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8/4/2019 What is Political Economy (2008 Week2)
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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.
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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.
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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.
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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.
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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.
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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)
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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.
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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.
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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.
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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.
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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.
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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.
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Cont.
Major elements of neoclassical economic theory are the analysis of
externalities (environmental
degradation) and the measurement of demand and supply elasticities.
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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.
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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.