Classical Liberal Theory & Security

1. Classical Liberal Theory & Security • The founder of this school: Adam Smith, The Wealth of Nations (1776) • Major actor in international relations and global politics: the individual or “Economic Man,” not the state • The state is to be subordinated to the will of individuals in pursuit of their material welfare • The best state is the state that governs least • The state is the protector of property and the right of individuals to dispose of their property and skills as they determine • Protecting freedom is the principal aim of the state

2. What Do All Humans (if Free) Pursue? • Humans seek material welfare: Left free, humans “truck, barter, and exchange one thing for another.” (p. 13)

3. How Most Efficiently and Effectively to Pursue Wealth? • Smith stipulated that individual self-interest is the most powerful incentive for generating wealth and of maximal material advantage for individuals and the nation: • individual and national wealth will increase if individuals are free to sell their labor and dispose their property to suit their self-interests • “. . . [M]an has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if can interest their self-love in his favor, and show them that is it for their own advantage to do for him what he requires of them” • The autonomous, self-interested individual, if institutionalized as the principal unit of organization of a nation’s economic system, will maximize both personal and national wealth

4. The Self-Interest of Individuals Produces Public Goods • “Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every offer; and it is in this manner that we obtain from one another the far greater part of those good offices, which we stand in need of. It is not the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

5. But How Does Self-Interest Work to Produce Wealth Globally? • Two more institutions are needed to make self-interest work: • A division of labor in producing goods and services and in distributing wealth • A global market, viewed as a political system, that coordinates and integrates the preferences of all individual and actors within the system

6. Adam Smith’s Illustration of the Efficiency of a Division of Labor: The Pin Factory • Smith and the pin factory narrative: • 10 workers produce 48,000 pins or 4,800 pins per worker vs. 20 if each worker were required to complete all of the steps in the process of producing a single pin • The social reorganization of production: Specialization --- breaking down production into its component parts -- and the division of labor produces more goods and services (wealth) than traditional, home production systems

7. Why Does the Division of Labor on a Global Scale Produce Wealth? • Specialization increases skill & productivity • Decreased transaction costs through repetition (pin factory workers producing one element of the production of pins) • Encourage machines and capital goods to increase labor productivity and to exploit market • Encourage innovation to improve competitive advantage and exploit market efficiencies (Creative destruction of capitalism) • Encourage entrepreneurship for profit

8. How Is Self-Interest and the Division of Labor Combined to Produce the Wealth of Nations? • Global Markets coordinate the labor, capital, land, and knowledge needed to produce goods, services, and the distribution of wealth • This coordination is accomplished by voluntary, not coercive, exchanges • This coordination is accomplished globally through markets by prices which are (theoretically) universal, that is, the same everywhere for labor, capital, land, knowledge as factors of production and for the production of similar products and services

9. What Is the Theory of Security of Classical Liberalism in Contract to Realism? • Humans, while viewed as self-interested, are rational • They seek to maximize their wealth • This aim is fostered by voluntary, not coercive, exchanges which ensure that the preferences of the actors are given full realization in terms of market competitive rules • Liberal stipulated that the preferences of self-interested individuals will produce public goods • Consensus on the competitive rules of the markets works for the material advantage of all actors

10. Expectations of Liberals of Human Behavior • Liberals believe free humans will cooperate, not conflict • This condition prevails if the coercive state is reduced to defending private property and contracts and protecting open, free, global markets

11. Peace and Liberal Theory • Peace will gradually replace war • Because the state will be focused on fostering wealth, not war. • Because war wastes and destroys wealth and rational economic actors are • Because imperial systems, which stimulate war and inefficient economic practices, are eliminated • Because freedom in the market place through prices fosters freedom in the political market place through votes -- markets and democracy are mutually supportive

12. World War I and the Economic Interdependence of the European States • Norman Angell, predicts perpetual peace, • but war breaks out as a result of national conflicts and • The struggle of the European states to preserve their empires • The arms races between the Europe states and the war planning of these states triggers a world war

13. World War II • The failed peace and unequal treaty of the Versailles Treaty to control Germany fuels national conflict • Nazi Germany claims a special position on the basis of race to rule Europe and its empires abroad • Japan hinges its security and prosperity on imperial expansion • Free open markets are abandoned as a solution to global and national wealth and welfare or security

14. Cold War • Realism would appear to explain the global struggle between the United States and its allies vs. those of the Soviet Union better than liberal theory • Note the global alliances formed • Note the nuclear arms race • Note the unprecedented militarization of Europe • Liberal theory has little or nothing to say about the beginning or evolution of the Cold War

15. What Can Liberal Theory Explain • First, it can explain why both the Soviet Union and Communist China abandoned the model of a centralized, state-run economy • The Western capitalist states model produced superior economic growth and technological development • The Western market system was also a system of power • States or regimes which could not adapt to this system of power were threatened to be “selected out” of the system of states if they remained isolated from the benefits of market competition

16. But Why Did the Soviet State Implode? • Liberal thought is unable to explain this result • It has no theory of the state • Ethnic, national, religious, cultural differences are expected to gradually disappear in importance as a consequence of market exchanges • These elements of identity politics, like the state, fall outside the boundaries of liberal thought that is based on the rational, materially driven, individual which subordinates his loyalty to the state or to his communal identification to the stipulated efficiencies of market exchange.

17. Liberal Theory Is Also Incapable of Explaining Conflicts after the Cold War • Genocide and ethnic cleansing in • Africa (Sudan, Congo Republic, Rwanda, Burundi, Uganda) • Europe: Balkans and Chechnya • Middle East: Israeli-Palestinian conflict; Hamas and Hezbollah opposed to Israel’s existence; religious/ethnic conflict between Shi’ites and Sunnis, and Kurds • India’s conflicts between Muslims and Hindu nationalists • The national tensions in Northeast Asia

18. The Countervailing Power of Global Markets on State Conflicts • The Western market states resist a direct confrontation with China as a rising power • Criticism of human rights abuses and undemocratic practices are muted • China encourages foreign investment and provides a favorably environment for business • Chinese financial policy underwrites the mounting foreign debt of the United States

19. Implications of Economic Constraints on State Conflict • These examples of economic cooperation restrain state and national competition • Liberal theory can partially explain why these states chose non-coercive policy means to advance their interests and national security • But, given the experience with the outbreak of World War I, how long can these restrains on conflict and war continue?