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INTERNATIONAL POLITICAL ECONOMY PHENOMENA AND ITS NEW ORDER

(From Free Trade to Anti-globalization through Freedom Perspective)

Nofia Fitri (The Founder of National Universitys Students Studies Group/KSM UNAS) Graduate Student of Eastern Mediterranean University, Faculty of Business and Economic Department of International Relations, Famagusta, Mersin 10, TURKEY Email: nofiafitri@student.emu.edu.tr

I. From Smith to Stiglitz: Between Pacesetter and Pacemaker Scholars had been stated that the International Political Economy (IPE) phenomena were emerged when the global politics constellation changing after the World War II, they called this the new era of modern economic. After the Great Depression of 1930, The Bretton Woods System established (1944). During those times many countries used the concepts of Welfare State by Keynes as his published influential work, The General Theory of Employment: Interest and Money. Thereafter the dynamic of IPE was started, while it continue, the IPE studies was closer to it shape. Had been marked as the international financial structure found it agreement, fixed exchange rate simultaneously with the established of IMF and World Bank as the world financial institutions. The deficit of balance of payment among US and Europe brought The Bretton Woods System into its end. Papp stated that the collapse of the Gold Standard and the breakup of the Bretton Woods system (1970s) showed that the established of IPE was began with a world new system, then known widely as interdependent.1 Within this conditions, as being explained by Papp, United States (US) found out there are emerging many countries with a new-economic power (with abundant of oil especially), and the performed of economic growth on amount of countries. During those times (1930-1080) also one of the important within the beginning of IPE studies, Marxian scholars who sought the economic development problems of developing countries presented the Import Substitution (IS) for the solution, known as Structuralists. This policy had been implied by some countries in Latin America and East Asia. Simultaneously with the failures of IS, at the beginning of 1970s following the breakup of The Bretton Woods System and as the effect of oil embargo by some of the Middle East countries as their respond to against the US within the Yum Kippur War, the principles of neoLiberalism and Free Trade were appeared. Started with the very controversial book of Robert Nozick Anarchy, State and Utopia in US as the basic steps of Reaganomics together with the Keith Joseph in United Kingdom, who became the architect of Thatcherism, the idea of new liberalism was being adopted inspired by the basic philosophy of Locke, Smith, and Mill about freedom rhetoric. Developed by Chicago School, Friedman through the Capitalism and Freedom sought to establish an argument about the interconnectedness of economic and political freedom, thus the new era of neo-liberalism begun. The principle of Neo-liberalism and Free trade implied by many countries included developing countries, which brought the emerging of Newly Industrializing Countries/NICs and became more potential for the advanced countries market (Big Emerging Markets/BEMs). But otherwise, the developing countries also have an opportunity to expand their economic, reach the global market. Finally the WTO established to erode protectionism policy while in the other hand, international trade arrangements being kind of options for some countries for express themselves within the free trade.

1 For some scholars, this system is not fully accepted, while they have been thought about that the evidence showed it is not interdependent, but dependent, knows as dependency theory, which has been build by many scholars from Latin America, based of the theory of Marxian.

