Development Studies THE STATE UNIVERSITY OF ZANZIBAR (SUZA) DS 301 for diploma students third year. Prepared by: Mr. Abdulrahman Mustafa Nahoda

What is Political Economy? History: In the time between Adam Smith’s Wealth of Nations (1776) and John Stuart Mill’s Principles of Political Economy (1848), what is now called economics was more generally called political economy. The term political economy reflected the belief that politics and economics are inseparable, and in fact that political factors are crucial in determining economic outcomes.

What is Political Economy? First, political economy is “political” in that it involves the use of state power to make decisions about who gets what, when, how, and why in the distribution of public goods and social values. Second, political economy is about the economy or economics, which means that it deals with how scarce resources are allocated to different uses and goods are distributed among individual actors. As the term suggests, political economy brings together both political and economic considerations in allocating resources.

Case Studies First case: The Federal Reserve system or the budget Second case: The Arab Oil Boycott of 1973 and 78 Third case: Globalization

What is Political Economy? Microeconomics, political economy is an approach used to understand how political and legal institutions influence the economic behavior of people, firms, and markets, as well as the economics of how interest groups influence the formation of laws and regulatory policy.

What is Political Economy? From the standpoint of international economics, political economy is concerned with understanding how national policies influence international trade, investment, and finance, with the processes that lead to the formation of international economic treaties and institutions, and with the economic consequences of these laws and institutions.

What is the focus of the study of PE? The interaction between the state and the market By state we usually refer to the political institutions of the modern nation-state, a geographic region with a well-defined territory and population and a coherent and autonomous system of government capable of making collective decisions and exercising sovereignty, including a coercive apparatus and the legitimate use of physical force to administer control over the population within its territory. By market we usually mean the economic institutions of modern economy, which are dominated by individual self-interest and conditioned by the “invisible hand” of market forces through the balance of demand and supply.

The interaction between states and markets? Central Questions: what is the nature of the relationship between states and markets? How the two interact with each other?

Conflictual or Unconflictual When unconflictual? When states and markets have similar goals or driven by similar interests and values When conflictual? When the motives and values of states and markets differ

Why the two often conflict in IPE? efficiency vs. fairness freedom vs. equality self-interest vs. common interest

Does the relationship between states and markets look similar or different in different political economies? In a free market economy In a centrally planned economy

Power Power is the ability to control or influence the minds and actions of others and affect or determine outcomes. Power (politics) and wealth (economics) are often intertwined and interact with each other. Relational power vs. Structural power

Contending Theories Liberalism/Capitalism a political and economic theory that emphasizes the freedom of the autonomous individual, the system of private property and self-regulating markets, and the pursuit of individual interest.

Contending Theories Marxism and Communism a political and economic theory that is influenced by the political and economic philosophy of Karl Marx and his methodology of class analysis that emphasize the system of class domination and class interest, the value of equality, and the social cooperation and social ownership based on universal humanity.

Contending theories Corporatism It refers to a theory that seeks to bring about the institutions and practices that involve a system of interest representation or a kind of state-society relationship that is controlled and regulated by the state, the requirements of the law, or the predominant social norms, and their interactions are incorporated into the formal structures of the state, monitored and guided by the state in modern society or political authority in traditional society.