Economic and Political Economy
To date, in Govt E-1780 we have studied four distinct perspectives governing the worlds interactions in politics and economic policies. These competing theories include: international political, international economic, domestic political/institutional and domestic economic. Each of these perspectives offers a unique set of conditions to define the international financial landscape and politics effect on it. Simplistically, the international political perspective can be defined as the geopolitical relations among various nations. The international economic structure views the world from the perspective of international macroeconomic conditions and the effect they have on nations. Domestic political structure is attributed to the structure of individual domestic political institutions and how the various structures can affect the nations economy. Finally, the domestic economic perspective reflects an individual nations socioeconomic interests.
It has been argued that “In the 19th century, British military domination and a rough balance of military power in Europe, allowed international trade and investment to flourish in an atmosphere of commercial and financial liberalization. When military conflict began to increase, between 1914 and 1945, international economic ties shattered into trade wars and Depression”. With reading this statement, and pairing it along with the four perspectives of this course, it matches the theory of: international political economy most closely. The Edwardian era (dating from roughly 1901-1914) stands out in history as a time of peace. During this time the British Empire led world trade on the backs of its new colonies. During this time, London was seen as the center of the world. It was a hotbed for entrepreneurship and was the financial center of society, with arms much further reaching than New York City, Paris, or Berlin.
This financial success allowed Britain to build up a vast reserve of overseas credit in their formal empire as well as its informal empires in Latin America. Philosopher Adam Smith challenged that the mercantilist doctrine and argued that economic and individual freedom would produce prosperity for the greater good. Adam Smith felt the proper role of government included defending society, maintaining law and order, and building selected public works such as roads and other infrastructure along with public education.
The international political approach “studies the political battle between the winners and losers of global economic exchange. It examines how this political competition shapes the evolution of the international trade and monetary systems, and influences the development strategies that governments adopt” (Oatley 2). The international political approach focuses mostly on national power. The international political approach views each nation-state as a unitary rational actor on the international stage. The belief