Political Economy/Modern Political Economy

Modern Political Economics

Introduction

The economy is the realized social system of production, exchange, distribution, and consumption of goods and services of a country or other area. Today the range of fields of study exploring, registering and describing the economy or part of it. Practical fields directly related to the human activities involving production, distribution, exchange, and consumption of goods and services as a whole. Sumer developed a large scale economy based on money, while the Babylonians and their neighboring city states later developed the earliest system of economics as we think,in term of rules/laws on dept. The ancient economy was mainly based on subsistence farming.

Assumptions

Introduction

Modern economies generally produce a large (by historical standards) economic surplus. This surplus is composed of a vast number of goods in addition to those associated with the basic physiological needs of food, shelter, etc.

However, in the modern world, the majority of human beings live in large-scale, organized societies, called states. The government of a state claims a de jure, and often possesses de facto, the monopoly of legitimate force within its borders. This control of the monopoly of force allows a government to re-allocate, through law, portions of the economic surplus between private individuals. This study of political power as it affects distribution and production of goods in an economy creates the field of political economy.

To varying degrees, ranging from the very slight to the very extensive, all modern and pre-modern states in the world redistribute economic goods within their borders. The manner, extent and moral legitimacy of such redistribution is the source for much political debate and disagreement.

Hence government is a lucrative source of income (or economic rents ) for any group that can control or influence it. Competition between organized social groups for control of government has therefore been a source of conflict throughout history. This competition continues to express itself in everything from peaceful democratic elections to civil war. Modern political economists are often concerned with the problem of how to form a stable power bloc sufficient to gain and hold control of the government.

Modern Capitalist Conception Of Money

Money is only a means of exchange. It is quite possible to have communities use barter instead, such as "I give you a cow for (whatever)". In a society that uses money care should be taken, if at all possible (unfortunately very often it is NOT possible), to ensure that the total of the spending of money per year is always less than the total income per year of the individual, or community, concerned.

Money loses its value continually; this is called inflation, because prices increase as the value of the currency decreases. This could be thought of as being a tax on all savings and also at the same time as a reduction of all debts.

Many people borrow money and later repay that amount - unfortunately borrowing can be very expensive, because interest usually has to be paid in addition to the amount borrowed (called "The Principal"). Sometimes the economic conditions are so very bad that no repayment of the principal is possible for a very long time, if at all; even to get enough money for paying the interest on the debt may be quite difficult. If interest is not paid at the time it is due, then the loan is said to be "in default", and considerable trouble can be the result.

See also:

• Personal Finance
• Money and inflation
• Introduction to Economics
• Economic Uses of Money
• What is Money?

From Wikipedia:

• Bank
• Credit
• Currency
• Debt
• Default
• Finance
• Financial services
• Inflation
• Loan
• Money
• Personal finance

Liberalism

Social Liberalism

• The economy of a country is closely connected to the well-being, or otherwise, of the people living there, and politics can influence considerably the economy of that country. In general the income of individuals is related to their education, and the jobs available at the time may require a particular set of skills. Poverty results from inability of individuals to have income larger than the actual expenditures.
• Governments can have large expenditures, possibly larger than the revenue obtained via taxation; then there is a deficit, requiring the borrowing of money and the consequent payment of interest on the amount borrowed. That interest payment could have been prevented if the revenue obtained from taxes would have been higher.
• One group of politicians may want to supply a lot of expensive services to people for free or at low cost, while other politicians may want to minimize the amount of taxes that have to be paid, and they may even promise tax cuts. In democratic countries the number of votes obtained by candidates for parliamentary/congressional seats depends considerably on election promises, and these, if implemented by the government, may considerably influence the economic health of the country, and of its individuals, eventually.

Marxism

Marxism deals with the processes that constitute objective reality.

Dependency Theory

• Core
• Periphery
• Multinational corporations.

Weber

Elite Theory

Elite Theory is based on the idea that a society is always divided into two groups i.e. the minority elite and the ruled.Elite Theory is a direct contradiction to the Marxist Ideology.

Neo-Mercantilism/Economic Nationalism

Nationalistic Theory

• Control of growth.
• Rapid industrialization.

Development

The area of development is a diverse field with many political orientations, Marxist, Neoliberal and Postmodernist being among them. It covers the reasons behind the historical growth of Less Developed Countries (LDC), sometimes called the Third World. Political economy of development embraces an interdisciplinary approach that includes many social sciences. Much of the research into this area is focused on the growth of what are now developed countries, like Taiwan, Korea and Japan. The debate is how these countries became rich, what political and economic factors caused these places to change so much.

Another strand of research is in the failure of countries to change, such as India's post independence state failure in Industrialisation. Other debates include whether democracy or inequality causes or constrains growth and sustainable development.

Typically political economists view the world as heterogenous, that is there are no universal laws to explain development. Instead they focus in on an area in the world and even individual countries and sub-nation-state units which allow them to come to conclusions on questions.

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Khan's Patron Client Model of Development

Khan applied the patron client model to development in many developing countries. Essentially the state is given as a patron, and it has many clients who are capitalists. These capitalists bribe the state and in exchange get subsidies and other benefits forming a patron-client relationship. Other clients in the nation-state are the middle class, who engage in political activism to obtain benefits.

This model is applied to different developing countries, so Korea, which did not have any middle class had high growth due to the capitalist clients getting most of the money from the government to invest and market their products. On the other hand India had a large middle class which meant that its industrialisation programme was hindered by middle class competition for resources from the state.