IPE Theories and Global Economic Structures: Mercantilism to Modern Inequality

Posted on Nov 11, 2025 in Social sciences

Mercantilism: Central Idea, History, and Neo-Policies

The central idea of mercantilism is that economic activity is a tool of state power, and wealth should be accumulated to strengthen the state in a competitive international system. For mercantilists, the economy is not an autonomous sphere but subordinated to politics: trade, production, and finance are instruments to enhance national security, sovereignty, and power. This contrasts with liberalism, which emphasizes cooperation, or Marxism, which focuses on class conflict.

Historical Illustration (16th–18th Centuries)

During the classical mercantilist period, this idea was clearly reflected in state policies. Practices included:

• Bullionism: European powers accumulated gold and silver from their colonies, considering bullion the basis of national strength.
• Colonial Monopolies: Britain, France, and others implemented colonial monopolies and navigation acts to secure resources and guarantee captive markets for their goods.
• Protectionism: Tariffs were imposed to shield domestic producers and ensure a favorable balance of trade.
• State Intervention: States granted monopolies, subsidized strategic industries, and built powerful navies to control trade routes.

All of these practices reflected the belief that international economic relations are zero-sum: one country’s gain necessarily implied another’s loss.

Recent Neo-Mercantilist Policies

Although classical mercantilism declined, its logic persists today in the form of neo-mercantilism:

• Strategic Trade Policies: Subsidies to national champions in sectors like aerospace or semiconductors reveal the continued use of the economy as a geopolitical tool.
• Trade Wars: The use of tariffs and restrictions on technology transfers (e.g., between the United States and China) to defend national interests.
• Resource Nationalism: Control of critical exports (such as China’s rare earth exports or Russia’s use of energy as leverage) demonstrates the link between natural resources and national security.
• Investment Restrictions: Many states impose restrictions on foreign investment in critical sectors to safeguard sovereignty and protect technological leadership.

In conclusion, mercantilism’s central idea is the primacy of the state in shaping economic relations, with international trade viewed as competitive rather than cooperative. The persistence of these practices shows that, despite globalization, economic policy continues to be closely tied to questions of power and security in international relations.

The Corn Laws Debate: Mercantilism vs. Economic Liberalism

The Corn Laws in nineteenth-century Britain exemplify the clash between mercantilist and liberal views of trade. These tariffs on imported grain, introduced to protect domestic agriculture, kept food prices high and favored the landed elite.

• Mercantilist View: Protection was justified as it ensured national self-sufficiency, safeguarded sovereignty, and preserved the political and economic dominance of landowners.
• Liberal View: Opponents, led by figures like Richard Cobden and the Anti-Corn Law League, argued that free trade would lower living costs, increase real wages, and make British manufacturing more competitive abroad. Trade, from this perspective, was mutually beneficial rather than zero-sum.

The repeal of the Corn Laws in 1846 under Prime Minister Robert Peel was a decisive victory for liberalism and marked Britain’s turn toward free trade.

I favor the liberal side of the debate. While concerns about food security were valid, the Corn Laws mainly benefited landowners while hurting workers and industry. Free trade not only reduced the cost of living but also promoted Britain’s industrial expansion and long-term prosperity.

In sum, the Corn Laws highlight the mercantilist focus on protection and power versus the liberal emphasis on openness and efficiency, with liberalism ultimately shaping Britain’s nineteenth-century economic leadership.

Marxism’s Four Contributions to Structuralism in IPE

Marxism has made four main contributions to contemporary structuralism in International Political Economy:

1. Historical Materialism: This highlights how the economic structure of society (the “mode of production”) shapes politics, law, and ideology. This focus on material forces and class relations as the foundation of power remains central to structuralist approaches.
2. Class Struggle: Marx emphasized that conflict between classes—the bourgeoisie and the proletariat—drives historical change. Structuralists extend this to the international level, analyzing inequalities between the Global North and South, or between core and periphery economies.
3. Exploitation: The theory of exploitation, where the surplus value produced by workers is appropriated by capitalists. Structuralists adapt this to international relations by showing how advanced economies exploit developing ones through unequal trade, financial dependence, and control over global institutions.
4. Ideology and False Consciousness: Marx showed how dominant ideas legitimize existing power relations and mask exploitation. Contemporary structuralists apply this to global capitalism, examining how neoliberal discourse promotes “free markets” while concealing structural inequalities.

