Guest post by Alan Cunningham
International political economy (IPE) is a very sensitive system. It determines how international trade and commerce is conducted and helps the long-term development of nation-states and also helps the growth of free trade.
Encyclopedia Britannica defines International Political Economy as the study of “problems arising from or affected by the interaction of international politics, international economics, and different social systems (such as capitalism and socialism) and social groups (for example, farmers at the local level. , ethnic groups that differences within a country, immigrants in regions such as the European Union, and the poor who are transnational in all countries).
The academic encyclopedia further writes that IPE “[explores] a set of related questions (“problematique”) arising from problems such as international trade, international finance, the relationship between rich and poor countries, the role of multinational corporations, and the problem of hegemony (the dominance, physical or cultural, of one country over part or all of the world) , along with the consequences of economic globalization”.
In the discussion of IPE, there are three main perspectives in the field, namely Mercantilism, Liberalism, and Structuralism.
Mercantilism
Mercantilism is defined in Baylis, Smith, and Owens’ book The Globalization of World Politics: An Introduction to International Relations as one of three traditionalist approaches to IPE. More specifically, it is the idea that “the world economy is an arena of competition between countries that seek to expand their international relative strength and power”. This is done through selective investment, and self-sufficiency in large industries, markets, and commodities in the country’s domestic economy. Along with this, some countries have more power and maneuverability than others and this is often limited by alliances with foreign countries, hegemony, and various other factors.
Liberalism
Liberalism is another traditionalist approach to IPE. The liberal tradition is built on the assumption that “free trade and the free movement of capital will ensure that investment flows to where it is most profitable to invest”; it is easier to say, “each country can exploit its own advantages, resources, and natural endowment, and achieve specialization” with “the optimal role of government and institutions. [being] to ensure the smooth and unrestricted operation of the market”.
The difference between mercantilism and liberalism
One of the biggest differences between the mercantilist and liberalist approaches to IPE is the fact that liberalism seems to want a freer aspect of the economic system, allowing countries and states to have access to various forms of economic capital obtained from their own domestic power. and foreign trade transactions while also changing policy methods in domestic and foreign markets, while mercantilism is based on competition with other countries and the overall dominance of the country over other countries.
The larger goal of mercantilism is for countries to strengthen their own power base and economic revenue streams while viewing the world through a competitive world view.
This is a fundamental difference between the two because it sees the global economic market as a way to cooperate with other countries, while mercantilism sees the international economy as fundamentally competitive. Both mercantilism and liberalism are very pragmatic about the world system, in that they are about examining states and how they use, acquire, and maintain power in their own spheres of influence and try to diversify around the world. I find this very interesting in how it might relate to earlier thought processes in international relations like realism, liberalism, and constructivism.
When discussing which option, mercantilism or liberalism, is better, it is always in the line of thinking used by global leaders and nation-states.
If the overall goal of the country’s leaders is to increase the country’s power and ensure that the finances are safe and can improve, then mercantilism will be an option that is more considered. However, if the overall goal is to try and create a global economy where countries can act with each other and can play their strengths in terms of domestic materials and try to diversify the economy, then the leader will consider liberalism as liberalism. better international political economy.
Of course, it can be argued that the international political economy created in the liberal sense will be better than in the mercantilist sense. In the current global political system, somewhat divided, in which many countries are drifting more and more based on political ideology, unifying the world in a liberal sense seems to be a better option for reinvigorating trade and investment throughout.
While the global economy is competitive and ensuring that the domestic market is maintained is a necessity, it should not be one of the countries that uses economic nationalism to maintain the economy.
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