What is Political Economy (2008 Week2)

8/4/2019 What is Political Economy (2008 Week2)

1/16


2/16

2

Thee ways of defining

political economy

In terms of the practical, real-world

problems on which it focuses;

In terms of how these problems areanalysed; and

In terms of the currents of economic

thought from which it draws

Stilwell, F. (2000), Political Economy: the contest of economic ideas, p.3.


3/16

3

Relevance to real economic problems In our everyday life earning a living,

managing an income, and makingdecisions about consumption and

saving. Beset us collectively how to balance

economic growth against environmental

concerns, how much to redistributeincome through taxes and governmentexpenditure, and how to deal withimbalances in international trade.


4/16

4

The Political Economy Questionstake globalisation for example

First: What is happening? requires a careful definition of the

process globalisation of finance, of trade,

of culture, of environmental concerns, and of human rights, etc.


5/16

5

Second: Why? Draw attention to the causal factors. Explore the relative significance of

technological change, consumerism,and government policies in driving thechanges.

A process of enquiry that takes nothingas given.


6/16

6

Third: Who gains, who loses?

Specific aspects, such as the changing internationaldistribution of jobs. Large multinational companies have often relocated

parts of their routine manufacturing activities to ThirdWorld nations (profit maximisation).

Original employees face wage reduction orunemployment? Alternative employment available?

To Third World nations, more jobs but associated withparticular health or environmental risks; companies paymore taxes to help the local community?

This illustrates the interdependence of economic, socialand political considerations, which is one of thehallmarks of POLITICAL ECONOMY.


7/167

Fourth: Does it matter? Requires specification of the criteria by

which evaluation occurs.

Include efficiency (in achieving what?);equity (according to what standards of fairness?); sustainability (economic,social, or ecological?); and consistencywith other social and political goals(which themselves need to be clearlyspecified)


8/168

Finally: what can be done? The role of government and the

state come under scrutiny. Whether the state s capacity for

national economic management isundermined by the greater mobilityof capital.


9/169

Contributory Conceptual Currents Focus on the real-world questions does

not deny the value of economic theories. Four different schools of economic

thought developed during the last 250years, four have obvious relevance in theconstruction of modern political economy.

One is classical political economy,including Smith, Ricardo and Malthus.

The economic system produces goodsand services surplus to what is required

for social reproduction remains valuable.


10/1610

Cont.

How surplus maybe expanded

e.g.,whether through trade and anincreasingly complex division of labour is central to the analysis of economicgrowth.

How the fruits of economic activity aredistributed e.g., among capitalists,workers, and landowners.


11/1611

Cont.

Having its roots in classical politicaleconomy, Marxist economics provides aquite different, more critical, interpretationof capitalism.

It emphasises: property relations, theassociated class structure and economicinequalities, and the relentless drive forcapital accumulation.

It posits the exploitation of labour as thesource of the economic surplus, whichsprings class conflict and the potential forradical political economic change.


12/1612

Institutional economics (Germanhistorical school of 19 century) focus onthe growth of big business, transnationalcorporations, the influence of tradeunions, and the character of governmental economic activities indifferent nations.

A particular focus is the potential for

more extensive interventions by the stateto alleviate the inequality and instabilityof free-market capitalism.


13/1613

Keynesian economic analysis stresses onthe persistence of involuntaryunemployment, and identified thenecessary remedial politics.

The macro economy did not functionsimply as the aggregation of micro economic markets and without enlightened

government intervention, the capitalisteconomy would not ensure full employment.


14/1614

Cont.

Major elements of neoclassical economic theory are the analysis of

externalities (environmental

degradation) and the measurement of demand and supply elasticities.


15/1615

A common theme for modern political economy is the rejection of the pseudo-scientific positive economics in favour of amore down-to-earth approach thataddresses real problems and makes valuesexplicit.

Environmental concerns/issues are centralto modern political economy.

Some argue to create an ecologicaleconomics.


16/1616

A final thought How the economy works using natural, human,

and manufactured resources to produce goodsand services, and distributing the fruits of thoseendeavours according to the relative economicpower of the participants there is considerablecontinuity in the real world.

Also there is considerable change, of rapidtechnological innovation, globalisation, andstructural economic adjustment.

The need for creative political economic thinking is imperative.

What is Political Economy (2008 Week2)

Documents

Transcript of What is Political Economy (2008 Week2)