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What Is Political Economy
What Is Political Economy
What Is Political Economy
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Relevance to real economic problems
• In our everyday life– earning a living,
managing an income, and making
decisions about consumption and saving.
• Beset us collectively– how to balance
economic growth against environmental
concerns, how much to redistribute
income through taxes and government
expenditure, and how to deal with
imbalances in international trade.
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The Political Economy Questions
take 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 the
changes.
• A process of enquiry that takes nothing
as given.
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• Third: Who gains, who loses?
• Specific aspects, such as the changing international
distribution of jobs.
• Large multinational companies have often relocated
parts of their routine manufacturing activities to Third
World nations (profit maximisation).
• Original employees face wage reduction or
unemployment? Alternative employment available?
• To Third World nations, more jobs but associated with
particular health or environmental risks; companies
pay more taxes to help the local community?
• This illustrates the interdependence of economic, social
and political considerations, which is one of the
hallmarks 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 consistency
with other social and political goals
(which themselves need to be clearly
specified)
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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 is
undermined by the greater mobility
of 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 250
years, four have obvious relevance in the
construction of modern political economy.
• One is classical political economy,
including Smith, Ricardo and Malthus.
• The economic system produces goods
and services surplus to what is required
for social reproduction remains valuable.
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Cont.
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Cont.
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• Keynesian economic analysis stresses on the
persistence of involuntary unemployment,
and identified the necessary remedial politics.
• The ‘macro’ economy did not function simply
as the aggregation of ‘micro’ economic
markets and without enlightened
government intervention, the capitalist
economy would not ensure full employment.
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Cont.
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• A common theme for modern political
economy is the rejection of the pseudo-
scientific ‘positive economics’ in favour of a
more down-to-earth approach that
addresses real problems and makes values
explicit.
• Environmental concerns/issues are central
to modern political economy.
• Some argue to create an ‘ecological
economics’.
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A final thought
• How the economy works– using natural, human,
and manufactured resources to produce goods
and services, and distributing the fruits of those
endeavours according to the relative economic
power of the participants– there is considerable
continuity in the real world.
• Also there is considerable change, of rapid
technological innovation, globalisation, and
structural economic adjustment.
• The need for creative political economic thinking
is imperative.
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