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The conceptual differences between Realism, liberalism, and Marxism and


their stand on hegemonic stability and global integration

By: Saeed Kakeyi


October 22, 2007

Abstract
The question arises as to why there are so many theories and why they differ from each other.
There are several reasons for the existence of multiple theories. Each theory has a different goal
in mind; for example, realism is concerned with the security of the state, liberalism with building
wealth or cooperation and Marxism in pursuing class equity. While they are all trying to
understand the world, they are looking at different aspects of human existence. A second and
related reason is that a particular theory usually advances the interests of a particular group.
Richer, more satisfied people and states tend to favor liberals which do not threaten their
interests while those disadvantaged by the system are more likely to espouse Marxism. A third
explanation is that it is impossible to prove a theory right or wrong. Evidence is often disputed
and interpreted in different ways. Moreover, unlike the laws of nature, people are able to reflect
upon their behavior and change their form of organization and interaction. In the words of Robert
Cox: “Theory is always for someone and for some purpose” (Kaufman: 2004, 752).

Introduction
Actors in the International Political Economy (IPE) and those studying it use a variety of theories
and use them for a variety of purposes. Some people are interested in predicting a stable
economic growth, or to predict unstable economic situations. Others think that prediction is
nearly impossible because so many factors come together to influence events. These people often
use theory in an attempt to understand the world rather than to predict what will happen next.
This paper will describe and compare a number of theories in order to understand and
explain developments in the world political economy. Since 1970s, the development of IPE is
often constructed around a debate between three contending conceptions or schools of thought;
Realism, Liberalism, and Marxism. It will be evident that although analysts distinguish between
these three conceptions there is a wide variety of thought within each conception that affects the
IPE. Before addressing the current state of theory, however, this paper will next introduce the
key propositions of the three perspectives and highlight the major differences between them.
Thereafter, it will provide summary accounts for the Theory of Hegemonic Stability as well as
key issues of Global Integration.

