GPE - General Summary
Theoretical Perspectives 2
Liberalism 2
Neoliberalism 4
Mercantilism 5
Classical Mercantilism 5
Neomercantilism 6
Structuralism 6
Gramscianism 8
Main Structures of GPE 9
Global Production Structure (GPS) 9
International Trade Structure (ITS) 11
Historical Development of ITS 12
Money and Finance Structure (IMF) 14
Macro-Economic Policies 15
Bretton Woods 16
Rising Powers: BRICS 17
Issues & Challenges in Contemporary GPE 19
I. The Development Challenge 19
Perspectives on Development 20
II. The GPE of The EU 22
GPE of the Euro (2002) 23
The GPE of Migration 23
III. The GPE of MENA and Climate Change 24
The GPE of Climate Change 25
IV. Migration and Global Health 26
Migration 26
Global Health 27
, Theoretical Perspectives
LIBERALISM
Rooted in the belief that competition and self-belief form (and should) the basis of thinking actors, although
this will not result in a zero-sum game. This competition regulates economic behaviour, which results in
commodification: prices for goods match the amount of demand. The market dictates societies economic
activities. Diverse markets are created because no one will start a business in a market in which they will not
survive. They move to other fields. Competition constraints and disciplines the self-interest of individuals.
This mechanism is dependent on the absence of regulation by anything other than market mechanisms; it is
based on the principle of laissez-faire.
- Rational Choice of Individuals: individuals are rational and behaving according to self-interest. The
actions in which the costs outweigh the benefits will be most likely to be chosen by actors.
- Market Efficiency: capitalist and liberalism theories assume that the market and its mechanisms will
ensure that resources will be naturally divided along the lines of consumer demand. Linked to laissez-
faire.
- Market Equilibrium: equality of supply and demand. Naturally, someone will not produce more than
the consumers demand.
- Price mechanism: if the market is working like the aforementioned principles, the price mechanism
will ensure that goods and services are sold at their natural price.
- Efficient Market Hypothesis (Eugene Fama, 1970s): Claims that an investor cannot outperform the
market or gain extremely off investments. Only by luck.
✴ Adam Smith
Modern economics. Against the mercantilist ideals of state-led economies / ‘visible hand’. Replace it by the
invisible hand of the market. However, some state interference may be necessary to fight self-interest of
monopoly holders, which is not barred by liberalism/capitalism. So, Smith argued that the state should
refrain from interfering the market, besides from safeguarding the important principle of competition in the
market.
✴ David Ricardo
Orthodox Liberal theorist who argued for free trade. His reasoning is following the classical liberalism point
of view: The pursuit of individual advantage is connected with the universal good of the whole. So, free
markets ensure a positive-sum game, in which everyone benefits from trading and engaging the market.
Finally, states should ideally specialize in an industry they are relatively efficient in and export those
products, as well as import those products that they produce inefficiently.
✴ John Stuart Mill
Thought capitalism results in inequality. Focussed mainly on social issues which can not be solved without
state interference. Government support, for example, may be required in helping parents educating their
children. But Mill is a Liberal philosopher: individual liberties and decentralization of the state. State
interference is selective and as minimal as possible.
, ✴ John Maynard Keynes
1900s. Keynesian Critique of orthodox/classical economic liberalism entails that
- Rational and self-interested behaviour of individuals will not necessarily produce outcomes that are
beneficial to the whole of society.
- The market will not correct itself as it is naturally vulnerable to outside influence.
- Uncertainty of future events bars rational choice from being effective and the market self-sustaining.
• Paradox of Thrift: occurs when multiple seemingly rational actions causes a destructive collective
result. For example: if you’re unemployed, the rational thing to do is to save money. But, if everyone
saves money and spends less, consumption decreases, production decreases and jobs are lost, causing
a massive failure of economy. Instead ↑ Keynes said: when a recession presents itself, the state should
safeguard its citizens from the paradox by adopting anti-cyclical strategy (state steps in during a
recession and stimulates the economy to promote production and consumption → short budget deficit
but growing economy in the end). Keynes is often referred to in heterodox liberalist critiques of
orthodox neoliberalism.
• Keynesian Demand Management: Keynes developed two instruments of macro-economic change.
To stimulate the economy. States who apply this method are often referred as Keynesian Welfare
States due to this use of macro-economic demand management.
1. Monetary policy: stimulating the economy through lowering interest rates. Lending money becomes
cheaper if interest rates are low. Firms borrow money to invest and encourages consumers to take out
loans and buy. In a fragile economy, central banks need to stimulate the economy as well.
2. Fiscal policy: if states lowers its taxes, people will spend more money.
• Embedded Liberalism: Keynes was faced with a conflict of interests. He argued for (domestically),
the government should deal with problems the invisible hand of the market could not solve. On the
other hand, the international system was of trade was not to interfere in order to rebuild the post-war
economy. The solution was embedded liberalism: international markets could only interfere for the
good of domestic priorities. On an international level, this resulted in the creation of the Bretton
Woods Regimes, which regulated a steady decrease of international trade until domestic markets
regained competitiveness needed for fruitful trade. The dollar-gold standard was introduced to
reduce currency fluctuation (currencies were linked to the dollar, dollar linked to gold → stable).
Domestically, state intervention in the market was allowed in order to strengthen and stabilize the
economy with the aim to protect society from the excesses of the market. Some argue that this only
worked because the USA was able to bear the costs of repairing the global economy, also known as
hegemonic stability theory.
