Political Economy Studies: Study Political Economics

Political economy or “the economics of polities”, as it was originally known, was the study of production relations vis-à-vis the customs, law and the state in countries born out of the new capitalist order. In short, it was a web of relations between the society and the individual and between the market and the state.

Political economy or “the economics of polities”, as it was originally known, was the study of production relations vis-à-vis the customs, law and the state in countries born out of the new capitalist order. In short, it was a web of relations between the society and the individual and between the market and the state. The term was attached to the “Labour theory of Value” in the 18th century and by the 19th century “economics” or the study of the economy using axiomatic principles and fundamental mathematical techniques gradually superseded the term of “political economy.” [br]

But political economy as a branch of social science, now evolved from the mere science of production and distribution of resources or “wealth” in an economy using the “invisible hand” of Adam Smith (Wealth of Nations-1776), or a theory of “rent” of David Ricardo (Principles of Political Economy and Taxation-1817) or of “value” where “utility is said to be origin of value” by W.S. Jevons (Theory of Political Economy -1871) is gaining more and more importance in a globalized and integrated world of today.

Studies in political economy can be defined as the study of economic and political relations between nation states. Political economy, drawing heavily from the branches of economics, law and political science, has now gained a much larger scope and is interconnected with topics such as economic and political history, anthropology, human geography, ecology and psychology. This improved version of political economy has often been referred to as International Political Economy (IPE), marriage between International Relations and Political Economy, and deals with the politics of economic relations between countries and the different political and economic equations which influence domestic monetary and fiscal policies, which in turn, affects world trade and finance.

One of the most important studies in the field of political economy or IPE has been the resurgence of the USA economy after the Great Depression of the 1930’s. It has mainly been ascribed to World War II which brought about increased public expenditure in defense and military equipments which pulled out the economy of recession and put it in a path of sustained growth. Notably, this not achieved without high rates of inflation in the economy. But the US economy maintained its high rate of growth until 2001 when it experienced recession again for the first time. But the American economy remains the largest economy in the world and is the most advanced country in terms of technological innovations and high standards of living it has managed to achieve over the last sixty years. The WW II had not only pulled the economy out of the recession, but increased military expenditure had also paved way for discovery of the “internet.” [br]

Such studies like the already mentioned study of the American economy from the WW II period till the Cold War era from the 40’s to the 90’s does constitute a substantial part of the literature on studies on political economy. The book “Chicago Studies in Political Economy” by George. J. Stigler in 1988 conveys a view mostly held by the Chicago School of Political Economy and effectively deals with the functions of the economic forces to determine a state’s political institutions and a theory of regulatory policy that accounts for these forces and it concludes by a thorough examination of industry regulations and offers various corrective measures. There also have been many attempts to integrate the theory of ideology and political choice into the sphere of political economy. Studies in political economy can also encompass the issue of trade liberalization which is determined by both economic considerations, that is, if increased trade can bring about higher per capita incomes and political considerations which might entail in setting up industrial lobbies in the respective lobbies. For example, the theory of the “British Trade Cycle” of the 1920’s and 30’s and interwar changes in the location of industry and interwar population changes falls under the ambit of studies of political economy. Political economy studies deal with the economic development and flow of capital to the less developed economies of China, India and the developing nations of Latin America. It can also cover issues such as class struggles and the fight for identity for the unprivileged sections of the society in the form of domestic feuds going on in many nations of the world.

Political economy has now changed from the approaches of the traditional political economy and approaches such as “Mutualist Political Economy” have also evolved. The modern political economy deals with internal cooperation and competition in the field of international trade which might increase or decrease world per capita incomes, global warming, international immigration of skilled labour to the developed countries and the rising inequality in incomes due to globalization in the underdeveloped economies. These burning social, political and economic issues can only be handled effectively under the purview of political economy, or IPE in particular, with proper political will shown by the world polity.