Lecture 1: What is Political Economy?
Political Economy is different from Economics and here is why
It is very much related, but definitely not the same. Understand especially the relationship
between states and markets, what kind of political choices are under different economic
policies.
An important takeaway: The economic (perspective on the world, economic policies,
markets, trade) is inherently political. What we decide politically determines the
economic trends, systems. So, it is also inherently normative: different choices, values,
underlying economic systems.
Political Economy
Studies the fundamental interconnection between states and markets:
o States and markets are not disconnected, but rather very much connected. One
cannot exist without the other.
o Understand economic policies as the means for states to achieve their objectives:
One objective is to have more prosperity, to improve well-being and
this is done through different economic policies.
Considers today and tomorrows political economic relations and battles from a historic
perspective: o See cycles, patterns to economic development and see why certain
states are in a better position to develop than others and so understand why, for
example, the US is so keen on protecting its intellectual rights.
o Almost every topic we study in pol science has a political economic story to it.
To understand what is going on in the present day and be able to act to make the world a
better place, political economy gives the capability to look at all issues from a more
thorough perspective.
Example: The Trade War
Trade war between China and the United States
A few pointers:
o Tariffs: when goods are imported into a country, states can levy taxes on
these goods. These are called tariffs. And make trade more costly:
E.g. Iphones produced in China and shipped to US. US produces cars
, and ships to another country. When you produce and exports goods
(e.g. iPhone parts to US), the country says
“ok, at the border we will put a tariff on this goods, at the gov we levy a tax”. This is very
common, it is a sort of revenue, but it also makes trade more costly.
o There are more goods coming from China to the US than the other way around.
So, money flows from US to China (=trade deficit), the US has to pay to
China. So, US owes money to China. Thus, US has a debt to pay to China.
And this is how the US trade war
started with China.
This means there are different financial relations, international trade
flows, countries are indebted to each other.
o International trade flows influences the value of currencies (exchange rates):
Each state has its own perspective.
o Central banks are responsible for monetary policy (in US: federal reserve)
Wireless Arms Race: Global 5G Rollout and Huawei Bans:
Who control the main infrastructure in the next evolutionary steps for technology.
Huawei is the leader now, and it is a premier as until this point always American
companies were in the front.
There is also a strategic, political element to all economic decisions.
Different governments fight because they have different perspectives. Underlying these
fights there is a fundamental questions of political economy about balances and
imbalances. But it is also a question of American hegemony, with the US seeing China on
the rise. Thus, Trump is questions whether it is worth being a hegemon power.
These are the question that political economy cares about.
Economy = politics and politics = economy:
The economy is inherently political. And much of what is political, is directly
related to the economy. PE is everywhere, and everything is PE.
o But if that is true…. How can you study this?
What is Political Economy? There are at least four flavors of PE.
1. POLITICAL ECONOMY I: The classic thinkers on state and market, and their followers
The classic thinkers on state and market, and their followers. They considered both states
and markets, integrated in one academic debate.
The roots of PE can be traced at least 250 years ago to thinkers like Adam Smith and
Marx. These were people who were very much interested in how societies could and
should be organized. It is about understanding from an academic perspective the
courses of wealth and prosperity, what makes the wealth of nations, but also what
determines inequality and how we can reduce poverty.
These thinkers though a lot about the vices and virtues of mankind.
o How government should also be organized so we balance these and improve
wealth and society. o They thought about both state and markets, integrated in
one economic debate.
To what extent should the socio-economic order be the outcome of coordination
either by the market or by state:
o This is the most important and fundamental question, can we organize it top-down
Political Economy is different from Economics and here is why
It is very much related, but definitely not the same. Understand especially the relationship
between states and markets, what kind of political choices are under different economic
policies.
An important takeaway: The economic (perspective on the world, economic policies,
markets, trade) is inherently political. What we decide politically determines the
economic trends, systems. So, it is also inherently normative: different choices, values,
underlying economic systems.
Political Economy
Studies the fundamental interconnection between states and markets:
o States and markets are not disconnected, but rather very much connected. One
cannot exist without the other.
o Understand economic policies as the means for states to achieve their objectives:
One objective is to have more prosperity, to improve well-being and
this is done through different economic policies.
Considers today and tomorrows political economic relations and battles from a historic
perspective: o See cycles, patterns to economic development and see why certain
states are in a better position to develop than others and so understand why, for
example, the US is so keen on protecting its intellectual rights.
o Almost every topic we study in pol science has a political economic story to it.
To understand what is going on in the present day and be able to act to make the world a
better place, political economy gives the capability to look at all issues from a more
thorough perspective.
Example: The Trade War
Trade war between China and the United States
A few pointers:
o Tariffs: when goods are imported into a country, states can levy taxes on
these goods. These are called tariffs. And make trade more costly:
E.g. Iphones produced in China and shipped to US. US produces cars
, and ships to another country. When you produce and exports goods
(e.g. iPhone parts to US), the country says
“ok, at the border we will put a tariff on this goods, at the gov we levy a tax”. This is very
common, it is a sort of revenue, but it also makes trade more costly.
o There are more goods coming from China to the US than the other way around.
So, money flows from US to China (=trade deficit), the US has to pay to
China. So, US owes money to China. Thus, US has a debt to pay to China.
And this is how the US trade war
started with China.
This means there are different financial relations, international trade
flows, countries are indebted to each other.
o International trade flows influences the value of currencies (exchange rates):
Each state has its own perspective.
o Central banks are responsible for monetary policy (in US: federal reserve)
Wireless Arms Race: Global 5G Rollout and Huawei Bans:
Who control the main infrastructure in the next evolutionary steps for technology.
Huawei is the leader now, and it is a premier as until this point always American
companies were in the front.
There is also a strategic, political element to all economic decisions.
Different governments fight because they have different perspectives. Underlying these
fights there is a fundamental questions of political economy about balances and
imbalances. But it is also a question of American hegemony, with the US seeing China on
the rise. Thus, Trump is questions whether it is worth being a hegemon power.
These are the question that political economy cares about.
Economy = politics and politics = economy:
The economy is inherently political. And much of what is political, is directly
related to the economy. PE is everywhere, and everything is PE.
o But if that is true…. How can you study this?
What is Political Economy? There are at least four flavors of PE.
1. POLITICAL ECONOMY I: The classic thinkers on state and market, and their followers
The classic thinkers on state and market, and their followers. They considered both states
and markets, integrated in one academic debate.
The roots of PE can be traced at least 250 years ago to thinkers like Adam Smith and
Marx. These were people who were very much interested in how societies could and
should be organized. It is about understanding from an academic perspective the
courses of wealth and prosperity, what makes the wealth of nations, but also what
determines inequality and how we can reduce poverty.
These thinkers though a lot about the vices and virtues of mankind.
o How government should also be organized so we balance these and improve
wealth and society. o They thought about both state and markets, integrated in
one economic debate.
To what extent should the socio-economic order be the outcome of coordination
either by the market or by state:
o This is the most important and fundamental question, can we organize it top-down
