Jeraldo Jacobs

U21599298

IPL 310

International Relations

Individual Assignment

Mr. J Naidoo

7 April 2023
Abstract

In the realm of international relations, different states interact and work with one
another not only on a political scale but also through trade and corporations that
operate on a national and or trans-national scale. There can be little arguments that
international interdependence has strongly developed and heightened over the last
decades, and that international economic relations have been strongly influenced by
politics and have had a major impact on international politics. International economic
issues attracted little sustained attention, except insofar as they engaged with
questions of military policy or alliance politics. A field within international relations,
the International Political Economy (IPE) helps understand the hierarchies, systems
which regulates market forces such as finances, trade and driving factors, in addition
to this understanding we can view the field through a theoretical lens. A number of
theoretical explanations have been given to the understanding of the international
political economy, such as a constructivism, world dependency theory, mercantilism
and liberalism, just to name a few. These theories seek to explain various market
conditions on the global scale as not all markets and political interactions are the
same, they each have respective structures and characteristics that make them up.

Word count: 196

Table of contents

Title Page number

Introduction 1
Neoliberalism 2
Contributions and value of 2-3
neoliberalism
Mercantilism 3-4
Contributions and value of 4-5
mercantilism
Conclusion 6
Bibliography 7
Introduction.

During the 1950s and 1960s international relations as a field of study was concerned
primarily with security, or the military threat posed by states to one another’s
territories. To briefly explain it, the international political economy (IPE) is a field of
study that seeks to understand the interactions between politics and economics at
the global level. It also studies the influence of markets on politics and the influence
of politics on markets. The international political economy emerged after the 1970’s,
the emergence of this as, put by Frieden and Martin (118: 2002) is a sub academic
discipline of political sciences. The field of the international political economy as
stated by Cohen (169: 2008) can be regarded as a reaction to the separation of
economics and politics. As argued by Agnew and Crobridge (2002: 2) the primary
concern in the field of international relations has shifted from security and military
issues to many new developments, such as, the growth of the organization of
petroleum exporting countries (OPEC), the ever-changing demands of poorer
countries for a new international economic order. These have brought about a sense
that the field and study of international relations was shortcoming in its capacities to
address fundamental global issues. The study of the international political economy
seeks to provide a deeper understanding of local, national, and international
interactions between political and economic forces. The field of study further
determines how these interactions influence the outcomes of policy, trade, finance,
and development. Frieden and Martin (118: 2002) argues that during the earliest
parts of the 21st century, regardless of the imprecision in the definition of IPE the field
of study has reached harmony in theories, analytical frameworks, methods, and
important questions. In helping us understand and study the international political
economy, this essay will respectively critically evaluate the value and contributions of
the neoliberal and mercantilist theories to the international political economy as
theories within this field of study.

Neoliberalism
Phelan and Dawes (2018: 9) states that the defining moment in the political
emergence of neoliberalism is the elections of Margaret thatcher in 1979 and Ronald
Regan in 1980. But, on the other hand the rise of neoliberal policies and ideologies
in the 1970’s and 80’s has a longer history that predates the second world war.

Neoliberalism is a term or ideology used to refer to market reform policies and the
ideology is associated with that of free market capitalism. This ideology suggests
state intervention reduction in economic and social activities and the deregulation of
labour and finance markets. Examples of reform policies are eliminating price
controls, deregulating capital markets, lowering trade barriers and reducing
especially state influence in the economy. Neoliberalism can be seen as a revival of
classical liberal ideas and an assessment of the legacies of laissez-faire liberalism.

Contributions and value of Neoliberalism.

Contributing to its value in the study of the international political economy is the
Economic efficiency that neoliberalism brings forth. Economic efficiency happens
when all goods and factors of production in an economy is distributed and allocated
to their most valuable uses and a waste of resources is either minimized or
eliminated. Regarding income distribution Palley (2005: 1) argues that in a free
market, neoliberalism claims factors of production such as land and capital should be
remunerated according to what they are worth. Neo liberalism further maintains that
this remuneration can achieved through supply and demand processes where
remuneration would rely on the factors of productions supply comparative to its
productivity which in turn will affect its demand. Furthermore, liberal free markets will
not let valuable factors of production such labour go to waste.

Competition is a state where rivalry between two or more parties arise and all strive
for a common goal (maximise gains, limit losses) which cannot be shared, so,
assuming individuals behave rationally, they of course would seek to amplify their
gains and possibly eliminate their losses when making and selling goods or services.
This in turn will aspire wealth generation through competition in local, national, and
international markets with others.

Free trade, another value and contribution of neoliberalism is trading that does not
restrict imports and/or exports. Free trade is mainly advocated for by political parties
that hold economically liberal values. The condition of free trade leads to increased
economic efficiency, factors of productions productivity and to more modernised
innovation. By lowering trade barriers Milner and Kubota (2005: 108) claims that it
has significantly contributed to the expansion of world trade, they further claim that
by countries choosing to integrate their economies into a global economy it has
dismantled its protectionist barriers.

Another key contribution and value of neo liberalism is the promotion of individual
freedom. Individual freedom in a neo liberal international political economy gives an
individual free choice and enterprise which means that private business operates in
competition and largely free of state control. These private entrepreneurs are also
free to get and use resources to produce goods and services. They are also free to
sell these goods and services in markets of their own choice. Individual freedom in
neoliberalism also promotes the construct of private property rights. Private property
rights allow for resources to be privately owned and they possess the tittle and legal
claim to the property. Private property also allows owners to have exclusive rights to
use and benefit from the product and services from the property.

