Political science 222

Global political economy

Week 2 notes

Lecture 4
 Liberalism
o Main Tenets
o Key Theorists
 The Invisible hand
 Comparative advantage: the Cornerstone of free Trade
 Neo liberalism
o Main Tenets:
o Key Theorists:
 Globalisation
 Critique of Globalisation
 Main differences between liberalism and neoliberalism

Lecture 5
 Mercantilism
o Main tenents
o Main theorists
 Neomercantilism/Economic nationalism (18 th century-present)
o Main tenets
o Main theorists
 Main differences between Mercantilism and neomercanlitism

Lecture 6
 Structuralism
o Main tenants
o Two primary theories
 Dependency theory
o Three main characteristics of dependency theory
o Criticism of dependency theory
 World Systems theory
 Overall criticism of structuralism

Lecture 4
 Liberalism
 o Main Tenets
o Key Theorists
 The Invisible hand
 Comparative advantage: the Cornerstone of free Trade
 Neo liberalism
o Main Tenets:
o Key Theorists:
 Globalisation
 Critique of Globalisation
 Main differences between liberalism and neoliberalism

Liberalism
Main Tenets:
• Limited Government: Liberals advocate for a limited role for
government, allowing individuals and businesses more freedom.
• Free Markets and Efficiency: limited government intervention leads to
efficient allocation of resources and economic growth. Also reduces
potential abuse of state power. Adam smith state’s “a commercial society”
should produce rising standards of living for all members of society.
• Economic Interdependence and Peace: Increased economic
interdependence creates mutual interests, discouraging conflict between
countries. As countries become more reliant on each other for trade, the
potential for war decreases – it is a less attractive option.

Key Theorists:
• Adam Smith (“The father of modern economics”) (Scottish,1723–
1790): argued for free markets driven by individual self-interest as the
path to prosperity. The best interest of all of society is served by (rational)
individual choices, which when observed from afar appear as an invisible
hand that guides the economy and promotes the common good.
• David Ricardo (English,1772 -1823): Theory of comparative
advantage showed how free trade benefits all countries.
• John Stuart Mill (English,1806-1873): State can correct the failures and
weaknesses of the market through selective state action in some areas.

The Invisible hand

“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 selflove, and never talk to them of
our necessities but of their advantages.” – Adam Smith
- In a capitalist economy, self-interest drives individuals to make rational
choices that best serve their onw needs and desires. However, it is
competition that constraints and disciplines self-interest and prevents it
from become destructive to the interests of orthers.
 - Under ideal circumstances, producers must compete with others, which
forces them to charge reasonable prices and provide quality goods to their
customers who may be willing to pay more for a product.
- Even if producers might want to push prices high and buyers want to push
prices low, the force of competition keeps the pursuit of self-interest from
going to extreme.

Comparative advantage: the Cornerstone of free Trade

• David Ricardo –adopted much of Smith’s ideologies.
• Champion of free trade.
• Free Trade: aims to reduce or eliminate government involvement in
international trade. Economic policies between countries that aims to
minimize or eliminate barriers to the import and export of goods and
services.
• Tariffs, Quotas, Subsidies
• Opposed Britain’s Corn Laws which restricted agricultural trade.
• “The free international market stimulates industry, encourages innovation,
and creates a ‘general benefit’ by raising production.”
• Under a system of perfectly free commerce, each country naturally
devotes its capital and labour to such employments as are most
beneficial to each.
• Free commerce produces efficiency, a quality that liberal value
almost highly as liberty
• Positive-sum game: in which everyone can potentially get more by
making bargains with others as opposed to not trading with them

• Theory of Comparative Advantage:

Comparative advantage refers to a country's ability to produce a particular good
or service at a lower opportunity cost than its trading partners.
See: [Link]

Neo liberalism
Main Tenets:
• Market Fundamentalism: prioritise free markets with minimal
government intervention as the most efficient way to allocate resources
and achieve growth.
• Globalization: Neoliberals see globalization driven by free trade and
capital mobility as a positive force for efficiency, innovation, and global
prosperity.
• Individual Responsibility: Stress individual initiative and competition as
the drivers of economic success, often downplaying the role of social
welfare programmes

