SUMMARY INTRODUCTION TO INTERNATIONAL POLITICAL ECONOMY
Module 2 – Mercantilism
Philosophical background of mercantilism
Mercantilism is the oldest theory in international political economy. A famous sentence belonging to
this is ‘salus rei publicae suprema lex’. This can mean some different things. The first part can mean
the safety of the state, the public well-being, or the security of the government, all regarding the
second part, meaning ‘is the supreme law’. So, with this sentence the safety of the state is seen as
the same as public well-being. In mercantilism, states are seen as primary actors.
An important author that can be linked to mercantilism is Thomas Hobbes, who wrote the Leviathan.
In this book, he assumed that societies are governed by a social contract and a political contract. This
idea lies at the basic of mercantilism. The social contract works horizontally, and people reason
together that they will leave each other be. But at the same time Hobbes argued that people
wouldn’t obey this contract unless there would be some kind of control, and here the political
dimension shows up. The political contract works vertically, and forms authority over the people to
force them to stick to their promises, people accept their stable position as a return and this is how
the contract.
For until now, the above is applied to the domestic field. But how does it work for international
politics? Here, an expression of Vilcani is applicable, namely “the end justifies the means”. He came
back to what Hobbes had sad about the Leviathan and described the Janus-faced character of it.
Differently than within states, there still is anarchy on the interstate level. States can not trust each
other and make use of violence.
The above seems pretty uncivilized, but for the time the theory was developed it was a progress
because the domestic situation was pursued to be peaceful and developed, and states want to
protect the domestic sphere. It is, again, about the public well-being of the own state and about
defending this from the outside world. The state is understood as a social entity that is represented
by the government, and that has the goal to improve the public well-being.
Authors who made use of these theories are Colbert, Hamilton and List. Many authors still root their
ideas on the basic concepts of mercantilism. For the context of industrialized countries, we talk about
neomercantilists. Authors who belong to this last group are Gilpin and Drezner.
Historical examples of mercantilism
Mercantilism is a theory that has been applied as a political practice throughout the modern ages. In
the early middle ages Europe was fragmentated, and slowly territories clamped together. It was only
in the 19th century that statehood became to be. Mercantilism, in the end, is a theory of how to build
a state by economic means.
France is known to be a mercantilist state since Louis XIV (1638 - 1715). He was the first king to
create a structure to be able to effectively collect money. A structure was put in place to force people
to pay their taxes, and infrastructure was needed for this. These two things made an entity of France
as we know it today. Another point was the support of industry in the country, to collect money, and
invest it again in more industry. What the French kings of this time did was trying to weaken the
classical nobility and create a new social class of bureaucrats who were ‘recruited’ from among
common men. By this means, France managed to become one of the most important states of
Europe from then on.
,The second example is England, which however is not the best example for a successful mercantilist
state, for it has some limitations. Like France, the English crown wanted to start collecting money,
and England started to enforce strict capital controls. The most important development in England is
the rapid industrialization and the urbanization that came along with it. One of the things the English
crown did was introducing the first forms of property rights and patent. By this, the state created
artificial monopolies. From the mercantilist point of view, these patents helped expanding the capital
of the monopolists to expand even more. Patents where thus a very important tool in industrial
policies at that time. Also, the English state was very mercantilist in the international playfield and
their colonist practices. The British variant of mercantilism probably wouldn’t be possible without all
the colonization. This is an example that shows the side of mercantilism that can be very brutal when
viewed at the international level, and meant to stabilize the domestic situation.
The third example is that of the Netherlands. In the literature, The Netherlands are not generally
discussed as a mercantilist state, but some elements can be discussed to be of mercantilist character.
Even more strongly than England, the mercantilist state of the Netherlands was very outwards-
visioned. The Netherlands tried to establish themselves as international trade centre, in this way also
trying to enhance the public wellbeing of it’s citizens.
So, summing up, mercantilism in historical practice, firstly is about strengthening the state apparatus.
Only if a very strong state is created, an infrastructure can be established in which the public
wellbeing can be ensured. A second important conclusion is that a reshuffle of societal elites has to
take place in order to accomplish this (the classical elites are not sufficient). Thirdly, what is very
important for a mercantilist state, is the modernization of infrastructure to move goods and make
the monetarization of a state possible. A fourth important factor of a mercantilist practice is to have
strategic monetary and trade policies. These four factors are needed to further the public wellbeing
of domestic citizens. But, as stated before, the Leviathan is Janus-faced, and the protection of
domestic citizens goes hand-in-hand with a very aggressive attitude towards other countries. This
shows the beauty but also the brutality of the mercantilist state in modern ages.
Neomercantilism in industrialized countries
The question is how long ideas can survive. It can be argued that with mercantilism, it’s forever.
Mercantilists argue that the basic ideas and concepts still are the same and can be applied in modern
times. Obviously, the means how to accomplish the public wellbeing have changed, but the idea that
the own country comes first, still is the most important issue of mercantilists. A big example of this is
the US, when looked at rhetoric’s and defence expenses. But also from the EU could be said that it is
mercantilist, for example by looking at the strong efforts of remaining the high education level or
defending our economic market for the outside. From the perspective of mercantilists, by this, we try
to prevent developing countries to catch up with us. In the end our policies are still oriented, as
mercantilists would say, towards the end of furthering economic progress to enhance the well-being
of our domestic sphere.
Neomercantilists, analytical authors who talk about mercantilism in our times for the context of
industrialized countries, differ a little bit from classical mercantilists. They still see the government as
the most important actor, at least when it comes to international affairs, but the government in a
neomercantilist perspective is well-aware that it needs the input of societal actors. They may provide
expertise and articulate interests, and in return the government protects them and politically steers
their market. By this, it also protects domestic actors against competition from outside (think of
goods standards and import tariffs).