Realism, liberalism, and Marxism: key actors and dynamics

Realism is focuses on the role of the state and the importance of power in shaping
outcomes in the IPE. Scholars of this paradigm stress the importance of the interest of the state or
the nation in understanding the role of economy in international relations. Economic analysts of
this concept are variously termed as mercantilists, neo-mercantilists, statists or economic
nationalists. The origin of this school of thought can be traced back to the emergence of the
nation-state in Europe in the fifteenth century. Mercantilism was a doctrine of political economy
that governed the actions of many states until the liberal revolution in Britain in the mid-
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nineteenth century. Insofar, realists view states as motivated by power maximization; and, with
respect to trade, they view economic statecraft, including trade policies, as one of many
instruments available to states in their pursuit of power. Scholars working in this perspective
argue that the nature of the global economy reflects the interests of the most powerful states.
This hegemonic power is needed to provide leadership and absorb the short-term costs of
maintaining a free-trade regime. Robert Gilpin has argued that changes in the distribution of
power between states increase the chances of conflict in the international system. Because of this
view considerable time can be devoted to contemplating the rise and fall of great powers
(Kaufman: 2004, 477-484).
In contrast to the realist theories, liberals focus either upon the individual or a wide range
of actors. They do not see the state as a unitary actor, but as influenced by numerous factors.
Rather than stress the inevitability of conflict, liberals search out the conditions for cooperation.
They tend to underplay the role of force and coercion in human affairs and emphasize the ability
of individuals to choose between striking courses of action. Liberals see the world system as one
of interdependence rather than anarchy. States and peoples can cooperate for mutual benefit.
Rather than a zero-sum game, liberals see a positive-sum game where the pie grows bigger and
everyone gains. Liberal theories of political economy emerged in eighteenth and nineteenth
century Britain in the wake of the industrial revolution. Political economists such as Adam Smith
and David Ricardo preached the merits of government non-interference in the economy and free
trade (2004, 420-424).
In reaction to the liberal thought, another conception emerged in the nineteenth century to
move away from the individual and states by considering other unit of analysis. Karl Marx, with
the help of his co-author, Fredrick Angles, developed his Marxist theory by focusing upon class
and the interest of workers. During the industrial revolution, Marx took issue with the idea of a
harmony of interests that the liberals advocated. Marx recognized an ongoing conflict between
workers and capitalists that would only be resolved when the workers seized power. Marx also
recognized the desire of states to maximize wealth, but believed that this goal is pursued to
benefit particular classes, rather than society as a whole. For Marxists, the state is not a unitary
actor, but is a structure representing the interests of the dominant classes in society. Neo-
Marxists maintain that the state is fundamentally an instrument of class domination. The Marxist
rejection of the liberal and realist assumption of the neutrality of the state vis-à-vis class interests
leads to the conclusion that trade policies do not benefit all individuals within society, but in fact
promote the interests of the dominant classes (2004, 426-431).
Realists view the state as the main actor in the IPE. Their major assumption of is the
primacy of the political over other aspects of social life. Unlike liberals who view state with
hostility since it brings politics into the realm of economics, realists focus on the activities of the
state or nation rather than the individual. Mercantilist thought begins from two major
assumptions. The first is that the international system is anarchical and that it is therefore the
duty of each state to protect its own interests. At the core of realism—which mercantilism has
developed from—is the belief that an economy acts for the good of all its members. The second
assumption concerns the primacy of the state in political life. As the state is the central
instrument through which people can fulfill their goals it follows that the state remains the
greatest actor in the domestic and international domains. Economic policy therefore should be
used to build a more powerful state. Whereas the liberals, on the other hand, believe that if
individuals are left freely to engage in production, exchange and consumption would benefit all
and that the insertion of state control distorts benefits and adds costs to participants in the
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market. Within the liberal perspective, however, there are a number of key actors. Liberal
economic theory begins from the analysis of individual wants and preferences. In the context,
liberal theorists focus on the behavior of individuals, firms and states. Unlike economic realists,
individuals as the key economic actor—in pursuit of self-interest—will maximize the benefits of
economic exchange for society (2004, 431-437).
In contrast to both realism and liberalism, Marxism begins with a focus on class as the
main ‘actor’ in the IPE. They reject the individualism of liberal theory and embrace the
collectivist approach of economic nationalist perspectives. However, Marxism rejects the realist’
nationalism and focuses instead on the significance of class. Marx defined class in relation to the
structure of production which creates owners of the means of production (the bourgeoisie) and
the workers who sell their labor power to the bourgeoisie. This focus arises from the Marxist
account of capitalist relations which are predicated on exploitation (2004, 438-440).

Market economy differences


From a realist perspective IPE is constituted through the actions of rational states. If international
relations are conceived as a struggle for power, IPE is a struggle for power and wealth. Market
relations are important indicators of power and wealth but the market is governed by the
activities of states. Economic activity is subordinate to political goals and objectives.
Furthermore, economic actors are subject to political authority. The consequence of the salience
of the state is that international economic relations are international political relations. The global
economy in this view is subordinate to the international political system (2004, 411-412).
For liberal theorists, however, the market lies at the centre of economic life. Economic
progress results from the interaction of diverse individuals pursuing their own ends. While
liberals acknowledge that market relations are not always optimal, they tend to argue that
intervention in the market is most likely to produce less favorable outcomes. Liberals differ over
the importance of market imperfections and the policies that ought to be implemented to deal
with market failure (2004, 489-490).
Dominance and exploitation among and within societies provide the main dynamic for
Marxist theories of IPE. Unlike liberals Marxists view market relations as inherently
exploitative. According to Marxists, under capitalism workers are denied a fair compensation
because capitalists pay workers less than their labor is worth. Marxists view international
economic relations as inherently unstable and problematic. First, the tendency for the rate of
profit to fall sees capitalists engaged in fierce competition with each other and will tend to drive
down the wages of workers. Secondly, capitalism leads to uneven development as some centers
increase their wealth and growth at the expense of others. Thirdly, Marxists argue that capitalism
leads to overproduction or under-consumption giving rise to fluctuations in the business cycle
and undermining social stability (2004, 546-551).

