Economic parallels of Realsim

An article in the newest version of the Economist (September 17) caught my eye in that it displayed contrasting points of idealism and realism. While reading and thinking about the material we covered in class, I was confronted with an unexpected but well received notion. Through reading I realized how this article brought together the ideals of realism with the theories of capitalist economics. I want to take this opportunity to compare the two spectrums and show the striking similarities between the two. The article, titled The Tents of Righteous, focuses on a financial organization based in Paris which concentrates on eliminating sleaze and cronyism from the international political and economic spectrums. When in the Organization for Economic Co-operation and Development countries must pass laws outlawing international bribery and are closely monitored to insure the laws are being strictly enforced. Almost all countries outside of the OECD co-operate with the organization in some way, but recently the only formal application has come unexpectedly from Russia, while others such as the remaining BRIC nations (Brazil, India, and China), South Africa, Indonesia, and Saudi Arabia remain outside of the organization. Many are surprised by Russia’s application citing the vast amount of favor-swapping inside Russia. However, the OECD only deals with international dealings, so theoretically a country could be full of sleaze at home while maintaining a clean sheet in business abroad. Latter, the article makes a point regarding America which I think is worth noting. “Even the United States…has had to undergo scrutiny at the hands of peers and listen meekly to ideas for better enforcement. That contrasts sharply with the rejectionist American approach to many other forms of international legal scrutiny.” This statement left me wondering why the United States would join such an organization, and how realism and idealism comes into play when a state joins any international organizations.

There are two schools of thought regarding organizations, one is economistic, rooted in rationality and efficiency and the other is sociological, focusing on legitimacy and power. (Adler) While on the surface, it may seem that states join these organizations for idealistic reasons, to benefit the common good; these organizations are truly an instrument to gain power and influence. International organizations often become sources of power through the legitimacy and legal authority they embody and control over expertise and information. (Adler) These organizations are often responsible for classifying the world, giving meaning to these classes or categories and creating new standards, principles, and actors around the globe. Relating back to the article, many countries choose to participate in this organization not only because it is truly of good intent, but because it allows them to keep watch on other countries actions which intern, increases their sense of security. Theoretically, most countries would not want a global government keeping watch on them, telling them what to but if there is going to be some variety of international organization, naturally a country would rather be the one who has input in the decisions than one who obeys them blindly. However, many significant countries do not participate in the OECD and other International Organizations. What seems the most sensible is that these countries have calculated that the costs of being in these organizations, whatever it may be outweighs the organizations’ benefits. This type of decision is the foundation for modern economic theory which poses remarkably similar ideologies.

Realism, as economics is based on the principle that every man or in this case every state will act according to their own self-interest. As people act in self-interest, only doing what is best for them, the invisible hand will always theoretically move the market towards equilibrium price and quantity. While socialism or acting on behalf of the common good is plausible in theory, in practice it is a failure due to little incentive to produce and little incentive to progress technology. (Colander 82) Perhaps international relations follows the same values in that what is best for you will actually be the best for the group as a whole. Perhaps the realists have learned something from economics and are using that knowledge as a basis for their ideals. Although there are a few differing forms of realism, they all seem to relate to economic theory in their own unique way. In the Classical Realism approach, states place their self-interests ahead of the ideologies, placing benefit ahead of morals or even social norms (Goldstein 43). In the market, consumers are always acting on the law that if the marginal benefit outweighs marginal cost, it is a good economic decision. In both instances, the state and individual fail to take into account the effects on a third party. In the market, the government imposes taxes or bans to discourage these behaviors but in international politics, there is no supreme authority to hinder the undesired behaviors. In structural realism, forces above and below the state is the cause of a state’s actions (Goldstein 56). In the market, the consumer is often influenced by factors such as social norms and the state of the economy, neither of which is in the relative control of the consumer. Lastly, Statecraft is the art of managing state affairs and effectively maneuvering in a world of power politics among sovereign states (Goldstein 73). In this practice, a state may strategically take a short term loss in order to gain future power and influence. Comparing this to the market, often times business will take a loss when starting a branch of their business or entering a new market in order to ensure long-term growth and prosperity.

What this article introduced was that although all states may have similar aspirations to gain as much power as possible, they road in which to get there varies. While some states may join organizations to enhance their world influence, others may prefer to stay out and do business against society’s rules. The latter may see the costs of changing their ways may be too detrimental to the economic and political systems and not worth the future benefits. Power, just like the free market is a zero-sum equation, the more power one state has, the less power another has. Power, like resources, is scarce. There is not an unlimited supply for all to share, there is a fixed amount going to the highest bidder. While idealists may have the ‘right’ values that states should abide by, realists seem to have the edge with an economic comparison. History shows us that while it may not be perfect, capitalism is the best system we have. Socialism, on the other hand, has proven to have an even greater list of pitfalls, most notably a halting of growth. Does economic history show that when countries act for the benefit of the group and forget self-interest there is a loss in some type of progression? Or perhaps all the similarities between realism and capitalism are just coincidences and that correlation really does not prove causation. While economists often use theories and principles to gain a better understanding of the past, realists and idealists are attempting to shape our future. One can never really know which side is truly correct, but we can see whose predictions hold true and whose ideals continuously shape our evolving society.

Adler, Emanuel. “The Politics, Power, and Pathologies of International Organizations.” International Organization 65.3 (2011): 707+710. Print.

Colander, David. Microeconomics. New York: McGraw-Hill, 2010. Print.

Goldstein, Joshua S. International Relations. New York: Longman, 2010. Print.

“The Tents of the Righteous.” The Economkst 17 Sept. 2011: 62-64. Print.