Chapter 6: International Political Economy §

IPE = Politics (State) + Economics ( Market)

Studies the interaction between politics and economics in international relations.

Divided into 3 Theories:

• Mercantilism
• Economic Liberalism
• Marxism

I. Mercantilism §

1. Assumptions §

• Economic activity is the subordinate to building up the state’s power
• Economics is the tool used for political actions
• Economic strength and state’s military-political power is complementary, growing each other
• Economic competition is “zero-sum game”, one must win, one must lose

2. Types §

• Benign Mercantilism: States look after economic interests as it’s important to the state’s security (Defensive)
• Malevolent Mercantilism: states attempt to exploit others through expansion (Offensive)

👑 Mercantilism is similar to Neo-Colonialism. Exploiting smaller states with soft power and economies.

3. Modern Examples §

• State Intervention: state involvement in national economy to change for better economic system. (protectionism)
• Protection Policy: protectionism (Trade War)
• Productive Power:

II. Economic Liberalism §

1. Assumptions (autonomous) §

• Markets expand by itself to satisfy supply and demand
• Market economy will operate using its own mechanisms and laws
• The central actors are individuals (consumers)

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Principles of Free Market

• Individual Rights: everyone has equal ability to defend our liberty, and participate in economy.
• Limited Government: to secure individual’s rights only
• Equal Justice Under Law: government must treat every individual equally, no ranks
• Subsidiarity: government has the lowest authority
• Spontaneous Order: unregulated supply and demand for individuals ⇒ competition ⇒ best economic benefits
• Property Rights: leave resources to private sectors…?
• The Golden Rule: require honesty between individuals

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⚙ Spontaneous Order: is a system when left unregulated, competing buyers and sellers will bring in the best outcome for the economy.

• When is Government Intervention necessary?

  When there is Market Failure.

III. Marxism §

Karl Marx thought reforms from Liberalism and Realism aren’t enough. Instead a revolution and overhaul of every system is necessary.

1. Assumption §

• Economy is full of Human Exploitation and Class Inequality
• Capitalist based on two actors
  • Bourgeoisie: owner of production, middle class
  • Proletariats: Owner of Labor power, working class (bound by bourgeoisie)
• Bourgeoisie exploits proletariats
• Demands ‘Social Revolution’ to replace every system

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1. Theory of Economics

   Surplus value: products’ costs mostly go to capitalists

   Workers paid little ⇒ Can’t afford products made ⇒ overproduction ⇒ less employment ⇒ depression ⇒ capitalism collapse

2. Theory of Social Class

   Divided of two social classes

   The rich: owner of productions

   The poor: rely on rich to rain money

   The rich will use their power to set up methods which protects their wealth and power

3. Theory of History

   Past exploitations of lower classes in history has shown to have collapsed many times.

   The collapse of each systems leading from

   Feudalism ⇒ Capitalism ⇒ Socialism

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Neo-Marxism §

1. Cox’s analytical framework §

World Orders

Forms of States

Social Forces

2. Dependency Theory §

Development of Developing countries rely on development of developed countries

• Primary Commodities: Unfinished products / Raw materials

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| Primary sold to rich, rich sells back more expensive value-added products

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Value-added Products: changing primary commodity adding more value to the product

• MNCs

• Aids and Support

Richer states can have influence on governance of poorer states through aid

3. World System Approach §

Focus on Center-Periphery States

• Core: Rich (West)
• Semi-periphery: Industrializing (NIE)
• Periphery: Poor (East)

Core exploits periphery through neo-colonialism