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During those times, there is extremely right that within all of the process many scholars have been contributed, started with built the concepts up to bidding the ways for made them real. When scholars quoted some arguments from their former, we have called them, the the pacemaker (or we could call them) and the subject who had been quoted by them, we have called the pacesetter (or we could call them). The classification between them not exactly permanent, because they could be moves one to another. Adam Smith published his pathbreaking book the Wealth of Nations in 1776. In this time also, as a scholarly discipline, economic was begin, which had been marked as the beginning era of classical theory (Samuelson, 1999). While it was continuing with the emerged of amount of names: Ricardo, J.B. Say, Malthus, up to Mill, Marshall, and Marx with his socialism theory, economic field getting closer with politics and the new era of neo-classical was started. At the time when Fisher, Keynes, Prebisch, Hayek, up to Friedman and Samuelson launched their theories as their responds to the condition of world economic, the era of neoclassical economy being marked with more the modern mainstream of the relation between economic and politics thoughts. Names like List, Hamilton, Cohen, Frieden, Lake, Stiglitz, Spero, Bhagwati up to Krugman have been known recently as the activators of political economics debates. It would be need many pages to explore all of the concepts by all those scholars. As the connection between them, my emphasizes in this paper is to give an abstract that within the IPE, the emerging of scholars with their each political thoughts keep going on innovation, one critique for one theories, one argument for many theories, many arguments and many critiques for one theory, and else. Some of them had drafted the ideas, concepts and in the other hand, some of them created the ways to reach the purposes and again with a dynamic cycle of economic-political thoughts. Thus we can see, the IPE phenomenon has been build by the pacemaker and pacesetter. In one hand, there someone who build a very sophisticated thoughts, and in the other hand, someone expands them. As well, many students and academicians can learn the IPE literatures from the easy stages up to the most difficult stages. History is the absolute guru who has been teach us how to know about everything and how to get some lessons form those all, just to be more erudite, -and aware-. As the genuine, we had born by history, so did with the IPE scholars. They built their concepts; what is the good system for world today, what should be the right ways to reach its purposes, finally they past the process. The IPE Phenomena also changed (for the modern economic), start with the liberalism, continue with the very tight protectionism, there is such a kind of light evolution when neo-liberalism appear, but then when the heavy crisis again rushing the economic global, governments talked about their role players. In this time I just want to say, that IPE keep on stable with its phenomenon trough the dynamic changing within the world constellation. One day when the crisis again hit it, we would say, we should learn from history and again there would be emerge the new-protectionism system, the new neo-liberalism system, the new the Bretton Woods System, and another new things. Thats why IPE being moving by pacemaker and pacesetter, one day the pacemaker would be a pacesetter when he/she builds the new things and bidding him/her ways. Therefore, there would be come new-Smith, new-Ricardo, new-Keynes, new-Friedman, new-Hayek, newPrebisch, new-Stiglitz, and new-other scholars who would be pass the process of metamorphosis between pacemaker and pacesetter. II. Traditional School of IPE (Mercantilism, Marxism, and Liberalism) Every explanation about IPE normally starts from the three Traditional School: Mercantilism, Marxism, and Liberalism. Within this paper before some points that Ive been listed as IPE trends, firstly I give just a briefly explanation of IPE traditional School. Mercantilists believed that wealth and power were closely associated with the possession of so-called precious metals, governments organized their international trading structure for the purpose of maintaining a favorable balance of trade to accumulate these metals. There were controls on exchange markets and the international movement of precious metals, along with regulation of individuals and general commercial transactions through tariffs, quotas, and prohibitions of some transactions which government also gave subsidies to export and import substitution industries and sometimes engaged in production or trade.

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Marxism which originated with the writings of Karl Marx saw that capitalism and the market creating extremes of wealth for capitalist and poverty for workers. While the entire populace may have been better off than before, the capitalist were clearly expanding their wealth more rapidly than everyone else. Marxism rejected the assertion that exchange between individuals necessarily maximizes the welfare of the whole society. The ideas of liberalism as the economic principle appears after Smith introduced his Laissez faire (Leave me alone). As a philosopher, Smith had been influenced by Cicero, Hobbes, Bacon and Locke, but at the time that he was in writing his Wealth of Nations, he should be missed that Locke had been separated the power of government became three: executive, legislative, and federative to bounding the government authority. Need to be underlying that Smiths ideas had been affected by his experiences, while he was live in the mercantilism era, which states had a very strong authority. As a responded toward mercantilists, the liberal argument emphasizes how both the market and politics are environments in which all parties can benefit by entering into voluntary exchanges with others. If there are no impediments to trade among individuals, Liberals reason, everyone can be made as well as possible, given the existing stocks of goods and services. All participants in the market, in other words, will be at their highest possible level of utility. So therefore the reason that the economics role of governments should be quite limited, because many forms of government intervention in the economy, according to liberalist argument, intentionally or unintentionally in the superiority of the market and thereby prevent potentially rewarding trades from occurring. Thus argument by the liberalist that giving priority to the welfare of individual, which according to them, the social welfare will be highest when people are free to make their own decisions about how to use the resources they posses. III. Issues of IPE Trends 1. Neo-liberalism and Libertarian Anarchist By the contribution of Chicago School, the neo-liberalism appeared. As the neo-liberalism emerging, Thatcher and Reagan success brought them countries went outside from the crisis.2 These two leaders were success brought their countries to become a successful industrialized country, which then have, again a problem of economic crisis in 2007, and Gordon launched a very strange statement, British man for British job. In this time, Reagan also, most probably, from the deep of dark ground, his brow is wrinkled, when he hears Obamas yell-yell, American Buy. The central figure of neo-liberalism was Milton Friedman. He was the one standing man as a forefront of Chicago school. One of the very famous statements of Friedman can be show through this cited: There is, as it were, an invisible hand in politics that operates in precisely the opposite direction of Adam Smiths invisible hand. Individuals who intend only to promote the general interest are led by the invisible political hand to promote a special interest that they had no intention to promote (Friedman and Friedman 1980, 281). Need to be mention in here, beside Friedman, one of the liberal classical theorists, Hayek had influenced for the developed concepts of neo-liberalism. He was the pioneer of capitalism principles which he started his economic thought as a critique to Keynes. His greatest influence was on the conservative movement in the UK and US which many of his view work became the dominant influence over the Reagan revolution in the United States and the Thatcher administration in Great Britain. There is also many achademician called that between Friedman and Hayek is head to head. As Hayek and Friedman concerned with the individual freedom principle, by the end of the twentieth century, many libertarians, guided by the work of Murray Rothbard in For a New Liberty (1973) which he (directly defense of orderly anarchy) viewed orderly anarchy as a desirable and potentially achievable state of affairs andsome would arguethe only state of
2 However, Thatcher was never being poor, Danish extremely rich. Just the remainder, as her principle, you may have to fight a battle more than once in order to win it, otherwise this inverse with the very famous economic principle, gain without losses. Maybe when Thatcher started her neo-liberalism and getting some advices from Keith Joseph, she was found out that Keynes was died. Perhaps, therefore she hated to stir her administration, and devolved some of the governments responsibilities into the market.

