Political Economy

Political and economy (PE) field are mutually dependent. PE is the basis for the government in decision making.

2. Use political power to deal economic
resource
Economic situation also influence political
decision
INTRODUCTIONINTRODUCTION
Political and economy (PE) field are mutually
dependent.
PE is the basis for the government in decision
making.

3. Definition of Political EconomyDefinition of Political Economy
• Two fields grafting namely political and
economy
 Economic Politics Master:
Classical: Adam Smith, David
Recardo, James Stuart, Karl Marx
Modern: David N Balaam, Robert
Gilpin, JA Frieden, I.
Wallerstein

4. Understanding of Politics Understanding of Politics
Definition of politics
“Who gets what, when & how”.
“The art and science of
government”.
Can be formulate as arrangements to seek, use
or empowering to an individual or a group of
individual.

5. Economy Insight Economy Insight
Limited resources vs. unlimited will focus to:

6. 6
ECONOMIC POLITICS DEFINITION ECONOMIC POLITICS DEFINITION
Can exist in domestic level.
Use of political power to determine
distribution of limited economic resources.
Involving two (2) important mechanism namely:

7. 7
Domestic
Focus on how government use political power to
deal economic resources in countries.
Depends on form of government that is
practiced.
Example: monarchy, autocracy, republic and
democracy

8. 8
International
Focus on how government use political
power to deal economic resources
between countries.
Depends on pact between countries at
international level.
Example: ASEAN,EU, AFTA, NAFTA

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ConclusionConclusion
PE is field which discusses how political
factors can influence and produce
results or economy policy or economic
arrangement which influences political
decisions.

10. IDEOLOGI POLITIK EKONOMIIDEOLOGI POLITIK EKONOMI
Three major ideology according Gilpin in his book
‘The Political Economy of international Relations':

11. Must occur separation between economy and
government intervention.
To reduce bureaucracy and give plenty of
freedom to traders and dealer.
In the opinion of Liberalist : logic will
determine market and with freedom,
healthy competition will incur.
Liberal

12. Efficiency and economic development can
produces better life standard.
Humans will always want best benefit by
giving priority to cost reduction and
maximize income.
Finally, humans want equality among
products and cost so that the people are
pleased with the market.

13. Nationalist
Almost alike with the concepts of
mercantalism, protectionism and statism.
All economic activities are supervised by
government or country.
Intends to fulfill national interest.
Gives priority to national interest, country's
defense system, national security and
development.

14. Economy must be contributed to nation building.
Extreme Nationalist thought says,
“international economy is the stage to extend
the country’s mastery and the field to seek out
maximum wealth for national treasury”.
Wealth > power > national security

15. Marxism
Discussion is focused to questions relating
to production that can be felt by all layers
in community.
According to Marx (1818 1883), although man
originally are rational and can use logic with
balance in wealth accumulation and wealth
distribution, eventually rational and logic
would force humans to reap more profit to
ensure their own future.

16. Associated with interclass competition concept
(class struggle) and finally change the world to
socialism concept (national property ownership
and equal distribution of property).
Marx 's views was further developed by Lenin
(1870 1924).
New Theories such as ‘Modern World system’
came into existence; dual concept namely
‘core and periphery’ and also dependency
theory concept.

17. WORLD ECONOMY WORLD ECONOMY
POLITICAL STRUCTURE POLITICAL STRUCTURE
Divided into 4 structures:

18. Production structure
How products are issued and traded.
International trading are bound by various regulations
(GATT, WTO)
Also discusses on who are the manufacturer and who
are the users

19. Security structure
Safety factor in economy politics especially during the
Cold War (components of the world fell into two main
block:
support US
support the Soviet Union/ Sosialis)
Also means that the country can handle various threat
in or out and give protection to other countries as well.

20. Financial structure
Discusses the cash flow (ways to get and ways to
use) as a tool to get the resources in the world.
Example: A country which takes up a loan from
IMF is forced to follow and reshuffle their
economy to suit IMF’s will.

21. Knowledge & Technology Structure
Emphasizes the importance of interest and use of
knowledge.
Nations that have the knowledge and technology will
advance in comparison to those without either.
Example: Japan, US, South Korea

22. Conclusion of Four StructuresConclusion of Four Structures
Altogether this perspective would be the
elements to see tendency / level of cooperation
framework of one country.
Although they differ from one another ,
sometimes they are joined.

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OPEC oil crisis 1970
Influenced by political crisis then: Arab-Israel war (end
of 1940 ‘s).
In 1973, war between Arab-Israel caused Arab (which is
the main country in OPEC organization) to increase the
world oil price
This was to retaliate towards the Americans and British
who supported Israel
OPEC controls almost 85% world oil production

24. Price gambol 400% ( from $2.90 > $11.65)
Crisis worsened with the fall of Iran 's Shah
> Ayatollah Khomenei (gambol $34 one
barrel, 1200%)
This proves that economic activities are
influenced by politic and vice versa

25. Multinational Corporation (MNCs)
Important in world economic development
Rich and can move around the whole world
without restrictions
MNCs readily acceptable (modal injection /
factories construction
MNCs is divided to various kinds:
manufacturing (car), finance (banks, solicitor
firm), technology (IBM, Microsoft).
Has 2 or more branches in other countries

26. Developing countries make the effort to
attract outside investors (foreign direct
investment-FDI) because lack of capital
and skill
US also requires MNCs to move their
economy. In the year 1980, 40% world FDI
encroached US.
However in 1990 ‘s, FDI distribution was
stable in Cold War post era

27. Basically, FDI gives positive impact to the
host country: gives revolving capital, job
opportunities, new market, technology
transfer
weakness: MNCs will move to other country if
the operation in the present country is more
remunerative
For example: when China open her door to
world economy, many MNCs company moved
there due to cheaper labour cost

28. Regional Economy PoliticsRegional Economy Politics
There are regional organizations which plays
important roles in development of world
political economy.
Among them are: European Union, NAPHTHA
and ASEAN
Even though it gives emphasis to regional
cooperation, could not get away from the
occurrence of political consideration in decision /
economy policy

29. Thank you…Thank you…