Why Political Economy?

The global crisis is both economic and political. But economics and politics on their own won’t help us understand it

Tony Payne
Tony Payne

Why set up a new blog to host debate about issues of political economy?  Why establish a new university-based research institute – SPERI- focused upon the study of political economy?

The answer comes in two parts.  The first is that the global crisis, through which we are now living, with its varying national and regional ramifications throughout the world, including prominently the UK, is both economic and political in character.  The second is that the mainstream Western traditions of analysis in neither economics nor politics are capable of providing the explanations, insights and strategies that we all desperately need.

This double argument is the core reason why we need something called Political Economy as the intellectual fountain of new ideas and thinking for a new and troubled age.

So what’s wrong with the economics and the politics taught and researched in most leading Western universities these days? Why can’t these subjects, or disciplines, as they like to be termed, provide the tools we require to make sense of the financial crash, the recession and the resulting widespread confusion in so many countries about what kinds of growth model can be made to work sustainably in the future?

Economics has worked very hard over the past few decades to turn itself into a science that studies the choices made by rational actors in market environments under conditions of scarcity.  In so doing, it has substantially narrowed its remit, deploying ever more complex abstractions and mathematical tools to get its answers.  Modern economics is undeniably technically clever in much of what it does and it has acquired accordingly the cachet of being the most ‘scientific’ of the social sciences. Not surprisingly then, economists are in great demand to offer definitive advice to governments and other organisations. They tend to relish the challenge, displaying little uncertainty in the answers they provide.

But there is a big problem with this trend.  In creating this mock rational-actor world and then treating it with scientific reverence many contemporary economists, especially those trained in the neoclassical tradition, have given up on trying to comprehend the real world wherein the rest of us live and work.  Unfortunately, economists prefer far too often to forget that human beings are social and political animals, possessed of complicated and contradictory packages of motives that are not fully understood.

Politics as a field of study in the academy is very different.  It is true that it has within its ambit, especially in the US, a large group of researchers that aspire to emulate economics – to build up testable propositions that can be proved or disproved by reference to evidence.  It hardly needs to be said that this task is even harder to do on the basis of the rationality of political man.

In reaction to this pseudo-scientific thrust many other methodologies have flowered, ranging with huge variety across normative, institutional, behavioural, feminist and discourse perspectives. This list mainly describes the leading approaches to analysing domestic forms of politics and doesn’t touch on the much-touted claim that, notwithstanding the reality of globalisation, the ‘international’ is a field apart.

As with economics, this work is certainly not to be dismissed.  A lot of it is clever, insightful and deserves a wide readership.  The problem is that politics as a field of study has now spread itself too widely in search of methodological originality and pluralism.  There is no longer any core, no heartland of common knowledge and debate about power or democracy, the state or civil society, or indeed any of the major concepts in political analysis.  In the old saying, the field constitutes a pudding without a theme.

Where, then, have we got to in the overall argument?  We unquestionably still need economic and political analysis, more than ever perhaps, and we don’t have to worry about whether economics or politics predominates in determining events, because each does so in different situations at different times.  The key is always to think of these two dimensions of social life as comprehensively bound together, as constantly interacting, as constituting a political economy.

Here the really good news is that in seeking to chart a political economy of the current crisis we don’t have to start from scratch.  We can in fact go back to the future, because political economy, thankfully, does have a long and heroic intellectual history.  Before the modern social sciences began to divide a complex, interdependent world into discrete disciplines (like economics and politics) within which professional academics could build reputations, careers and departments, all that existed was the study of political economy. And, importantly, political economy was always grounded in a strong sense of moral philosophy.

Just think back to Adam Smith, Karl Marx and Max Weber, the great classical theorists of the ‘original transition’ to capitalism; remember how Joseph Schumpeter, John Maynard Keynes and Karl Polanyi kept political economy going as modern economics and politics began to take hold. And don’t forget the Latin American dependentistas, the world systems theorists, the French regulation school or the many contemporary followers of Antonio Gramsci.

This is political economy.  Its proponents saw the current global crisis coming more clearly than did most economists and political scientists. Today it offers the best basis on which to stand and think our way through to a new order.  We need even more political economy analysis in the future than we’ve had in the past and we need the key debates within political economy to be noticed in the corridors of private and public power. SPERI Comment aspires to be a place where these debates can be discovered and conducted.