HISTORICAL EVOLUTION OF THE GPE. WORLD ECONOMY M.Teresa Aceytuno University of Huelva

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1 HISTORICAL EVOLUTION OF THE GPE WORLD ECONOMY M.Teresa Aceytuno University of Huelva

2 SUMMARY Mercantilism and Nationalist Political Economy Tradition. Classical Liberalism and Neoliberalism. Marxism and Marxian Political Economy Tradition. Conclusion

3 Mercantilism and Nationalist Political Economy Tradition Early forms of Mercantilism Origins: First writings emerged in Sixteenth Century. By seventeenth Century, the core tenents were established. Dominance of national interest in economic policy. Central role of state in directing economic activity. Importance of creating favourable trade balance to promote growth and prosperity. Mercantilists viewed power and wealth as interrelated and interdependent objectives of state policy, rather than as trade offs.

4 Mercantilism and Nationalist Political Economy Tradition Viner (1948) identify four essential elements of all mercantilist writings: 1. Starting point: State s overriding need for security in and environment of international anarchy. 2. Wealth is a necessary condition for state power; so power is an esential means to wealth creation. 3. In the short run, it may be necessary to sacrifice economic wealth in the interest of the state s power and security. 4. International system is a zero-sum game; economies compete for a given size of economic weath precious metals, that is, accumulation of gold and silver bullion.

5 Mercantilism and Nationalist Political Economy Tradition Friedrich List and Alexander Hamilton s nationalism: The state s economic interests were to be balanced between long-term and short-term goals The national economic interest is comprised of competing national interests Not necessarily unsympathetic to free trade or liberal economic policies

6 Mercantilism and Nationalist Political Economy Tradition Specific policies advocated by nationalists included: Protectionism: State has to intervene in trade and erect barriers to protect domestic producers. Promotion of infant industries : In their early stages of development, nascent industries are particularly vulnerable to competition from mature industries. Education: List stressed the importance of national education strategy to develop fully the human capital of a society. Infrastructure: Providing basic infrastructure for industry and commerce.

7 Mercantilism and Nationalist Political Economy Tradition Nationalism in the twentieth century: Leading economies seek refuge in mercantilist policies in the interwar period. Aggressive forms of mercantilism: Nazi Germany between 1933 and 1945: Racial ideology merged with an expansionist policy of territorial gain. Imperial Japan: Greater East-Asia Co-Prosperity Sphere. Developing countries after IIWW: Theory of Dependency. Raul Prebisch and Fernando Henrique Cardoso. Break the exploitative links between the capitalist centre and the dependant South. Import substitution industrialization (ISI)

8 Mercantilism and Nationalist Political Economy Tradition Contemporary mercantilism: Governments continue to pursue trade protection. Strategic trade theory: Governments and industries can use trade protection and subsidies in a strategic way to expand their global market share and pre-empt entry into the market by competitor firms. Criticism. Hegemonic stability: Free trade is desiderable but can only be secured if it is backed up by a hegemonic state with preponderant power. Criticism.

9 Classical Liberalism and Neoliberalism Classical Liberalism: Adam Smith: An inquiry into the nature and causes of the wealth of nations (1776) Attacking mercantilism: Rejection of state intervention as prescribed by mercantilism. State s role is to support, not hinder, the free interplay of market forces. Further development of these liberal principles over the next two centuries.

10 Classical Liberalism and Neoliberalism Key principles: Individualism and individual liberty. Market mechanism: natural and most effective mechanism for coordinating individuals pursuit of self interest- Limited government. Progress in history: Liberal principles will lead to prosperity and peace. International economic relations: No zero-sum game: all nations can benefit from free trade and international division of labour. But: In a world of international anarchy, no nation could ignore security concerns.

11 Classical Liberalism and Neoliberalism Free trade liberalism: Further development of peace-through-trade principle: David Ricardo and the theory of comparative advantages. Richard Cobden and the free trade that would end economic nationalism. Critics: E.H. Carr: Advantages for advanced nations. Experience from the interwar period.

12 Classical Liberalism and Neoliberalism Twentieth-century liberal theory: New situation after the IIWW Construction of an open and liberal system Stop believing in the link between peace and trade. Two major strands of thought: The concept of interdependence. Robert Keohane and Joseph Nye. Interdependence limits national autonomy and puts a high price on war and military expansion. Force them to more institutionalised and lasting cooperation. Theories of international institutions and regimes: Concept of international regime by Stephen Krasner. It has brought to more orderly and stable international relations.

13 Marxism and Marxian Political Economy Tradition. Marx s theories: Critique of the social basis of capitalism The autonomy of individuals is constrained by the need to reproduce the capitalist system Capitalism depends on an ever more-finely detailed division of labour Capitalism dehumanizes individuals ( alienation ) Workers interests do not coincide with interest of the capitalist system False consciousness as a means of procuring consent The logic of extracting surplus value from labour results in a procedural injustice

14 Modern Marxists Seek to uncover exploitative dynamics in capitalist society, and to present them as infringements of global justice Structuralist approach conceives of world economy as a single, integrated capitalist system E.g. Lenin Imperialism is the highest stage of capitalism Capitalism had become a world system World Systems Theory (e.g., Wallerstein) Dependency Theory (e.g., dos Santos)

15 Alternative Distinctions (4)

16 Conclusion Simple, clear-cut divisions obscure the complex and diverse theoretical underpinnings of IPE as a field of study A more accurate understanding of the historical roots of contemporary theories suggests that the categorization of contemporary theories is a problematic exercise

17 REFERENCES Ravenhill. J. (2014): Global Political Economy, Oxford University Press, chapter 2.