The Big Ideas of Political Economy

According to Pranab Bardhan (2008, p.2) “Political economy refers to the distribution of political and economic power in a given society and how that influences the directions of development and policies that bear on them.”

The questions of the economic role of the state, importance of international trade, contradictions in the modes of production and the ecological hindrances to the continuous economic growth led to the development of various theories such as Doctrine of Laissez-faire by Adam Smith, Theory of historical materialism by Karl Marx and Theory of population growth by Thomas Malthus respectively. Within the backdrop of Mercantilism of the eighteenth century, Physiocrats and the Scottish enlightenment thinkers introduced the arguments of invisible handled competitive market based economic system.

Business as economic activity was deemed to be the function of rational economic actors who will compete in a competitive market determined economic system paving the way for optimum allocation of resources.

The Industrial Revolution and the problems of capital accumulation paved the way for the development of ideas of economic structuralism and historical Materialism by Marx and Engels. Marx and Engels characterized the state in the Communist Manifesto as “a committee for managing the common
affairs of the whole bourgeoisie”. (I. Robinson, 2001).

The democratic revolutions of the nineteenth and twentieth centuries provided legitimacy to the state through the modicum of social justice. The post-colonial states took the shape of developmental state based on the
principle of Welfare state. To resolve the legacy problem of colonial exploitation these states were interventionist in nature. Based on the capabilities to direct development these states were categorized as strong and weak states.

In the period of 1980s with the triumph of a neoliberal form of capitalism, many developmental states pursued market-led economy systems. However,
in the recent decades after the triumph of a neoliberal form of capitalism, there has been a sharp rise in inequalities which is even taking the shape of political inequality by direct and indirect influences of business elites on political systems.

The future waits for …………………………………………