Bonje, Hans Gabriel A. Prof.

Elmer Soriano
BAPS 1-4 Fundamentals of Political Science
CHAPTER 6: POLITICAL ECONOMY AND GLOBALIZATION

Questions for discussions:

1. Does politics shape economics, or does economics shape politics?

Answer:

Definitely both. Based on the book, Heywood emphasized that the relationship
between politics and economics are inseparable which affects each other to a certain
extent. Politics shape economics through state intervention which ensures that public
order and property rights are protected (e.g., contracts are upheld). Politics—particularly
pertaining to the capacity of the government—also enshrine the regulation of the
economy and even exert efforts through direct control over economic life by means of
planning and nationalization. On the other hand, economics shape politics because
theories and approaches developed within economics are being used to analyze politics
per se (e.g., rational-choice and social choice). Hence, Orthodox Marxists also view that
economics is a contributory and determining factor upon shaping political processes
because they believed that economics (as the “base”) condition politics (as part of the
“superstructure”) which is more likely—related to their inextricable relationship—the
reflection of the class system. Therefore, political factors are crucial in determining
economic outcomes through the employment of policies of the state (taxation,
memorandums, and reforms for the growth and prosperity of national progress and
citizen’s welfare); and, in the same manner, economic factors are also crucial in
determining political outcomes because the condition of the market (supply and
demand, employment and unemployment rate, import and export, and so on) affect the
political decision-making of the government.

2. What type of capitalist system will prove to be the most viable in the twentieth-
first century?
Bonje, Hans Gabriel A. Prof. Elmer Soriano
BAPS 1-4 Fundamentals of Political Science
Answer:

State Capitalism is proved to be the most viable type of capitalist system in the
twentieth-first century and even as an alternative to western-based capitalist models.
The book stressed out that, in the modern context, state capitalism is more often used
to describe capitalist economies in which the state plays a crucial directive role. To
further expound, the state provides regulation in the market through the enactment of
economic-related laws, and guarantees protection against the adverse consequences of
a “self-regulated market system”.

Hence, Friedrich Pollock emphasized in “State Capitalism: Its Possibilities and

Limitations” that state capitalism possessed a totalitarian propensity and a characteristic
of a democratic form. Totalitarian, in the sense that the state can be the power
instrument of the ruling class which has resulted from the merger of the most powerful
vested interests, the top-ranking personnel in industrial and business management, the
higher strata of the state bureaucracy (including the military), and the leading figures of
the victorious party’s bureaucracy—any entity or institution who does not belong to this
group is a mere object of domination. Meanwhile, viewing state capitalism as a
democratic form, Pollock stressed out that the state has the same controlling functions
but is itself controlled by the people. It is based on institutions that prevent the
bureaucracy from transforming its administrative position into an instrument of power
and thus laying the basis for shaping the democratic system into a totalitarian one.
Friedrich also mentioned that the market is removed from its controlling function to
coordinate production and distribution due to the system of direct control by the state
which subverts the market’s freedom of trade and that enterprise, as well as the labor,
are being subject to governmental interference of such degree that they are practically
abolished. On the other hand, Friedrich added that the control of the state uses a
combination of old and new devices, including a “pseudo-market”, for regulating and
expanding production and coordinating it with consumption.

Therefore, state capitalism is proved to be the most viable type of capitalist

system in the twentieth-first century because it centralized the notion of being
cooperative with the workers (which magnetize their interest and labor) and its aim for
Bonje, Hans Gabriel A. Prof. Elmer Soriano
BAPS 1-4 Fundamentals of Political Science
long-term relationships through prioritizing their social welfare (lifetime employment,
pensions, social protection, and so on) to keep them chained up in the exploitative
nature of capitalism.

