Compare and contrast the Ideas of Liberalism and Marxism in Global Political Economy.
Introduction
The study of cooperation and conflicts between different nation states has been termed as the International Relations; the main purpose of IR had always been on the issues pertaining to peace and war in the region. Recently, in the twenty-first century, there has been a conscious shift from these issues to take into consideration the issues related to wealth and poverty; the issue of who is gaining wealth in the international system has been known as the International Political Economy. ‘Political economy’ was the term used for referring to the study of the general conditions under which the principle of capitalism was accomplished within nation states (Gilpin and Gilpin, 1987). But with the passage of time, the concept has broadened and now it refers to interrelated approaches which are used to understand the economic as well as the political behavior of any country. There is no doubt that politics plays a treacherous role in influencing the economic policies of a state. The paper would focus on the emergence of the discipline and establish why the new approach was necessitated; the actual purpose of the paper is to evaluate and study the major theoretical perspectives of the Marxist and the Liberal ideas while investigating their relations to the IPE otherwise known as the Global Political Economy.
Why International Political Economy?
There are different views on the definition of IPE; several elements have become important due to the different hypothetical perspectives. Several authors consider that IPE is an entwined branch of International Relations while some are of the view that it could be related to the field of political economy. The difference between the theoretical perspectives is: how each approach defines the players that comprise the economic element; and the political element for the model of political economy (Gilpin and Gilpin, 1987).
It was in the early twentieth century that IR rose as an academic discipline with the basic goal of understanding how to ensure the provision of peace in the globe. It was until the 1960s that the main focus of the discipline was maintained; “International relations asked the question why nation-states continued to go to war when it was already clear that the economic gains made in war would never exceed the economic costs of doing so. International political economy todayasks why do states fail to act to regulate and stabilize an international financial system which is known to be vitally necessary to the ‘real economy’ but which all the experts in and out of government now agree is in dangerous need of more regulation for its own safety?” (Dunne and Hansen et al., 2013, pp. 405--425). So, in simpler words, the IPE or the GPE is the shift of the current affairs to the issues of poverty and wealth where earlier it focused on war and peace.
Two reasons have been given by Gill and Law regarding the rise in the interest of the field of GPE especially during the period of 1970s. The first reason was that during 1971, there was a change in the economic system of the globe mainly due to the oil crises; and the second was the collapse of the Bretton Woods System (Gilpin, 2011). After the World War II, the politicians had established this system to make sure that the global economy grows, but it was seriously in a bad condition. “Politically weak and economically poor recently decolonized countries were unhappy with their subordinate position in the international economic system” (Gilpin, 2011).
Therefore, the United Nations proposed a “New International Economic Order” in the 1970s so that the disparity of wealth could be addressed between the developing countries and the developed ones; the actual focus of this system was to ensure that the economic position of the countries in the third world could be improved.
Theoretical Perspectives
In order to study IPE, researchers have used various theories that served different purposes like predicting about the economic growth of the state or its economic stability. The issue is that events are influenced by far too many factors which is the reason why it is almost impossible to pass valid predictions. Yet, there have been a wide variety of theories which has been justified by Robert Cox; he states that theory is highly prevalent because it always has an aim and demonstrates the areas of interest of the people (Cox, 2013, pp. 126-155). The two main perspective of Global political economy are the liberal theory and the Marxist theory; the former is concerned with the establishment of cooperation and increase in capital while the critical theory that is also known as the Marxist focuses on the removal of the differences pertaining to economy, gender and environment within the society.
During the 19th century, in the period of the industrial revolution, the liberal theories emerged in Britain. In response to the liberal thoughts, the Marxism also emerged in late 19th century (Walter and Sen, 2010). The liberal theories are favored by those individuals and states that are wealthier because it is associated with their interest and matches their comfort. The point of view of the critical theories is favored by those who seem to be unsatisfied with their socioeconomic status (Gilpin and Gilpin, 1987). The most exciting element of a theory is that nothing can be proven as being right or completely wrong; so, it depends on how one interprets the goals or views.
Marxism and Liberalism have conflicting perspectives where the significant difference is how both view the role of the state and the role of the individual in the global political economy (Gilpin, 2011). All the values which contain the critical elements of the international political economy have particularly a relation to the economy. There are total four approaches known as the Liberals, Realist, Marxist, and Constructivist; but this paper seeks to address only the Liberals and the Marxists.
Economic Approaches
Liberalism is the most determining approach in economy; the basic argument of this perspective is that the economy must be dominated by free market and the state must not intervene in the economy. The liberalists state that the demand and supply need to be adjusted so that best economic rates can be obtained in any country. The notion of “Liberalism” was initially used by the scholar Adam Smith in his novel, “The Wealth of Nations” (Elkins and Simmons, 2004, pp. 171--190). The actual concern of the liberals is the needs of an individual; they analyze the behavior of the firms, states and the individuals to assess the global economy while giving priority to the individual as the main actor. Adam Smith uses the idea of invisible hand to argue that humans are selfish in nature and the relations between markets are critical to bring harmony in the society.
The liberals believe that in order to enhance the efficiency, sustainability and the productivity in the economy, no regulations should manage the economy and no intervention should take place. An individual would pursue self-profit by benefitting from the competitive environment and lead to increase the overall benefits of the economic exchange for the general public (Walter and Sen, 2010). The liberals perceive that firms and companies are the source of wealth and expenditure in the economy.
