What Is Political Economy

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What is Political economy?
* No widespread agreement of what; but understood in three ways- those who see PE as an interaction of existing disciplines, those who see it as a set of questions, and those who see it as a method of analysis:

Interaction of existing disciplines:
* Starting point is that as capitalism develops politics and econ becoming increasingly interdependent. * Not only interdependence of domestic pol and national econ but also international pol and global econ (4 disciplines) * Criticised by Marxists, because focuses on how the national state manages economic problems

Radical/Heterdox IPE (those who see it as a question);
* PE is an area of study, a set of questions, a series of assumptions- who has power? What’s the source of power?
PE as a method:
To understand society, you need to understand economics foundation, then you understand politics, ideas, and laws; “What is it about economic power that produces society”?
Four approaches:
* Political economics/and or politics of the economic policy-making (separate disciplines; influence of politics on the economy and of the economy on politics) * International political economy- Susan Strange (who gets what in the global context- politics, economics, security and social values) * Classical political economy- forerunner of modern social science (Smith WN 1776) * Critique of classical political economy- Karl Marx

Political economics:
Strict separation between the disciplines of politics and economics: * Politics- the art and science of government
* Econ- rational utility maximising behaviour in conditions of scarcity * Field of pol economics studies role of politicians in making econ policy and the effect of econ performance on the electability of government. * Main contribution – theory of political business cycle - in run up to election govts favour policies which enhance popularity with voters * Politics of economic policy making- “Policy is the action taken by government in pursuit of certain goals...many goals have an economic aspect. Economic policy is the economic aspect of overall government policy: it consists of deliberate government intervention in economic affairs in order to realise certain goals. * The common objectives include the objectives of a government (full employment, control of inflation etc)

Main policy instruments-
* monetary policy; controlling supply of money, and interest rates (demand for money) * Exchange rate policy- i.e. the value of sterling in relation to other currencies * Fiscal policy- raising and spending money

* Industrial policy; subsidies, direct sponsorship[
* Competitive policy- supply side economics, improve of supply of labour (education and training); concerning anything that inhibits free competition (monopolies e.g) * Nationalisation and industry

* Foreign policy- PE of military spending
Assessing this approach
* Useful in directing our attention to present day policy objectives and levers available to government * However, limited understanding of pol and econ and rather journalistic. * Does not offer a conceptualisation of pol econ merely a description of govt intervention in economic affairs * Concern with wealth and power of the state (modern day mercantilism)

IPE- Susan Strange
Strange played a central role in developing international political economy as a field of study in Britain. She claimed that in general, "economists simply do not understand how the global economy works" due to a poor understanding of power and an over-reliance on abstract economic models. However, she noted that political scientists also have a woeful understanding of international relations due to their emphasis on institutions and power. Thus she became one of the earliest campaigners advocating the necessity of studying both politics and economics for international relations scholars....
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