sub-field the influential economic actors of the Market.
sub-field versus inter-discipline? Should it focus on the special nature of the system of states, along the lines of more traditional international relations,1 or should it develop its roots in the intellectual movements that emerged as classical/radical political economy, in turn developing branches across a broad range of social science traditions?
The following analysis will focus on the field of international political economy and it’s long reaching concepts through a scientific viewpoint. The analytical paper is separated into specific themes that when conjoined together, provide an explanation of the relationship between the two main underlying dimensions of international political economy. The notable dimensions are the political entity of the State and the influential economic actors of the Market. Henceforth, the analysts endeavours to research the correlations and paradoxical relationship between the two actors. Firstly, it’s imperative for the analysis to organise itself within a framework to explain the different concepts of international political economy, with a specific focus on the three main schools of international political economy. Thusly, the characteristics and foundations of Structuralism, Liberalism and Mercantilism are elucidated. In addition, the notions and definitions of the concepts of the Market and the State are presented within the analysis. It is imperative to do so in order to understand the foundations that compose the basis of international political economy. Additionally, within the analysis there is an illustration of the individual relationships between the economic dynamic of the market, and the changing political landscape of the state and the interlining connection between both actors. While both dimensions are independent of each other to a certain degree, the analysis goes to effort to explain the existence of mutual interference and and a paradoxical relationship between the two, that diverges on mutual benefit and obstruction. In short, the following analysis provides a conspectus of the under lining themes and concepts of international political economy and how these notions influence the relationship between the Market and the State.
2. Brief understanding of the International Political Economy
The basis of International Political Economy is formed on two principle actors: The State and it’s political presence, and the Market with it’s economic influence. A main point of International Political Economy is the basis that it’s viewable from a wide range of perspectives. When viewing from an political aspect, the analysis is focused on the political decisions about the distribution of wealth among people and the processes and time of this distribution (Balaam & Veseth, 2008). More precisely, international political economy concerns the sociopolitical and economic relations, which have an impact on the international system of production and distribution (Strange, 1988). Due to the interchanging mix of notions and values, once considered within the global market system, the characters of both actors being to intermingle and inter influence each other within different levels. –
The historical foundation of Political Economy has existed indirectly since the dawn of civilisation, ever since the creation of a “State” or a political head which had influence over the Market of the region, we can see prime examples inside the Roman Empire, where the emperor had an overwhelming influence over the market schematics and trends. However, International Political Economy as an subject of study was initially compressed into the field of social sciences, beginning within the dawn of the sixteenth century, where early forms of Mercantilism appeared and it’s core tenets developed during the seventeenth century. As in every theoretical field, there exist several notable figures that have contributed significant and often conflicting theories that form the theoretical basis of Political Economy. Figures such as Karl Marx, Adam Smith, John Stuart Mill and John Maynard Keynes have all contributed into developing the field of science of what we know today as International Political Economics. However, even though we are forced to accept the multitude of sub theories and concepts that exist in Political Economy, the basis of this analysis focuses on the traditional triad of schools of Political Economy, and how they revolve around the fundamental question of Market and the State. –
A compendium of key points for the triad of schools can be found in the analysis of Oatley (2008). First and foremost, Mercantilism is a national economy policy in which it promotes relation of the nation’s economy by the government in order to prioritise the trade of a nation in order to accumulate wealth. It began as the dominate school of thought In europe during the fifteenth and eighteenth centuries and inevitably lead towards European expansion and colonisation of territories. At it’s base, Mercantilism and to a large extent Nationalism propose a strong interaction between the State and the Market, by arguing that national power and national wealth form a symbiotic relationship. It emphasises international trade as an imperative factor of development for the national economy and emphasising economic practices that focus on augmenting the home nation’s economic power over rival states, stressing a focus on exports and a limit on imports other than raw materials. Mercantilism soon evolved to it’s present form, more often labeled as Neomercantilism which is a policy that inherited many of the same principles as it’s ancestor: Stressing centralised currency decisions and controlling capital movement at the discretion of a centralised government in order to increase the level of foreign reserves and maintaining effect fiscal and monetary policy. In a sense, in Neo Mercantilism it is the States that vie for economic and national power instead of the companies, as seen in Economic Liberalism. –