3. Are free-market economies inherently unstable and prone to inequality?

Answer:

Indeed. Free-market economies are inherently unstable and prone to inequality

because it is difficult to sustain. This notion, also known as Laissez-faire or the principle
of non-intervention of the government in economic affairs, was rejected by John
Maynard Keynes on “The General Theory of Employment, Interest, and Money” (1936)
because he believed that a free-market had merely resulted in instability and
unemployment which was evident in the advent of Great Depression of the 1930s. The
idea of free-market economies can also be resulted to an extreme presence of atomism
—the tendency for society to be made up of a collection of self-interested and largely
self-sufficient individuals—due to the absence of state intervention policies which could
protect the exploited workers or even those who have less power in the market system.
Keynes also emphasized that when unemployment rises, the government should
“reflate” the economy—expanding the level of output of an economy by government
stimulus using an either fiscal or monetary policy (increasing public spending or cutting
taxes). However, since there is an absence of state intervention in this form of
economy, it can even perpetuate inequality, monopoly of power, over-production of
negative externalities, over-consumption of demerit-goods, and ecological
unsustainability. Therefore, a free-market economy could further widen the so-called
“social stratification” or “social cleavage” because the ruling elite (particularly
corporations) will use it as a vehicle to employ their self-serving economic interests—
undermining the people in the margin to suffer more from deep poverty (deprivation of
material necessities and cheap labor workforce) and social exclusion (ranging from
educational, political, and social impediments to meaningful participation in the
economy and society).
Bonje, Hans Gabriel A. Prof. Elmer Soriano
BAPS 1-4 Fundamentals of Political Science
4. Are socialist economic models any longer of relevance?

Answer:

Yes. Socialist economic models are no longer relevant because State socialism
failed to produce modern consumer goods and deliver widespread prosperity, while
Market socialism’s weakness is that self-management of enterprises are having
conflicts with market disciplines (market liquidity, setting prices, and so on) which tend
to serve the interests of their workforces or their entity per se.

Moreover, to further expound, State socialism pertains to the form of socialism in

which the state controls and directs economic life in regards to the interests of the
people. Hence, particularly in USSR, it encapsulates the notion of common ownership
and collectivization (under the party-state apparatus), one-party state and centralized
political control, and directive and central planning by establishing “heavy” industries to
upgrade the production that can cater to the needs of the people (e.g., Five Year Plan).
However, the central planning system of State socialism (mostly the egalitarian system
of distribution) did not contribute that much to promote efficiency and even encourage
enterprise. In addition, it also resulted in the advent of new social divisions based on
political or bureaucratic position who enjoyed a status and privileges equivalent to those
of the capitalist class in western societies.

On the other hand, Market socialism focuses on the idea of an economy with
self-managing enterprises that operate within a context of market competition,
supposedly delivering efficiency without exploitation. Briefly saying, it both prevents the
danger of “central planning” system in State socialism and the danger of bureaucratic
power. However, in correlation to its “self-managing” trait, the downside of this form of
socialism was the failure and collapse of unprofitable businesses and industries due to
the harsh imposition of market disciplines. These market disciplines, as mentioned
above, respond to the interest of their own workforce—neglecting the economic
capability and capacity of the people (as consumers) to achieve efficiency.
Bonje, Hans Gabriel A. Prof. Elmer Soriano
BAPS 1-4 Fundamentals of Political Science
Therefore, the aforementioned socialist economic models are no longer relevant
because of the commonality of their failures rooted in their apparent negligence of the
supposed prosperity and social welfare of the people by the self-serving interest of
those people in power.

5. What would be the features of an ecologically sustainable economy?

Answer:

The features of an ecologically sustainable economy would be centered on the

notion and importance of sustainability, morality, and ecology per se. According to the
book, Green economics pertains to the call for the economy to be restricted around the
principles of ecological balance and sustainability—the capacity of a system to maintain
its health and continue in existence.