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affairs consistent with a libertarian philosophy. One strand of the libertarian anarchist argument is the claim that everything the government does, the market can do better, and therefore the government should be eliminated completely. A second strand is the proposition that government is unethical because of its use of force. Finally he illustrated how the private sector can undertake more effectively all government activities, including national defense (Holcombe, 2004). Finally I found out that in one generalization Liberty thoughts of Friedman and Hayek were moved into the idea of anarchy by libertarians fundamentalist. That the Government is unnecessary but inevitable came from most of the libertarian anarchists, so there would be any tendency of anarchy condition (as a political ideology). I remember the philosophy of anarchism ideology which had been written by Rudolf Rocker, Anarchism Syndicalism (Rocker, 1996) about the anarchy community without government. This book extremely shapes my vision about the freedom of human as himself. In the other hand, among some music community, they like to talk about Punk energy as a self-rebellion against the authority of government (as one of the expression of Anarchy ideas). But this is not the place to explore the concepts of anarchy as an ideology. Therefore, the only my attention is, however, as much as we pursue the liberty, the consequences of absolute liberty was society without conscious to aware each others. As the era of Fascisms showed that authoritarian of Nazi emerging, was because the freedom of society had brought the society to be chaotic. We can get one lesson that the Liberty-or freedom- should be given for the society as what it deserve for them. 2. Free Trade Debates and New-Protectionism One of the debates between Trade Liberalization (Free Trade) and protectionism (Autarky) is moving among the government role. But with the historical perspectives, can we find out how significance is the governments role in advanced countries and backward countries with their intervention to trade. This answer would explain why the debate of free trade and protectionism has emerging the concepts of new-protectionism. As protectionism policy is closely aligned with anti-globalization and contrast with the Free Trade, where governments barriers to trade are keep to a minimum, in short, this policy is protect business and workers within a country by restricting or regulating trade with foreign nations. Protectionism policies are including tariff, import quotas, administrative barriers, antidumping legislation, direct subsidies, export subsidies, and exchange rate manipulation. But because of the movement of this worlds economic can not be predictable, in the other side, protectionism can be implemented as an explicit-policy. And also sometimes this policy is can be the right choice for states for save their economics problems. For this review, I just want to emphasize that in one condition, states or the policy maker inside may dont have any choices, they must adopt protectionist as their economic policy. Learning from the history, when United State of America took this policy by raised tariff to allow nascent Northern manufactures to compete with their more efficient British competitors. This policy was to help protect infant industries at those times, and no matter what the economic interest by one group, state just tried also to help protect newly founded infant industries. So we can conclude that even protectionism opposite with liberalism and Free Trade, in the other hand closely aligned with anti-globalization, ISI, or as historically was associated with the mercantilism, because the important roles of Government, theres would always possible in one case, one country which is it has been try to liberalize its market, would be adopt this policy to protect its domestic market, or to solve their economic problems. But need to be underlying this opinion doesnt mean that protectionism is a solution for the economics problems. However, protectionism can not develop the economic of one country, because there is always available the scarce factors in it, so the interaction of countries within trade is something necessary. Need to be underlying, according to one of the famous modern economist, Jagdish Bhagwati, he said that developed countries effort in imposing their own-labor or environmental standards as protectionism. Also the impositions of restrictive certification procedures on imports like intellectual property, copy-right, patent restriction. So if the critiques about protectionism have been gone out to developing countries, it wasnt true, and must be corrected. Nowadays, every country can adopt and implement protectionism policy as their own-styles according to their economic interests, this is what would we call new-protectionism.