Next in order is the study of Economic Liberalism, otherwise known as Laissez-faire liberalism or internationalism. This economic thought was based on the notions of Adam Smith as analysed in An inquiry into the Nature and Causes of the Wealth of Nations as well as David Ricardo during the eighteenth century. Oatley (2008) expand upon the differences in economic thought that liberalism brought to the knowledge of political economy. Economic Liberalism emphasis that the key to state wealth and consequently national power is economic growth, and the foundation of economic growth is free trade – free flow of investment across borders with minimal government intervention. In short, it stresses that the marketplace should act according to the invest hand and to place emphasises on innovation and competition and not favouritism by the State nor obstacles imposed by it, such as tariffs, quotas and barriers. Economic Liberalism is in favour of a discreet and limited State in the role of the market, o “establish the rights concerning ownership of property and resources” (p. 9). However, with the rise of Modern Liberalism, this stance has somewhat softened to the point where while the State should maintain minimum intervention, since the market isn’t always self -regulating, in times of economic crisis it is the State’s responsibility to jump start the economy with stimulus packages as done by the FDR government during the Great Depression.
In direct comparison however, is the economic theory of Economic Structuralism which focusing on the concern division of labor created by capitalism, with an emphasis on the economic thought of Marxism. Marxism was created by the economists Karl Marx and Friedrich Engels as an outlining theoretical critique of capitalism found in books such as The Communist Manifest (1848) or The German Ideology (1845). This prevalent theory has had a lasting influence on the world stage not only from an economic view point but from a state view point (USSR, CHINA). Marx’s main argument refers to the internal weakness of capitalism and to its collapse. The political vacuum of this collapse would be replaced by a societal economic system, whose feature is the communally owned and operated means of production (p. 27). In this train of thought, the capitalistic system favours the concentration of wealth in the hands of a few due to economic competition and this inequality creates different levels of economic class structure. Resulting in different social and economic classes, thus separating people from a single cohesive structure. The Marxist economic thought bases itself on the foundation that the capitalistic class exploits labor and the rich countries exploit the poor ones as well (Oatley, 2008). Therefore, the State and the major companies have a rigid regulation over the market, thus leading to inequality and lower wealth. In essence, Marxism stresses the need for an equal distribution of wealth between classes, however, we’re forced to stress that marxism doesn’t have a successful historical basis, seeing as no communist state has ever had sustain economic growth for more than a single generation. –
3. The two dimensions of International Political Economy
The definition of State that is commonly used in International Political Economy commonly refers to a political entity and institution which exerts power over a nation. This institution may take the form of a democratic system, republican system or even a authoritarian system. In other words, In other words, a nation-state is a compulsory political organisation with a centralized government that maintains a monopoly of the legitimate use of force within a certain territory. (Dubreuil, Benoít 2010). While the terms State and Government might be synonymous to certain academics, there exist certain differences: States are immaterial and nonphysical social objects, while on the other hand governments are people groups with certain authoritarian powers for a time period. A state’s duty is to define the political domain in it’s sphere of influence. Meaning, establishing order and policy in the formation of the political establishment, social and domestic policy, economic policy and foreign affairs with other states. We must also take into consideration the symbolic value of sovereignty of the state. considering the analysis of Aron (1966b), the state has the monopoly of the total control of legitimised use of coercive domestic power. State, as a collective entity, is sovereign and it has the dominant power to regulate the domestic laws. Therefore, it is not subject to jurisdiction to any political authority outside its borders and this fact makes the fundamental value of sovereignty of high importance. –
