This paper is a reflection on the following question: In our age of globalization, what is the relevance of the three traditional theories of political economy? This subject will be explored in the following manner. First, there will be a brief examination of the meaning of political economy. Secondly, by looking at the political ideologies of capitalism, Marxism, and communism. Third, by examining the political economies of the three ideologies. Fourth, by examining how each ideology created a specific political economy in keeping with the ideology’s political framework. Finally, an examination of how these political economies work within a globalized world.
Definition: Political Economy
A political economy is the intersection of policy, polity, and politics. The assigned reading by Gilpin (2001) provided a detailed explanation of the evolution of the understanding of political economy as this developed in parallel with the study and understanding of economics, by “…historians, economists, and social scientists” (Gilpin, 2001, p. 25). What is of particular interest is that political economy affects all aspects of life, and the evolving definitions are also a reflection of the ages in which the definitions were developed. This is reflected in the attempts of various schools of economics to rationalize individual behaviour vs. rational-choice methodology in an attempt to explain how economic factors affect “…social institutions, public policy, and other forms of social activities” (Gilpin, 2001, p. 26), which is now regarded as having an impact on economic life. In 2017, some years after the global financial crisis, it is clear that there is a broader understanding of the intersectionality of economics and social institutions. As well, the recent political upheavals in Britain, with Brexit, and in the United States, with Trumpism, seems to be redefining our current understanding of just what political economy is. This is because both political events are trying to upend the liberal democratic understanding of capitalism from a position of global interdependency, to return to a world of protectionism in a world that cannot unravel global interdependence (The Economist (b), 2017).
The Three Traditional Ideologies
Capitalism was born of mercantilism at a time when the nation-state was developing and the power of the state was being expanded through the age of discovery. The fiscal power of a state ultimately determined its power. This is demonstrated in our own age by the creation of the European Union (EU) and the EU currency, the Euro. This trading block had essentially developed its own currency, minus the historical background of traditional currencies, and the EU is now a global power to reckon with (The Economist (a), 2008).
Marxism – Communism
Marxism was born of the Marxist theory of the relationship of the worker to the products of his/her labour. On a nationwide level, this was reflected in varying degrees by how socialist leaning states interpreted this relationship, that is, as a socialist state with some control of the economy remaining in government hands, or as a communist state with a centralized economy? In the instance of communist state economies, there are two main examples, the USSR and the Peoples Republic of China, prior to post-modern political world. Both economies were centrally controlled, but in each, the manner in which the particular ideology developed, diverged, became very strict, as in Stalin’s USSR and Mao’s China, and then changed to meet the reality of a globalized world. The USSR essentially collapsed, with the new Russian state’s economy going into free-fall and, presently, in a state of near collapse due to economic sanctions because of the political decisions of the Russian state. In China, on the other hand, there has been a liberalization of the economy but the state retains control over big spending on big infrastructure directed at future development of the state, for example, the Three Gorges Dam and the Mega-cities as regions of directed economic growth (The Economist (c), 2017).
The Intersection of the Political Economies & Ideologies of the Three Ideologies
In all three instances, it is clear that the political framework of each polity directs the political economy of each respective country. Each country’s economy has had to adapt to the changing world economic order, in order to survive. Countries that have remained isolated, for example, North Korea, find that they cannot compete in the global economic market and must rely on a benefactor nation; in this case, the North Koreans rely heavily upon of China and, to some extent, on Russia.
Political Economies Within a Globalized World
The global financial system is so integrated that isolation is no longer possible. As noted above, each ideology has had to adapt to external, international trends in their economic practices, in order to survive economically, politically and socially. Technology has integrated the world to such an extent that it is not possible for technological and industrial advancement without integration on a global level. In the noted instances of attempted isolation, Brexit and Trumpism, there is little indication that this will be possible without damaging the UK and US economies. In each case, new political attempts at isolation have created uncertainty and the economic impact has adversely affected the respective economies. This indicates that the relationship between politics, polities, and economies, still stands, and attempts to sever these links moves political economy into uncharted territory.
To conclude, the global economic order is well integrated and globalization is a part of the economic life of each country. Some countries have usually adapted to globalization, irrespective of the nature of the political ideology practiced domestically. Countries that have remained isolated face economic difficulty because of the inability to change political ideological beliefs to adapt to the evolving technological and industrial developments that are advancing at a rapid pace. The connection between politics, social institutions, and economic practice strongly impacts the development of a political economy. With technology, all these variables play a part in a very globalized world, where all actors are interconnected through political and social systems. As in the time of mercantilism, each nation-state is evolving and adapting to the changing economy of its polity. The factors of production now encompass global considerations and political economies must adapt or they will falter.
Gilpin, R. (2001). Global Political Economy: Understanding the International Economic Order. Princeton: Princeton University Press.
The Economist (a). (2008, May 14). Europe’s single currency: A decade on from the decision to launch the euro. Retrieved October 3, 2017, from The Economist: http://www.economist.com/node/11362788
The Economist (b). (2017, June 14). The 1914 Effect: The Globalisation Counter-Reaction – Globalisation is a highly disruptive force. It provoked a reaction in the early 20th century. Are we seeing a repeat? Retrieved October 2, 2017, from The Economist: https://www.economist.com/blogs/buttonwood/2017/06/1914-effect?zid=310&ah=4326ea44f22236ea534e2010ccce1932
The Economist (c). (2017, April 6). Beijing’s new annex: A plan to build a city from scratch that will dwarf New York. Will Xi Jinping’s dream come true? Retrieved October 2, 2017, from The Economist: https://www.economist.com/news/china/21720318-will-xi-jinpings-dream-come-true-plan-build-city-scratch-will-dwarf-new-york