Definition of IPE

IPE is the study of inequality of power and wealth between people and nations and
the patterns of collective power and learning that changes this inequality. It is also
study of interaction of politics and economic that illuminates the reasons why
changes occur in the distribution in the state’s wealth and power.
Evolution of IPE
International Political Economy (IPE) emerged as a field of study in the mid-
1970s, starting as a single course within university degree programs before
developing into a distinct sub-field within International Relations (IR). Initially
linked to political science departments, IPE has since grown into an
interdisciplinary field. In the 1990s, a review highlighted both continuity and
change in IPE's core issues. While topics like the impact of transnational
corporations, international finance, and trade remained central, attention shifted
from areas such as East–West relations and North–South conflict to newer
concerns around environmental issues and gender.

Historically, social sciences were not always divided into specialized subjects, with
early thinkers like Adam Smith—a moral philosophy professor—working across
what are now distinct disciplines. However, as knowledge expanded, social
sciences became compartmentalized, with fields like anthropology, sociology, and
economics developing their own approaches to questions within isolated contexts,
particularly as nation-states solidified in Western Europe. This "methodological
nationalism" often neglected global interconnections. IPE emerged to address these
gaps by bridging the boundaries between politics and economics, as well as
between national and international frameworks, drawing on insights from
geography and history to enhance understanding of global political economy.
 Economic Nationalist Perspective or Mercantilism or Neomercantilism or
Statism

Introduction and Definition

The economic nationalist perspective focuses on the role of the state and the
importance of power in shaping outcomes within the international political
economy. This view, often referred to as "mercantilism," "neomercantilism," or
"statism," parallels the realist approach in international relations. Central to
economic nationalism is the protection of the nation-state, viewing economic
activities through the lens of national interests and power. Economic nationalism
prioritizes the objective of strengthening the state's economy, often through
protectionist measures and policies aimed at limiting foreign competition.

Key Actors
In the economic nationalist perspective, the key actor is the state. This perspective
views the state as the primary player in the global political economy, as it is
responsible for safeguarding national interests in an anarchic international system.
Other economic players, like firms and transnational corporations (TNCs), are
recognized but are considered secondary to the state. Ultimately, these firms
operate within the bounds set by state power, and in times of economic or political
crises, they often turn to the state for support and protection.

Key Features
The economic nationalist perspective is characterized by several distinct features:
1. State Primacy
Economic nationalism assumes that the state holds primacy over the market, and
economic activities are primarily shaped by political power.
2. Focus on National Interests
This perspective emphasizes the importance of securing national interests and
ensuring the state’s economic power, often at the expense of other states.
Economic nationalism views global wealth as limited, creating a "zero-sum game"
where one state's gain is another state's loss.

3. Protectionism and Industrialization

Economic nationalists advocate for protective measures like trade barriers and
strategic policies that support domestic industries, enabling them to compete
internationally and enhance state power.

4. Market as Politically Shaped

Economic nationalists assert that markets do not exist independently but are
shaped by social and political factors. Political needs drive economic policies,
which are crafted to build a powerful and self-sufficient state.

5. Persistence in Contemporary Economics

Despite globalization, economic nationalist thought remains relevant, as seen in
cases where states protect certain industries or maintain trade surpluses. Examples
include Japan’s relatively closed economy and the U.S.'s protection of its
aerospace industry through defense spending.

Liberal Perspective

Introduction to the Liberal Perspective

The liberal perspective on political economy stands in contrast to economic
nationalist theories by focusing on a diverse range of actors, including individuals,
states, corporations, and interest groups. Unlike nationalists, who often view the
state as a unitary actor, liberals recognize the influence of various factors on state
behavior and emphasize conditions for cooperation rather than conflict. They reject
the idea that international relations are purely a zero-sum game, instead promoting
the notion of interdependence and the potential for mutual benefit. This perspective
emerged during the 18th and 19th centuries alongside the Industrial Revolution,
with figures like Adam Smith and David Ricardo advocating for free trade and
larger markets as means to enhance overall wealth. In contemporary discussions,
liberalism remains influential in shaping global economic policies, with varying
strands of thought that either prioritize the diminishing role of the state or
recognize its importance within interconnected systems.

