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UB00402

ACADEMIC READING AND WRITING

TITLE: THE EXISTENCE OF INTERNATIONAL POLITICAL

ECONOMY IN OUR WORLD IS RELEVANT.

NAME: NUR ALYAA FATIN BT MOHD IZZAD

MATRICS NO: BA 09110203

SECTION: 20

LECTURER: MR JAUJI BIN HJ HUSSIN

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Title: The existence of International Political Economy in our world is relevant.

Introduction

International Political Economy (IPE) is term that we recently heard in our daily

life and this term is being used in every country in the world. Since this term is so

famous, why some of us still didnt know what is it international political economy?

International political economy is international in scope, meaning that it deals with

issues that cross national borders and with relations between and among nation-states.

International economy politic is concern with the interaction between the state and

the market. The state and the market, in turn are associated with the political pursuit

of power and the economic pursuit of wealth. There are many definitions of international

political economy and the exact definition for international political economy still cant

find. For Adam Smith, international political economy is the science of managing a

nations resources so as to generate wealth. Therefore, for Marx, it was how the science

of managing a nations of production influenced historical processes. Professor Susan

Strange believed that international political economy is concerns the social, political, and

economic arrangements affecting the global systems of production, exchange, and the

mix of values reflected therein. From all these scholar definitions, International political

economy can be seen as the relationships between the roles of politics and economy in

the international economic system. In international political economy, mercantilism,

liberalism and Marxism were the most famous perspective that always been discussed or

debated in international economy system. This three perspective or approaches can be

used to view and interpret developments in international political economy.

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BACKGROUND

IPE emerged as a heterodox approach to international studies during the 1970s

as the 1973 worlds oil crisis and the breakdown of the Bretton Woods system alerted

academics, particularly in United State of the importance, contingency and weakness of

the economic foundations of the world order. Before 1970s, the awareness of the

linkages between politics and economics were not get attention from the world because

of the influenced of the liberal school thought that considered economic and political

matter to be largely separable. The idea of Adam smith (1723-90) who was the liberal-

theorists believed that economic system will functions best with the minimal interference

from government, this thought influenced the world to follow it. Besides that, IPE

scholars such as Eugene Low also asserted that earlier studies of international relations

had placed excessive emphasis on law, politics, and diplomatic history. Similarly,

neoclassical economics was accused of abstraction and being a historical. Drawing

heavily on historical sociology and economic history, IPE proposed a fusion of economic

and political analysis. In this sense, both Marxist and liberal IPE scholars protested

against the reliance of Western social science on the territorial state as a unit of

analysis, and stressed the international system.

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MERCANTILISM

Mercantilism is the oldest theoretical perspective in international politic economy.

This theory is about the relationship between economic activity and state power. The

central focus of mercantilism is the problem of security, the role of the state and the

market in providing and maintaining a nations security in all forms.

Our economic rights are leaking away. If we want to recover these rights we must

quickly employ state power to promote industry, use machinery in production, give

employment to the workers of nation. (Sun Yat sen 1920).

According to mercantilist, the state is the principal or dominant actor in international

politic economy. States is the decision maker in any economic activities and promote

exports and limit import, thereby generating surpluses to create power and wealth.

Mercantilist states in efforts to increase their exports of their manufactured goods, they

did not allowed exports raw materials and technology. This is because they wanted to

limit the ability of others to develop their own manufacturing capabilities in order to

preserve and protect their national security and independent. Alexander Hamilton is the

famous mercantilist and in his report said that not only the wealth; but also the

independent and security of country, appear to be materially connected with prosperity

of manufactures.. They also limited imports manufactured and luxury goods, and only

imported raw materials that would reduce costs for their own manufacturers. (Report on

the subject of manufactures 1791)

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LIBERALISM

Liberalism is the most famous theory that had been used by most of the country

in the world. Liberalism emphasizes the importance of free market and private property

right and prescribes only a limited government role in economic activities. As a liberalism

scholar, Adam Smith asserted that the trade should be free and should be specialize in

what they could do best so that they will become wealthy and powerful. Meanwhile,

liberalism argues that when people are free to make their own decisions about how to

use the resources they possess, the social welfare will be in the high levels.

In this theory, individuals and private firms can freely express their economic

preferences and the state play the role as the invisible hand in preventing restraints on

competition in free trade and providing public goods such as roads and other

infrastructure. State should guide the allocation of resources through voluntary market-

based transactions between individuals. At the same time, John Maynard Keynes, also a

famous liberalism scholar said that state play the important role in economic activities

and necessary to intervene regularly in the economy. This is because Keynes view that

the market generated equilibrium between production and consumption might occur at a

situation where labor and capital are underutilized. This situation can contribute to

instability in the economy system which can due to stagnation (a situation where the

economy decrease and at the same time unemployment happens). When this happened,

the demand will decrease, and production and investment also will be reduced. To

overcome this situation, Keynes emphasis the need of government to make fiscal

policies (government make investment by increased the government expenses) to

increase demand.

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MARXISM

Marxist identifies the relationship among classes as the main factor affecting the

economic and the political order. Each mode of production associated with two

opposing classes; the bourgeoisie and the proletariat. The bourgeoisie is the people

that own means of production or in other words, those who are rich. On the other

hand, proletariat is referring to labour or people that work for bourgeoisie and most

of them are poor. This theory was originated from Karl Marx when the revolution of

industrial happened. He believes that capitalism first emerged in Europe because

private feudal land holding could be converted into private bourgeoisie property

when capitalism replaced the feudal make of production. This theory also known as

structuralism because the economic structure is the strongest single influence on

society. Additionally the role of state in this theory is to support and defend the

interest of dominant class of bourgeoisie capital owner. This is why exploitation

happened in this theory where bourgeoisie exploited the proletariat. In Marxism, the

exploitation of proletariat by bourgeoisie can be explained by the amount of wages

that proletariat get. In order to maximized profit and generate wealth, bourgeoisie

will try to produce goods by reducing the cost of production but, the goods were still

in a good quality that can fulfill their customer demand. So the labour will be the

saving machines in this situation because they cant refuse to accept lower wages.in

this situation, there are gab between proletariat and bourgeoisie where bourgeoisie

will become richer and proletariats will become poorer.

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CONCLUSION

Mercantilism emphasize on the national interest where they want to generate

wealth together with power to protect their country, this is why most important actor

in this theory is state. However, liberalism did not take state as the most important

actor because they believe individual and private firms can produces more wealth

than states. This is the liberalist objective to generate wealth by making more profit.

In this theory, state only plays their role in making policies and law. On the other

hand, Marxism also did not take state as the most important actor in generating

wealth but they used state as a tool to find market for capitalists. The terms of

monopoly has exists in this theory because the competition between capitalists in

free trade in order to get market for their goods. As a conclusion, we can see that

these three major theories are still used up to nowadays. Because of each theories

has its own good, maybe if our country combine these theories and apply it; our

country will be the first class country in the world which is powerful and wealthy.

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REFERENCES

Thomas Oatley. 2010. International Political Economy (interest and institutions in global

economy). Fourth edition. United States. Pearson Education Inc.

David N. Balaam, Michael Veseth. 2008. Introduction to International Political Economy.

Fourth edition. United States of America. Pearson Education Inc.

Theodore H. Cohn. 2003. Global Political Economy Theory and Practice. Second edition.

United States. Addison Wesley Longman Inc.

Robert E. Goodin. 2006. The Oxford Handbook of Political Economy. Great Britain.

Oxford University Press.