International Political Economy - Assignment Example

Introduction The assertion that, ‘the market operates in isolation and therefore not affected by politics’ is a myth. It is impossible for the two social institutions to be separated from each other, even though there are a few scholars who think it is possible. The political institutions control what takes place in the world of economy. Historically, politics has played a big role within the economic institutions. In the 15th century for instance, there was what was referred to as the rise of Mercantilism. This led to the centralization of authority in a view to control the economy. A strong economy was perceived as a source of political power (Dememark, 2000, p.65). During this period, the owners of means of production ensured that they regulated the wages and salaries. There were poor laws that protected the employees. There was need to cut down the cost of production in order to increase revenue in a given economy (Watson, 2005, p.74). Increase in military power has also been a way of making others to adopt a particular economic system (Watson,2005, p.75). This has been common between the United States and Cuba for decades. There have also been periods of cold wars between the United States, China and Russia (Chris, 2000, p.383). This owes to the fact that while the latter countries have been using the communism economic system, the United States has been calling for capitalism. However, a lot of revolution has taken place in the world of economy to protect the rights of individual countries and employees while the contemporary mercantilism states otherwise. According to the proponents of this theory, the current international political economy has nothing to do with improving the livelihoods of the people (Wood 2002, p.54). It has been all about creating wealth and power for the states. This explains why the largest economies in the world such as China have also the highest number of poor people in the world. In his theory of capitalism, Karl Marx indicated that the main aim of the owners of means of production is to accumulate the wealth at the expense of the labourers (Marx, 1846, p.321). The following discussion shall focus on whether market operates independently from the political interference. The main areas that will be considered to show that the two institutions work together are market liberalization, globalization and democracy. The three are imperative in fostering growth and development in the market. Economy and politics inseparable The political and economic institutions are entwined and therefore difficult to separate them (Heilbroner 2008, p.98). The international economy cannot succeed unless the political atmosphere allows. The political institution determines whether a country will be governed through communism, socialism or capitalism (Wolf 1999, p.45). Most scholars agree that the political institutions shape the way the economic activities are conducted globally. For instance, it is difficult to conduct trade between a capitalist country and communism one. The economic policies of such two countries are different. In the former for instance, there is what is referred to as the market liberalization (Stilwell, 2002, p.87). Under that, the forces of demand and supply control the prices of commodities. The government does not dictate on the cost of goods and services. On the other hand, however, in most communist countries, the governments may interfere with the market prices, aiming at protecting the citizens against any exploitation by the ‘unscrupulous businessmen.’ Due to these differences in economic systems, the international relations and trade of such countries may be inhibited (Scott 2005, p.987). Political and economic tensions become the order of the day. To understand how the economic systems affect most countries, the relationship between the United States and Cuba is a living testimony (Scott, 2005, p.97). The two countries have been in a state of cold war for decades. This is because the two countries have different economic systems that make it difficult for them to engage in any businesses. The United States has always wanted to ensure that its hegemonic culture is perpetuated in Cuba (Scott, 2005, p.98). Globalization and politics This is one of the major social phenomena that proofs that economy and government are inseparable. One of the major expectations by the international political economy is globalization (Arrighi, 2003, p.87). This is explained as the process through which the world shares their culture, exchanges goods and services as wells as promoting the movement of people from one part of the world to another (Dememark, 2000, p.87). Some of the latest concomitants of globalization is the internet and interconnected transportation lines. Globalization has been hailed for fostering growth of economies as well as culture (Ravenhill 2005, p.56). It has facilitated the movement of people and goods from one point to another. The world has therefore become a ‘global village’ due to the interconnection of ideas and culture. There cannot be successful international relations and trade without globalization. This explains why the United States has been particular on the need of countries to open their boundaries and allow international markets (Amin, 1976, p.94). It is meant to open new avenues and opportunities for other members of the society. For instance, there have been increased immigrants in many countries looking for employment opportunities or better services such as health and education. However, it is the role of the government to either support or reject globalization. This depends on how such countries are affected by this social phenomenon. The developed countries are for instance the most beneficiaries to the effects of globalization. Currently for instance, the culture of the developed countries, rules the world. This is the main reason why the critics of globalization indicate that it is a plan of the United States to promote homogenous culture globally (Phillips, 2005, p.93). This explains why many countries especially those in the Asian continents have opposed globalization. This social phenomenon can also be understood better by focusing on the Liberalism, Marxism, and realism theories. According to the former category, globalization is imperative for the growth and development of the markets (Obrinsky, 1990, p.117). It ensures that the surplus materials find their destination. It assists in the exchange of goods and services easily. With no barriers within the world of trade, this means that there will be movement of goods and services from one point to another. Liberalization however insists on the need of agreements on the part of the governments to allow for globalization (Arrighi, 2003, p.88). According to this theory, politics plays an important role in determining whether it will open its boundaries for the exchange of goods and