Different perspectives have tried to theorize about how well to obtain economic prosperity. This paper will examine two such perspectives where one will see economic advancement as a function of effort as presented by the cosmopolitical view and the other will see it as product of state policies as argued by the mercantilist view. According to the former view, there is emphasis on the individual as the key unit of analysis, on rational decision-making as well as on the non-interference of governments because of the work of the ‘invisible hand’. The mercantilists on the other hand like List and Hamilton argue the state to be the key unit of analysis and its role in the world system is presented as necessary to be involved. Nevertheless both of these views argue that their respective approach leads to economic growth in a given society. Thus, this paper will essentially present comparatively and contrastingly the two views. It will show how the cosmopolitical view sees economic advancement as a function of effort of the individual who is the unit of analysis through the dependency theory, the idea of specialization, hard work and rational decision with no government involvement. It will demonstrate how the mercantilist view sees this advancement through the state policies that centralizes the state as the key player in the system and therefore deems government involvement as necessary.
Adam Smith argues that individual self-interest unconsciously promotes common good in which a market accommodates on a product distribution and set prices that are beneficial to all members of a community. Moreover, if each individual consumer is permitted to choose liberally what to buy and each producer is allowed to choose freely what product, he/she will sell; the market holds a price that is favorable to all individuals who belong to a given community. This allows for a self-interested competition in the free market. In Rone Tempest’s Barbie and the world Economy, China serves cheap labor which allows the market to keep prices low while building incentive to production of Barbie dolls, therefore it is evident that the self-regulating nature of the marketplace is able to function through a set distribution and prices. Furthermore, the dependency theory is applied to the cosmopolitical unit of analysis through a periphery state flowing resources to a core wealthy nation, which in turn advances at the expense of the poorer state (Tempest, 3-5). For example, the USA depends on an inferior country, being China for production, which will enable the USA to prosper economically.
Adam Smiths theory is opposed to protectionism and limits government involvement and regulations of markets in order to enforce contrasts, grant patents, and copyrights, regulating banking and providing public goods and national defines which leads to the invisible hand of the government. In examining Adam Smith’s liberal idea, Joseph Stieglitz criticizes Smith’s