Focusing on the desired genuine sustainability, Cameron Allen and Stuart Clouth
(2012) from UN Division for Sustainable Development on “A Guide to the Green
Economy” emphasized that Green economics should enshrine the protection of global
ecosystems and biodiversity; reduce energy, materials, and water consumption through
high-efficiency strategies; de-carbonize the economy; and avoid the generation of all
forms of waste and pollution. Moreover, on the aspect of morality, Allen and Clouth
stressed out that the global economy should rethink nor more likely reconstruct such
systems and strategies upon the extraction of industries from nature which obstructs the
essence of sustainability—morality over materialism. Hence, in the aspect of ecology,
they also mentioned that world leaders should provide socioecological inclusive policies
to industries, corporations, or businesses to prevent the destruction of the environment
which can lead to the crisis of resource scarcity, rampant poverty, and even the fall of
the global market—ecology over economics.

Therefore, the features of an ecologically sustainable economy would be

sustainability, morality, and profound concern for ecology because it establishes a
resilient economy that provides a better quality of life for all within the ecological limits of
Bonje, Hans Gabriel A. Prof. Elmer Soriano
BAPS 1-4 Fundamentals of Political Science
the planet. In addition, the United Nations Environment Programme (2011) defined the
true essence of a green economy as “one that results in improved human well-being
and social equality, while significantly reducing environmental risks and ecological
scarcities. It is low carbon, resource-efficient, and socially inclusive”.

6. Is globalization a myth or a reality?

Answer:

Globalization is a reality. As the book says, it is a slippery and elusive concept

because it is being contextualized in various instances like “a process”, “a policy”, “a
marketing strategy”, “a predicament”, or even an “ideology”. Globalization is a reality
because it affects not just the people but the totality of nations through cultural, social,
economic, and political, which to a certain extent sheds positive and negative impacts.
In a positive manner, Fredrik Erixon (2018) on “The Economic Benefits of Globalization
for Business and Consumers” pointed out that globalization expanded the role for trade,
foreign direct investments and other forms of cross-border exchange in national
economies, and the amount of output that is produced in a country. However, on its
negative side, due to the interconnectedness of countries brought by globalization, it is
often linked with “homogenization” which pertains that the aspect of cultural, social,
economic, and political diversity is being destroyed in which people consume and
conform to the same media programs and commodities. It also encapsulates the idea of
“indigenization” that pertains to the process through which alien goods and practices are
absorbed by being adapted to local and circumstances. Therefore, globalization is
indeed a reality and not a myth because aside from the economic prosperity it gives to
the nations, it also affects negatively the operation of different markets in terms of
consumer behaviors, traditions, expectations, and their attitudes.

7. Does globalized economy mean opportunity for all, or greater insecurity and
deeper inequality?
Bonje, Hans Gabriel A. Prof. Elmer Soriano
BAPS 1-4 Fundamentals of Political Science
Answer:

A globalized economy—although it brings opportunity for all through working

abroad, tourism, international remittances which hugely contribute to a certain economy,
or even economic trading—inevitably brings greater insecurity and deeper inequality to
the economy because of its interlocked economy trait. For instance, during the 2007-09
financial crisis, it did not just affect the economy of the United States of America but
also resulted in such consequences in the global economy (e.g., threatened to destroy
the international financial system; caused the failure (or near-failure) of several major
investment and commercial banks, mortgage lenders, insurance companies, and
savings and loan associations; and precipitated the Great Recession (2007-2009) which
the worst economic downturn since the Great Depression during the 1930s). In other
words, Economic globalization also became the passage of much intensified global
capitalist system because due to the interconnectedness of countries, the competing
and self-serving economic interests of transnational corporations (capitalists per se)
continued to spread its exploitative characteristic, maximization of profit, and even their
rapacious environmental extraction of resources. Therefore, a globalized economy
means a vehicle for deeper inequality which widens the gap between the rich and the
poor, further stratification—even socioeconomic and sociopolitical manipulation and
covert imperialist agenda—of the First World countries to the Third World countries, and
much evident enforcement of neoliberal policies which has the tendency to destroy the
environment and social welfare of the people.