Conflict and cooperation


As mentioned earlier, realism views the world as anarchic, lacking any central authority.
Relations between states are thus characterized by unending conflict and the pursuit of power.
International economic relations are therefore perceived in zero-sum terms, that is, the gain of
one party necessitates a loss for another party. The system structure is perceived in problematic
terms (2004, 435-436). This can be seen in terms of security concerns, that is, a state should not
be reliant on the import of some specific goods otherwise in times of conflict these goods may be
unavailable. It can also be seen in terms of the preservation of the cultural values of the nation.
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For example, many realists believe that the import of some products pollutes the nation through
the introduction of foreign values. From the foregoing, it is easy to see how realists support the
protection of their domestic markets.
Liberals, on the other hand, believe that market relations will lead to positive outcomes
for all. In other words, economic relations are positive-sum. One persistent liberal belief has
been that realist policies lead to conflict. Unlike Marxists who denounce the growth of global
capitalism as a cause of war, liberals view increased international cooperation as a source of
prosperity and peace (2004, 506).
Within the study of IPE, liberal theories share assumptions concerning the feasibility of
cooperation. In the 1960s, the interdependence system was developed to explain the connection
between increased economic exchange and interconnectedness and the long-lasting peace among
Western countries (Spero and Hart: 2003, 28).
In the 1980s and liberals continued to argue that international cooperation was
both possible and desirable. In contrast to realists, liberals illustrated that international systems or
regimes would maintain international economic order even after hegemony (2004, 490).
Marxism perceives international economic relations as a zero-sum game. The structure of
global capitalism is fundamentally problematic and arises from the law of motion of capital. In
the international arena the clash between workers and capitalists is often obscured by nationalism
and the intervention of the state. Through the mechanism of imperialism dominant states oppress
weaker ones and this nets an international struggle between imperialists and their victims.
Therefore, international conflict is inevitable because of the drive for profit.

Merits and dangers of the Hegemonic Stability


Hegemonic Stability Theory (HST) was developed by realist theorists to explain the instability
between the world wars of the twentieth century. This instability, according to Robert Gilpin,
was primarily economic in nature, and the Great Depression was the result (2004, 483).
However, the instability led to, and ended in, war. The theory holds that international systems are
established by very powerful “hegemonic” states to advance particular political and economic
interests. Charles P. Kindleberger is usually credited with having introduced the theory which
examined the causes of the Great Depression. He concludes that “the main lesson of the inter-
war years [is] that for the world economy to be stabilized there has to be a stabilizer, one
stabilizer” (1973, 305). This one stabilizer can only be the hegemon.
This is where Keohane’s definition of hegemony: “one state is powerful enough to
maintain the essential rules governing interstate relations, and willing to do so” is applicable
(1984, 34-35). Political, economic and military powers are all needed. Political strength is
necessary to use military and economic powers to affect—the willingness to which Keohane
refers, as well as to induce other states to act without recourse to force. Economic power is
needed for the hegemon to be able to set rules for the working of the liberal international
economy. A large internal market can be used as an incentive, and serves as a stabilizer in the
economic system. Military power is needed to protect the international economic system form
the peripheral states which may seek to impose an alternative system in place of the hegemonic
system (1984, 39).
Given the assumptions Gilpin and other realist writers make about the competitive, zero-
sum nature of the international system, hegemonic power is consequently seen as cyclical: one
power will ultimately be replaced by another as uneven economic growth fundamentally
transforms power relativities between states (2004, 481).
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In the 1980s most liberals were primarily concerned with how to encourage international
cooperation ‘after hegemony’ (Keohane 1984), as the anticipation was that American hegemony
would decline. However, by the end of the Cold War and with the US assuming a relatively
uncontested ‘unipolar’ position in the world, attention has turned to explaining the failure of
other countries to ‘balance’ American hegemony in the way realist theory predicted. G John
Ikenberry argues that wars and their aftermaths present especially fluid moments in which
emergent hegemonic powers can create a new international order. Significantly, however, the
international order the US was instrumental in creating was one characterized by a high degree
of institutionalization (2001: 43-78).
The liberal Bretton Woods system not only provided a capacity to manage and guide
international economic and political relations, but it provided economic growth, key incentives
and pay-offs for all concerned (2003, 70-72). While the overall liberal international regime may
have reflected and furthered the interests of the US as the dominant power, its subordinate
countries benefited from the creation of a predictable, open, liberal economic order (2004, 480).
On the other hand, as Gilpin logically cautions bout the dangers of shifts in international
market developments, the realist hegemonic stability view holds that “unleashing of market
forces transforms the political framework itself, undermines the hegemonic power, and creates a
new political environment to which the world must eventually adjust” (2004, 282). With the
decline of the hegemon in an anarchic world, “the possibility increases that a financial crisis or
some other economic calamity will occur that will cause a dramatic collapse of the system,
particularly if a divergence of interests among major powers takes place” (2004, 483).

