Chapter 10: States and Markets in the World Economy


Important background information

What do you do?

Economic liberalismAdam Smith inspired this hands-off school of political economy. The government will take a minimalist role in this capitalist economy. The invisible hand of the marketplace will result in the best economic outcome for society as a whole. Economic liberalists do not believe open market economies produce winners and losers, rather, everyone will win as gains are absolute, even if some win more than others. Economic liberalists generally desire economic integration into an open world economy.
Economic nationalismThis school of thought does not think the invisible hand of the economy will result in the best economic outcome for a developing state. The state should guide and develop the market by nurturing key industries, building banks, and planning institutions that will streamline future economic growth. These capitalists do believe international trade can be beneficial, but only under certain conditions. Of principal concern are relative gains, where potential adversaries may disproportionately gain more from certain economic relations.
MarxismMarxist socialism in practice results in a communist economy. Marxists argue that open economic systems, such as capitalism, only benefit the capitalist upper class at the expense of the majority of society, the working class. Marxists also believe status quo international trade systems only serve the interests of the richest, capitalist states.