The Main Aspects of International Political Economy - Coursework Example

Running Head: International Political Economy International Political Economy [Institute’s International Political Economy The world is a political arena and just like people in social settings, countries have relationships amongst themselves, which are governed by the policies of their governments and the precedents of past governments. These relationships outline the attitudes of countries regarding trading, aid, military support, and immigration and visa policies amongst other issues. There are several policies and theories, which govern the attitudes of countries and strategies of countries in the political arena. These strategies form the basis of a country’s behavior and the way they conduct themselves in the international political economy (Larsone & Skidmore, pg. 65-68, 1997). Countries have relationships and alliances with one another which form the basis of their behavior and their exchanges with one another. Some countries are rivals or have a relationship of enmity ever since their existence such as Pakistan and India, Israel and Palestine, and other countries. These countries control their relationships with limited visitation rights across borders, limited trading policies, and do not usually support each other with financial aid and other supportive activities. Other countries have friendly relations amongst themselves, which include friendly and open trade policies, financial aid, political alliances, and other supportive activities such as technology transfers and other policies such as China and Pakistan. However, some other countries refrain from taking sides or involving themselves in trade activities such as Switzerland and keep themselves in a neutral stance. This usually means they do not involve themselves in wars, do not trade much with one another, and do not state their opinion regarding international issues (Knorr, pg. 75-80, 1975). All policies that a country maintains will have an effect upon its progress, economic prosperity, and its power in the political arena. The policies that govern a country are also determinant of the danger a country is in from attacks, how protected it is from neighboring countries and rivals, and how much power it may have over other countries. Some countries may want to maintain power over other countries and prefer to position themselves in a powerful state. These countries include the USA, which currently has hegemonic status in the political arena and strive to maintain a top position in the United Nations, which gives it veto power upon world governing policies, such as the issue of child labor and dumping policies and policies regarding world pollution and the depletion of the ozone layer (Larsone & Skidmore, pg. 25-27, 1997). Political economic theories aim to explain the behavior of countries and their behavior amongst one another and in the international arena. There are several views and theories, which aim to explain the strategies and working of the international economy such as the classical theory and the Marxist view. Political economic theory previously used to cover topics such as production and consumption but now covers many other issues which include production, trading, laws, and governmental issues. Political economic theory aims to explain the whole international arena and form reasons for the way the international world is currently operating and why people and governments act the way they do. For the purpose of this paper, the dimensions of political economic theory will be examined before each economic theory is examined in turn. Political economic theory is a study of the Marxian concepts concerning class formation and the economic and social outcomes of these formations and relationships. A modern definition of political economic theory is that it is “the relationship between economics and politics in nation states or across nation states” (Timimi, pg.1, 2010). As political economic theory includes elements of a wide range of subjects and topics such as psychology, history, anthropology, geography, and others, it seeks to apply these elements upon the behavior of countries in a socio-economic context. Studying political economic theory is termed as the study of the International Political Economy and is resultant from the globalization of the international arena and the inter-relatedness of processes and relationships amongst countries. The most popular study of the international political economy begins with ideas from the economist, Karl Marx, who took a different view towards the study of economics while studying the world economy. Instead of focusing upon the standard study of supply and demand and the relationship between the production of commodities and the prices that commodities are bought and sold at, Karl Marx focused upon the relationship and interaction of people and categorized that as a determinant of the outcome of economic relationships. He sought to explain the relationship between different social classes and the way the people belonging to this social stratus treated each other and the behavioral policies they adopted. Marxist theory seeks to explain how people who are wealthy or own the resources in the world use them to exploit those that do not own these resources (Knorr, pg. 89-95, 1975). Accordingly, Marx based his ideas upon the capitalist school of thought, which emphasized upon the “labor theory of value” and which was supported by economists such as Adam Smith and David Ricardo. Smith and Ricardo were also the main economists who formed modern day political economic theory. The labor theory of value emphasized upon the idea that value was created through the work or the labor put into the production process by the working class. The system of the theory emphasized that the value of a good or a commodity was determined by the amount of labor put into creating that commodity. Hence, the commodity was worth the value of labor or the time spent in creating that commodity. All goods that had the same amount of labor put into their production were exchanged for equal value. Smith explained that this phenomenon could only be applied to exchanging commodities and did not extend to the relationship between workers and the owners of capital. This was because if this was the case between the relationship between workers and the owners of capital, then this phenomenon did not explain the reason for the existence of profits. However, David Ricardo said that the phenomenon was true and the relationship between owners and workers is the same as the exchange of commodities and something of the same value is exchanged between both parties (Friedman, pg. 56-60, 2000). David Ricardo observed the time of industrialization in which mechanization resulted in enhanced levels of productivity. This