International

Political Economy
[IPE]
Chapter #4 Comparative Politics
 Political Economy
 Effects of politics on economy.
 Politics and economy are highly interconnected.
 Especially in 21st century economist shapes the politics.

Why do we study political

economy?
• We study political economy because in our state many things are related to
economy, for example; a recent report which tells that Bangladesh is more
developing than Pakistan.

• How it can be measured?

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 For instance; there is an agency of United Nation which is called
United Nation Developing Program (UNDP).
it is world biggest developing program.

According to United Nation, United Nation developing Program

every year rates the states, ranks the states, and it tells which state is
developing.
And that index where state`s data calculated is called HDI
(Human Development Index)

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 There are four important variables in HDI.

Per Capita Income

Average of annual income of every state`s individual.

Literacy rate
Primary enrollment

Infant mortality rate

Death of child before age of one year

Life expectancy
Surviving years of individual

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 Per Capita Income
Per Capita Income
Pakistan`s per capita income is 1200
Bangladesh`s per capita income is 2100

Primary enrolment
Bangladesh 98 (100)
Pakistan 72 (100)

Infant Mortality rate

In 2019, the infant mortality rate in Pakistan was at about 55.7 deaths per 1,000 live
births

Life expectancy
Bangladesh 72 years
Pakistan 68 year

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 Bangladesh

Ranked on 133
HDI value is 0.632
Life expectancy at birth is 72.6
Expected year of schooling is 11.6
Mean of schooling (year) is 6.2
Gross national income per capita is 4,976

Pakistan
Ranked on 154
HDI value is 0.557
Life expectancy at birth is 67.3
Expected year of schooling is 8.3
Mean of schooling (year) is 5.2
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 World Bank did analysis of Bangladesh and then compared to Pakistan
January 1972

An average Bengali earns 1 rupee per day

An average Pakistani earns 50 rupees per day

January 2021
An average Bengali earns up to 100 rupees per day
While an average Pakistani earns 50 rupees per day.

The question is what Bangladesh did to grow ?

And the answer is “the created everything from nothing”

They made industries, textile, garments.

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 There are many important elements in comparative politics and to understand
them is very important for us.

• GDP (Gross Domestic Product)

• GDP is the total market value of all goods and services produced within
a country`s borders, usually in a year`s time.

• GNI (Gross National income)

• Total income of citizens either they are living in their own homeland or
in foreign countries.
• It is the total income from all goods and services earned by a country`s
producers, regardless of where they operate.

• So a German company operating in India that earns profits would be

counted in the GDP of India but GNI of Germany.
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 Per Capita Income
What`s your state earnings, when we divide them into the public then that will be our per capita
income.

Per capita income vary from region to region.

For instance GDP volume in Pakistan is different, America`s GDP volume is different.
Pakistan`s GDP per capita income is $1200, Bangladesh`s GDP per capita income is $2000.

This difference shows the wealth and development of states.

These are the developing countries, if your state`s per capita income is above than $30.000, it
means that your state is going toward advanced industrialized state`s level.

And if your state`s GDP per capita income is between $1000 to $30.000, it means your state is still
developing.

And there are the states their GDP per capita income is less than $1000 those states are poor
states.
For instance African countries, Congo $448,
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 . Gini Coefficient

Basically measured between 0 and 1.

Absolute progress measured by 0, and when you measure inequality in any
area then you mark 1.

The most commonly used measure of inequality across an entire population

is the Gini coefficient, which measure how much of a society`s wealth or
income is held by what percentage of the population.

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 PPP (Purchasing power parity)

Your cost of living, you adjust with an individual`s earnings.

If someone earning 500 per day, then how many things could he purchased.
An adjustment made to income measures to account for differences in cost of living.
Inequality
An average GPD per capita of $30,000 can result in a country where half the
people earn $60.000 and half earn nothing, or it can happen in a country
where everyone earns $30,000 exactly.

In the social sciences, the differential distribution of access to goods like

power, status, and material resources.

Income Inequality
Measures how earnings are distributed.
Some societies have income that are distributed very equally across people,
while other countries have incomes that vary dramatically between different
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 There are two kinds of managing economy
1) Market Centric Approaches
2) State Centric Approaches

Market Centric Approaches:

Basically this theory was given in late 18th and 19th century, there was a
British economist Adam Smith who wrote a book in 1876.
“the wealth of Nation”
He gave a notion and said that states are made with the people.
If you liberate your people especially on ground of economy, where ever
they want to invest, that is their choice, humans are rational actor they
invest, where they`ll get high returns, before investing they think about
risk factors.

When high returns come people will move toward the markets and banks he
added that by this process, over all society will grow.
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 He further said economy must be free.
Let people take their decisions, leave markets on consumer and producers.

State centric approaches:

Don’t let markets to make their decisions.
State has authority to give guidelines to the markets, properties to where
they have to go? and how it would go?
This debate is continues from 19th-20th

There are many states who controlled economy, and they grew.

In 1979 China brought a policy called Opening up economy

Opening up economy means to give space to international enterprise so that

they can invest in the country, they gave space to the individuals to invest.

Shahbaz Alee Then state will have less control over them
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