Page 37 - Global Political Economy_Understanding The International Economic Order

CHA PTER O NE
production of wealth and how these markets can be made most effi-
cient. How societies then choose to distribute that wealth amongal-
ternative ends is a moral and political matter lyingoutside the realm
of economic science.
In the study of political economy, however, the purpose of eco-
nomic activity is a fundamental issue: Is the purpose of economic
activity to benefit individual consumers, to promote certain social
welfare goals, or to maximize national power? The question of pur-
pose is at the core of political economy, and the answer is a political
matter that society must determine. The purpose that a particular
society (domestic or international) chooses to pursue in turn deter-
mines the role of the market mechanism in the economy. Whether a
society decides that the market or some other mechanism should be
the principal means to determine the allocation of productive re-
sources and the distribution of the national product is a political mat-
ter of the utmost importance. The social or political purpose of eco-
nomic activities and the economic means to achieve these goals
cannot be separated. In every society, the goals of economic activities
and the role of markets in achievingthose goals are determined by
political processes and ultimately are responsibilities delegated by so-
ciety to the state. Yet, the market has its own logic, and its dictates
must be heeded; as economists are fond of remindingus, every benefit
has a cost and in a world of scarcity, painful choices must be made.
Therefore, the market and economic factors do impose limits on what
states can achieve.

Conclusion

The functioningof the world economy is determined by both markets
and the policies of nation-states. The political purposes, rivalries, and
cooperation of states interact to create the framework of political re-
lations within which economic forces operate. States set the rules that
individual entrepreneurs and multinational firms must follow. Yet,
economic and technological forces shape the policies and interests of
individual states and the political relations amongstates. The market
is indeed a potent force in determination of economic and political
affairs. For this reason, both political and economic analyses are re-
quired to understand the actual functioningand evolution of the
global economy. A comprehensive analysis necessitates intellectual in-
tegration of both states and markets.

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