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Three Ideologies of Political Economy

POS 131 IPE Report

Exequiel Salcedo

on 23 January 2013

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Transcript of Three Ideologies of Political Economy

THREE IDEOLOGIES of POLITICAL ECONOMY (Gilpin 1987) ideology system of thought and belief
by which individuals and groups explain
how their social system operates
and what principles it exemplifies (Heilbroner 1985) moral and intellectual position
which encompasses the
role and significance of the market
in the organization of
society and economic affairs ideology ECONOMIC
LIBERALISM MARXISM STATE MARKET SOCIETY unlike theory, an ideology is a position
that entails a total belief system
concerning the nature of
human beings and society a paradigm that demands
a sense of commitment, providing
its own scientific description of
how the world does work
and should work (Kuhn 1962) emerged from the writings
of Adam Smith during the
Enlightenment period
as a reaction to mercantilism ECONOMIC ECONOMIC LIBERALISM greatly influenced orthodox economics,
with the assumption that
economics and politics do and should exist
in separate spheres a set of liberal values emphasizing
individual equality and liberty,
grounded on its assumptions about
the nature of human beings,
society and economic activities firmly believes in:
the market as a rational and spontaneous entity that exists to satisfy human needs
the price mechanism as the most efficacious way of making the buyer's and seller's ends meet human beings as, by nature, economic animals; and therefore evolve on their own

Mankind is inherently able to
"truck, barter and exchange". to facilitate exchange, people create markets, money and economic institutions BUT a form of government is necessary
to protect and maintain this system Adam Smith (Radford 1945) The Market System aimed at increasing economic efficiency, maximizing
economic growth, thereby
improving human welfare Free Trade purportedly established in order to benefit the individual consumers by providing them more and better choices of goods and services The Individual Consumer the basis of society
behaves rationally, i.e., opting for maximum gains at minimum cost
will seek to acquire an objective until market equilibrium is reached Perfect Rationality individuals have complete information before making a beneficial choice PRODUCER CONSUMERS *in a truly competitive market
using a free price system Price Signals as Information PRODUCT "Law" in Liberal Economics impersonal and politically neutral
assumptions Law of Demand relative price of a good is inversely proportional to the no. of that good an individual will tend to buy
relative income of an individual is directly proportional to the no. of goods he/she will tend to buy Law of Supply scarcity and limited resources as inevitable constraints in human existence
every course of action has an opportunity cost Towards Equilibrium and Stability
the market as self-correcting and self-operating
instances of disequilibrium eventually leads to a new state of equilibrium Harmony of Interests will supercede any temporary conflict of interest
self-interest as beneficial to all in the long run
gains are proportional to the contributions The Promise of Progress
embodied by increasing wealth per capita
linear, gradual and continuous economic growth for properly functioning economies
"political evils" such as wars and imperialism are political, not economic, by nature The Science of Modern Liberal Economics incorporated the empirical epistemology
a progressive discipline that discovers new laws and theories, both contingent and normative (e.g. theory of comparative advantage, theory of marginal utility, and the quantity theory of money)
its principles and tenets have led real-world economies to grow as they continue emulate the market economy, guided by modern economics A Vision of World Peace trade and economic intercourse as sources of peaceful relations among nations
creating a bond of mutual interests and commitment to the status quo
the principle of relative gains remains valid but distribution of wealth emerges as an issue of contention CRITICISMS WEAKNESSES & Unrealistic assumptions perfect rationality and a perfectly competitive market cannot be attained
the "economic man"
undermines reality for predictive capacity
Artificial separation focuses on economics and forgoes the underlying sociopolitical background
homogenizes society with respect to rationality and absence of social constraints Free market assumption exchange is assumed to be free and occurring in a perfectly competitive market composed of fully informed individuals with potential mutual gains Cost of liberal economics teaches that everything has a cost; all courses of action have opportunity costs
separation from the sociopolitical sphere is necessary Limits of economics economics as an insufficient approach to political economy despite its dominant perception as the master social science Outcome of economic activities justice and equity are disregarded; distribution of wealth is not a concern Static analysis consumer demands, institutional framework and technological environment are held constant
social, political and technological variables are considered exogenous ECONOMIC NATIONALISM economic activities are and should be subordinate to
the goal of state building and
the interests of the state,
i.e., primacy of the state, national security and military power
malevolent mercantilists perceive international economy as an opportunity for the state to aggrandize itself and
expand its influence Wealth and power wealth as a means for power
power as necessary means to acquire wealth
wealth and power as ends of national policy
there is harmony between these ends, but sometimes economic sacrifices must be made for the sake of miltary security A necessary struggle pervasive and inherent in the nature of states due to the role of economic factors in the international order
shown in history, in the emergence of constantly competing states
nationalists identify a balance between trade and national security Industrialization foremost objective of nationalism
has effects to the overall development of the states, nationalist and liberal alike
economic self-sufficiency and political autonomy
basis of military power and central to national security Wealth distribution markets have the tendency to concentrate wealth based on power relations between strong and weak economies
defensive economic nationalists employ protectionist policies to protect the fragile/declining industries Monopoly vs Competition relative gains weigh more than mutual gains; interests are inherently conflictual, not mutual
policies are made to benefit stronger states more disproportionately
insecurity outweighs cooperation; control is the goal
contemporary mercantilism relies on policy competitiveness
benign mercantilists perceive economic interests as the least priority of the state in order to survive and prosper (Viner 1958) one's gain is someone else's loss
mutual benefit is impossible, thus competition is rendered necessary
wealth and (military) power do not necessarily go hand-in-hand, in the short run
industry is more reliable than the market criticisms AND WEAKNESSES Perception of gains lacks theory of domestic society, state and foreign policy
forgoes pluralism in society, and varying degrees of autonomy in policymaking Deficiencies might lead to inefficiencies and economic retardation
industrialization is good but agricultural development must be also attended to Protectionism and industrialization a necessary but not sufficient condition
might even retard economic development
The role of the state MARXISM Karl Marx and Friedrich Engels Bernstein and Kautsky
hardly distingushable with egalitarian democracy Evolutionary Marxism Leninism
violent takeover of the state apparatus Revolutionary Marxism dialectical approach to knowledge and society
historical materialism
general view of capitalist development
normative commitment to socialism Essential elements of Marxism private ownership of the means of production and existence of wage labor
driven by capitalists striving for profits and capital accumulation
labor is transformed into a commodity, subject to the price mechanism
self-destructive and will eventually lead to the fulfillment of True History Capitalism law of disproportionality - disproves tendency towards equilibrium
law of concentration of capital - increasing gap between the rich and the poor
law of falling rate of profit - more capital, less incentive to invest Economic laws of Marxism self-destructive due to the severity of downturns in the business
to be replaced by the socialist economic system
internationalized by Lenin (imperialism)
Irrationality of Capitalism capitalism evolved into something more vibrant, technological and global
aside from trade, foreign investment and international finance (which controlled industrial manufacturers)
most developed stage of capitalism; went beyond the boundaries of the nation
colonial imperialism as a necessary feature of advanced capitalism Imperialism due to creation of dependencies
different rates of profit accumulation causes instability
struggle of nations (like class struggle) Law of uneven development CRITIQUE OF MARXISM cannot expand internationally due to unconventional mode of incentives
failure to appreciate the role of political and strategic factors in international relations
historical evidence
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