In sum, Marxism shaped structuralism by providing the analytical tools of materialism, class conflict, exploitation, and ideology, which remain crucial to understanding global economic inequalities today.

Neo-Imperialism, Dependency Theory, and World-System

What are the essential characteristics of neo-imperialism, dependency theory, and the modern world system approach?

Neo-Imperialism

Neo-imperialism refers to the continued domination of developing countries by advanced economies after formal colonialism ended. Unlike classical imperialism, which relied on direct political control, neo-imperialism works through indirect mechanisms such as foreign investment, multinational corporations, trade dependency, and international financial institutions. The essential characteristic is that power is exercised economically and politically without direct rule, ensuring that developing countries remain subordinate within the global system.

Dependency Theory

Dependency theory, developed mainly by Latin American scholars in the 1960s and 1970s, argues that underdevelopment is not simply a stage on the path to development, but rather the result of structural relationships between the core and the periphery. The periphery provides raw materials, cheap labor, and markets for the core, which in turn exports manufactured goods and capital. The key characteristic is that development in the core is directly linked to underdevelopment in the periphery, creating a structural dependency that traps poorer countries in unequal exchange.

Modern World-System Approach

The modern world-system approach, developed by Immanuel Wallerstein, builds on and extends dependency theory. It characterizes the global economy as a single capitalist system divided into core, semi-periphery, and periphery. The core dominates technologically and financially, the periphery supplies raw materials and cheap labor, and the semi-periphery plays a stabilizing role between the two. The essential characteristic of this approach is its emphasis on the global system as an integrated whole, with structural inequalities embedded in the capitalist world economy that reproduce themselves over time.

In short, all three perspectives share the view that global inequality is not accidental but structurally produced. Neo-imperialism highlights indirect domination, dependency theory stresses the core–periphery exploitation, and the world-system approach explains how these dynamics fit into a long-term global capitalist system.

Causes and Trends of Global Inequality Since the 1980s

Since the 1980s, inequality has been shaped by profound economic, political, and technological transformations. The most important causes include:

• Globalization: While global trade and investment have fostered growth, their benefits have been unevenly distributed. Advanced economies and highly skilled workers have gained, whereas low-skilled labor has often been left behind, contributing to rising wage gaps.
• Technological Change: Automation and digitalization have disproportionately rewarded workers with high levels of education and technological skills while displacing routine and low-skilled jobs.
• Policy Choices and Neoliberal Reforms: Tax cuts, deregulation, privatization, and reductions in welfare spending have weakened redistribution in many countries. The weakening of labor unions has also reduced the bargaining power of workers.
• Financialization of the Global Economy: The expansion of capital markets and financial assets has disproportionately benefited the wealthy, who own stocks, property, and other financial instruments, leading to a concentration of wealth at the top.

Inequality Trends

Inequality has increased both within countries and, to a lesser extent, between countries. While some emerging economies (such as China) have experienced rapid growth and reduced poverty, internal inequality has often risen at the same time. In advanced economies, the gap between the top 1% and the rest of the population has expanded significantly, with wealth concentration reaching levels not seen since the early 20th century.

In conclusion, inequality since the 1980s has been driven by globalization, technological change, neoliberal policies, and financialization. The main trend has been a sharp rise in income and wealth inequality within countries, especially in the advanced economies.

Spain’s Cultural Identity and Foreign Relations

In the case of Spain, several elements of culture and national identity strongly shape its relations with other countries:

• Historical and Linguistic Legacy: As the former center of a vast empire, Spain maintains deep cultural and linguistic ties with Latin America. The shared Spanish language and historical connections translate into close political, economic, and cultural relations, reflected in investment flows and cooperation within organizations such as the Ibero-American Summit.
• Mediterranean and European Identity: Spain’s geographic position fosters engagement on issues such as migration, energy, and security, especially with North African countries like Morocco and Algeria. Its identity as a consolidated European democracy shapes its strong commitment to the European Union.
• Multicultural and Regional Diversity: The existence of strong regional identities—such as Catalan and Basque nationalism—has influenced Spain’s external image and sometimes complicated diplomatic relations. Nonetheless, Spain’s ability to balance unity with diversity contributes to its credibility in promoting dialogue abroad.
• Cultural Diplomacy: The global reach of the Spanish language, literature, art, gastronomy, and sports (notably football) strengthens Spain’s soft power. This cultural influence helps build goodwill and enhances Spain’s standing internationally.

Together, these elements demonstrate how national identity and cultural heritage continue to play a decisive role in Spain’s position within the international system.