In relation to the state, the slogan of the economic liberalist Friedrich Hayek was laissez-faire; it also suggests that people and the state can benefit through cooperation. The conflicts must be avoided; by consulting both the sides, a peaceful decision must be identified. The reason for this is that both the economic and political systems are interdependent in the global political economy. A very significant issue is that of the Transnational Companies; the TNCs tend to benefit both the host and the home countries. The TNCs boost the host economy by the transfer of capital, market access, and technology in particular; while it simultaneously benefits the home country through technology and skills of capital management (Helleiner, 2011, pp. 67--87). This notion is basically referred to as the positive-sum game; it is the idea that with cooperation, everyone can reap benefit.
The liberals believe that the core component of the economic life is the market; and growth in the economy occurs when individuals pursue their goals. From this perspective, the theory of comparative advantage states that even when one of the countries has more productivity as compared to the other country, the benefit of the trade would be achieved by both. Adam Smith believes in the expansion of markets so that the needs of the humans can be satisfied when the market economy operates according to its free laws and mechanisms (Mortimer, 2012, pp. 409--409).
The other school of thought is Marxism that discusses international relations with the context of “nation”. The theorist Karl Marx states that the labor class is disassociated through the tool of nation. The main issue is that Marxists criticize the link of the international theory on economy. This theory has very few practical implications in states where only China, Cube and USSR have experimented in Marxism (Mortimer, 2012, pp. 409--409). Along with Karl Marx, the other founder of this school of thought is Frederick Engels; they believe that the history is based exclusively upon the struggle between classes. It is the capitalists’ governments who actually help to keep the capitalist business leaders or the ruling class, otherwise known as the bourgeoisie in power (James, 2013, pp. 1-8). Until and unless a revolt is experienced, the working class, otherwise known as the proletariats is ruled by the bourgeoisie. With the rise of revolution, the proletariats come to rule.
In contrast to the Liberalism where market and state are the key players; Marxism has three players: state, proletariats and the bourgeoisie. The state helps to devise and implement policies in response to the socio-economic issues of the proletariats (Looney, 2003, pp. 568--586). When the revolution takes place, the ruling class would no longer exist and therefore the proletariats would no longer be ruled by them. Marx and Lenin believed that there is a very interesting relation between the state; first of all, was feudalism which led to the capitalism that further changed to socialism and the next step would be to the creation of a society with no class at all (James, 2013, pp. 1-8). So, in their view, all the non-capitalist regions in the globe could be made capitalist by those states that were capitalist in nature. It is important because to reach a classless society, these areas had to move through capitalism and socialism.
The Marxists believe that capitalism lead to overproduction which results in decline in the wages and therefore under consumption. The main belief of the theory is based upon inequality and the exploitation of the humans (Munck, 2010, pp. 45--53). There are four elements of Marxism: the dialectical approach states that the current position of the society is due to the past situations; materialist approach believes that historical change is inherent in the struggle of classes and the product distribution in economy; it is believed that the modern society as well as the economic laws set the capitalist development; and normative commitment to socialism (Jessop, 2012).
Comparison
As compared to the invisible hand seen by Adam Smith that played a positive role; the Marxists believe that invisible hand of capitalism was not for the betterment of the state and economy. Moreover, as the Liberals view that cooperation is an essential component for ensuring positive gain; the Marxists classify the world into “have’s” and “have-not’s” (Bieler, 2012, pp. 274--279). The world is divided into periphery and the central; due to many reasons, the raw end is obtained by the periphery also because periphery is the provider of natural resource. The interaction between the economies of the world depends on the relationship between the center and periphery.
The Liberals believe that the global economy is highly beneficial for all the players involved while the Marxist considers this theory completely nonfactual. The Marxist applies the concept of zero sum game because interdependence creates ongoing conflicts and insecurity for those involved (Spero and Hart, 2010). With the comparative advantage theory, liberals apply the positive sum game to the capitalist system where each state reaps mutual benefit from interdependence. Liberals assume that human behaviors are derived from equilibrium and stability in the economy (Alpeza, 1998). In the long run, even after a global economic crisis has struck, the equilibrium can be reached. So, due to interdependence, peace would be fostered in the globe due to the economic interaction of the nations.
Marxists state that those people who possess economic power have hold over the economy. These same people have strong position in the political system of the country resulting in inequality and human exploitation (Phillips, 2005). The Marxist strongly opposes the Liberalists and their major critique on capitalism is that this system is completely illogical. In contrast to the liberals, the Marxists also oppose the TNCs; the issue has been that individual TNCs have obtained more wealth than the country itself (Munck, 2010, pp. 45--53); and yet, the economic disparity prevails as it is not paying appropriate proportion of income to its workers and so, wealth inequality exists.
Conclusion
In this paper, the international political economy has been approached by shedding light on the two major theoretical perspectives, the liberalism and the Marxism. Liberal theory was established in early 19th century whereas the Marxist theory was established in response to it in the late 19th century. The political factors and the economic players are highly influential on each other; the influence of the two major economic approaches has been studied on the developments of the economy and on the international relations in the globe. Liberals and Marxists completely oppose each other on how the global political economy can be approached. Each has its own key players and distinct assumptions.
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