,In international negotiations, a two-level game takes places of preferences coming from the domestic
level on the one hand and interests that play on the international level on the other hand. This two-
level game gives the government a very strong position because it can make use of its superior
knowledge.
Another point that is included in the neomercantilist perspective is that of culture, which currant-day
states also try to protect. They want to have an economy that is in line with the culture, because this
makes that that people get the feeling that the public well-being is being improved. The cultural
aspects and social preferences of the citizens are therefor taken into account when states interact on
international level.
Another point is the prisoners dilemma on an international level; states don’t know if they can trust
each other. So international cooperation is very difficult from a mercantilist perspective. The only
way to work together (seen from this perspective) is to work with regimes. This concept is introduced
by neomercantilist authors in the 1980s. In a very abstract way, regimes are the form of government
or the set of rules, cultural or social norms, that regulate the operation of a government or institution
and its interactions with society. This is very abstract, but think of international organizations.
Neomercantilists argue that a certain amount of cooperation is possible with these regimes. First of
all, because of the lower transaction costs. Secondly, regimes or international organisations have the
possibility to prevent free riding, by this preventing the distrust between states. However,
international regimes are expensive. This is a problem for several reasons. So even if a mercantilist
states that a cooperation might be possible under certain circumstances, it always remains inherently
instable and fragile. Here it comes back at the ugly side of mercantilism and the egoism of states,
which is one of the core concepts of this theory.
Development states in the global south
An often discussed question is if mercantilism can be applied to the global south. Calmers Johnson
was intrigued by the rise of the Japanese economy after the second world war, and wanted to
discover how this was possible. He came up with the idea of the developmental state.
The developmental state is a sort of hybrid between a socialist planned economy and the capitalist
free economy. Essentiality, it is based on the idea of a powerful state, which is needed to steer
economic and societal processes. Only if the state has the capacities to steer the economic and
societal processes, it can engage in long-time planning and develop a vision to develop a country. To
this end, the state needs a strong bureaucratic apparatus; an ‘elite bureaucracy’, which is very
devoted to its task. If we have this kind of bureaucrats, it will be possible to device effective
instruments to develop the country. There is also a final darker condition for a successful
developmental state, according to Calmers Johnson. He assumed that a developmental state needs a
nationalist or even a fascist regime to fully work, which can let civilians make sacrifices for the good
of the future development.
South Korea is an example of a developmental country. It started with massive investments in heavy
industries and put up nationalised companies (cheabols). President Park had a strong regime in
which protests were not allowed.
Another example is India, at least in some sectors. In India, the most important was the so-called
Green Revolution. It made use of a lot of varieties to overcome the big food shortages in the country.
The Indian developmental state also got engaged in other sectors, for example the railway sector.
But after all, the Indian developmental state was less successful. First because of the high level of
bureaucracy. At the same time, the economy remained very unequal.
, The question is if it is possible to reconcile an authoritarian developmental state with the idea of a
democratic regime. Some countries try to do so, for example South Africa and Brazil, but the
question is to what extend they succeed in this.
In the end, we can say that the implication of mercantilism in the context of the global south is a
mixed bag. The developmental state has be very successful in some countries and sectors, but it has
also showed equally impressive failures. In the end, in the mercantilist logic, we would assume that
the developmental state can only be successful under certain conditions. States need a domestic
market size, which make it possible for the state to stand the pressures of industrialized countries.
They must one the one hand respond to societal needs, but at the same time be able to make
autonomous (and if necessary very oppressive) decisions. Finally, development states simply need
some luck.
Module 3 – Liberalism
Liberalism
Liberalism is a theory of international political economy which assumes that everybody can win from
a corporative game of different actors bound by institutions.
The state of nature is a thought experiment. It is about a situation in which we do not have any rules
and have to find instruments, institutions and policies how to cooperate and how to accomplish well-
being. In the mercantilist perspective of Thomas Hobbes, this situation is very bad. His worldview is
pretty pessimistic and the state of nature would cause a ‘war of all against all’. This pessimistic world
view is strongly opposed by liberal scholars such as John Locke. Locke and other enlightenment
scholars in the liberal tradition assumed that people are a little bit better then Hobbes assumed.
Locke thinks that even in a state of nature, people have reason. People themselves realise that in the
long run, they will get further if they live peacefully together. He goes even a step further, and states
that this reason is kind of a law that governs our behaviour.
Other scholars, like Immanuel Kant are a little more sceptical, but he agrees to the point that people
have reason. Kant states that even people of devils would prefer a situation in which their behaviour
would be regulated by institutions, by what he calls a constitutional state. This is kind of the basic
question of all the philosophers of the enlightenment period. They asked themselves how the
enlightened self-interest of the people may help for a peaceful cooperation. Much of these
philosophers inspired their ideas on religious thoughts (for example Adam Smith).
Adam Smith states that self-interest of individuals eventually comes to the greater good. But, Adam
Smith also argues that the ultimate goal of this self-interest behaviour should be a prospering society
which would be to the service of all inhabitants. In this contradiction, there is a certain tension which
is very important for liberal scholars. Liberal scholars try to understand how individual rationality
based on self-interest) and collective rationality (aiming at the public welfare) can be reconciled.
With a jump in time, we go to Max Weber, who made a very famous distinction of how people come
to their preferences. On the one hand, people are very self-interested. Max Weber called this
instrumental rationality. The value-based rationality is about how people develop their preferences,
and what they get to find worth pursuing. In this, people form their preferences based on cultural
norms, personal convictions, experiences, and so forth. Only when we have decided about these
values, we know what means/instruments we need to reach these goals.
