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Political Economy Summary
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Summary for the course Political Economy
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Political Economy notesWeek 1
Stilwell, Frank. 2012. Political Economy. The Contest of Economy Ideas. 3th edition.
Sydney: Oxford University Press. pp. 2-9. Available through canvas
Globalization breaks down the territorial boundaries that use to limit opportunities and threats
that we experienced.
Technological and economic changes transform society and culture.
“What is Happening?”
• Distinctions between globalization of finance and trade, culture, environmental
concerns, human rights
“Why?”
• Analysis of the drivers of change:
o Complex interactions between the forces external to nation states
o Forced nurtured within them
• Example: influence of consumerism, technology, and governmental policies
“Who gains and who loses?”
• Changing of international distribution of jobs and incomes
• Relocation into developing countries
• Industrialization in “export-processing zones”.
• Competitive for more affluent nations
Major social and environmental implications.
Questioning around surplus (Smith etc.)
Careful consideration of Marxists economists.
Roots in classical political economy, but different more critical interpretation of capitalism.
• Property relations
• Class structure
• Relentless drive for amassing wealth.
Source of economic surplus is the exploitation of labor -> Class conflict.
Explains dramatic shocks to economic systems (financial crises and poverty).
Interpretation of concepts: globalization as the drive by capitalist business interests to break
through the constraints of their growth imposed by national boundaries.
Institutional economics.
Focus on economic evolution:
• Growth of big business,
• transnational corporations,
• governmental economic activities per nations,
• influence of trade union.
Particular focus on more extensive interventions by the state to reduce the inequality and
instability of free-market capitalism.
Keynesian economics.
,Why capitalism cannot guarantee full employment, and remedial policies.
Economy not as simple aggregation of economic market. Without government intervention,
unemployment would recur and inflation.
Orthodox economists’ response: “neoclassical synthesis”: microeconomic emphasizing market
freedoms + macroeconomic emphasizing the necessity of government intervention.
Neoclassical economists:
Dominant economic orthodoxy.
Quest for an alternative.
Approach:
• NE as a possible source of contributions to the modern political economist’s tool kit.
• NE as presenting a particular image of a free-market capitalist economy serving societal
preferences.
Modern political economy:
Draws on Schumpeter, Robinson, Kaldor, Kalecki, Sweezy, Myrdal, Veblen, Galbraith and
Keynes?
Keynesian and post-Keynesian ideas exert a strong contemporary influence.
Desire for a down-to-earth approach.
Political economy embraces environmental concerns.
Reconcile economic with ecological.
Neoclassical economists: recurrent market failures occur when “environmental goods” are not
properly priced.
Political economy addresses real-world concerns in a way that emphasizes the connections
between economic problems, social structure, and political processes.
There is a rich heritage of economic thought from which modern political economy draws,
including classical political economy, Marxist economy, institutional economics, and Keynesian
economics.
Neoclassical economic analysis also needs to be carefully considered because of its major
influence on orthodox economic theory and governmental policies. The challenge for political
economic is to go beyond critique to the formulation of effective alternatives.
Strange, Susan (1988). “Prologue: Some Desert Island Stories”, in States and Markets.
Londen: Pinter, pp. 1-6. Available through canvas
Fortress society: priority to order and security -> Nationalist
Community: priority to justice and equality -> Socialist
Market society: priority to wealth, efficiency and production -> Liberal: free market
, Value preferences of three lifeboats (where S=Security, W=Wealth, J=Justice and F=Freedom to choose)
Could have been including division of power, equality
Smith, Noah (2019). “Economists Need to Add a Little History to Their Tool Kit” online
in Bloomberg opinion. Also available on Canvas
Brad DeLong and Larry Summers: Economists learn a lot of mathematical models and
empirical facts about the present, but not much history.
If they had, they would not have been so blindsided by the financial crisis or the recession
following.
Economic history is underemphasized.
Not prestigious.
History is necessary to understand economics and society.
Too empirical, too real less fantasy.
, Because economic history uses economic theory to analyze past events, it creates plausible
explanations.
Robert Allen: globalization has allowed countries around the world to bask in a flood of low-
wage labor, which might have reduced companies’ incentives to invest in new technologies
➔ Explanation of China’s economic and technological fall behind
Economic history’s power is beyond theory and explanations, although it can predict the
future.
Example with China’s growth slow-down, or cryptocurrency.
Can help understanding broader social phenomena.
E.g. welfare programs and legal services for African-Americans decreased the severity of urban
riots in the 1960s.
Stilwell, Frank. 2012. Political Economy. The Contest of Economy Ideas. 3th edition.
Sydney: Oxford University Press. pp. 51-64. Available through Canvas
Economic activity can be organized to satisfy the social purpose.
Principal systems as alternatives:
• Communism
o Economic activities can be organized communally.
o Decision making strongly influenced by custom and convention.
o Tribal societies -> anthropological studies
o “Primitive communism”
o Principles and practices are relevant wherever cooperative behavior needs to be
nurtured.
• Slavery
o Explicit use of force by one class (slave owners) over another (slaves): central
organizing principle
o Violence (or threat): driver of economic activity -> what’s done, by whom, how,
where, and when
o Commonplace in the Mediterranean land: cradle of modern Western
civilization
o USA slavery as an economic prosperity cause, UK, Australia
o Still elements today:
▪ Coercive aspect of prostitution
▪ Use of child labor
▪ Prison labor for cheap labor
• Feudalism
o Historical and contemporary significance
o Core principle: mutual obligation
o Different social classes are linked by a system of mutual rights and obligations,
based on traditional roles and beliefs (Serfs).
o Derivatives in poorer countries nowadays: landowning class possesses big
surplus share
o Power maintained by cultural and religious ideologies
o The demand for land reform is the usual signal for a feudalism challenge
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