Differences in liberal and realist approaches

Every group interaction between humans in different activities entails defining the participants in discrete groups of two. The purpose of which is to differentiate between one group of participants that excel from the other group that does not. The exact labeling of these groups varies with the activity under consideration. Morally speaking, a person can be grouped into either good or evil class; Talking about football, a player can be grouped into either superior or inferior category; economics also entails dividing the people who study them as either classical or Keynesians. Though the initial two groups occupy the end points of a horizontal scale, there are many entities that interconnect these two, thereby filling the grey area. They never full advocate the logic of any one of the two rather argue for an amalgamation, offering a middle path to any eventual solution. The history of Political science as an academic field of study also has been imbued with an eternal clash of ideas between two schools of thought. Throughout generations these two schools have vied for the coveted position in explaining the nature of humans as political entities. One sees humans as increasingly self centered and find little in them to work collectively for the benefit of all humankind; the other believes in the selflessness of the same humanity and sees hope and reason to continue working for a world where everything would be characterized by principles of freedom. The former is called the Realist school of thought while the latter stance is that of the Liberals. The clash is particularly evident in the area of International Relations within Political Science. Here realists think of the international state system as increasingly anarchic, believe that all states work in their self interest and characterize international politics as power centered concentrating on balance of power, and finally that war is inevitable in the international state system. On the other hand, liberals argue that that there is great room for cooperation and benefit for all in the international state system, believe that states can and do work for mutual benefit and find evidence against the realist claim that all international politics is power politics. They also argue that war is avoidable and complex interdependence has also a role to play in the international arena. If the above demarcation separates the liberals and realists within IR, the academia within another relatively new sub discipline of Political Science, IPE, had also followed that pattern in their study of a relationship of international politics and economics. Realism in IPE has been more often called as mercantilism. In both case they represent the same school in a sense that both of them act as synonyms for a particular school of thought. Mercantilism has come to find more usage as a term within IPE as opposed to realism in IR. As the aspect of international politics economy under discussion is international trade, I will use realism as mercantilism throughout the course of this paper to remain synonymous with the terminology used within IPE. The paper would give a brief introduction of the two discourses within IPE and then scrutinize them further side by side till the end of the paper. The conclusion aims to provide a brief understanding as to where we’re headed in this discussion now and in the future.

Liberalism traces its roots to about two hundred years ago to economic philosophers Adam Smith and David Ricardo. Liberalism has abounded in popularity in the aftermath of the WWI and WWII. Although limitations have come around in the inability of liberalism to bear the fruit which it so vigorously argued for, liberals are found everywhere today in the business community of the West, Wall Street, IMF and World Bank etc. Liberals praise the benefits of free market and trade. Liberals’ most important contribution is the idea that all participants in a system of free markets and trade are beneficiaries (Cohen, p 12, 2008). The view does not stop at the junction of free market. They fail to give due importance to the role of Politics in free markets and trade. State for most liberals is a negative and holistic entity which should be kept out of the affairs of the free market as it impairs the Laissez-faire idea of market regulation.

Mercantilism rightly claims to have the longest intellectual tradition because this emphasizes the importance of nations and power in thinking about economic issues. Mercantilists contrast most sharply with liberals in asserting that the gain of one nation usually comes at the expense of others (Cohen, p. 12, 2008). As a result mercantilists see international economy increasingly characterized by a close relationship between economic, technological and military strength; all topped by a greater national influence. Mercantilist arguments are increasingly used by countries and groups disadvantaged by international trade as a cover for their inability to stimulate domestic development process. They argue for self serving initiatives like protectionism etc. in the areas of economics and military technology. The contribution of mercantilists is to recognize that international economic relations operate within a world of competitive and conflictual nations (Cohen, p. 12, 2008). For mercantilists, power and economic motives both play an important role in the shaping of international economic cooperation or competition.

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The two ends of the spectrum are linked together by a multitude of theories and discourses. The links at times appear to be very convincing while at other times add to the already prevalent confusion in this field. This uncertainty is what makes IPE as a discipline so interesting to study. The feeling of intrigue very much abounds within oneself as one studies more and more the web that connects nations in international politics or separates them. International political economy is not an easy subject and the major tool for analyzing IPE, trade, becomes harder to critically analyze with the aim of reaching towards a specific conclusion. Hence one should delve further into IPE with an open mind and let the discourse guide oneself towards any eventual conclusion.

The modality of the topic requires me to compare and contrast liberalism and mercantilism. The framework that I intend to use is to analyze both in terms of their key actors, key dynamic and their stand on conflict and cooperation in the international arena of trade. I also intend to put side by side their inception as an academic school of thought and see if any meaningful result can be deducted from it.

