Transcript What is Political Economy? - State University of Zanzibar

Development Studies
THE STATE UNIVERSITY OF ZANZIBAR
(SUZA)
DS 301 for diploma students third year.
Prepared by: Mr. Abdulrahman Mustafa Nahoda
1
What is Political Economy?
History: In the time between Adam Smith’s
Wealth of Nations (1776) and John Stuart
Mill’s Principles of Political Economy (1848),
what is now called economics was more
generally called political economy.
The term political economy reflected the
belief that politics and economics are
inseparable, and in fact that political factors
are crucial in determining economic
outcomes.
What is Political Economy?
First, political economy is “political” in that it involves the
use of state power to make decisions about who gets what,
when, how, and why in the distribution of public goods and
social values.

Second, political economy is about the economy or
economics, which means that it deals with how scarce resources
are allocated to different uses and goods are distributed among
individual actors. As the term suggests, political economy
brings together both political and economic considerations in
allocating resources.

Case Studies

First case:
The Federal Reserve system or the budget
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Second case:
The Arab Oil Boycott of 1973 and 78
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Third case:
Globalization
What is Political Economy?
Microeconomics,
political economy is an approach used to
understand how political and legal
institutions influence the economic
behavior of people, firms, and markets, as
well as the economics of how interest
groups influence the formation of laws
and regulatory policy.
What is Political Economy?
From the standpoint of international
economics, political economy is
concerned with understanding how
national policies influence international
trade, investment, and finance, with the
processes that lead to the formation of
international economic treaties and
institutions, and with the economic
consequences of these laws and
institutions.
What is the focus of the study of PE?

The interaction between the state and the market

By state we usually refer to the political institutions of the
modern nation-state, a geographic region with a welldefined territory and population and a coherent and
autonomous system of government capable of making
collective decisions and exercising sovereignty, including a
coercive apparatus and the legitimate use of physical force
to administer control over the population within its
territory.
By market we usually mean the economic institutions of
modern economy, which are dominated by individual selfinterest and conditioned by the “invisible hand” of market
forces through the balance of demand and supply.

The interaction between
states and markets?
Central Questions:
 what is the nature of the relationship
between states and markets?
 How the two interact with each other?
Conflictual or Unconflictual
When unconflictual?
 When states and markets have similar goals
or driven by similar interests and values

When conflictual?
 When the motives and values of states and
markets differ

Why the two often conflict in
IPE?
 efficiency
vs. fairness
 freedom vs. equality
 self-interest vs. common interest
Does the relationship between states
and markets look similar or different
in different political economies?
 In
a free market economy
 In
a centrally planned economy
Power
Power is the ability to control or influence
the minds and actions of others and affect or
determine outcomes.
 Power (politics) and wealth (economics) are
often intertwined and interact with each
other.
 Relational power vs. Structural power

Contending Theories
Liberalism/Capitalism
 a political and economic theory that
emphasizes the freedom of the autonomous
individual, the system of private property
and self-regulating markets, and the pursuit
of individual interest.

Contending Theories
Marxism and Communism
 a political and economic theory that is
influenced by the political and economic
philosophy of Karl Marx and his
methodology of class analysis that
emphasize the system of class domination
and class interest, the value of equality, and
the social cooperation and social ownership
based on universal humanity.

Contending theories


Corporatism
It refers to a theory that seeks to bring about the
institutions and practices that involve a system of
interest representation or a kind of state-society
relationship that is controlled and regulated by the
state, the requirements of the law, or the
predominant social norms, and their interactions
are incorporated into the formal structures of the
state, monitored and guided by the state in modern
society or political authority in traditional society.