POWER AND WEALTH Individual Assignment

“Power and wealth are intricately linked. Critically discuss drawing on at least two perspectives from the field of International Political Economy and practical examples from the global political economy” Introduction
Robert Gilpin (1975) once defined International Political Economy as the “reciprocal and dynamic interaction in international relations of the pursuit of wealth and the pursuit of power”, allowing for the understanding of the relevance of power and wealth in the global economy. The study of International Political Economy provides an understanding of the interaction between the Market and the State, as well as the importance of their existence within countries around the world. In studying this particular area, it is important to familiarize oneself with the key elements and determinants which make up the global economy. Two factors which play an essential role in the global political economy are Power and Wealth. These are considered to be significantly linked, as they share many similar attributes, and many corporations and actively involved members of the State seek to achieve and/or maintain both aspects. Power is globally acknowledged as the ability to influence the behavior in other individuals, or the authority to make decisions. As illustrated by Dahl (1957), the intuitive idea of power allows for the understanding that “A has power over B to the extent that he can get B to do something that B would not otherwise do.” This alluded to the understanding that power is a relation, and more importantly that it is a relation among people. (Parsons 1997) This definition by Dahl has, however, received criticism from Peter Bachrach and Morton Baratz (1962) for its inability to examine the second face of power, which is recognized as “a person or group – consciously or subconsciously – creates or reinforces barriers to the public airing of policy conflicts.” (Bachrach and Baratz 1962) On the other hand, wealth is loosely defined as a measure of value of all of the assets of worth owned by a person, community, company or country. (Investopedia n.d.) By this definition, many individuals hold the assumption that power and wealth are interrelated, as wealth is assumed to be achieved and maintained through Power. In order to investigate and analyze the relationship between power and wealth, neoliberal and feminist perspectives will be utilized, as well as practical examples of situations currently occurring within the global political environment. In understanding the relationship between Power and Wealth, individuals can understand their relevance in the global market, as well as their relationship with the Market and the State, two main features of the international political economy, as previously stated. Through examination of the different views and perspectives which exist on the topic, it can also be determined whether the notion of “power” and/or “wealth” are used mainly to describe certain sectors within the State and its beneficiaries, or whether the terms can be used more broadly to describe all parties within the global economy. In investigating the topic previously mentioned, and achieving the aforementioned purpose secondary research will be undergone though books, such as “International Political Economy”, by Frieden and Lake (2000), and various articles from sites, such as The Daily Ticker.
The Existence of Power and Wealth
In its earliest form, the modern international economy was organized on the basis of mercantilism, a doctrine asserting that power and wealth were closely interrelated and were legitimate goals of national policy. (Frieden and Lake 2003) Therefore, wealth was necessary for achieving power, and power could be used to achieve wealth as well. Although these two aspects have been perceived as interconnected, they are also both considered independently. When one speaks of these two entities, an immediate connection to the State and its government is made. According to Sinclair (2009), our natural trust in authority has allowed for the dependence on policy making in our best interest. However, this has also allowed party leadership to adapt their ideologies overtime to combine dogma, power and wealth. Unfortunately this thirst for power and wealth also leads to eventual corruptive practices. In democracies “power” stems from the trust of the people, and therefore when authorities or parties undermine that trust through corruption they also diminish their power. When independently considered, “wealth” can be associated with the high ranked members of Multinational Corporations, more specifically the Board of Directors, and is said to be mainly accumulated from Trade, as stated by economists. (Sinclair 2009)
Since wealth is mainly associated with global entities, whose goals are centered on maximizing Shareholder wealth, it raises the question of whether Multinational Corporation actually have power or authority over the State. Do these companies hold more power than the law enforcers who govern our international economy? According to Saul (2011) Corporations are making more, spending more, and employing more of the world’s resources than ever before. Because their influence has become so significant, it is believed that Corporations play a greater role in our daily lives than the government. For instance, Eric Schlosser wrote in his book, Fast Food Nation, “The McDonald’s Corporation has become a powerful symbol of America’s service economy, which is now responsible for 90 percent of the country’s new jobs.” (Saul 2011) Korn (2012) suggests that Multinational Corporations are increasingly exerting their power and clout in the legislative and regulatory spheres, resulting in a new and alarming world power structure.