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3. States Role and Keynesian At the time when this world collapse by the economic Great Depression of 1930, the British economist who became one of the very influential economists in the world nowadays, John Maynard Keynes presented his General Theory. Within the General Theory Keynes suggested: neoclassical economists were wrong to think that an economy would always return to full employment automatically. He argued that an economy could get stuck at an equilibrium characterized by underutilized production capacity and high employment, and governments need to accept persistent high employment, instead government could use macroeconomic policy, and those are monetary policy and fiscal, to restore the economy to full employment. Keynes argument can be explain by this view: by spending when others would not or by increasing the money supply to induce other spend, the government could increase demand in the economy. Thus talked about the states role, Keynes General Economy Theory therefore represented substantial challenge to the prevailing wisdom about the role governments could and should play in managing the domestic economy. As Keynes saw that the market economy as potentially unstable and economic system needed a stabilizer, and in his vision, government could perform this stabilizing function by using macroeconomic policy to manage aggregate demand, he sees that in all instances, monetary and exchange rate politics are driven by competition between groups pressuring by the government to use these policies in ways that advancer their economic interest. Then we could see that Keynes point of view, states by the government role useful within the market failure. As the effect of the global economic crisis of 2007, Keynesian perspectives, again, has been using to rescue the world economy, as what Obama and Brown started. 4. Structuralists-Marxian and Dependency Theory As the critiques of Liberalism, structuralists had made some lists to against free trade and as the result some countries had success with their protectionism policies and ISI, otherwise some countries had failed. Structuralists critiques were logic, if we use the perspective of history. As Prebisch stated that the domestic market couldnt be expected to bring about the necessary shift of resources. Thats why structuralists were skeptical about the market because they believed that developing world economies were flexible. Structuralists argument was international trade provided few benefits to developing countries. Because developing countries were skeptical that trade could contribute to economic development, one of their principal objectives was to reform the trade system in ways that would transfer income from core countries to the periphery as compensation for the losses resulting from their deteriorating terms of trade. Dependency theory had been use by Marxian scholars to explain the relation between developing countries and developed countries. As I have mentioned before, this theory is to against the interdependency which has been use by some of libertarian scholars. While many research had found out that some backward countries have been depend of advanced countries, but also in the other hand, we can not close our eyes from the evidence that backward countries have get so much progress by their trade relation with advanced countries. As long as I can see, the tendency of between dependency and interdependency is at the condition which one country could get beneficial from the other country, but in the other condition that country would never being independent and this condition became obstacles for developing countries to reach their economic development. This condition clearly showed within the explanation of the flows of economic surplus from the third world. Finally as far, they had seen that the trade between developing countries and developed countries as a new shape of imperialism and politicaleconomic hegemony by developed countries. IV. IPE New Order Points Through the New Politic Order of Noam Chomsky, most of students in the political science and international relation have got some new-perspectives by someone who has a high-desire of the better world politic for the future. Ive been started also this paper with my perspective based of the evidence and some of the opinions by scholars, for only one purpose: which make this world fairly. Better as a word has a general meaning which next would be any progress than now, but the question, better for whom? Within the IPE literatures, perhaps, better is only for developed countries, or better only for one continental, or better only for some institutions. But,

