In this piece I introduce political economy in general terms and reflect on how we might apply this to the issue of COVID-19. In what follows, I discuss ‘five Cs’ – COVID, Capitalism, Collaboration, Continuity and Change – which shed some light on these questions.
It is difficult to discuss the impact of the COVID-19 pandemic without falling into superlatives. The title of the IMF’s June 2020 World Economic Outlook Report, entitled ‘A Crisis Like No Other’, is a good place to start. Consider three observations, taken from Adam Tooze’s recent book Shutdown. At the height of the pandemic, 3 billion adults were on furlough or working from home, half of the world’s adult population. 1.6 billion young people had their education disrupted. The World Bank projects that estimated loss to life earnings will be $10 trillion.
What does the sheer scale of COVID-19 mean for how we should study its impact on the world economy? One entirely reasonable response is to say we need to break COVID-19 down into its component parts. We need epidemiologists, sociologists, public health analysts, political scientists, policy experts, econometricians and so on. And that is of course true. However, I argue that ‘BigEvents’ also demand conceptual toolkits which can generate ‘Big Picture’ analysis. This is where political economy comes in.
So what is political economy? It is a distinctly modern approach, which rose to prominence during what Eric Hobsbawm termed ‘the long 19th Century’. This period, starting with the late 18th Century French political and English industrial revolutions, generated a new form of social organisation. This social, economic and political system – what we now refer to as capitalism – was the necessary precondition for the rise of political economy and subsequently became the central object of analysis of political economy.
How, then, should we study capitalism as political economists? There is not a singular answer to this question. A good place to start, though, is agreeing upon some central features of capitalism as a form of social, economic and political order. One feature I’d highlight is capitalism’s expansionary character. Capitalism relentlessly projects its logics outwards and integrates a diversity of social structures into its developmental orbit. Different traditions within political economy agree on this central point. Liberals point to the comparative advantages of free trade and the ways in which this foments international economic integration; Marxists stress capitalism’s ceaseless drive to open up new frontiers of commodification and accumulation; post-colonial scholars emphasise how systematic patterns of racialised extraction animate an unequally integrated world economic system.
The restless dynamism of capitalism has important conceptual implications. An expansive system requires an equally expansive intellectual toolkit. Capitalism jumps boundaries; so we need an approach that can move fluidly between different areas of study. Capitalism takes concrete social practices (think of your everyday work practices), abstracts them from these contexts, and creates an abstract and quantifiable realm such as the ‘labour market’. We likewise need an approach that can uncover the complex intertwinements between the concrete and abstract dimensions of capitalist development. Dynamism may be one side of the capitalist coin but its tendency to produce crises is the other; so we need an approach that does not assume away disequilibrium but instead foregrounds the contradictory tensions enshrined into capitalist development.
Political economy provides us with this toolkit. It captures the dynamics of capitalist development because it conceptualises capitalism as a totality –as an integrated social, political and economic order. There is no ‘economy’ understood as separate sphere of production, exchange and contract. There are only political economies, embedded within complex sociological webs of asymmetric power relations.
The great classical political economists all recognised this need to study capitalism holistically. Adam Smith was famous for theorising the division of labour and the emergent logics of market society in his Wealth of Nations, but he was equally attuned to the moral and political philosophy of the Scottish Enlightenment. Karl Marx may have spent hours in the British museum pouring over factory inspector reports and the accountancy of the linen trade, but his project was fundamentally rooted in a critical extension of Hegelian philosophy. Susan Strange, the great pioneer of British International Political Economy in the 1970s, lambasted economists and international relations theorists alike for mutually neglecting each others’ insights. She called for a holistic approach that doesn’t simply assume away the connections between states and markets but instead takes this nexus as its central object of study.
To be a political economist, then, is to view capitalism as part of a wider social totality. If we accept this premise, then inter-disciplinarity is not a tokenistic add-on. It is at the heart of what political economists do. This is where my third ‘C’ – collaboration – comes in.
How might political economy approach COVID from an inter-disciplinary perspective? Imagine a room full of budding political economists from a range of disciplinary backgrounds. The historian begins by noting that pandemics have played an important role in transforming social structures in the past. The Black Death in the 14th Century, for example, decimated the European population and empowered the peasantry, unleashing dynamics that would ultimately result in the collapse of feudalism. The geographer agrees but points out that the Black Death emerged from Europe’s integration with Asia via the Silk Road trading route. She points out that her discipline provides a useful toolkit to theorise international economic linkages, such as global production and world city networks, which could be deployed to analyse COVID. At this point, the economic sociologist comes in and points out that global supply chains are often premised upon systematic patterns of gendered exploitation. How might this inform our analysis of COVID-19 and its fall-out?
The point of this imagined conversation is that political economy is not what any one of these sub-disciplines brings to the table alone. It is what emerges out of the conversation. That is what I recommend to all students interested in political economy: have these conversations.
My fourth and fifth C’s can be summarised as a question. Will COVID-19 and its fall-out produce continuities or changes in the world economy?
We can’t look into the crystal ball. But what we can do – and what political economy is particularly well-placed to do – is draw on past historical experience and make an informed judgement on this question.
Take the 2008 global financial crisis as an example. In the immediate aftermath of the crash, many scholars predicted a transformation of global capitalism. After all, the key claims of neoliberal elites and intellectuals had been catastrophically undermined. Deregulated financial markets, tight fiscal discipline and international economic integration had not delivered what globalisation’s proselytisers had promised. Instead of rising prosperity and economic stability, 2008 generated destabilising dynamics of crisis and contagion.
The manifest failures of neoliberal globalisation did not result in the predicted transformation, however. Instead, a new age of austerity took root, further entrenching existing patterns of inequality. Loose monetary policy such as quantitative easing kept advanced economies afloat, but stimulated the wealth of asset owners while wages stagnated. Emerging exporter economies were negatively impacted by the decline in international trade and investment. Politically, it wasn’t the Left but the Right that successfully entrenched its rule across the West. So a lesson as we investigate COVID-19 is that big crises don’t automatically produce change but can reinforce existing power asymmetries.
That said, there is evidence of significant change since 2008. In light of falling international trade and investment, China stimulated its economy and established itself as an alternative hub of global economic demand, drawing commodity exporters and East Asian assembly platforms into its developmental orbit. An ongoing decentring of global capitalism away from the West has been the result. Within the advanced economies, new economic ideas proliferated, as colleagues at SPERI have written about (for example, here and here). The old certainties of neoliberal globalisation – low tax, capital account openness, labour market deregulation, tight counter-inflationary discipline – have been questioned.
Political economists can often appear to be a gloomy bunch. But perhaps, with the variety of changes that have taken shape since 2008, there is some room for optimism. The central lesson of political economy is that the economy is just that – political. The future isn’t set. It is relatively open. It is the role of political economy to take the structural and political constraints inscribed into global capitalism seriously. The hope is that by charting these constraints properly we are better placed to address them.