International Political Economy (Pols 204)

Introduction

International political economy (IPE) studies how politics and economics interact across borders, and three traditions dominate the field: mercantilism, liberalism, and structuralism. Each offers a different account of who gains from global trade and why. This note fact-checks and cleans up the notes on all three, plus the related Structural Adjustment Programme (SAP).

World bank building 

Mercantilism

Mercantilism was the dominant lens in Europe from the 16th to the 18th centuries, built on a zero-sum view of the world. Its core belief was that a nation's wealth and power were measured by its stock of precious metals (gold and silver). To amass this treasure, a country had to export more than it imported, creating a favourable balance of trade — and this required active state intervention. Governments imposed high tariffs on foreign goods, subsidized domestic industries, and granted monopolies to favoured companies. States also established colonies — not primarily for settlement, but as captive sources of cheap raw materials and exclusive markets for finished goods. Navigation Acts ensured that trade flowed on national ships, further protecting domestic shipping.

Mercantilism promoted self-sufficiency, discouraged imports and domestic consumption, and often kept wages low to boost competitiveness. It treated international commerce as a battlefield: one nation's gain was another's loss. It eventually fell from favour, criticized by Adam Smith and others who argued that wealth comes from productive labour and free exchange rather than hoarding bullion. Its legacy persists in modern protectionism, trade wars, and the tendency to treat trade as a contest of national strength.

Liberalism

In IPE, liberalism is primarily about market rationality and openness rather than social welfare or individual rights. It argues that economic logic drives state behaviour, and that free trade and global integration foster peace, prosperity, and cooperation. At its core, liberalism asserts that absolute gains matter more than relative power — unlike mercantilism's zero-sum competition, liberalism sees trade as positive-sum, where all participants can benefit. This is facilitated by institutions such as the World Trade Organization (WTO) and IMF and other international regimes, which reduce transaction costs, provide information, and enforce rules to mitigate cheating, helping states overcome collective-action problems and build trust.

Its intellectual foundation rests on comparative advantage — the idea that specialization and exchange maximize global efficiency. Liberalism therefore champions reduced tariffs, encourages foreign investment, and supports open capital flows. It also emphasizes the role of non-state actors, such as multinational corporations (MNCs) and epistemic communities, in shaping economic policy alongside governments.

Critics argue that liberalism ignores power asymmetries and domestic inequality, while its proponents maintain that open markets ultimately lead to convergence and democratization. The 2008 financial crisis and rising protectionism have challenged its dominance. Today, liberalism in IPE represents the ongoing tension between the ideal of a borderless global market and the political reality of national sovereignty.

Structuralism

Structuralism argues that the global economic system is not a neutral arena of mutual benefit but a deeply stratified one that perpetuates inequality, rooted in Marxist and dependency theory. On this view, the world is divided into a dominant "core" (industrialized capitalist states) and a dependent "periphery" (developing nations supplying raw materials and labour). The core maintains its wealth through structural power — controlling international finance, technology, and trade rules via institutions like the IMF and World Bank. These rules are seen as rigged to favour capital accumulation in the North, creating unequal exchange where the periphery exports cheap commodities but imports expensive manufactured goods. This "development of underdevelopment" means peripheries are not simply poor — they are actively made poor by their integration into the system.

Structuralism rejects both the state-centric assumptions of mercantilism and realism and the free-market assumptions of liberalism. It treats outcomes as determined by a country's position within the global hierarchy, not by individual rational choices or comparative advantage. Change, on this view, requires not just policy tweaks but a fundamental restructuring of property relations, production, and global governance to break the cycle of dependency.

Structural Adjustment Programmes (SAP)

SAP refers to a set of neoliberal economic policies imposed by the IMF and World Bank on indebted developing nations in exchange for emergency loans. Recipient countries had to implement strict conditionalities: fiscal austerity (cutting public spending), privatization of state-owned enterprises, trade liberalization (removing tariffs), and deregulation of financial markets. In IPE terms, SAP represents a critical power dynamic — a mechanism through which core capitalist states and global financial institutions extend market logic into the Global South, often prioritizing debt repayment over social welfare. Critics argue SAPs undermine national sovereignty, exacerbate inequality, and dismantle local industries, triggering poverty and social unrest; proponents claim they restore macroeconomic stability and efficiency. Ultimately, SAP encapsulates the North-South divide, illustrating how economic coercion and ideological consensus have shaped development, governance, and dependency in the post-colonial era.

Conclusion

These three traditions offer competing diagnoses of the same global economy: mercantilism sees trade as a zero-sum contest for power, liberalism sees it as a positive-sum path to shared prosperity, and structuralism sees it as a rigged system that entrenches core-periphery inequality. SAPs are best understood as liberalism's policy prescriptions applied under structuralist-style power asymmetries — which is precisely why they remain so contested.