It is without a doubt that the international economic system is made up of a wide variety of influential actors who define and shape policy. However, according to the classical political realism train of thought, the states are the most important factors in the international system (Carr, 1989; Aron, 1966a). Sovereign States are motivated above all to follow their national interests on the international stage according to their policies. The States attempt to increase the positive consequences of their actions by taking into consideration a mixture of potential profits and the political cost. For example, while a State may stand to profit from a bilateral trade agreement, it might have to give up something that costs them popular support. Each State is different and the means by which they pursue their national interests vary according to their own policies and resources. Several States such as The United States Of America practice as form of projectional power across the globe, securing interests and coercing other nations through displays of soft power (Hollywood) hard power (Military intervention) or political power (UN veto vote) while a State such as Greece is more limited in it’s options due to it’s weakened economy. Therefore, the ultimate interest for a State is their political survival while pursuing national interests, states have coherent political targets and it is on their duty to serve the satisfaction of their national interests (Clausewitz, 1989). –
This form of thinking has lead to the result that States have adopted an increasingly interventionist policy in social and economic policies in order to strengthen their national wealth and protect themselves from turbulent economic crisis (2008 US crash and the 2010-on going European Debt Crisis). As a result, States are driven to gain international political power in order to better position themselves in negotiations and on the international political stage, such as the United Nations Assembly or during trade agreements through the World Trade Organisation. On the other hand, it can be highlighted that political choices are based on the satisfaction of the states’ political national interests, which are the political existence of the state, the augmentation of the political power that they possess and the influence they have on the occurring in the international political stage. –
The singular definition of the term Market has come to be seen as a physical gathering place where individuals may gather and have an exchange of goods for current. While this is correct, once we look at the economic spectrum through the view point of macroeconomics, we can see that rather than being a physical place, the term Market is by broader sense a system with a structure, as defined by the theory of perfect competition as an integrated, omnipresent and cohesive capitalist world economy. Going into detail, we can better orientate the individual by stating that the Market represents the force or the action where supply and demand confront each other and trades are created. Therefore, we can conclude that the Market instead of being thought of as geographical location, should instead be conceptualised as a force which shapes the structure of economic interactions.
In addition, a market isn’t a singular polarising force. It is made up from a multitude of different actors, such as physical consumer markets (Food retail, retail marketplaces, big box stores and temporary markets), physical business markets (service industry, labour markets), Non physical markets (Media industry, internet markets and artificial markets such as cryptocurrency or pollution permits) and even financial markets (Stock markets, bond markets, prediction markets) All of these institutions represent the many difference facades of the Market as a dimension, and how it affects and defines International Political Economics. Due to the different disciplines that run through the understanding of the Market, such as sociology, economic history and geography and marketing the result has been the creation of a great number of theories that have tried to explain the nature of the market dimension.
One prevalent theory which was conceptualised by the economist Adam Smith has to do with an invisible hand that guides the economy indirectly leading towards the common good. The theory states that if the individual and the consumer are allowed to freely choose which products to sell and purchase in a matter befitting their own situation, the market will adjust accordingly and prove beneficial to the individual and the community as a whole. This happens due to increased competition resulting in an increase in innovation and efficient production in order to maintain competitiveness. However, this theory is as dividing as it is polarising, with a great many economists unable to decide whether this theory is beneficial or in fact, burdening to the economy.
Subsequently, we’re able to state that markets are also a product of social phenomena. They are a part of communities and they have connections with some kind of state actions (Walzenbach, 2017). Markets are influenced to a certain extent by individuals and social phenomenons such as the media or the internet. The market also influences the social aspect of humanity by rationalising and influencing the assumption of self interest maximisation and the value of the commodity being exchanged, meaning that individuals and exchanges may be disentangled from thick social bonds. In the theory of social systems by Niklas Luhmann, markets are embedded as inner environments of the economy, representing the environment of the actually realised investment devisions. These environments can be further observed in systems of society such as in the Political spectrum, scientific and religious spectrum. Therefore, we can conclude that the market as a dimension is a force that encompasses and is encompassed by a wide range of influential actors and provides a dominant pillar in the science of International Political Economics. –