services. Secondly, the liberal view is that market liberalization has been able to ensure that there is free movement of people from one country to another in such of greener pastures (McCraw, 2011, p.56). The United States has been one of the major destinations to thousands of people in the world. The government has opened its doors to any individuals provided that they meet the criteria. This has therefore assisted in the creation of jobs for thousands of people from many parts of the world. On the other hand, though, the Marxism theory states that globalization is a bad system for the developing nations (Marx, 1848, p.84). The proponents of this theory indicate that while the developed nations continue to thrive, the developing nations continue to languish in more poverty. He explains this by stating that there is imbalanced exchange of goods, culture, and ideas that run the economic and political world (Marx, 1848, p.85). The ideas of the developed nations are the ones that decide how the rest of the world will be run. For instance, many countries have accused globalization for corroding their cultural beliefs. This includes the loss of the cultural heritage. In some developing countries, people prefer the western culture since it is regarded as superior to that of their own countries. This is why people have neglected their own. Secondly, Marxism theory also indicates that the introduction of the globalization has been unfair to the goods coming from the developing worlds (Dememark 2000, p.53). For instance, when the developed countries want to control the supply of goods, they put strict standards that the imports must meet before they can be accepted in their society. This is similar to the principles explained by the mercantilism theory. The powerful countries must use their political power to control the flow of foreign goods in their markets. This is done for the purpose of protecting their own industries from collapse. As for the developing countries, any effort to block entry of foreign goods is perceived as threat to market integration. Such countries may receive international sanctions. On the other hand, it is imperative to note that most of the exports of the developing nations are raw materials (Lash 2010, p.86). For that reason, it becomes difficult for such goods to compete favorably with those from the developed nations. The realism theory on the other hand states that globalization is imperative, though it should be approached with care by the member states. Just like the liberal theory, the realists indicate that there is creation of market for goods and services (Heilbroner, 2008, p.65). Such a market ensures that goods and services reach their intended destinations within a short period of time. However, the realists indicate that continued globalization may affect the power of the states. This is especially the developed countries, which want to continue holding on power. As the mercantilist theory indicated, a country must always try to control its important and increase its exports (Heilbroner, 2008, p.28). This is the only way that such a country will become self-sustaining. This is where politics come into play. For instance, the Chinese products have infiltrated the market, and led to low demand for the products of other nations. The country is able to make almost all the products, which are produced by other countries with minimal effort and, reduced cost of operation. For that reason, this country is able to sell such goods at relatively low cost, thereby affecting the demand of goods from other markets. As a result, the country has become one of the biggest economies in the world, and for the first time in history beating that of the USA (Heilbroner,2008,p.89). This has however created both political and economic tension between the two countries. Political propagandas have been used in many countries including the USA to disregard goods from China because ‘they are substandard.’ However, this is mere politics because the countries are competing for a market niche (Gilpin 2001, p.87). From the analysis of the spirit of globalization, it is imperative to note that though it is supposed to lead to economic growth and development, it is controlled by the political interests (Gill, 2001, p.64). Once there is any threat to the country’s power, the governments step and put different hindrances that prevent any further balanced trade with other countries. It is a system that only benefits the most developed counties of the world. Market liberalization and political influence There is a close relationship between the government and the market liberalization. The latter refers to the freedom that must exist in the market (Fulcher 2004, p.90). The forces of the market must be given the freedom to determine the prices of goods and services. It is one of the concomitants of the international political economy. The market has to be opened up and the forces of demand and supply left to determine how goods and services would be sold. This is imperative in the sense that it has led to growth and development of industries and businesses (Fulcher 2004, p.77). It has helped in attraction of foreign investors, which on the other hand leads to increase in revenue of a given country. This system has many effects on the ability of some countries to trade effectively. It has the effect of affecting the infant industries, and may lead to their collapse. For instance, the developed countries are able to produce goods that are relatively cheaper prices and therefore sell them at cheaper goods. Goods from other countries such as China have made it difficult for other nations to develop their industries. This is due to the stiff competition (Friedman, 2002, p.80). In the developed nations, companies and the producers of the raw materials receive incentives from their governments thereby enabling them to compete favorably in the markets. The case is different in the developing nations. The cost of production of goods and services in such countries is much expensive (Friedman, 2002, p.87). It therefore becomes difficult to compete favorably with goods from other countries. When this is the situation, the political institutions come into play to save the economy. The economic institutions work hand in hand with the government in a view to change some of the business policies. This includes the need to control the supply of the foreign commodities. This includes introduction of new tariffs, the procedures taken to register a company and other related issues. Taxes for instance have been used politically to discourage the foreign investments. The government ensures that such tax is high so that any foreigners wanting to set up a company will be discouraged (Friedman, 2002, p.95). On the other hand, the import duties are increased to discourage the increased volume of the foreign commodities. This is done with an aim to protect the local market. In the