Key Theorists:
• Friedrich Hayek (1899-1992):
• The Road to Serfdom
• Explored growing state influence that he felt represented a
fundamental threat to individual liberty. In his view, allowing more
government intervention to provide greater economic security was
the first step on slope to socialism or fascism.
• Argued central planning stifles economic growth and individual
liberty, championing decentralized decision-making through free
market.
• “ the only way to have security and freedom was to limit the
role of government and let the market provide opportunities
to free individuals”
• “minimally fettered” capitalism or a limited state role in the
economy
• Milton Friedman (1912- 2006):
• Capitalism and Freedom
• advocated for free markets, deregulation, and monetarist economic
policies.

Key Concept: Trickle-down economics (or supply-side

economics)
Globalisation
 • “While neoliberalism was spreading in the mid-1980s, the United States
and other industrialized nations began promoting globalization—the
extension of economic liberal principles the world over—as a process that
would boost economic growth and bring democracy to those nations
integrated into this capitalist structure.”
• “Emphasizing the role of unfettered markets, globalization promised
to enhance production efficiency, spread new technologies, and
generate jobs in response to increased demand.”
• Factors that increased the spread of globalisation
• Reduced cost of transportation = industrial outsourcing and trade
• New technologies = internet
• Increase in speed and reduced distance = improvements in
communications, commerce, and innovation = more interconnected
world!
• Neoliberal influence spreads
• Fall of Berlin Wall = defeat of communism
• Former Soviet Union countries replace centralised state planning
with more market oriented strategies – opened their economies to
foreign investment and trade.
• By first half of 1990s, many governments were implementing
deregulation and privatization.
• The fall of the berlin wall caused a shift from a predominately Cold
War order (1947-1990) , where state were preoccupied with
territorial security and military power. The collapse of communist
regimes, new governments in Eastern Europe and in newly
independent countries of the former Soviet Union replaced
centralized planning with more market-oriented strategies and
opened their economies to foreign investment and trade.
Neoliberalism seemed to be triumphant.

Critique of Globalisation
• Heterodox economic liberals
• Neoliberal IMF and WB policies made it difficult for developing nations to
reduce their debt and benefit from globalisation.
• Widened the gap between the rich and poor – increased inequality.
• Environmental damage
• Focused on the negative consequences of globalization:
• Sweatshop conditions in poor countries
• Damage to the environment
 • Maldistribution of income
2008/09 Great Recession = debate between Heterodox vs Orthodox economic
liberals.

Main differences between liberalism and neoliberalism

• Government Intervention: Liberals approve some government
involvement in social welfare and market regulation, whereas neoliberals
advocate for minimal intervention.
• Social Justice: Liberals often emphasize social justice and addressing
income inequality, while neoliberals prioritize individual responsibility and
economic efficiency.
• Focus: Liberalism has a broader scope encompassing political and social
freedoms, while neoliberalism primarily focuses on economic aspects.

Lecture 5
 Mercantilism
o Main tenant’s
o Main theorists
 Neomercantilism/Economic nationalism (18 th century-present)
o Main tenets
o Main theorists
 Main differences between Mercantilism and neomercanlitism

Mercantilism
Most aligned with the realist school of thought in International Relations. The
state is the primary unit of analysis. Concerned with WEALTH and POWER.
Main Tenets:
• Accumulation of wealth/bullion (gold & silver). A country accumulates
wealth by exporting more goods/products than it imports, creating a good
trade balance. Trade surpluses are favoured.
• Promotion of state-led intervention to benefit the economy. Policies like
tariffs and subsidies aim to promote exports and limit imports. Also focus
on building a strong military (navy) to protect trade routes and colonies.
• Colonies exist to benefit the mother country. Colonies provide raw
materials and new markets for exporting goods.
• Mercantilists tend to view economic transaction as a zero-sum game, in
which gains by one person or group necessarily come at the expense of
others
 • Emphasize using the economy to help protect the nation state from any
number of real and imagined threats.
• Governments and populist-nationalists movements that criticize
globalization often draw on mercantilism

Main Theorists:
• Thomas Mun (England, 1571-1641): Focused on the importance of positive
trade balance and accumulation of bullion
• Jean-Baptiste Colbert (France, 1619-1683): Supported state intervention
through protectionist policies.

