Question

What are the differences between the economic theories and the reality of policy implementation?

Answer 1

Economic theory has often been associated to U.S. foreign policy by integrating in many ways. When the U.S. started its life as a young exporter of raw materials vitally dependent on ties to traders from Britain, simplistic economic theories followed nearly all foreign-related debates and pronouncements. As the nation grew in size, population, and resources, this relation became less apparent and much less important or commonplace indeed. Foreign trade rarely exceeded 5 percent of American gross domestic product, according to most estimates. Moreover, in the late 19th century, after significant growth and increased specialization in export markets

Notwithstanding the adaptable ideas of pioneers such as the British economists Adam Smith and David Ricardo, economic theory had previously been applied only broadly to U.S. foreign policy issues or, as in the early Republic, only in ways of a predominantly pre-scientific nature, too amorphous and theoretical to create a permanent connection or meaningful transgenerational study. Here it had often expressed little more than a curiosity about how one could either figure out the reasons behind international trade advantage or better distinguish both trade constraints and commercial potential in world markets.

From the American economists who consulted for the World War II Strategic Bombing Survey to those who acted as currency stabilization advisors today, economic theory has now permeated nearly every possible study and situation in foreign policy. It is no longer confined to questions of international trade benefit or even international trade. At the same time, his main occupation was most frequently limited to three main areas: trade policy, international monetary policy, and international growth and development policies.