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fairly has a meaning that at the future would be equal, no matter for developed countries or for developing countries. The equal doesnt mean that same equation within the economic statistic each other, but equal on the ways of institutional treatment, be equal on rights within the market, and be equal in opportunity within the process of economic development. As I can separate the list of the current IPE issues, there are started from the issue which Oil as the IPE new order, according to many scholar arguments and would be in close by the controversial of globalization. Oil Countries: Sense of War Why did the Iraq War become very famous at the beginning of 21 century, and how could Bush have got many critiques from his opposites, even from his endorsers. Was it right that US purpose within the Iraq Aggression is for Oil? Economic Global Crisis of 2007 Started from the Lehman-Brothers, GP Morgan, into Goldman Sach and some others giant financial companies in United States of America (USA), like mushroom, economic complicated diseases had addicted to every country at the beginning 0f 2007. This crisis again remained every actor within the world economic to take a sit together and find the solutions to rescue this world. The G-20, the BRIC, and the European Union G-20 had met in London with some agendas which one of the main purposes was to found out the solutions for economic global crisis of 2007. This economic group being potentially as the IPE new order. In the other had, as Goldman Sach published its prediction of Brazil, Russia, India, and China (BRIC)s economic growth, the phenomenon of BRIC emerged, while Krugman then talked about why we should learn from Europe with the idea of democracy economy. Balance of Power: United States and China Uncle Sam is in a nightmare, that the dragon enlacing him thigh. This idiom as deeply has a reason. Why should United States government very busy with the Chinas currency nowadays? East Asia: Liberalism or NOT? Some of scholars had been stated that the success of East Asia within the economic reform and went out from crisis was not merely because of Liberalization. Even in some of country in Europe and China exactly, the liberalization was not the only their way to reach the prosperity. International Institutions of Financial Reform One of the effects by the booming of Stiglitzs book is I have an anxiety, how the reform of the international financial institutions can be held. FDI and MNC growth: Inflow and Outflow Within the explanation of countries market expansion, Foreign Direct Investment and MNC exactly marked as the important variables. United Nations Millennium Development Gold The very sophisticated dream of the United Nations (of this world by 189 governments had signed), the Millennium Development Gold contenting by eight purposes, emerging with its slogan Keep the Promise in 2015. Environmental Issues My instructor asked us in our class, do you believe there is any Global Warming? I dont have any answer in that time, but I believe as soon as possible, humans will kill themselves. But according to Butler, concerns of environmental issues like global warming, in recent years have multiplied within increasing role in trade negotiations, for example ramification. Globalization Evidence Globalization and Its discontent, this sentence has been using by many of authors as them book title. This sentence also has been using by many scholar as them discussion theme, and this sentence also has been using by many social activist for express their refusal. Globalization has

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been emerging as the never ending debates within many elements. At least there are three things which appear as the reasons for many world activists to posting themselves as the antiglobalization supporter. Exploitation as the first reason, became the causes of the second reason, structural poverty, and third is interdependency as the climax. These reasons are my conclusion from many debates of anti-globalization. V. Closing Statements So glad to found out that most of the scholars who have been concern with the IPE issues are philosophers, they built their concepts structurally, some of them were deductive and had been affected by moral philosophy. But as the result, does it working as well now, do people still think about that within the political-economic we need morality? This is what would be my question as my closing statements. Cogito, ergo sum no matter how controversial this philosophy, for me Descartes just want to make me aware that without thinking, there is no I am. Every part in our live urge we to be always criticize of anything. Thats why Ive been pointed some of my views about the IPE today: 1. Since the first time, when the concepts of new modern economic was born, there was no rule outsides of the developed countries within the process of system building and deregulation, which had build the principle of Free Trade. So my question, who have an interest with those all the regulations and economic institutions? Whos the subjects, and whos became the objects. 2. I think Stiglitz also realized that the reform of international economic institutions looks like the way to disperse a gang of wild animals, whos going to start it? If he thinks about that the concepts that he had written very nice within his book would be effective, Im afraid, very-very afraid, it would be only a paper tiger like Democracy Ideas of Plato in many countries which had been in overpower experienced with their pleonastic governments in the name of democracy. 3. If some of the scholars built their political-economic concepts affected by their experience in their country, like some opinion emerged that: Keynesian only suitable in British, because Keynes used his country within his explanations, or Friedman must be should live in East Asia, then he would see that was not only liberalism as the way to reach the high stage within the economic development. So wee need more scholars who make a research by comparative analysis of cases in several country. 4. In one hand economic views only talked about sense of winner, became loss or gain (looser or gainer), and consumerism facts has showed that human have been under the control of their own-self-desire (ego, and sometime absolutely selfish). Moreover, political views started with the opinion by Plato, that human have an animal sense (which sometime more dominant). As my suggest, many of IPE actors today have get back to the era that there is ego and animal sense were dominant. This is the reason why there are no more concepts about political-economy with morality, because sometime freedom brings people to be selfish, remembering that since the first time, Smith economic principle was based on the moral philosophy. In the other hand, there is also some scholars who had been learned the philosophy of moral but they just see human between rate and grade, automatically this perspective sees that prosperity is about the individual freedom and living standard. In my opinion prosperity is not only about those all, but also about humanity and principle of fairness. 5. Among the student activist we like to say Just leave your instructors, if their have been failed, beforehand, to teach your nations leaders, and became a new instructor to remain this world that your nation is depends of its leaders. Then just leave your classes, if there are only any dumb chairs and tables, while the activists spheres more sound out about the humanity and prosperity, and build new classes for educate this world to be more respect of its societys problems. So the academicians have a very important role to shape the perspectives of their students. This is a heavy responsibility for education institutions today. University, especially its instructors should be more active within the role to build the society with science

