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Notes exam 1 Political Economy
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Lecture notes of 62 pages for the course Political Economy at UvA (Lecture 1-6)
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Video Brief 1:Covid situation understanding → PE helps, when industries where hired by the crisis
immediately the stet steps in and provides aid , immediate support for some companies and
sectors (ex: airlines (fast support) vs restaurants (slow)). Core issue: obviously markets
cannot function on their own without gov entmt and states (and also the other way around).
The Key point of these courses is that markets and states are interconnected (need one to
understand the other). The relationship is dynamic and developed over time.
How markets and states are connected?
Course is 3 parts (7 weeks) → READ
1. 2 weeks: intro to key notions in PE, thinkers and their relations
2. development in global capitalism: interaction between states and markets (book)
3. Issues and consequences of covid
Political economy as a course
PART I: The ingredients of Political Economy (1-4)
PART II: Developments in Global Capitalism (5-9)
PART III: Real World Economics in times of crisis (10-14)
LITERATURE
Schwartz: historical developments in global capitalism.
• A very rich book will take some effort and close reading.
• Some parts from Stilwell textbook.
• Additional articles are not always easy reads.
Lecture 1:
Intro to PE: what is PE? Perspective through which u can study it. It is always about looking
in a particular way what is going on in society → who wins and who loses? (principal
question). Distributional question → economics is about exchange and exchange is never
neutral (win or lose) → inequality and PE tries to understand that.
Lecture 2: classical
Classic Hikers, there was no difference between eco and pol science (developed in the 20th
century). Moral philo, started to be concerned about society and eco interaction and the role
of the state. Adam Smith ``Theory of moral sentiments'' and “Wealth of nations''. Key
takeaway Smith: true that there is a vision that states that he is the one who said that the
free market is what we need, true but for his free market is not a goal is a means for an end
→ well being of the society (pb of social order). To get there market exchange can solve the
pb of social order.
Article: Argument about Smith by Samel’s
Lecture 1: What is political economy? What is it all about?
, ● Political Economy ≠ Economics:
PE is not economics but it's very related and there are large branches of PE where there are
calculations and math, using econometric methods, this is not what we are gonna do. We
will do PE to understand the relationship between markets and states, between economic
development and the goals the society set for themselves, understand what political choices
are underneath the economic models that we see and how these choices are constrained by
the country and the path of development of the country, ressources, location…
Take away: the economy is inherently political, this means that underneath the economy
there are choices about how we organize the world, some are deliberate some are less but
it shapes the world and since the early days of PE people think about how to organize
societies in such a way that we benefit the people the most. There are normative
assumptions under economic systems, there are different values and choices underlying
economic systems (choices determine to a certain extent the kind of system u end up).
1. Studies the fundamental interconnection between states and markets: Book → min point:
states and markets are not disconnected and dependent.
2. Understands economic politics as a means for states to achieve their objectives: PE is
about the understanding of economic politics/policy as a means for states to achieve their
objectives (make life better, prosperity).
3. Considers today and tomorrows political economic relations and battles from a
historic perspective: eco history shows cycles, patterns, cadence to economic development
(ex: why the US are so interested in their intellectual property rights?), certain states are in a
better position to develop than others.
, ● From the PE perspective, almost every topic studied in Pol Science has a PE angle.
Example: The Trade War between China and United States:
What is going on? A few pointers:
- Tariffs: one country trades with the other → when goods are imported into a country, states
can levy taxes on these goods. These are called tariffs (“taxes”). And make trade more
costly. (ex: US --tariffs--> China)
- There are more goods coming from China to the US than the other way around (China
exports more to the US than the US to China). So money flows from the US to China
because the US pays for those goods (=trade deficit). So the US owes money to China
(China holds the debt of the US).
- We have trade flows (politics), tarifs and financial relations, these international trade flows
influence the value/exchange rate of the currency => battle ground (interests, perspectives,
cooperations, goals…)
- International trade flows influence the value of currencies (exchange rates).
- Central banks are responsible for monetary policy (in US: federal reserve)
Example: Controversies of Huawei and 5G:
Same goes by → Story about espionage but also economic development and technology
and about how to control the main infrastructure in the next step of mobile devices, and the
internet. 5G faster erosion of 4G: Chinese film leader in that the technology has not
happened before bc before they were in the hands of western countries. Debate about if
western countries want that technology to be integrated in their economy or not.
These questions have always been popping up in history, there is a political element related
to improvement (risks).
, The economy is inherently political. And much of what is political, is directly
related to the economy. PE is everywhere, and everything is PE. But if that is
true.... How can you study this?
I. What is Political Economy?
There are 4 kinds of political economy
1) The classic thinkers on state and market, and their followers
2) The political science of economic policy fields
3) Political phenomena considered from an economics perspective
4) Markets and business considered from a political science perspective
★ Political economy I: The classic thinkers on state and market,
and their followers
They considered both states and markets, integrated in one academic debate
The roots of PE can be traced back at least 250years ago to thinkers like Adam
Smith, Marx… very concerned about how the society could and should be organized, they
were moral philosophers (political science) before economics developed. It is about
understanding the concept of wealth and prosperity (what makes the wealth of nations?
What determines wealth? What determines prosperity? What determines inequality...).
These classic thinkers thought a lot about the nature of human behaviour: vices, virtues,
government should be organized... to enhance wealth and prosperity.
Fundamental question: Should social economic order be the outcome of coordination by the
markets or by the states? Should we organize it top down? (hierarchy), horizontal? (market
relations) → this remains a fundamental question.
Early 20th century: The Academic Divide
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