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Summary of Foundations of Political Economy
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All intended learning outcomes, sample questions, some important comparisons (dualism vs embeddedness, Hayek vs Polanyi, Neoclassical vs classical, etc)
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FPE SAMPLE QUESTIONSCore questions:
1. What do we mean by “economy”?
2. What is the difference between economy, economics, and political economy?
3. How is capitalism different from other economic systems?
4. Where does capitalism (the market economy) come from and how does it work?
5. What are the benefits of the market economy?
6. What are the sources of conflict embedded in the market economy ?
7. Is capitalism based on individual freedom ?
8. What is the role of the state in the market economy ?
9. Are economy and state two separate spheres? Or are economies embedded in
institutions?
10. What is the role of inequality in capitalism ?
11. Is inequality a problem?
12. How does class analysis explain inequality?
13. What is intersectionality?
14. What is the relationship between production and social reproduction?
15. What is the difference between stakeholder and shareholder models of corporate
governance and financing?
16. How have financial mechanisms for allocating resources evolved in contemporary
capitalism?
17. What are the impacts of financialization ?
18. What is the goal of development ?
19. What is the relationship between development and underdevelopment?
20. What is the role of the state in promoting development?
21. What are alternative approaches to development that move beyond the imperative of
empirical growth?
Some questions worth prepping:
1. Discuss competing perspectives on inequality and sources of inequality.
Can be viewed as...
● Individual
● Incidental
● Contingent
● Fundamental
● Political
...depending on one’s view of political economy…
● Neoclassical (inequality is natural in market economies)
● Statist/developmentalist (inequality is state produced)
● critical political economy (inequality is created by the bourgeoisie, class, interest
groups)
● Feminist political economy (inequality is created by the patriarchy)
● Others; ethnicity, race, etc.
,However, there are three prominent accounts of inequality:
1. Functional theory of inequality
- Individual; result of individual characteristics and skills
- Natural; based on sorting mechanisms and division of labour
- Inequality can be a good thing as it results in social stratification system with
positive functions (right people in the right places)
2. Market explanations
- Natural; result of markets
- Contingent; somewhat reliant on how the market is organised, how much state
involvement is there
- Individual; markets are competitive, inequality inevitable
- Inequality is a good sign because it means economic growth; some people are
getting rich; more income to tax; trickle-down effect
3. Social conflict perspectives
- Not natural, political; inequality is created; it’s a choice
- Contingent; depends on social relations, institutions, interests & capabilities of
actors
- Different types of inequality; gradational vs relational
2. Explain variations observed in comparisons between ‘advanced capitalist’ and
developing economies, in varieties of capitalism.
VoC approach: focus on advanced capitalisms
- LMEs vs CMEs
- Variations in how important the state is
→ but can also be applied somewhat to developing countries (e.g. look at the role of the state,
organisation of economy)
VS developmentalist states; common in developing countries
- State-led development
- State is key in coordinating economic activity (similar to CMEs)
- In advanced economies we may find more regulatory states (more like LMEs)
Both LME and CME approaches are found in advanced capitalisms and developing countries
→ LME often recommended by IMF, WB (Washington/PW consensus; neoclassical
approach) but some countries have successfully used more statist approach (CME) (e.g. Asian
countries; developmentalist states)
Welfare Regimes Analysis:
Different kinds of welfare regimes:
, - Advanced: has welfare state in place; institutional responsibility matrix; differnt types
(liberal, conservative, social democratic); are seeing a reduction in welfare state?
- Developing: usually has no strong welfare state or welfare state is absent; reliance on
second generation welfare regimes (informal protections)
→ different capitalisms result in different welfare regimes; in developing countries welfare
regimes are less stable and common, whereas in established capitalisms welfare states mostly
exist (but there are variations in degrees of decommodification)
→ are seeing two types of development; race to the bottom (shrinking welfare state) or
compensation thesis (growing welfare state); race to bottom used to be mainly developing
countries but some advanced capitalisms also experience it
→ in advanced capitalisms: shifting towards Gig Economy/Industrial Revolution 4.0; will
impact economic organisation (e.g. how will LMEs or CMEs respond?) and welfare state
3. Discuss features of welfare regimes in advanced capitalism versus middle- and low-
income countries.
Advanced capitalism:
- Pretty much always have a welfare state. institutional responsibility matrix: welfare
comes from state, market, household, family and community
- Three types: liberal, conservative/corporatist, social democratic
- Varies depending on political-class settlements
Middle- and low-income countries:
- Welfare state mostly absent because of weak institutions, low state capacity,
corruption?
- Reliance on second generation welfare regimes; family, community, informal
protections
- Can mean adverse cooperation and bad impact on long-term welfare +
intergenerational poverty
BUT are we seeing a race to the bottom in both cases, or compensation thesis?
4. Discuss and compare in detail major perspectives on origins of contemporary market
economies, the relationship between the state and market economy, and the state’s role.
Be sure to include an analysis of the economy viewed from the perspective of class,
gender, and ethnicity.
3 Main Traditions
1. Liberal/Neoclassical political economy (e.g. Smith, Marx)
Origins:
- Develop naturally (natural end-stage)
Relationship:
- Varies within the school; some more dualist than others
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