Economic Liberalism in the International Political Economy

 

Economic liberalism is the idea that free markets stimulate the fastest economic growth and the most efficiency (Mingst, McKibben & Arreguin-Toft, p. 271).  It argues that markets should be free from government interference to optimize profits.  While I wouldn't argue against this theory being accurate, the reality is that for a few centuries economic liberalism was a mainstream practice.  When the Industrial Revolution gave record profits to capitalists, economic liberalism created many social problems like labor rights and environmental damage.  Some countries, such as ours, have adequately addressed the labor rights issues this created, but many others haven't, like China and Bangladesh.

Mercantilists wanted states to accumulate wealth and gold to guarantee power for a strong centralized government (Mingst, McKibben & Arreguin-Toft, p. 271).  The goal for mercantilist states was to maximize exports by industrializing their economies.  They generally wanted governments to reduce imports and encourage exports.  Protectionism is similar in that seeks to create policies that protect merchants from foreign competition, guarding against domestic jobs being lost.  The difference is that protectionism is more of a passive way to encourage exports, while mercantilism seeks to actively expand domestic markets through exports.  Both would advocate increasing tariffs or taxes on imports, but a mercantilist might take it a step further by investing in domestic markets or by acquiring foreign markets for exports.

The role of the state is to write fiscal, monetary, and microeconomic policies that stimulate or slow down their economies (Mingst, McKibben & Arreguin-Toft, p. 272).  Among the fiscal policies involved are government spending and tax rates.  Monetary policies include the manipulation of interest rates, while microeconomic policies regulate competition through things like laws, subsidies, and antitrust actions.  Multinational corporations (MNCs) are a positive development according to supporters of economic liberalism (Mingst, McKibben & Arreguin-Toft, p. 274).  MNCs and economic liberalists believe the market should regulate itself without government interference.  Like states, MNCs invest in foreign countries and import and export goods.  Unlike states, they try to avoid import barriers like taxes and tariffs.  International organizations like the World Bank, the International Monetary Fund, and the World Trade Organization work to promote free trade between states to facilitate and regulate economic liberalism.

As the world becomes more globalized, I believe the state will matter less in the global political economy.  MNCs may be globalized, but they are limited by international laws and negotiations.  That is why I think international institutions are more important than both- because they are globalized and regulate the political economy.  While it may seem like large states such as the U.S. sway the balance of these institutions in their favor (no doubt under the influence of their MNCs), the progressive power of international institutions, which have gained in size and strength over the years, leads me to believe the trend will continue as states become more dependent on one another.  Incidentally, I think the Internet facilitates this movement by diluting cultures across the globe, creating more tolerance on a grand scale.  As states become more tolerant and dependent on international politics, I think these international institutions will strengthen as diplomatic sources, offering a more stable global economy than in the past.

Sources:

Mingst, Karen A., McKibben, Heather Elko, Arreguin-Toft, Ivan M.  2019.  Essentials of International Relations, 8th ed. W.W. Norton & Company, Inc.  Canada.