International Political Economy Ralph Pettman\'s

¶ … International Political Economy

Ralph Pettman's book "Understanding International Political Economy" has become of the most popular IPE textbooks. Author uses diverse material to cover different aspects of such an integral concept as "economics," uses various examples and comparisons in order to explain economical concepts and the meaning of the "economics" in general. That's why the book is probably called "Understanding International Political Economics."

The main themes that are covered and discussed in the book are three theories of international economics perspective, described in a historical order according to the epoch when they were first introduced. The first one is mercantilism, the second one is liberalism and the third one is Marxism. In order to understand the historical and economical point of them, it's important to refer to the historical period they were developed and considered as the most appropriate for state regulation over economical processes.

Mercantilism considered the wealth of the society to be in accumulation of money (silver and gold). According to the concept of mercantilism wealth and prosperity could be achieved only thanks to the development of foreign trade. The growth of wealth here is obvious: cheap good are sold for higher prices abroad. The problem of economical theory according to mercantilists was the development of the most effective recommendations for the state politics in regulating economics. Mercantilists thought that for the development of favorable conditions for economical growth, the state has to intervene in economics, encourage native industry and trade.

The theory of mercantilism crashed in the epoch of new age, when economics was dominated not by trade capital, but by industrial capital. Later it was also proved that the wealth of the nation is achieved not in trade but in production, and as the production is based on the natural laws of society there is no need to let the state intervene in economical affairs. As Pettman writes, there exist two possible state regulation schemes of accepting mercantilist theory. State may stop goods exchange with foreign countries or limit it to the certain level, in order to develop inner market and inner economical relations, it may also set firm prices on goods and vanish anything like free competition. The second scheme is more favorable for economics, as state regulation will be only limited to setting special regulations for foreign trade through taxes, tariffs, etc.

The second concept covered by Pettman is liberalism. Liberalism differs in many ways from the theory of mercantilism, as it proposes freedom from state regulation in economics. Liberalists agree that goods have to be imported and exported as more as possible. Describing the theory of liberalism, Pettman explains that in any case with free capital move, the state economics will be in advantage. Free trade will develop and increase market relations, will increase demand in products imported and exported and it will result profits growth from the side of customers and manufacturers. Besides, the state will have profits from the system of fair taxation and will win by the amounts of goods exchange. Still, liberalism theory has its limits in being introduced as it doesn't include the concept of protection of native manufacturers and customers. Foreign companies may establish monopolies on certain kind of goods and dictate their own price policy, also foreign companies may set their business and put natives out of business, which will result negative impacts as job losses, public unrest and decreasing trust to the government.

The concepts of liberalists had influenced the development of economical thought in future, as their analysis and approach remains to be one of the fundamentals for modern economics. Liberalists had proposed the concept of labor distribution, they have determined the main factors which establish product's value (salary-income of workers, rent -- the income of landowners, profit-income of businessmen). Liberalists also pointed on reasonable price policies as the guarantee of social stability and peace within the country.

The development of liberalists' analysis of market and industrial relations of economics was continued by Karl Marx in his critical works on political economy and in "Capital." Pettman doesn't fully cover the aspects of Marxist political economy but he gives good explanation of basis of Marxist concept. Marx builds his theory highlighting social inequality between the class of capitalists and class of workers (proletariat), showing unfair position of proletariat as of class that doesn't own production means and is not able to decide the destiny of the products produced. Marx introduced a new theory of products value and a theory of a surplus value of products. Marxist political economy looked more like critics on classical political economy proposed by liberalists, yet it didn't give any definite solution to the problem of political regulation of economics. Socialist theories of political economics which were derived from Marxist concept failed to effectively function on the territory of the certain state, and the economical situation in such countries as ex-USSR, Cuba, Vietnam and North Korea prove it perfectly.

Now it would be difficult to find the country were the concepts of political economy mentioned above would be clearly realized in daily practices. The processes of globalization, goods exchange, industrialization and development of social infrastructure within one country and within the world economic community in general, had proved that only integral model of economical development has the right to be applied in our realities. From this point different factors have to be taken into consideration and they are not limited only to industrial or economical factors, but include geographical position of the country, its place in the system of world trade, national and political particularities, industrial or agricultural specialization of the production within the country, etc. Today most of countries of the industrialized world accept reasonable policy of economical regulation, protection of native business, guarantee social protection to the workers and stand for establishment of fixated prices on the products of universal consumption (oil, gas, gold, crops, metals, etc.). On the hand with free competition and trade these concepts, which originate from the views of mercantilists (state intervention in economics), liberalists (universality and freedom of goods exchange) and Marxists (social guarantees and privileges to workers) coexist together and may be applied for any dynamically developing economy.

In order to understand main economical concepts, Pettman had used a very specific and organized structure of material, which combines the theory with practice on the set of examples from past and present as well as modern situation in the world of global trade and interaction of different economical systems. The use of contemporary issues in the world of trade and state control over economics helps a lot to understand the core of every economical concept, it's advantageous and weak points. Besides, such manner of interpretation helps to develop analytical and critical thinking over the problems of international economics and tools for it regulation. Because there exists no optimal IPE theory that will satisfy modern tendencies in the sphere of marketing and trade, Pettman's illustrations help in forming individual vision of this problem and analysis for the search of better solution.

Illustrations of mercantilist concept of political economy were the most powerful, as it showed the bankruptcy of the mercantilism in a country, which has tight economical bounds with the rest of the world. Under the slogans for protection of native business, there is hidden tendency for established of the close economics and isolation from the rest of developing world, which results in economical and technological decline. An example of such undesirable changes in economics is Frederic Bastiat's "Petition of the Manufacturers of Candles, Wax- lights, Lamps, Candlesticks, Street Lamps, Sniffers, Extinguishers, and of the Producers of Oil, Tallow, Resin, Alcohol, and generally, of Everything connected with Lighting" (1909). The author wants to persuade Members of the Chambers of Deputies to ban all forms of light.