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and humanity, so every contribution for this global development would be feeling fairly. Since the very start, I am in believe that the free trade brings beneficial only for countries in particular. In one condition, most of countries which do not have any strong power and experiences how to manage their domestic market and local economy would be only exploited by strong power countries. However, I have found some evidence which had been explained that free trade as long as it working well, would bring more beneficial for developing countries, for example FDI which has many advantages for host country: transfer technology, infrastructure building, local development, etc. But, as what the critique towards the free trade many disadvantages also as much as possible for host countries: exploitation of sources, environmental damage, structural poverty, up to dependency of backward countries. With a very clearly explanations, my instructor had done an extra-ordinary teaching process during my IPE classes, that the reason why I could give more than one hundred opinions to response the IPE phenomenon. But process is only about how to take and how to give. So as my closing statements, considering that Ive been took so many ideas from my IPE concern, I wish I could give so many ideas for my IPE concern. Finally, as my temporary conclusion, I found out that the most important thing within the free trade is how much significance the role of government is. I would not reject the opinion by many libertarians that so much government intervention will only give so much limitation for the process of free trade. As soon as possible, government can leaves the market working by itself, and then government will have only a role as a watchdog. But before the government does that, there is something that government should be done first, and this is what Ive been called the quality of government intervention. So what should the government done first? For the answer firstly we have to see the basic philosophy which had been building and expands the liberalism, that is the idea about the natural liberty as what Smith had underlined after learned the logic and moral philosophy. However he should be missed that within the individual as a human, the rationality always contiguous with the irrationality. This abstract can express what Ive been thinking about the natural liberty, and perhaps would answer the question above: There is only one short span of distance between freedom and authoritarian, but there is also so close between freedoms and chaotic, while individuals never stop to pursue their liberty. Thus the answer what the government should done first is: I could not give the answer in this closing statement, because I will discuss my suggestion first with some of the choices people. As my first step, I start to make a communication with some scholars. Also I have been thinking that our former scholars most probably need more communications. Remembering that some of them busy with their beyond business, I am in trying to help them with the effective communications. Then I put my On liberty next to my Mein Kampf and Anarchy, State and Utopia inside of my cabinet in my room. The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations close to Das Capital and Manifesto of Communist and the General of Employment: Interest and Money between the Road to Serfdom and Capitalism and Freedom. Perhaps the authors would like to talk about the idea of liberty and prosperity within the political-economy when I am in sleeping. I wish I could help them, because they were lived in a very different century, then they would help me so. But especially for one book, I didnt forget to put the Globalization and Its Discontent under of my pillow, so I could understand deeply what steps that should I do first to make the globalization working. ---- Thank You---Note: For more communication with the author just contact directly through nofia.emu@gmail.com or visit my blog to get more International Relations (IR) literatures at nofia.emu@blogspot.com (Nofias Big Project Blog).

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