Professional Documents
Culture Documents
Lecture #10: Perspectives On International Political Economy: Mercantilism, Liberalism, & Marxism
Lecture #10: Perspectives On International Political Economy: Mercantilism, Liberalism, & Marxism
• A. Focus: states
• B. Nature of economic relations: conflictual
(zero-sum game)
• C. Relationship between economics and
politics: politics drives economics
What is Mercantilism?
• Theory of economic
organization
• Way to organize a nation’s
economy
• Goal: make Mother Country
wealthy
• Today? Capitalism, Communism
Mercantilism
IRON LAW OF
WAGES
Capitalism (Adam Smith, David Ricardo)
• The economy is seen as a complex natural organism
• Human labour is a key source of wealth
• Seeking balance between self-interest and cooperation
• “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our
dinner, but from their regard to their own interest. We address ourselves, not to their
humanity but to their self-love, and never talk to them of our own necessities but of their
advantages. “ (The Wealth of Nations”)
• Division of labour
• Key role of the market as an integrating force
• Harmony of interests between classes is possible
• Key role of the state in maintaining a market economy
CAPITALISM
•1. Private Ownership
•2. Profit Motive
•3. Market Economy
CAPITALISM
• 1. Private Ownership: Capital
belongs to individuals who are
FREE to do what they wish with it.
• For this reason, capitalism is also
called the “free-enterprise” system
CAPITALISM
• 2. Profit Motive: based on the
economic laws of supply and
demand, when enough people
want something, producers make
it because they want a PROFIT
CAPITALISM
• 3. Market Economy: a money value can be
placed on everything in the marketplace:
land, goods, time, and labor.
• Buyers and sellers are free to exchange
goods and services at prices determined
by…..”SUPPLY and DEMAND”
Economic Liberalism (Capitalism)
• Assumes a harmony of interests (Adam Smith):
pursuit of self-interest will make everyone better
off
• Example: Those who produce the highest quality
products at the lowest prices not only make
consumers’ lives easier/more enjoyable but reap
the highest profits
Economic Liberalism (Capitalism)
• “Laissez-faire” approach
• Comparative advantage (Ricardo)
• Countries should focus on producing those goods &
services they can produce most cheaply/efficiently
and trade for the rest
• An absolute advantage is held by any country
that can produce a given product more
efficiently than any other country in the world
Effects of Capitalism
• “Profit” for owners of
production/business
• Industrial vs agricultural economies
• Market competition = price of “things”
goes down……(because)
• Increased supply of “things”/goods
• Focus on PERSONAL
RESPONSIBILITY
Criticisms of Capitalism
• Uneven distribution of WEALTH
• Poor people live in SQUALOR: slums, bad sanitation, etc.
• Working conditions are miserable, etc, etc. see negative
effects of Industrialization
Marxism/Communism
Analytical
Analytical Perspectives
Perspectives on
on IPE
IPE -- Marxism
Marxism