International Political economy.
Theories in IPE: Mercantilism, economic liberalism,
and Marxism
Theories of Imperialism.
Dependence and Interdependence
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Points to Discuss ….!
Trade deficit? Trade surplus?
How do you gauge the economic performance of a country?
Do you want to own all of your earning or you want
government to keep your earning and cater your needs?
Strength of a country lies in economics or security?
CPEC: a political project or economic initiative?
Pak – US alliance in past, now relations with China?
Brexit, why?
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
International Political Economy Defined!
“It is a political battle between winners and losers from global
economic exchange.”
Central question is human welfare; however, the field has often
focused more on international system.
Example: US trade tariffs - China
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
What is IPE?
Study of the relationship;
1. b/w economics & politics
2. b/w market & state
IPE examines how politics can be used to achieve economic
goals and how economics is utilized for political interests.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
The evolution of IPE
First, Economic transactions among states rose in terms of
trade & investment.
Second, People expected that their governments will include
economy as serious as security & FP.
Third, economic issues become more transparent to the people.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Fourth, the UNO, IMF, World Bank, and WTO all became the
important focus of the study. (Bretton wood System)
Finally, Globalization is shaping international relations.
Bretton Wood system (IMF, WB, GATT 1944) helped US become
as the dominant power in the world.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Scope of IPE
To analyse IPE there are three approaches which outline the
specific actors, processes and level of analysis.
1 Mercantilism
2 Marxism
3 Economic Liberalism
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Mercantilism (Jean-Baptiste Colbert)
Economy is a critical element of national power - a country’s
power also depends on its economy.
Economy is used to build its military for better security and
buying vital goods.
Some form of activity is more valuable than others.
Manufacturing is better than agriculture.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Mercantilists believes in self sufficiency and discourage
economic dependence on others. Dependence = vulnerability.
Exports must be encouraged, and imports must be discouraged.
Economic interests also stir conflicts among states because
states aims to achieve their economic interests at the expense
of other states. (CPEC and Indian response, BRI and US
response)
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
States should establish trade surplus – more exports and less
imports.
What about Japan, Germany, and South Korea?
They have trade surplus – but, not known as military powers?
They spend more on masses – to enhance their quality of life.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Marxism (Karl Marx)
The ongoing economic system is capitalist. Private ownership
and workers are paid by the capitalists.
Individual may be naturally cooperative, but in society they act
in conflictual ways.
Main conflict emerges in societal groups; owners of the wealth
(Bourgeoise) and working class (Proletariat) over the
distribution of resources.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Third, State act to support Bourgeoisie
State V/S Workers
Fourth, in capitalism – owners of the land and industry amass
more and more resources at the expense of workers.
Marxists believe that MNCs , World Bank and other financial
institutions are exploitative and instrument of exploitation and
imperialism.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
They promote permanent inequality and hierarchal society –
where wealthy people enjoy power over poor.
Marxists argue resources must be distributed on just basis within
society and in Int. System.
Marxists conclude that the structure of the national and int.
economic order must be changed.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Economic Liberalism (Adam Smith)
Three basic assumptions of Economic Liberalism;
Purpose of the economic activity is to enrich individuals not
enhance state power.
Trade has benefits for all, regardless of imports or exports.
All productivity is valuable, but countries must specialize in
certain fields.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Economic Liberalism
21st century is the age of economic liberalism/globalization.
Liberals believe that human being act rationally in a
competitive way to maximize benefit.
This enable common man to improve living.
Market competition among businesses ensures low prices for
consumers.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Low prices increases the consumer welfare.
Liberals believe, economics and politics must be separated.
“government is not the solution; government is the problem.”
Ronald Reagan
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Govt. should only provide basic order in society.
Govts. & int. institutions encourage trade liberalization – that
lead to global interdependence & greater economic
development.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Key Concept in EL
Liberal economics is based on division of labor.
States differ in land, labor and capital.
British economist David Ricardo (1772-1823) developed the
“comparative advantage”.
“a state should produce and export those products which it can
produce most efficiently”
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
IPE an overview:
Variables Mercantilism Economic Liberalism Marxism
Relationship b/w Politics decisive Economics decisive Economics decisive
economics and
politics
Units of analysis States Individuals Classes
Economic goals Increase State Increase individual well- Class interests
power being
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Theories of Imperialism
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Dependency Theory
“Structure of the world economy is such that, it favours some
countries at the expense of others and limits the development
possibilities of the subordinate economics”
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Poverty of the underdeveloped countries is the result of the
present international economic system that keeps them as poor
as if they were still colonies.
Karl Deutsch
Developed by a U.N. Director Economic Commission for
Latin America in late 1950s, Raul Prebisch.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
DT emerged as the result of a larger movement asking question;
Q – “Why are so many countries not developing”?
“there are different kind of states with different functions”.
There are two types of states: core & Periphery
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
“Is a notion that resources flow from a ‘periphery’ of poor
& underdeveloped states to a ‘core’ of wealthy states
enriching the core at the expense of periphery.”
Peripheral countries are dependent on core countries.
Dependent nations’ development remains stagnant while
core nations continue to develop.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Three Core assumptions of DT
1- Int. division of labour between countries.
CC dominate the industry and technology and control capital
intensive industries.
Whereas countries in the periphery are dependent upon
resource extracting economies, agriculture and providing
cheap labour.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
2 - Class Distinction.
Rich elite cooperate with one another to ensure - they stay in
power and increase their wealth.
They collaborate with each other to keep the system going.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
3- Global Capitalism
In this system liberal economic theory dominate.
They all serve the interests of the core countries
“The situation is like “all roads to Rome”
In this system MNCs, Banks like World Bank, IMF all serve
the CC richest people and countries even global media etc.
All three concepts serve only CC
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
They do not promote development or equal opportunities instead
system promote dominance and exploitation.
This system is designed in such a way that no Peripheral country
can develop.
This is called “underdevelopment”.
So, this system promote underdevelopment …..!!!
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Interdependence
Interdependence means mutual dependence/mutual reliance.
Higher level of transactional relations means higher
interdependence.
Industrialization pushed this notion ahead.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Throughout history states have sought power by military means
& territory.
But, in today’s world economic development and foreign trade
is more persuasive than military force with low costs as well.
Cost of using force have been increased and out comes have
been decreased.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Changing character of economic production
Historically prior to 1950s, Possession of resources and
territory was source of strength.
Now qualified labour force, information, technological and
financial capital is the source of power.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
War fighting has changed
During cold war USA and USSR burdened themselves with
high military expenditure.
According to Rosecrance, Interdependence has made this
traditional threats less attractive.
David Mitrany, Greater interdependence leads to greater
peace.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
But
Interdependence must not be asymmetric.
Asymmetric interdependence benefits the industrialized and
poor economies suffer.
Note: Interdependence is a liberal theory which is capitalist in
nature and asymmetric interdependence always serve the
purpose of large country with imperial designs.
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
Questions
Lecture by: Zahid Mehmood Zahid, PhD (IR) NDU, NOA Islamabad.