8. To what extent did the crash of 2007-09 mark a turning point in the development
of the global economy?

Answer:

The crash of 2007-09 marked a turning point in the development of the global
economy through the re-evaluation and rejection of the neoliberal model of globalization
because the global financial crisis believed to be originated, and was initially most
Bonje, Hans Gabriel A. Prof. Elmer Soriano
BAPS 1-4 Fundamentals of Political Science
severe, in those economies that had embraced neoliberalism with the greatest
enthusiasm such as the United States of America and the United Kingdom—in which a
major factor in explaining the crisis was an over-reliance on an inherently unstable
financial sector. Moreover, the Crash also justified and emphasized that history seems
to suggest that major crises lead to transformations in the management of the world
economy (Casey, 2011). For instance, the Great Depression of the 1930s led, via
Roosevelt’s New Deal in the USA, to a shift in the post-1945 world in favor of
Keynesianism, while the “stagflation” crisis of the 170s contributed to the abandonment
of Keynesianism and the rise of neoliberalism. Hence, in the context of the 2007-09
Crash, the progress on the construction of a “New Bretton Woods”—which would re-
orientate the institutions of global economic governance away from neoliberalism—was
immediately abolished. On the other hand, some of the consequences of the Crash
include the widespread and unsustainable debt in many developed economies; the
paradoxes and pitfalls of deficit reduction; the possible end of neoliberal globalization;
and a major redistribution of power in the global economy. Therefore, the 2007-09
global financial crisis played an imperative and pivotal moment in the development of
the global economy because it did not only affect the developed world (the USA)
through massive indebtedness but also those developing countries and the global
balance of economic power. As the book stressed out, in a globalized world, no
economy is an island.

9. Does neoliberal globalization have a future?

Answer:

Definitely. Neoliberal globalization will have a future, and even further exist in
both national and international sphere due to the economic interlocking and
interconnectedness of countries. Hence, entities such as states, supranational
organizations, transnational corporations, and even political actors are inevitably
inclined to employ neoliberal policies such as privatization of the people’s social welfare
resources and institutions (housing, education, health care, and other basic
Bonje, Hans Gabriel A. Prof. Elmer Soriano
BAPS 1-4 Fundamentals of Political Science
commodities); low public spending which lessens the responsibility of the government
due to privatization; deregulation of the market system and tax cuts which benefits the
capitalists (e.g., import and export of tariffs, contracts and agreements, and legislation
of economic-related laws); and reduced welfare provision which pertains to the bare
minimum public services and cheap construction of public establishments. In addition,
these aforementioned principles of neoliberalism will only benefit the capitalists and
more likely result in the propensity of “turbo-capitalism” because of the intense benefits
that neoliberal globalization gave to them. By this, it will further perpetuate social
inequalities and social breakdown since the marginalized people’s capacity to comply
with these mattered principles of neoliberalism will be limited. Therefore, neoliberal
globalization does have a future because the distribution of power, economic interest,
and market monopoly are more likely to be centralized with capitalists that could lead to
such crises like the 2007-09 global financial crisis and deep social stratification.

RELEVANT QUESTIONS REGARDING THE CHAPTER

1. Are “beggar-thy-neighbor” policies still visible and inevitable in current global

market? In what extent can they affect such nation-state? (see p. 129)
2. Is perfect competition possible and desirable? (see p. 130)
3. In the lens of Marxist political economy approach, how can the proletariat
emancipate from the chains of capitalism? Is it possible to happen in the modern
age? (see p. 130-131)
4. Does the key features of enterprise capitalism paved way to the rise of
billionaires? If so, justify. (see p. 131-133)
5. Should billionaires exist? Explain. (own perspective)
6. Is social capitalism a pragmatic solution to such inequalities? (see p. 133-134)
7. Is state capitalism prone to neoliberalism? (see p. 134-135)
8. Which is more applicable in the current global economy, Keynesianism or
neoliberalism? (135-138)
Bonje, Hans Gabriel A. Prof. Elmer Soriano
BAPS 1-4 Fundamentals of Political Science
9. What is the biggest role of globalization in the intensification of global market
competition, warfare situation, global health care system especially amid the
pandemic, and to the future of the world? (own perspective)