capitalist states, which function under the concept of economic liberalism. Since there is an abstract competition among nations under globalization, the world order may be seen as peaceful. However, as the heightening exploitation of workers in off-shore countries continue, political and economic discontent among people of poor nations would pursue. As domestic agricultural products are dominated by imported products that are made cheaper by non-tariffication, the agricultural sector of these countries will live in a subsistence condition. They are the ones directly affected by the current economic policies of globalization. The lack of local industries in these poorer states that cause dependency to foreign-owned corporations would also cause discontent among the local people. Hence, globalization is not at all seen as a global policy that would sustain peace among nations.


This paper is able to differentiate the concept of mercantilism, economic liberalism, and Marxism form one another. The present globalization concept is a product of economic liberalism, a theory which economists consider the most functional and convenient among the three in terms of expanding competition and accumulating more economic outputs. Larger states are seen as the most that benefit from the concept of globalization, constructing policies governing this theory. However there are other groups that maintain of globalization being a non-efficient economic construct that limits benefits only to first world states. Poorer states are seen to be at a disadvantage in this global trend, where more economic dependence is seen as an outcome of globalization.


Hetzel, R. (1994) “The free trade debate: The illusion of security versus growth.” Federal; Reserve Bank of Richmond. Economic Quarterly. Vol. 80. Spring.

Dougherty and Pfaltzgraff  (2001) International political economy: Marxist, Neo-Marxists and Liberals.


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