Despite being prominent in its push for individualism, liberalism has been criticised
for this emphasis and its disregard for social welfare. Some of the neoliberal
economic policies such as deregulation and private property rights can lead to
strongly increased inequality and social exclusion as factors of production and
resources would be owned by only those private individuals who can afford them and
others such as regular society yielding little to no benefit off those resources. It can
be argued that these neoliberal policies are in favour of corporations and wealthy
private individuals rather than favouring the interests of the less fortunate or ordinary
society.

Mercantilism

Mercantilism is an economic theory claiming that trade generates wealth and

encourages the stack of profit which a government should stimulate by the means of
protectionism. Mercantilism is an economic policy designed to maximise exports and
minimize an economy’s import. With characteristics of state efforts to gain power and
wealth to protect its society from outsides, influences, threats and states,
mercantilism is closely related to realism. Mercantilism emerged as an economic
theory in the 16th century and dominated the European way of economic thinking up
until the late 18th century. The main idea behind mercantilism was to increase a
nations wealth and power through trade by achieving a positive balance of trade in
which a country exported more than what they imported.

Policies dominating mercantilism were characterized by the use of trade tariffs,

subsidies and regulations that were used to protect a countries domestic industry
which would in turn discourage importing goods from other countries. Back in the
times during the 16th and 17th centuries mercantilist saw colonies as sources of for
raw materials and as a market for the parent countries manufactured goods. The
emergence of mercantilism was partially motivated by the need to finance expensive
wars and territorial expansion. As argued by Fontanel, Herbert and Samson (2008:
2) the constitution of nations led to financial needs of European monarchies due to
the rise of permanent armed forced and the rise of expensive military needs to
maintain their sovereignty and rule over territories. Many European countries such
as Britain and the French have adopted these mercantilist policies to gain economic
and political power.

Contributions and values of Mercantilism.

One of the key values contributed to the study of the international political economy
is its push for national security. National security is an important consideration in
mercantilism, as countries will focus on becoming self-sufficient and would reduce
their dependence on other countries. Mercantilist economies maintain national
security through policies such as, trade tariffs and protectionist measures. This is
seen as necessary to maintain a nations security as it reduces its reliance on
another nation, this also ensure the availability of essential resources for a state. But
these mercantilist policies for national security can also have negative consequences
in the long run if it ever leads to trade wars.

State sovereignty or a sovereign state is also of value to mercantilism and the

international political economy as a sovereign state has the highest level of authority
over a certain territory. Furthermore, it refers to the legal authority and responsibility
of an independent state to govern and regulate its political affairs without any foreign
interference. States in the mercantilist system exercised sovereignty by regulating
their trade and controlling the flow of goods and services and capital by imposing
taxes and duties on various imports and exports. State intervention in the
mercantilist system was crucial in the economy to ensure the accumulation of wealth
and for states to maintain national power.

Valuable to mercantilist states, domestic stability was seen to be achieved through

strong government intervention. Governments created monopolies of certain
industries and controlled prices by establishing regulations on those respective
industries. The goal of domestic stability was to ensure that the countries domestic
economy strived, which would obviously lead to the mercantilist goal of increased
wealth and power for its nation.

Under mercantilism a nation’s wealth was believed to be determined by the number

of metals it could obtain, metals such as gold through trade. Valuable to mercantilist
states a trade surplus of goods was seen as desirable outcome of a mercantilist
countries economic policy. This trade surplus occurs when a country exports more
goods and services than it imports. This results in a country earning more revenue
from its exports than what that country would pay for its imports which brings a net
inflow of funds and little to no out flow of funds.

However, mercantilism has been critiqued for its strong focus on trade surpluses and
its sense of disregard for citizen welfare. Mercantilist policies such as the trade tariffs
and protectionism can lead to strong increase in prices of domestically produced
goods and services, and it also limits citizens access to internationally produced
goods and services.

Rodrik (2013: 1) Claims that the history of economics has been a constant struggle
between liberalism and mercantilist schools of thought. As further analysed by
Rodrik (2013: 1) a key distinction between neoliberalism and mercantilism is that
neoliberalism sees the state as naturally territorial and the private sector of
businesses as profit/rent seeking. So, in the view of neoliberalism, the model seeks
for a strict separation of the state and private businesses. On the other hand,
mercantilism views that state and private businesses as allies and they work
together in pursuit of achieving common objectives which are evidently strong
economic growth and national power.

Conclusion
With both theories having opposing views of economics, both neo liberalism and
mercantilism have made significant contributions to the understanding of the
international political economy. By highlighting their key views, we see their
significant contributions. Mercantilism has exclaimed the need for state intervention
in the economy to promote domestic trade, exports and maximising their sovereignty
and gains through governments regulating trade and protecting its industries.
Liberalism has emphasized the importance in free trade and limited state
intervention that will lead to economic efficiency and increased productivity.

Word count: 1874

Bibliography

Cohen, B.J., 2008. International political economy: an intellectual history. Princeton

University Press.

Frieden, J. and Martin, L.L., 2002. International political economy: Global and
domestic interactions. Political science: The state of the discipline, pp.118-146.

Agnew, J. and Crobridge, S., 2002. Mastering space: hegemony, territory and

international political economy. Routledge.

Phelan, S. and Dawes, S., 2018. Liberalism and neoliberalism. In Oxford Research
Encyclopedia of Communication.

Palley, T.I., 2005. From Keynesianism to neoliberalism: Shifting paradigms in

economics. Neoliberalism: A critical reader, 268.

Milner, H.V. and Kubota, K., 2005. Why the move to free trade? Democracy and
trade policy in the developing countries. International organization, 59(1), pp.107-
143.

Fontanel, J., Hebert, J.P. and Samson, I., 2008. The Birth of the Political Economy or
the Economy in the Heart of Politics: Mercantilism. Defence and Peace
Economics, 19(5), pp.331-338.

Rodrik, D., 2013. The new mercantilist challenge. Project Syndicate, 9.