The pursuit of power and wealth has been assumed to have led to corruption within the global markets. This has resulted from a greed of achieving more power in order to increase wealth, and has led to many unfortunate repercussions. For example, it is alleged that the banking crash in 2008 was predominantly caused by the act of corruption among bankers, politicians (who were previously bankers), regulators and credit rating agencies. (Bradshaw 2011) The documentary, Inside Job, gives an overview on the factors that led to the 2008 financial crisis, stating that there was a strong denial of the inevitable, even after the situation that occurred with the Lehman Brothers. Deregulation was a major factor of the crisis, which bankers are assumed to have understood and acknowledged when they supported the idea. Also, allegedly responsible for the crisis were the mis-selling of mortgages, as well as bank debt, credit card debt and bank loans. However, suspects such as Larry Summers and Glenn Hubbard remain in denial about the factors which led to the crisis.
The question of whether power and wealth are intricately interrelated have been viewed differently by a number of theorists. Some individuals, such as Joseph E. Stiglitz, believe that power and wealth are undeniably connected, when considering the political economy. Wealth begets power, which begets more wealth. (Stiglitz 2011) Economic Nationalists also believe that there is a significant connection between power and wealth, in that wealth contributes to power and vice versa. It was established by Berkeley that nationalists believe that states seek relative gains in both wealth and power and, therefore, pursue policies of protection and market control to achieve State power and wealth as means to security. There are two types of economic nationalist perspectives in the perception of wealth and power, being either descriptive or predictive. It is stated that descriptive economic nationalists believe that production, consumption, exchange and investment are governed by political power. (O'Brien and Williams 2010) Robert Gilpin associated the concept of wealth with the realm economics, including areas such as the contribution of international markets and material incentives- which he believes to be the main concern of economists, whereas he associates power with politics, including the role of the state and its ability to manage conflict – a concern of political scientists. (Cohen 2012) Two famous advocates of the mercantilist theory, which is an area of economic nationalism, were Alexander Hamilton and Frederick List. (Williams 2010) Hamilton was the founding father of the United States of America. In the 1790s, he urged Americans to protect their manufacturers from competition, so that they could industrialize and increase their power. A few hundred years later, List suggested that Germany industrialize behind trade barriers, so that it could catch up to the economic might of Great Britain. These initiatives subsequently led to other economic nationalist perspectives. However, as students of International Politic Economy, we should consider the persistence of the idea of mercantilism. It can be assumed that an economic perspective based on unparalleled state power is of little relevance in a world characterized by globalization. (O'Brien and Williams 2010) While this assumption is plausible, we should still consider the idea of economic nationalism. On one hand, it acknowledges that the state remains at the centre of power within the global political economy, and on the other hand, it recognizes that there is an intimate connection between power and wealth.
Yet Despite, Neo-liberals consider power and wealth to be distinctly different entities, and strive towards achieving wealth and economic justice through capitalism. They believe individuals are the key economic actors, and that the market lies at the centre of economic wealth. Neo-liberalism encompasses the belief that government intervention should be minimal, and that power should not lie with the State, with regards to international trade. In addition, significant aspect of the neo-liberal concept of power, is that it accounts for change in the international system. (Cowie 2014) These individuals welcome and encourage the concept of globalization. Therefore, it is believed that State intervention in the market creates inefficiency and reduces the prospect of wealth. Neo-liberalists have advocated for motives which would benefit the corporate sector and encourage international business, which include privatization, deregulation, “free” enterprise from any bonds imposed by the government, and elimination of the concept of “public good”. (Garcia) Modern liberalists, on the other hand, could be thought of as being situated politically to the left of classical liberalism, because of their willingness to employ the state as an instrument to redistribute wealth and power, in order to create a society deemed to be more equitable. (Thorsen 2007) Thomas Friedman, renowned journalist and author, believed that globalization is inevitable and irreversible, due to the rapidly evolving technology and flow of information. (Eichengreen 1999) He stated that the response of the state to the reality of globalization would determine the success of the international economy. In this respect, Friedman suggested utilizing the Golden Straitjacket as an alternative to free-market capitalism; this would involve privatizing enterprises, balancing budgets, lowering tariffs, removing restrictions on foreign investment, and eliminating subsidies for state-owned firms. Friedman, like most neo-liberalists, see this alternative as the only feasible route toward economic growth, and market wealth.