Neomercantilism/Economic nationalism (18th century-

present)
Main Tenets:
• National economic competitiveness. Focus on building strong domestic
industries that can compete internationally and generate exports. Export
promotion is key.
• Strategic government intervention. Support and develop strategic
industries (industries deemed crucial for national security and economic
development) and develop trade policies to achieve economic goals. Focus
on building manufacturing capacity and employ policies that protect and
develop infant industries (e.g. tariffs and subsidies)
• Value international trade. International trade is beneficial, but attaining
trade surplus is not the primary goal. Fair trade deals that benefit
domestic producers and consumers is valued/preferred.
• Economic nationalism: A people’s sense of economic loyalty to their
nation-state, became even more entrenched in international relations,
which in turn helped generate a second wave of imperialism when
Germany, Japan, Italy, and the United States began acquiring their own
colonies.
Main Theorists:
• Alexander Hamilton (USA, 1755-1804): Advocated for protectionist policies
to develop American industries. Free-trade policies were not in the best
interest of a young nation. Infant industries could never compete with
international industries.
• Favoured export subsidies because they offset subsidies that foreign
states granted to their own domestic companies.
• Friedrich List (Germany, 1789-1846): Supported government intervention
to help developing economies compete with established ones.
 • “The power of producing is infinitely more important than wealth
itself”
• Production of a wide variety of goods, along with investments in
education and the development of new technology, was more
important than investment in agriculture alone.
• “manufacturing and other occupations type of mental qualities and
abilities than agriculture.” And that “manufactures are at once the
offspring and at the same time the supporters and the nurses, of
science and the arts”

Main differences between Mercantilism and

neomercantilism
• Outlook on Wealth and Power: Mercantilism is more rigid, obsessed with
accumulating wealth (bullion) to prop up military. Neomercantilism is more
flexible, aiming for overall economic strength.
• Colonies: Mercantilism relies heavily on colonies. Neomercantilism focuses
on domestic industry development.
• Views on trade: Mercantilism take zero-sum approach to trade.
Neomercantilism is open to mutually beneficial trade agreements.

Lecture 6
 Structuralism
o Main tenants
o Two primary theories
 Dependency theory
o Three main characteristics of dependency theory
o Criticism of dependency theory
 World Systems theory
 Overall criticism of structuralism

Structuralism
With a focus on economic power, class conflict, and imperialism, structuralism
has its roots in the ideas of Karl Marx (1818-1883) – Das Kapital and
Vladimir Lenin (1870 -192) – Imperialism: The Highest Stage of
Capitalism
Structuralist analysis allows us to view GPE “from below,” that is, from the
perspective of the oppressed classes and the developing nations.
Main Tenets:
 • Unequal Power Structures: GPE is characterised by a core-periphery
structure. Developed countries (core) dominate the system, exploiting
developing countries (periphery) through unequal trade and investment
practices.
• Underdevelopment: Underdevelopment is not simply a result of a lack of
progress/national initiative; it is actively perpetuated by the exploitative
structures of the global system.
• Historical Context is Important: Historical processes of colonisation
and unequal exchange created the core-periphery structure which has
been maintained over centuries.
• State-led development: State-led development strategies are often
advocated and necessary for developing countries to advance their
development and overcome challenges created by exploitative global
structures.
Two Primary Theories:
Influenced by Marxists and Leninist ideas (NB)
• Capitalism and the class struggle (Marx)
• Class relations change more slowly than technological
development, social change is impeded; capitalism gradually
produces a face-off between the bourgeoisie and the
proletariat.
• Marx believed that capitalism is a necessary stage in history,
which builds wealth and raises material living standards. It
transforms the world and in so doing breaks down feudalism.
It creates the social and economic foundations for the
eventual transition to a “higher” level of social development.
• Marx contribution to structuralism
• The definition of class
• Class conflict and the exploitation of workers
• Capitalist control over the state
• Ideological manipulation
• Imperialism (Lenin)
• Through imperialism, advanced capitalist core states
expanded control over and exploited what his contemporaries
called “backward” colonial regions of the world, leaving them
unevenly developed, with some classes to prosper and other
mired in poverty.
• Centralisation of market power into the hands of a few
“cartels, syndicates and trusts and merging with them, the
capital of a dozen or so banks manipulating thousands of
millions.
 • Imperialism also signified the monopoly phase of capitalism
or “the transition from capitalism to a higher system” by
which he meant the presence of monopolies and
imperialism .
• Imperialism helped convert the poorer colonial regions into
the “new proletariat” the international capitalist system.
Dependency Theory
(Modern) World System Theory