meant that it took less time to make the same amount of goods, hence the labor put into the goods decreased, which makes the value of the goods decrease. However, the prices charged for those goods in the marketplace remained the same which is how profits were created. This also means that even though workers were producing more goods in a lesser amount of time, they were receiving the same wages. Hence, the value of their wages was decreasing as they could buy a fewer amount of products with their current wages. This also signified that profits were being increased at the expense of wages and wealth owners were benefiting as their wealth was increasing but as workers were the cause of this increase in wealth, workers were actually getting poorer in terms of their purchasing power (Friedman, pg. 78-79, 2000). Hence, the struggle of the classes occurs as the poorer workers struggle to come up to the standards of the wealthy capital owners who owned the resources of production. They struggled against exploitation as they claimed that it was their own labor and expertise that was adding to the wealth of the capital owners. However, the capital owners were not giving back as much as they were receiving. However, Marx retaliated this notion that the working class was being exploited and claimed that in order for society to properly function and proper trading and exchange to occur between countries it was essential for one part of society to own the resources and they were to exploit workers in terms of their labor. The principle of “money makes money” applies and money could only be increased through the investment of money. If the working class rose to the level of the capital owners, there would be no one to perform the labor tasks in society. Hence, inequality has to exist for society to function properly and for the international arena to properly interact with one another (Elkins & Simons, pg. 172-173, 2004). One party has to be more powerful than the other for equilibrium to exist in society. The same are the rules between countries. Marxist theory explains that people are selfish and will seek their own benefit in everything they do. The same law applies to countries who take actions for their own benefit or because it is feasible to them instead of seeking the benefit of the whole world as a whole. There are several branches of Marxist theory that range from the neo-classical version to the post-classical version amongst the various branches of Marxism or classical economic theory (Elkins & Simons, pg. 170, 2004). Another popular theory that seeks to explain international relations and the relationship amongst nations is the Hegemonic Stability Theory. This theory stresses upon the fight for immense power and the top position in the world amongst countries. Previously, Russia was the hegemony of the world and now the USA holds this position. The hegemonic stability theory claims that it is essential for one country to keep the position of a hegemon to maintain peace and equilibrium. This country has the highest authority in the international arena and has the power of veto in the United Nations. This country dictates the rules and regulations of exchange to other countries and specifies the policies that should be adopted in the international world. The hegemon needs to enforce or coerce other nation states to adopt the same policies or perform certain actions in order to maintain peace in the world. In other words, if there is no country which is all powerful and able to control other countries, it would be very difficult to maintain order. The nation state that is given the title of a hegemon usually possesses three attributes which include the power of enforcing policies and regulations upon other nation states, the nation state must want to take and use this power of coercion, and must be able to use the policies in a manner which would be beneficial to the rest of the world (Corbridge & Agnew, pg. 15-28, 1995). In today’s time, the USA is the hegemon and uses its veto power to decide world issues which it does not seem feasible for the proper working of the world. Issues such as laws against child labor, trading quotas and tariffs, immigration policies, and laws supporting human rights all over the world are discussed and voted upon by nation states. However, the hegemon usually has the authoritative vote, which remains the highest authority over all previous votes. The USA exercises this power when it aims to deal with issues such as terrorism and other important international issues (Corbridge & Agnew, pg. 65, 1995). To have this elated position of power, a hegemon must possess certain characteristics such as an immensely stable economy and a powerful economic system. The country must be technologically advanced and must own resources, which other countries may not have access to. The country must also possess knowledge, human resources, educational capacity, and other things which would sustain its position in the international arena. Moreover, the country must possess some military power and capacity which would make it less vulnerable to attack. A hegemon must expect to be attacked or fought against eventually as the struggle for power intensifies in the international arena. Previous hegemons include England, USSR, and now the USA. The future shows India and China as emerging nations, which may be in constant competition for the position of hegemon. However, this position can only be given to the nation which brings the USA to defeat. Accordingly, the international arena is a complex place full of various strategies and positions which determine how the world progresses and the relationships between nation states. As in any other economy, nation states base their systems upon principles of economics, geography, socio-economic concepts, and beneficial reasons, which can benefit the states themselves. International Political Economy relates the politics that occur within an international context instead of addressing those that occur in a country itself. References Corbridge, S. & Agnew, J. 1995. Mastering space: Hegemony, territory, and International Political Economy. Routledge Elkins, Z. & Simons, B. 2004. “The Globalization of Liberalization: Policy Diffusion in the International Political Economy.” American Political Science Review. Volume 98, Issue 1. Friedan, J. 2000. International Political Economy: Perspective on Global Power and Wealth. Douglas Bell Knorr, K. 1975. The Power of Nations: The Political Economy of International Relations. Basic Books Larsone, T. & Skidmore, D. 1997. International Political Economy: The Struggle for Power and Wealth. Harcourt Brace & Co. Timimi, K. 2010. “Political Economy Theory.” Economy Watch. Retrieved on December 31, 2011: www.economywatch.com/political-economy/political-economy-theory.html Read More