What is political economy theory

Political economy

deals with the interdependence between economy and politics, whereby the different variants of political economy bring different aspects of this interdependence to the fore. In classical political economy (Adam SMITH, David RICARDO, John St. MILL and Friedrich LIST) there was hardly any distinction between the economic and political spheres, and political processes were not explicitly taken into account (classical theory). The Marxist Political Economy developed by Karl MARX and Friedrich ENGELS represents a first closed theory of social, economic and state theory. In this variant, the production of goods and services is directly related to the social structure: The political system is dominated by the means of production viewed in different historical formations (historical dialectics). The degree of economic exploitation of the working class by the capital owners is determined by the historically changing organizational form of society in which the state (temporarily) serves as an instrument of oppression for the ruling class of capital owners. According to Marxist theory, the historically conditioned political and economic changes in the social system ultimately lead to a society in which individual control over the means of production is given up and in which there is no longer any exploitation of the working class. In the period after
World War II, the "New Left" (in Europe) and the representatives of the "Radical Economics" (in the United States) adopted parts of the Marxist analysis (Radical School). The focus of their consideration (especially in the case of the latter group) is on the inequality of income distribution and wealth distribution, in which, in their view, the origin of all power in the social system is seen; The inequality has the effect that only a few exercise this power and, moreover, also influence international distribution because of their imperialist approach. In contrast to traditional Marxist economists, the representatives of "Radical Economics" emphasize that a decentralization of economic and social processes based on the needs of the population should be strived for, and that not so much a quantitative, evenly distributed increase in production, but one for all strata of the population a qualitatively improved supply of goods and services is to be undertaken. Overall, the teachings of Marxism have been a wrong track, which has brought people neither economic prosperity, but impoverishment, nor has this economic form led to other urgent human problems (e.g. environmental problems) being brought closer to a solution. In addition to the representatives of the Marxist (political) economy, some "unorthodox" economists are attempting to analyze the interdependence of economy and politics. The essential criticism of the existing (traditional) economic theory also stems from these two "camps". John K. GALBRAITH treats economy and politics as a unit which is of central importance due to the interrelationships between the two areas (mutual interdependence of politics and economy in highly industrialized societies). From this side, in particular, the unreality of the fundamental assumptions in traditional economics (e.g. complete competition) is heavily criticized. In addition to GALBRAITH, who is probably the best-known “unorthodox” man, Kenneth E. BOULDING should also be mentioned, who deals with the economic analysis of mechanisms such as exchange, love and threats as well as insignificant processes. Albert O. HIRSCHMAN primarily examines those processes that get started when the price system fails (e.g. deterioration in the supply of a good): According to conventional economics, another good (another supplier) is then chosen; In political science, on the other hand, attention is particularly drawn to the protest. According to HIRSCHMAN, both reactions can lead to an improvement in the offer. Another focus within political economy is the new political economy (or economic theory of politics), which emerged in the mid-1960s, in which the interdependence between economics and politics is examined using the tools of modern economic theory. Literature: Frey, B.S. (1977). Frey, B.S. (1974)

Previous technical term: Political-economic overall models | Next technical term: Political Economy of Protectionism



Report this article to the editors as incorrect & mark it for editing