Compare and contrast mercantilism and economic liberalism. What are the assumptions of each regarding the economy and politics? What are the weaknesses of each? Provide an example from international relations for each approach.

Question

What will be an ideal response?

Answer 1

The ideal answer should include:
1. Describe mercantilism and explain its assumptions. For example, mercantilism is an economic theory and a political ideology opposed to free trade; it shares with realism the belief that each state must protect its own interests without seeking mutual gains through international organizations. States worry about relative wealth and trade because these can be translated directly into military power.
2. Describe economic liberalism and explain its assumptions. For example, economic liberalism is an approach that generally shares the assumption of anarchy (the lack of a world government) but does not see this condition as precluding extensive cooperation to realize common gains from economic exchanges. It emphasizes absolute over relative gains and, in practice, a commitment to free trade, free capital flows, and an "open" world economy.
3. Discuss weaknesses of each approach. For example, economic liberals argue that interdependence inherently promotes peace, yet some observers saw similar trends in international interdependence just before World War I, but war occurred anyway. Mercantilism, on the other hand, declined in the nineteenth century as Britain decided it had more to gain from free trade than from protectionism.
4. Provide one example for each approach. Liberal economists believe in markets. For example, Saudi Arabia might be willing to sell a barrel of oil for $10 a barrel, while industrialized countries are willing to pay more than $100 a barrel for the oil. Prices are determined by market competition. Mercantilists' preferred means of making trade serve a state's political interests is to create a favorable balance of trade. China has run a large trade surplus for years-it gets more money for the many goods it exports than it pays for raw materials and other imported goods.
5. Offer a compelling summary and effective conclusion.