Global integration indifferences


In the debate over global integration both defensive and sceptical realist perspectives can be
heard. The defensive posture arises from a fear that global integration may prevent state actors
from fulfilling their goals. Unlike proponents of free trade, realists believe that the gains from
trade are unequally distributed and favor those with greater economic and political power. Thus
defensive realists can recognize global integration as a threat and seek to counter its impacts. On
the other hand, sceptical realists reject many of the current liberal arguments about globalization
and global integration. They contend that globalization is largely a myth and that the power of
the state remains undiminished. Moreover, it can be claimed that since states remain powerful
actors and the only legitimate centers of authority in the modern world, nothing significant has
occurred in the IPE (Baylis and Smith: 2005, 177-179).
Many liberal theorists have been at the forefront of the debate on global integration
arguing that is not only a reality it is a positive force for good. In the liberals view, global
integration pushes the state to retreat and by unleashing the force of production it can contribute
to enhanced happiness for humankind. Insofar, if one has to examine today’s global economy
carefully, he will conclude that it is governed largely according to liberal principles. For
example, the trade regime is based upon the goal of free trade: money flows into and out of most
countries without great difficulty and all forms of economic activity are increasingly liberalized
(2005, 195-199).
Yet, Marxism has tended, for a variety of reasons, to oppose global integration.
According to this argument, global integration represents an ideological intervention into
political economy. It supposedly describes changes in the world but in reality it is a set of
prescriptions in support of free markets and an instrument to increase the power of capital over
labor, the West over other states, and an instrument designed to further the interests of the
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leading capitalist power, the United States. In this sense, Marxists resist global integration since
it too maintains and increases exploitative relations (2005, 245-246).

Summary of the theories


This paper highlighted the existence of various interpretations. But what is the relationship
between various theories? Are they in conflict or can they be made compatible? At their core,
theories about IPE are incompatible because they have different basic assumptions about the
units of analysis, nature of the system and the motivation of actors. Yet, each theory can point to
some evidence to support its existence and each seems to be useful in explaining some aspect of
the global IPE. For example, one could have a general realist approach while conceding that the
system is also characterized by class exploitation and that there are times when cooperation can
be more beneficial than conflict. Alternatively, some theories may be more applicable in selected
time periods.

Selected References:

Baylis, John, and Steve Smith (2005). The Globalization of World Pollitics. 3rd. New York: Oxford University
Press.

Charles P. Kindleberger, (1973). The world in depression, 1929-1939. London: Allen Lane.

Ikenberry, G. John (2001), After victory: institutions, strategic restraint, and the rebuilding of order after major wars.
Princeton: Princeton University Press.

Kaufman, Daniel, Jay Parker, Patrick Howell, and Grant Doty, (2004).Understanding International Relations: The
Value of Alternative Lenses. 5th. Boston: Custom Publishing - McGraw-Hill.

Keohane, Robert (1984). After hegemony: cooperation and discord in the world political economy. Princeton:
Princeton University Press.

Sepero, Joan E. and Hart Jeffery A. (2003). The economic of the international economic relations. (6 th ed.):
Wadsworth, Belmont.