Dependency theory
• Dependency theory is a mixture of various ideas/theories. There is no
single coherent body of thought that can be described as ‘dependency’”
theory! Acknowledge the global capitalism system, do not seek to change
it, but show how the global political economy is structured in this system.
• It developed as a critique of classical liberal economics and liberal
modernisation theory. A key idea of modernisation theorists was that all
states would pass through stages of development and that sooner or later
all would become advanced, high-consumption countries. (see: Rostow’s
Modernisation Theory)
• BUT modernisation theory rejected/ignored the possibility that deep
structural factors might prevent economic progress and, more important,
that the nature of the international system itself might be an obstacle to
development.
• Dependency theorists suggested that the basic structure of the global
economy was such that it worked to further the interests of the already
rich, developed economies of the West (or North) and to progressively
impoverish already poor countries (mostly in the South).
• The basic structure of the world economy, the trading regimes that
existed, the nature of the markets for basic commodities etc.
fundamentally determined the development trajectory of individual
countries.
NEO-IMPERIALISM – states don’t have to occupy other countries to control or
exploit them. – subtle and indirect forms of control exerted by powerful countries
over weaker/less powerful countries– e.g. dependency on FDI/ development
finance; conditional lending; unfair/unequal trade agreements

Three main characteristics of dependency theory are:

• 1. The international capitalist system consists of 2 types of states:
dominant (core) and dependent (periphery).
• 2. External forces are critical in terms of economic activity of dependent
states. E.g. International trade rules.

• 3. Relationships, based on strongly historical patterns and dynamics (i.e.,

internationalisation of capitalism), between dominant and dependent
 states. Process of commercial and economic exchange taking place
between core and periphery states plays a considerable role in the
reinforcement of patterns of inequality.

Criticisms of Dependency Theory:

• It homogenises nations. Countries are either industrialised or not.
Dependency theory gives no allowance for a middle ground.
• No solid position on MNCs – some view them as detrimental others view
them as a vital means of technology transfer.
• Does not reflect the changed socio-economic and political situations of the
contemporary world.
• Former colonies can develop becoming semi-periphery countries – e.g.
India, Mexico

(Modern) World Systems Theory

• The world systems theory, developed by American sociologist Immanuel
Wallerstein (1930-2019), is an approach to world history and social change
that suggests there is a world economic system in which some countries
benefit while others are exploited.
• The big idea is that the global system is a stratified structure based on
inequality and institutionalised exploitation.
 • This theory asserts that the modern world-system is a self-contained entity
based on a geographically differentiated division of labour and bound
together by a world market.
• The main characteristics of the theory are:
• It is established on a three-level hierarchy consisting of core,
periphery, and semi-periphery areas.
• The core countries dominate and exploit the peripheral countries for
labour and raw materials.
• The peripheral countries are dependent on core countries for
capital.
• The semi-peripheral countries share characteristics of both core and
peripheral countries.
• This theory emphasizes the social structure of global inequality.
• Primary criticism: too deterministic. Wallerstein= “countries not free to
choose course of action or policies. Instead, they are relegated to playing
economically determined roles.”

Overall Criticism of Structuralism

• Overly Deterministic: Critics argue that structuralist models present rigid
structures that limit developing country agency.
• State-centric: The emphasis on state-led development can neglect the role
of other actors like multinational corporations.
 • Does not pay much attention to change: Some structuralist models might
not fully capture the dynamics of globalisation and the rise of newly
industrialised countries (NICs).
Nonetheless, structuralism provides a valuable critique of power imbalances in
GPE. It highlights the historical roots of underdevelopment and the challenges
faced by developing countries.