The origin of the mercantilist school of thought can be traced back to the emergence of nation based politics in Europe during the fifteenth century. Liberals found root in the wake of the industrial revolution of the eighteenth and nineteenth century. In this sense Mercantilism ideas have had a longer life than their liberalist counterparts. Liberal ideas earned much approval and favoritism in the wake of the failure of realism as an effective discourse describing and governing the international politics that led to the bloody World Wards I and II. Liberals see the international trade system as interdependent rather than anarchic and self serving as advocated by realists. Realists see the international trade as a zero sum game, the gain of one country is the loss of another, which liberals see it as a positive sum game that the growth of international trade is of benefit to everyone. Liberals give the idea of the growing of a pie, as the pie gets bigger the slice each participant gets also increases. Here one should question that this example fails to give due account to the question that which participant gets the bigger slice. Also that due to the comparative or absolute advantages that some countries hold over the other, those countries grow at a rate higher than the others. Also the countries not possessing the comparative or absolute advantage require huge domestic political costs to be entailed if a shift is made from no advantage sectors to ones having comparative advantage in its domestic economy; these costs include unemployment, temporary inflation, public backlash, loss of political support for the government in power etc. For example during the Vietnam war, President Nixon decided against raising taxes to cut back US trade deficit because it might weaker his already fragile political support. Now this differential growth rates for different countries presents itself as a dilemma for a state especially since the concept of a state is an entity that is supposed to provide the best possible package of security, progress and life style towards its citizens. In the pursuit of this self or collective interest of realists and liberals respectively, the former believe that power has an equal, if not stronger, role to play along with economics in the international economy and trade relations; the latter tend to underplay the role of power in the international politics and emphasize the ability of states to choose between attractive courses of action. Nevertheless, mercantilist arguments have often come to be chosen as routes for underdeveloped nations to catch up with their developed counterparts. Alexander Hamilton writing in the 1970s urged Americans to protect their manufacturers from foreign competition so that they could industrialize and increase their power. Almost a hundred years later, Fredrick List argued that Germany should industrialize behind trade barriers so that it could catch up to the economic might of Great Britain (O’Brien & Williams, 2004). The protectionist apprehensions or favoritism continue till this day. As recently as on the 17th of November this year, President Hu Jintao of China in a joint news conference with President Obama called for joint opposition to trade protectionism (China and US ‘to work together’, 2009).

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Realists see the state as the key actor in the international arena, while for liberals the starting point of analysis is the individual. Liberals argue for a complete freedom for the needs of the individual by arguing that if left alone the individuals would maximise the gain of the entire humankind regardless of their origin. Liberals see state interference in the market as negative and advocate the freedom of the market to self govern. Realists on the other hand believe that there is nothing natural about markets. They are artificially within the social contract of each state, which requires that a market’s functions have to be regulated by a higher authority. Similarly realists doubt the role firms have to play within the domestic markets and as expected for liberals the presence of firms is a positive omen in a sense it increases the overall wealth of any country. Realists prefer state to the individual and for liberals it’s vice versa. Even within liberal thought, there exist a demarcation separating those who are hardcore liberals and those who acknowledge the role state has to play. It ranges from those who see the state fading away in an emerging borderless world (Ohmae 1990) that will be dominated by private business to liberal institutionalists (Keohane and Nye, 1977) who stress the continuing importance of the state, but see it enmeshed in webs of interdependence and international organization (O’Brien & Williams, 2004).

Moving towards the dynamics of these two discourses, for liberal theorists the market lies at the centre of economic life (O’Brien & Williams, 2004). Realists feel the rational activity of the state characterizes the dynamics of international trade and cooperation. Here the rational activity by any is undertaken with an aim to get the best possible outcome for its citizens. Liberals admit the shortfall of markets to weave their magic in certain fragile times of international trade but they’re almost certain in their belief that any further state involvement at that fragile instant is certain to worse the already weak market situation. Realists back out of this argument by maintaining that market relations are important but market is governed by the activities of the state. Economic activities and actors are subordinate to political agendas and actors respectively. The consequence of the salience of the state is that international economic relations become international political relations (O’Brien & Williams, 2004). Realist scholars believe that the nature of global economy reflects the interests of the most powerful states by arguing that free trade regimes tend to exist during the times when a single state dominates the entire world system; as the hegemon can absorb the costs associated with imposing the free trade system. As the system degrades towards a multiple power centre system, conflict characterizes the international relationship between states as interests contradict. Liberals maintain that if all the countries maintain free trade policies and shun self centered motives, conflict would certainly not take place. They give the example of Europe following the WWII and also that liberal democracies never go to war with one another. The phenomenon of globalization has evoked two tiered response within both the realist and the liberal school of thought. Defensive nationalists within realism admit the presence of globalization and work to undermine it rather than skeptics who don’t see any form of globalization at all. Within liberalism too a similar trend is produced; hyper globalists see globalization as breaking down barriers between countries and unleashing a force of production bound to produce further happiness for humankind (O’Brien & Williams, 2004). Liberals influenced with Keynesian principles still see the problems of free markets in certain scenarios as cause for possible hesitation towards globalization; it might have some unwanted outcomes. They support the need for market reform till its perfection is achieved.

