News Analysis

News Analysis

International Political Economy (IPE) focuses on wealth and poverty, that is, focuses on who gets what in the international economic and political system. In international economics, people, firms, public institutions, and financial intermediaries interact on a closed economy, one that operates as if it has been excluded from the rest of the world. Within the international economy, economic agents from all over the world interact with foreign nations and citizens. The interactions may take the form of the transaction of currencies, exchange of goods and services, movement of persons, sharing of ideas, and the flow of financial funds. According to IPE, there are three key classical theories; neo-Marxism, economic liberalism, and mercantilism. Both mercantilism and economic liberalism represent perspectives of IPE that are literally liberal and real.

The Mercantilism Theory

The mercantilism theory states that it is the responsibility of the government to enhance the domestic industry by regulating the economy and trade in most cases at the expense of other countries. The theory focuses on the policies that restrict imports, accumulating currencies in the country, government investing greatly in research and development in order to increase efficiency and capacity of domestic industries and shielding domestic industries by giving them a monopoly, among other functions. It greatly opposes the theory of free trade, which argues that the country’s economy can be enhanced by having free trade and reducing tariffs. A good example of mercantilism is the England Act of 1651which was prohibiting foreign vessels from engaging in coastal trade.

Neo-Marxism theory

According to Karl Marx, the organization of production greatly determines the social and political relations. Therefore, at the international relations level, capitalism forces nations into the competition and the need to dominate each other. The theory further argues that world relations are driven by the desire to establish both the source of raw materials and the market for finished goods. The analysis of neo-Marxist theory helps in establishing that the cold war was meant to threaten the United States Business interests. The theory is more realistic as it assumes that the potential and conflicts between states are the reality of international relations; however, in the view of the nations, the conflict is driven by workers and business interests.

Economic Liberalism Theory

The theory argues that states can peacefully exist without any traces of war. The theory further suggests that the relations between nations are not always on the basis that if one party wins, the other must automatically lose. There are various forms of a liberal economy that are popularly known as the Kantian Triangle, and which were developed in 1795 by a German philosopher, Immanuel Kant. Liberal institutionalism, which believes it is the responsibility of global institutions to persuade people to get along well without engaging in war. For instance, the United Nations assumes the role of mediating and settling disputes between nations and therefore enhancing respect for international law as just any other law popular in advanced democracies. Liberal commercialism advocates for the advancement of the global economy by arguing that war is not profitable in any way to mankind, and therefore it is not also good for the economy. Liberal internationalism argues that democracies are most likely to incite wars than dictatorships, and therefore people can reject wars in legislatures or during elections. For instance, Argentina’s misadventures in Las Malvenas led to protests in 1982 that led to the downfall of the long-standing military dictatorship and led to the rejuvenation of democracy in the nation.

Approaching the subject of International Political Economies (IPE) in the perspective of classical theories of international relations was important in highlighting the roles played by nations, society, and the market in the international economies.