Task 3 - POLITICAL ECONOMY Flashcards
- Political economy. Explain the concept
No distinction btw politics and economy
Political factors are essential in determining economic outcomes and viceversa
- Pol econ: What does the study entale?
Pol econ examines how different econ systems affect institutional and political arrangements
- APPROACHES TO POL ECONOMY. Name the 3
- State-centric political economy
- Classical/neoclassical political economy
- Marxist political economy
1.1 State-centric political economy
Developed out of mercantilism: Econ markets not natural, but exist within a social context shaped by exercise of state power
- Build up state’s wealth, power and prestige
- Development of a favorable trading balance (low imports- high exports)
- Protectionism
1.2 Classical/neoclassical pol econ
Derived from Adam Smith’s writings
- Key econ agents: Individuals
- Unregulated econ tends to lead to long-run equilibrium
- Invisible hand
- Self-managing market
- Policy of lasseiz-faire
- No state intervention
- Conditions for perfect competition
1.3 Marxist pol econ
Capitalism as class exploitation system: Capitalist quest for profit only satisfied through surplus value from its workers (paying them less)
- Econ actors: Social classes
- Standing in relation to ownership of productive wealth
- Burgeoisie - proletariat
- VARIETIES OF CAPITALISM. Name the 3
- Enterprise capitalism
- Social capitalism
- State capitalism
2.1 Enterprise capitalism
Classical economists
- Faith in self-regulating markets
- Public ownership at minimum
- Welfare provision as more than a safety net
- Profit-driven business
- High productivity
- Labour flexibility
- Weak trade unions
- Wide material inequalitites
- Social fragmentation
- Vulnerable to market changes
2.2 Social capitalism
Much of central and western Europe
- Flexible and pragmatic ideas
- Econ importance of politics
- State intervention to protect infant industries
- Link btw financial and insutrial capital
Close relationship btw business corps and regional banks
Long-term investments (high and stable)
Social partnership
- Central theme: Social market
MARRYING DISCIPLINES OF MARKET COMPETITION AND NEED FOR SOCIAL COHESION AND SOLIDARITY
2.2 Social capitalism. Drawbacks
- Encourages inflexibility
- Difficult for businesses to adapt to market conditions
- High levels of social expenditure
Pushed-up taxes
Burden employers and employees
2.3 State capitalism
–> Capitalist economies in which the state plays a crucial directive role. Often non-iberal
- Collective capitalism: Cooperation and long-term relationships
- Relational markets (btw industry and finance)
- Long-term investments
- Firms provide core of life
Male workers get benefits for being ‘members’
Stress placed on team-work
Narrow income differentials (worker - manager)
- Taxation and public spending low
- Gov plays vital role in ‘guiding’ investment
2.3 State capitalism. Drawbacks
JAPAN
- Unresponsiveness to changing global market conditions
- Tendency for individualism and entrepreneuralism
- Values: Duties and hierarchy
CHINA
- Burgeoning capitalism and Stalinistical pol control
- Success in econ growth
- Huge supply of cheap labour
- Massive investment on econ infrastructure
RUSSIA
- 90’s shock treatment
- Wrest power back from oligarchs
- Failure to diversify economy
- Authoritarianism may generate resentment for pol freedom
- MANAGED OR UNMANAGED CAPITALISM. Name the 2 opposing views
- Keynsianism
- Neoliberalism
3.1 Keynsianism
–> Rejection of self-regulating markets
- Results in instability and unemployment
- State intervension promotes stability and safety nets
- Neoclassical pol econ
- If unemployment rises, the gov reflates the economy by increasing public spending or cutting taxes
3.1 Keynsianism. Drawbacks
–> “Tax and spend” policies: Sapped enterprise and initiative
- Undermined growth
- Permanent high inflation
Stagflation in 70s
3.2 Neoliberalism
–> Econ priorities towards free market
- Natural dynamism of the market
- Form of market fundamentalism –> Self-regulating markets
- Monetarism
- Supply-side policies (encouragement to produce)
- Deregulation
- Tax cuts
- GLOBALIZATION. Characteristics
–> Complex of processes sometimes overlapping
- ‘Borderless’ world: National borders become permeable
- Divisions btw people prev separated by time and space less significant
- Multidimensional interconnections
- Top-down processes -> Single global system (Homogenization)
- Localization, regionalization and multiculturalism
- Nation-state not able to organize econ and pol life correctly
Nationalism based on nation fades
- Globalization. Varieties
- Economic globalization
- Cultural globalization
- Political globalization
4.1 Economic globalization
–> all economies have been absorbed into an interlocking global economy
- Production is internationalized
- Financial flows freely and instantly
- Lower trade barriers
- End to exchange controls
- Freer movements of investment capital
Helped widen gap econ gap btw East and West
4.2 Cultural globalization
–> Process whereby information, commodities and images enter a global flow that tends to ‘flatten’ out cultural differences
- Driven by growth of transnational companies and the emergence of global commodities
- Culture serves and constraints the forces of glob
- ‘Information revolution’
4.3 Political globalization
–> Evident in growing importance of international organizations
- Exercise of jurisdiction not within a single state (international area)
- Intergovernmentalism: Provide mechanism for states to take concerted action w/o sacrificing national sovereignty
UN, NATO, EEC, EU, EC, WB, IMF…
- RISE OF NEOLIBERAL GLOBALIZATION. Main themes
–> Glob has developed w Neoliberalism, both are though of as a same larger phenomenon
Core of growth: Financial markets and process of ‘financialization’
- Capitalism turned into turbo-capitalism
- Rise of neoliberal globalization. Why are they so linked?
- Intensified international competition
- Deregulation and reducement of tax levels (attraction of FDIs, preventing TNC’s from relocation)
- Rise of neoliberal globalization. Drawbacks (4)
- Downward pressure of public spending
Association with inequality and social breakdown - Considerable growth of public and private debt
- Rooted in major contradictions
Democratic deficit through the internationalization of the state
Growing pressure to protect environm from glob
Surrender of state authority to corporate financial and econ interests - Naomi klein - Implications with
- Shocks
- States of emergency
- Crises
- The 2007-09 financial crisis
–> Deeper level: Merely a symptom of the defects and vulnerabilities of the neoliberal capitalism
- Chronic public/private debt
- Failure of productivity growth to produce increases in ‘real’ wages
- No demand = increased borrowing
- Govs allowed debt to rise
- ## Glob econ downturn by the crisis reduced tax revenues