current times, some governments have gone against the call by the international community and decided to control the market price indirectly by offering incentives the producers. This has been witnessed in the developing countries such as Malawi. This is one of the countries in Africa, which produces enough food for its population and surplus for exportation. The international community was however, against this move stating that it would interfere with the demand of other products from other countries. However, this is a demonstration that the government and market liberalization cannot be separated. From a Marxist point of view, politics plays an important role in market liberalization. It is indicated that this is the avenue, which the most powerful nations use to continue accumulating more goods and services. They become more economically powerful at the expense of the developing nations. Though it should be a way that is meant to ensure the growth and expansion of market of most of the countries, it has however benefited the few developed countries in the world. The critics of market liberalization indicate that there has been economic inequality between member countries. It is only meant to benefit few counties in the world, which are able to produce goods at a relatively lower cost. This has therefore made it difficult for many countries in the world to compete favorably. The Marxists see exploitation of the developing and infant markets by the more established ones (Dememark, 2000, p.98). One of the current social phenomena for instance has been acquisition of companies. The foreign industries for instance have been able to acquire infant industries in the developing countries, denying them the competitive power. They also indicate that the unscrupulous businesspersons have taken the advantage of the market freedom to exploit the community. They exploit the citizens through high prices of goods and services. According to Marxist theory, government intervention is imperative at this moment to protect the interest of the community members (De George 1999, p.81). The governments should be in a position to protect the citizens by setting the minimum and maximum cost of goods and services. However, this is against the spirit of market liberalization, which demands total desists from any external interference. However, the liberal and realism theories have on the other hand indicated that market liberalization is imperative, but also highlighted on the need for government regulation. Both theories indicate that any external forces should not interfere with the market. However, the realism theory indicates that there is need for the political regulation of the business activities for protecting the unbalanced trade. Every country focuses on increasing its exports and minimizing the imports. This is what provides such countries with the power that is required. There is a correlation between economic growth of any given country and political power (Cohen, 200, p.54). This is the main reason according to the realists that politics should play a big role in protecting the economy. Therefore, many policies that govern the market liberalization only exist on papers. The reality of the matter is that the politics will always seek to protect its own members and economic interests. With the need to gain political power, the government will always seek to control the demand and supply of commodities in the market. It is also imperative to note that politics play an important role in determining the rules that will govern the international market. Separating international politics from the market therefore becomes impossible. Democracy, human rights, and governance The international political economy calls for democracy and respect of rule of law. All the countries of the world are required to de democratic to allow for the international relations. Democracy is imperative in ensuring transparency and accountability within the social institutions (Amin, 1976, p.98). This is especially the economic institution that needs to be free of corruption. Democracy on the other hand ensures that the people have been given the rights to decide who their leader will be through elections. Democracy on the other hand ensures that there is rule of law within a given country (Amin, 1976, p.100). The political players within the government determine the economic market success. The United States is referred to as hegemonic because it has one of the strongest economy and military (Arrighi, 2003, p.87). It has therefore the power to ensure that it has control on other nations that seem to break the human law and deny democracy its role in the society. The government understands that without the rule of law enshrined in the democracy, it becomes difficult to carry out any meaningful business. The importance of democracy and rule of law has been observed by the relationship between the United States and Cuba (Arrighi, 2003, p.101). The two countries have been in political and economic tension for decades. Cuba for instance has not been recognized within the international market. It was denied this opportunity because their country had failed to respect the rule of law. Other allegations included the fact that the country had refused to give democracy in the country. For instance, the leader of the country has been accused of being a dictator. On the other hand, the economic system of the country has been foiled for not promoting a free market. The above description indicates the importance of democracy in international political economy. However, it has been observed that the west has an ulterior motives when they want other countries to become democratic. For instance, in the current times, the United States with an aim to end the era of dictatorship has assisted in toppling regimes in countries such as Tunisia, Egypt, and Libya. These countries did not support democracy and therefore, discouraging the international relations. However, many critics have indicated that there is always selfish interest that the west countries want to achieve when they want to ensure that a country becomes democratic. One of the biggest questions for instance is, ‘why would the United States not intervene in a country such as Somalia which has been in the civil war for many years? Some critics indicate that while democracy is good, it is a process that has to be given time. Others have indicated that some western countries have economic interests by asking counties to become independent. For instance, the west has been accused severally for indirectly endorsing a particular candidate during elections. It is the problems that come with democracy that many countries though regarded as ‘democratic’ have exercised some form of control. For instance, the Marxism views democracy as important for the development of the society as well as the protection of the human rights (Bacher 2007, p.76). However, as