Finally dealing with the aspect of conflict and cooperation, liberals see international trade as essentially cooperative as opposed to the realist view that it is conflictual. Example of theories within both the schools that advocate their respective ideas include the theory of comparative advantage within liberalism that describe that even while possessing a comparative advantage, not absolute, in a certain area of production, one can benefit from trade in the international trade. Realist power based theories moan the absence of any higher authority in the international state system which they see as must to regulating any cooperation and mutual benefit in the international trade. The concern for liberals with nationalist policies is that they lead to conflict. Liberal theorists see trade interaction as strengthening bonds for peace and stability. The liberal belief in the connection between protectionist policies and conflict and the reverse argument, namely that capitalist favours peace and conflict and the reverse argument, namely that capitalist favours peace, is central to the liberal critique of the international economic order. (O’Brien & Williams, p. 20, 2004) Immanuel Kant foresaw an era of perpetual peace when all the world market systems would be characterized by Free states and international state an alliance of democratic states. Woodrow Wilson advocated adopting liberal principles for the international state system following World War I; also a founding principle for the League of Nations. Similar nationalist policies following the Great Depression were understood to have aggravated relations between countries leading up to the World War II. Citing the pluralist nature of international trade and economic system, liberal theory of complex interdependence explain the connection between increase economic exchange and interconnectedness and the long peace among Western nations after 194 5represent classical liberal political economy (O’Brien & Williams, p. 21, 2004). The belief of international cooperation and conflict of realists tend to start with their lack of total belief in the abilities of market. Markets for realists produce both positive and negative outcomes. Since, due to their inherent assumption I believe, most realists see markets’ negative outcomes more than their positive ones realists argue for state control of important economic variables of their domestic economy. A liberal economy sees these very controls as measures of protectionism. Mercantilist arguments are prevalent more in sectors which are either critical to a nation’s existence or has to do with their cultural values. Examples of either of these could be a country’s defence industry or their local film and music industry etc. With the culmination of the cold war as well as the communist setups of many countries around the globe it appears liberal policies have seem to be dominate, for now. It remains to be seen how long does this majority support goes in redefining the international economic and political structure. Some liberals went as far as to claim that history had ended because the liberal democratic model had triumphed over other forms of social organization (Fukuyama, 1992).

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Robert Cox said, “Theory is always for someone and for some purpose” (p. 207, 1986). The presence of different ideas in analyzing one aspect of international economic system finds its roots in a number of reasons. The first of these is that although all the theories are trying to explain one single phenomenon, they are looking at it from different angles. One theory looks at it from the angle of security, for the other its economics that holds the upper hand and for another school of thought, Marxism or critical perspective, its all about class struggle. Another reason is the group of people the theorization is coming from. Rich and influential people would tend to favour liberal trade policies as it offers the least resistance in conducting their business and reaping profits. Under privileged group of people would advocate for protectionist policies that would protect their interests. One last reason is that due to the subjective nature of opinions and reasons, it is not possible to get an absolute categorization of a theory as right or wrong. Theories are based on observations, not mathematical truths. Thus their rightfulness depends on the value judgment that particular groups of people apply to them. It is important for us to realize is that we do not have to follow any one particular school of thought blindly. The presence of multiple layers of explanation presents one with a tool to apply one’s thinking to any specific case. More over one can find any amalgamation describing one’s own stance between these layers of theorizations that has taken place until now within International Political Economy.


  • Cohen, B. (2008). International Political Economy – An Intellectual History, 17 – 39.
  • O’Brien, R., & Williams, M. (2004). Global Political Economy – Evolution and Dynamics, 11 – 36.
  • (2009, November 17). China and US ‘to work together’. BBC News. Retrieved from http://news.bbc.co.uk/2/hi/asia-pacific/8363643.stm
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