Key Actors in the Liberal Perspective

1. Individuals
The individual is the fundamental starting point of analysis within liberal theory.
Individuals are seen as rational actors whose pursuit of self-interest leads to
benefits for society as a whole. Liberal economic theory, particularly neoclassical
economics, focuses on individual wants and preferences.
2. Firms
Firms play a significant role in the liberal perspective. Unlike mercantilists, who
view firms with suspicion, liberals regard them as sources of economic wealth and
innovation. Firms engage in production and exchange, contributing to societal
prosperity.
3. States
While states are considered key actors, many liberals view them with skepticism
due to their potential to introduce political interference into economic matters.
Liberals argue that state control distorts market benefits and adds unnecessary
costs.
4. Transnational Corporations (TNCs)
TNCs are seen as positive forces in the global economy. They are believed to
bring advantages to both their home countries and host countries by transferring
capital, technology, and market access, thereby boosting economic growth and
development.
Features of the Liberal Perspective

1.Spontaneous Market Expansion

Markets are believed to expand spontaneously to satisfy human needs, fostering
economic growth and interdependence.
2. Limited Government Intervention
Liberals advocate minimal government interference in economic affairs,
emphasizing that the state can either facilitate trade or impose restrictions that
hinder economic prosperity.
3. Cooperation and Progress
Economic markets are viewed as the primary sources of cooperation, progress, and
prosperity, creating opportunities for mutual benefit among nations.
4. Market Laws
A market economy is governed by its own principles or "laws," which dictate how
economic activities operate and evolve.
5. Independent Free Trade
Free trade should occur independently, allowing all participants to benefit without
coercion, fostering an environment of mutual gain.
6. Key Economic Actors
The two main actors in the liberal perspective are consumers and producers, with
individuals being the foundational unit of analysis.
Comparison between liberal and mercantilism ideologies

 Core Economic Principles:

 Mercantilism:

It is rooted in the belief that a nation’s wealth and power are best served by
increasing exports and collecting precious metals, like gold and silver, as
economic indicators of wealth. “Mercantilism assumes that economic
activity is a zero-sum game in which the gain of one nation results in the
 loss for another.” This view emphasizes competition over cooperation
among nations.

 Liberalism:

In contrast, liberalism is based on the principle that “markets are efficient

and that the pursuit of self-interest benefits society as a whole.” Liberals
argue for a cooperative economic system where “free markets and open
competition” lead to efficiency and general prosperity, benefiting all nations
involved through trade.

 Role of the State:

 Mercantilism: The state plays a highly active role in directing economic

activities and protecting national industries from foreign competition. This
interventionist approach is grounded in the belief that economic power
directly supports national power and security, as illustrated by policies
designed to “accumulate treasure and build up military strength.”
 Liberalism: Liberalism, however, advocates for minimal government
intervention in the economy. It holds that the state should act as a “night
watchman,” ensuring the protection of property rights and upholding the rule
of law but refraining from directly controlling or interfering with markets.
Liberals believe this non-intervention allows for greater innovation and
wealth generation.

 Global Trade Perspective:

 Mercantilism: Mercantilists view international trade as a zero-sum game

where one country’s gain is another’s loss, leading to policies that limit
imports and focus on export maximization. This often involves
protectionism and colonial exploitation to control resources and markets.
 Liberalism: Liberals, by contrast, see trade as a positive-sum game where
all parties can benefit. They advocate for “free trade as a means of achieving
peace and prosperity,” suggesting that global trade fosters interdependence,
which can reduce conflict and raise living standards worldwide.

 Purpose of Wealth:

 Mercantilism: Mercantilists view wealth accumulation as a means of

strengthening the state, as wealth is directly tied to national security and
political power.
 Liberalism: Liberals, on the other hand, see wealth as a way to improve
individual well-being and overall societal welfare, with an emphasis on the
economic freedom and happiness of individuals rather than the
aggrandizement of the state.