indicated before, what max refers to as democracy has been the socialism system of governance. However, he faults what the current governments call democracy. According to him, this is capitalistic democracy, which is only meant to benefit the rich nations. For instance, with the democracy comes the transparency and market liberalization. However, as indicated before, this market system only benefits the most developed countries because they are able to produce goods and services at a relatively lower cost. The spirit of capitalism comes with democracy (Bryan 2000, p.87). To many proponents of democracy, it is supposed to bring about equality and improved living standards of the people. However, this has not been the case. With the current democracy, the world has witnessed that the rich have continued being richer while the poor members languishing in poverty. It encourages the accumulation of wealth as well as the promotion of the ownership of private properties. With the need to protect the lives of the people and also the market, many governments such as Cuba have not supported democracy. This is especially out of the perception that many countries have about democracy. Use of economic power to control According to international political economists, there is a correlation between economic power and political power (Fulcher 2004, p.76). The United States for instance has been a super power due to its huge economy and political stability. It has also one of the strongest military in the world. This is important when such a country want to make influence in the world, including the determination of the economic system that other member’s countries will adopt. For instance, apart from Cuba, which has remained ‘defiant’ majority of the developing nations, have been forced to adopt the capitalism systems of government. This system is perceived to economic growth, which on the other hand helps in eliminating unemployment and poverty. In addition to that, most countries in the world are expected to become democratic and allow transparent within their institutions (Bryan, 2000, p.69). This includes creating a free market where the government is not allowed to interfere with the economic activities. All these conditions are meant to create a favourable condition for economic activities. The military power goes hand in hand with the economic development. This explains the main reason why the military spending in countries such as China, America, Russia and Japan have been increasing (McCraw, 2011, p.89). The military power is imperative in the sense that it is used to ensure that certain social order is maintained within the society. It gives such countries the Bargaining power in the economic world. For instance, while the United States seems to punish some countries such as Cuba for not been a capitalist country, it has not done the same to countries such as China and Russia because of the economic and military power of the two countries. However, there has been decades of political tensions between the United States and these countries (McCraw, 2011, p.90). The main reason why politics and economy cannot be separated is that the former determines the policies that govern the world market. Apart from determining the right economic system, the government has also the power to decide which countries to engage trade with. In the African countries for instance, the Chinese government has increased its presence. The main goal is to build international relations that will enable that country receive cheap raw materials such as oil to run its huge economy. Secondly, the government has the ability to create a favourable environment for business. It has to address issues of insecurity and corruption that makes it difficult for countries to engage in any meaningful trade. Technological advancement has also been the forces that ensure efficiency in the international trade. Thirdly, the government lays down the conditions that have to be met by any foreign investors. For instance, taxation differs from one country to another, and therefore may be used as a tool to either encourage or discourage the international trade. Separating economy from politics While many theorists still hold that economy and politics are inseparable, Stilwell (2002, p.98), thinks that the two should work independently. Though he does not state how this can work, he believes that unfavorable political climate can have negative effects on the international relations and trade. Though also believes that the politics have a role to play in international market environment, he however states the need for the economic institutions to be autonomous in terms of making policies for conducting business. It is believed that this is the only way through which the economic tension created when governments are in transition can be avoided (Stilwell 2002, p.100). However, this is just a theoretical approach, which may take decades before it can become a reality. In conclusion, though it is almost impossible to separate the economic institution and the politics, a few scholars think it is imperative. The global economy is controlled by the economic powers. It is the government that is used in ensuring that there are norms, rules and regulation, which enable business to be conducted in the best way possible. The economic strength of any country goes hand in hand with political and military power. In the mercantilism theory for instance, a country, which accumulates more resources, has power of influence of other nations. In the current situation for instance, the United States has been able to take control of many economies in the world. Using its hegemonic status, it has been able to coerce most countries in the world to adopt the capitalism economic system. Through this, a favourable environment for conducting the business has been made possible. Governments control the international economy by choosing the types of economic systems to use. Some like the China have decided to stick to their traditional economic systems. It is the government whom decide the taxes that will be charged on any foreign industries. For that reason, such governments have the power to decide whether to encourage foreign investment or not. One of the main ways through which the governments support the international political economy is through ensuring obedience to the rules and regulations set by the member states. Political stability, democracy and transparency have also been imperative in ensuring the success of the international economy. It is imperative to note that the government plays a big role in the determination of the success of market liberalization, globalization, and democracy. These three social phenomena are imperative for the success of international political economy. However, it is the political arena, which determines whether any of these systems will be employed. 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