Liberalism, Mercantilism, and Political Economy

Summary

Noah Zerbe's video explores key concepts in international political economy, focusing on liberalism and mercantilism. It traces the evolution of global economic systems from their capitalist roots in 16th-century Europe to the impact of the Great Depression and the emergence of embedded liberalism post-WWII. The video discusses the principles of private property, self-interest, and market competition in capitalism, contrasting mercantilist views on trade as a zero-sum game with liberal advocacy for free trade and open markets as a positive-sum solution for global prosperity.

Takeaways

• 🌐 The video introduces key concepts in international political economy (IPE), focusing on liberalism and mercantilism as the two main theoretical approaches.
• 🏛 The global economic system has its roots in capitalist economies that emerged in Europe around the 16th century, with distinct forms developing over time.
• 🏠 Capitalism is characterized by private property, self-interest, market-based competition, freedom of choice, and a limited government role, especially in protecting property and enforcing contracts.
• 🤔 Classical economic liberalism, attributed to Adam Smith, views capitalism as a natural expression of human nature and a result of historical barter and exchange processes.
• 📚 Marxist critiques see capitalism as a historically specific system tied to economic and property relationships, with its global spread driven by European colonial power.
• 🔄 Mercantilism, the dominant philosophy in the early 1500s, viewed international trade as a means to national power and wealth, emphasizing trade surpluses and the accumulation of gold and silver.
• 🌟 The shift from mercantilism to liberalism was influenced by the British Empire's rise and the Industrial Revolution, promoting free trade and open markets as beneficial for all parties involved.
• 💡 Liberalism's central idea is that specialization and trade can benefit everyone through the concept of comparative advantage, leading to a positive-sum game in the international political economy.
• 📉 The Great Depression of the 1930s challenged economic liberalism, with countries implementing protectionist policies that worsened the global economic crisis.
• 🛑 'Beggar thy neighbor' policies, such as the Smoot-Hawley Tariff Act, were ineffective and contributed to the deepening of the Great Depression by restricting international trade.
• 🌍 The end of the Great Depression was marked by the massive increase in government spending and employment during World War II, leading to the development of a new international economic system known as embedded liberalism.

Q & A

What are the two key theoretical approaches to understanding International Political Economy (IPE) discussed in the video?

The two key theoretical approaches to understanding IPE discussed in the video are liberalism and mercantilism.

What is the historical origin of the current global economic system of political economy?

The current global economic system of political economy is rooted in capitalist economic systems that emerged in Europe, particularly in England and the Netherlands around the 16th century.

What are the common features shared by all capitalist systems?

All capitalist systems share common features such as centering on private property, being rooted in concepts of self-interest, market-based competition, freedom of choice for individual agents, and a generally limited role of the government.

What is the concept of the 'invisible hand' as introduced by Adam Smith?

The concept of the 'invisible hand' introduced by Adam Smith suggests that the individual pursuit of self-interest ultimately leads to the collective good, as people pursuing their own advantages inadvertently benefit society as a whole.

How do liberals view the emergence of capitalism?

Liberals view capitalism as an expression of human nature, where individuals are naturally self-interested, and they believe that capitalism emerged from the historical process of barter and exchange, facilitated by reducing the role of the state.

According to Marxist critiques, what is the view of capitalism as a system?

Marxists view capitalism as a historically specific system that emerged due to economic and property relationships and the specific exercise of power in Great Britain and the Netherlands, with its global spread rooted not in human nature but in the power dynamics during the colonial period.

What is the fundamental belief of mercantilism regarding international trade?

Mercantilism views international trade as a function of or a key contributor to national prestige and power, with trade surpluses seen as the avenue through which states acquire wealth and strengthen their military power.

How did the industrial revolution and the British empire influence the shift from mercantilism to liberalism?

The industrial revolution and the growing power of the British empire sparked a fundamental transformation from mercantilism to liberalism, emphasizing free trade and open markets as the path to prosperity.

What was the policy response of the United States to the Great Depression, and how effective was it?

The United States responded to the Great Depression by imposing new tariffs and trade barriers under the Smoot-Hawley Tariff Act of 1930 and devaluing the dollar. These 'beggar thy neighbor' policies were ineffective and exacerbated the crisis.

How did the Great Depression affect the world's major economies, and what were some of the consequences?

The Great Depression led to a decline in industrial production, a drop in wholesale prices, a collapse in foreign trade, and a skyrocketing of unemployment rates in the world's major economies, with no social safety nets to protect the affected populations.

What was the term used to describe the new international economic system developed after World War II, and how was it different from the previous system?

The new international economic system developed after World War II is referred to as 'embedded liberalism,' which aimed to prevent global economic crises by embedding free markets within a framework of social welfare and state intervention.