Contrary to their support of globalization and capitalism, it is believed that neo-liberalism is leading/has led to an unequal distribution of wealth. According to Manbiot (2013), the world’s richest persons are now worth $1.9 trillion, which is only a tad less than the entire output of the United Kingdom. So, where did their good fortunes come from? This vast wealth is said to have been acquired from policies, such as the reduction of tax rates and tax enforcement, the privatization of public assets and the creation of a toll-booth economy, as well as wage liberalism and the destruction of collective bargaining to name a few. It is stated that throughout the OECD countries, taxation has become more aggressive, and as a result the poor have become more incapacitated, and the wealthy are the only ones who are benefitting. Corporations we receiving preferential tax benefits, which in turn undermined the efficiency of the economy. As taxes on the rich diminished, the spending power of the state and the poorer individuals fell, and demand contracted. (Monbiot 2013) This situation allows us to revert to the assumption that power has begun to lie within the corporations, rather than the state.
Realists share many views and assumptions on the concept of the political environment. For instance, they are state-centric in that they acknowledge that the main participants in the international environment are the states, and that these states make the key decisions. They believe that power is the currency of international politics, and many make a strong connection between economic and military power. (Mearsheimer 2013) Despite their shared perspectives, there is a diversity of assumptions within realism has led analysts to argue for differentiation among realists. More specifically, neo- classical realists and post-classical realists share different perspectives on the areas of power and wealth. (Brooks 1997) For instance, whereas neo-realism views the pursuit of power as secondary to that of security, postclassical realism regards rational states as ultimately seeking to increase the economic resources under their control, and therefore hold the assumption that wealth is a necessary means to power.
According to Mearsheimer (2006), the balance of power is “mainly a function of the tangible military assets that states possess, such as armoured divisions and nuclear weapons. However, states have a second kind of power, latent power, which refers to the socio-economic ingredients that go into building military power.” This latent power is based on a state’s wealth and the size of its overall population. This is based on the assumption that power is based on the material capabilities that a state controls.
Neo-realism compares to neo-liberalism in relation to power, in that both perspectives agree that the international political system is anarchic, although, as suggested previously, these theories share different views on why states pursue power. (Cowie 2014) Neo-realist, Herz (1976), argues that states must always pursue power in order to secure their sovereignty where war is always lurking in the background of international politics. In explaining the neo-realist view of power and its importance in the international political economy, Alvarenga (2007) suggests that power for neo-realists serves as a means to protect states so they become less vulnerable to external threats. Neo-liberals are more open-minded and flexible to the idea of power that neo-realists, as they argue that states should pursue power through cooperation, and, as stated previously, have advocated for such power to shift from states to corporations. Power is basically a relationship for neo-liberals in that they depend less on material elements than neo-realists, and they view it as a means of getting individuals to do what they want.
Conclusion
There are many theories which debate whether power and wealth are intricately linked. More specifically these philosophies have different views on the definition of power and what it entails. For instance, the neo-liberal perspective assumes that power as an entity which is pursued by the State. However, they believe that international affairs should be handled by the corporations and that the State should have limited intervention. They strive to encourage the concept of globalization in order for the economy to achieve economic wealth. Like the neo-liberal perspective, neo- classical realists believe that the international political economy is a rebellious system, however, believe that the state pursues power in order to protect the economy from rivalling territories. Nationalists, on the other hand believe that power and wealth are intimately connected in that substantial wealth is necessary for attaining power, and power contributes to the accumulation of wealth.
Theorists such as Robert Gilpin and Milton Friedman have contributed to the assumptions made by the neo-liberalist and nationalist perspectives, and have given their perspective on the relationship between the two concepts. Gilpin made a clear distinction between power and wealth, associating the former with the role of the State, and the latter with the role of the markets. Friedman supported the concept of globalization, by offering the “Golden Straitjacket” which suggested that the state can achieve economic wealth through involving privatizing enterprises, balancing budgets, lowering tariffs, removing restrictions on foreign investment, and eliminating subsidies for state-owned firms.
In my opinion, wealth and power have a positively intricate relationship, in that power is used to achieve wealth and wealth can contribute to power. For this reason states pursue both entities rather than one of the two concepts. It should be noted the impact that these two concept have on the economy as they influence the economic activities which occur around the globe. For instance, corruption is assumed to be a major consequence of this greed for power and wealth, causing governmental agencies, as well as corporations to become involved in fraud and misrepresentation. This belief that wealth gives entities the authority or eligibility to make decisions on behalf of the economy has cause a rivalry between the market and the state to the extent that some corporations are believed to have overpowered the state in decision making. Unfortunately, the existence of these different perspectives on the notion of power and wealth leads to little consensus on how to achieve an ideal political economy.

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