Essays

Response Paper

I wrote this paper for the class Contemporary Issues in the Global Economy. This response paper was my answer to the question, “Financial instability, rising inequality, and entrenched poverty are persistent characteristics of the global economy. Which theoretical perspective provides the most compelling reasons for and solutions to these issues? Why?” I took what I had learned all quarter in this class to craft a compelling answer.

Greed: The Common Denominator

A combination of realism and Marxism creates the most compelling explanation for why financial instability, rising inequality, and entrenched poverty are persistent issues in the global economy because at the core, individuals and states are inherently concerned with their own self-interest and there will always be a struggle between dominant oppressors and the non-dominant oppressed. Further, the most reasonable solution to these global issues can be found through the mercantilist perspective, as this is the easiest way to transition countries towards development and ultimately liberalism. Constructivism views additionally add some logical explanations to how these issues of inequality and poverty could ultimately be changed and resolved over time.

            In order to explore these rampant issues of financial instability, rising inequality, and entrenched poverty, one must first examine the root causes and influences. According to the ideology of the realist perspective, the individual is inherently fearful and power seeking, and each state acts in a unitary way in pursuit of its own national interest. Power is thought of in terms of the material resources necessary to harm or coerce another, and under this condition of anarchy, realists argue that states in the international system can only rely on themselves. Realism applies to instability and inequality worldwide in the way that when every state acts in their own self-interest and thinks of power in a way of coercion and oppression, naturally front runners will arise and weaker states will sink in a world system. Conflict will run rampant, coordination of policy and diplomacy will be on the back burner to war, and a global system will simply not work when every state acts as a unitary fashion. For example, North Korea acts as a unitary state, and out of fear of other states such as the United States undermining its power, facilitates nuclear weapons as their principal deterrent to ensure regime survival. In this way, North Korea is using the threat of warfare to protect its national security. Actions such as these contribute to international system in that it causes fear in many nations of nuclear attack to the extent that countries have to increase their own military spending even when they cannot afford it. This then amounts to debt accumulation.     

            Marxism can also create valid reasons for the rise of financial instability, inequality, and poverty on the global scale. Marxism is centered around the notion of class structures. There are ultimately only two camps: the oppressors and the oppressed. Not only can this be applied at the state level, but can be applied to the international level as well. Marx believed that all that matters is who has power and who is suppressed, and everyone at the suppression level is essentially the same. Historically, these relationships have existed: freeman and slave, patrician and plebian, lord and serf, guild-master and journeyman. One group has all the agency. Marx borrowed this notion of class from feudalism, but then boiled them down to just two classes: the class that owns all means of production, and the exploited labor. Within a state, a brutal class divide can be the reason why it cannot rise out of poverty. For example, South Africa can be considered one of the wealthiest countries, but there is still a monstrous 55% of its population still living in extreme poverty. This class divide is detrimental to its development.

In the international system, there are the developed countries and the developing countries. The powerhouse countries that are the most dominant actors are the countries owning the means of production, and the poor and underdeveloped nations are the countries that are the equivalent to the exploited labor. Uneven development empowers and enables the dominant states to exploit the underdogs. For example, an American company, such as Nike, can pay a poor woman in Vietnam $1.60 per day, which would be a miserable amount by the standard of any of the modern day capitalist companies, but in a country such as Vietnam, people will settle to be exploited because they have no other option. In this scenario, America continues to get wealthier because of its capitalist tendencies and profit motive, facilitating cheap labor out of the countries, and Vietnam continues to receive the short end and remains poor and exploited. Between the stark class divisions within states and the exploitation of weaker states and uneven development, the world has become financially unstable and uneven and rampant poverty and inequality persists.

Although the global system is fraught with inequality and instability, there is still hope for a better, stable, and more equal future. Mercantilism creates the best solution leading to increased financial stability, equality and less poverty, and constructivism explains how these transitions tend to occur. Mercantilism acts as a stepping stone in a country’s transition towards development and eventually liberalism. In this way, countries are able to protect their economies while they are graduating and incorporate innovation policies to move up the ladder. For example, the state can sponsor certain specialties to lead to more competition and innovation to make the state stronger. The more impactful initiatives are ones that invest in a country’s future, such as investments in health, education, and innovation which may take decades to see results but will ultimately be the ticket to development. As countries are able to advance in sectors like technology, they will begin to move out of being in a position where all they can do is be a source of labor and move towards being able to produce things on their own and control some of the means of production.

Another big part of the mercantilist theory is the idea of infant industry to protect emerging sectors. A certain degree of protectionism is needed so that the emerging country can produce goods on their own and promote domestic industries. This way, some money can be flowing back into the country and also create opportunity for foreign investment. For instance, if a country like India that is very underdeveloped can make some long term investments in technology that can fuel a new industry and then create buffers initially to protect that new industry with protectionism, they could potentially open up the floodgates to create some more income for the country and potentially tackle some of the poverty in that area. The goal of these developing nations should be privileging their security above all else, and all efforts must be geared towards galvanizing the national interest. If developing nations take this approach, they will be able to begin that transition towards a more profitable country. Mercantilism should not be permanently applied; however, it can jumpstart an economy to move out of poverty. This then applies internationally in the world system; as more and more countries arise out of their extreme poverty and markets grow and are spread more equally around the globe, global financial stability will increase as every nation becomes more and more on the same level and poverty will become less of an issue as nations can internally improve their economies.

It is also important to understand the role of the constructivism approach in looking at the course of countries developing. Constructivism is less of a theory and more of an approach in that it helps to explain how things come to be and how ideas, norms, and social structures change over time. This change is a very fluid process, and people realize all of this through almost a scientific approach of the how systems come and go. A method within constructivism is problematization. Using this approach, one could problematize inequality in the world, and then the next step would be to start the discourse worldwide to start to being upon this change.  Eventually, individuals will come to the logical conclusion that it would actually be more efficient to facilitate women, for example, in the workplace in the same fashion as men and eventually the discussion will start about this and change will be brought about. This is how change occurs. First a problem is brought up, then one makes sense of it, then it is analyzed, and eventually a discussion and a collective understanding will bring upon change. With a constructivist approach, these big issues like poverty, inequality, and financial instability will in fact be solved over time. These issues are already recognized as problems, and many countries are fighting to resolve them, and as norms as ideas shift and move with time, they will find solutions that work which will catch on world-wide.

At the end of the day, the solution for a more equal global system will be found through mercantilism. As each of these developing nations puts their resources towards investing in their own futures and focuses on protecting their own security, they will start to rise out of their current situation of massive inequality and poverty. This will in turn create a more balanced global system as less and less countries suffer from poverty and the whole system will increase their financial stability.

References

Balaam, D. N., & Dillman, B. (2018). Introduction to international political economy. London: Routledge.