What is Political Economy? How does it differ from
Orthodox Neo-Classical Economics?
Is political economy a branch of economics? In other words, should it be treated as categories like international economics, labor economics, gender economics and so on? In answering these issues, in many occasions, ignorance supplants wisdom and knowledge. Having overheard a discussion on the subject by some academics on the occasion of recruiting a person to teach political economy at the University of Peradeniya, I thought, as a person who taught political economy for more than three decades, it would be relevant to make it clear what the term political economy actually means. When I was a student at the University of Peradeniya, almost all my economic teachers were, in a broad sense, political economists. However, it is necessary to mention especially Prof. H A de S Gunasekera and Prof Budhdhadasa Hewawitharana, two great teachers under whom I developed my world view and perspective. So, in a way, in the sixties, the distinction between economics and political economy was not very clear as many economists were aware that there was nothing called pure economics. However, since 1975 onwards, there has been a paradigm shift in economics and economic teaching. I do remember heated controversy between ‘pure’ economists and political economists at the University of Sydney. Prof. Wheelwright wanted to introduce political economy paper at the first year level as an alternative, not supplementary, to principles of economics paper. It was an ideological war between economics and a critique of economics. In the late 1970s, Prof. W D Lakshman realizing that there was something lacking in the economic degree course took an initiative in introducing a separate political economy paper at the University of Peradeniya. After Prof Lakshman left University of Peradeniya, I taught that course until it was dropped from the syllabi in the 1990s.
The ‘end of history’ marked the victory for neo-liberalism in policy-making centers as well in the centers of economic teaching and research all over the world. The state was viewed as essentially bad. Economists have made an attempt to make economics a ‘pure’ science. In this context, political economy had become extinct or dying specie. Like Priory of Sion in Dan Brown’s Da Vinci Code, it survived secretly retreating to Geography Departments in the Universities. Prof. David Harvey, the most important and famous political economist today, began his academic career as a geographer. Alex Calinocos and Robert Brenner came from History while late Givonni Arrighi was a sociologist. If I put it bluntly, today, economic departments that specialize in orthodox neo-liberal economics cannot produce political economists. Factories that are equipped to produce chalks cannot be converted into factories producing cheese. Of course, there are a few exceptions like the economics departments of New School of Social Research, Jawaharlal Nehru University and School of Oriental and African studies. It is interesting and important to note that political economy or heterodox economic has affinity more with history, sociology, political science, anthropology and political geography than orthodox economics. Briefly, political economy is not a branch of but a critique of orthodox economics.
Orthodox and Heterodox Economics
The method, approach and coverage of Political economy differ qualitatively from those of orthodox economics. While the latter uses positivism as its scientific method, the method deployed by the former is genetico-evolutionary, critical, materialistic and dialectical. Political economy is essentially a trans-disciplinary subject that instead of putting up boundaries breaks down many existing ones. It posits that an economic phenomenon can be understood only in its historical, political and social context. David Ricardo brought in social classes and their interaction in his analysis of the process of accumulation. J S Mill argued that the distribution of social product was governed not by material-technological factors but social and political factors. Karl Marx emphasized the importance of class contradictions in understanding capitalistic system of production. As a result of modern compartmentalization of social sciences, one may even wander how J S Mill or Karl Marx or Max Weber can be characterized? A sociologist? An economist? A political scientist? Political economy treats society as an integrated totality. Hence, her/his role in understanding economic phenomena is to deconstruct this totality treating it as a text.
To meet the challenge posed by political economists, a change has occurred in neo-classical economics as many neo-classists have understood that the coverage of their discipline is too narrow. As a result a new kind of psudo-political economy appeared in the last three or four decades. Gary Becker used neo-classical methodology and categories in explaining marriage as a relationship based on relative cost and benefit. In my view, this development has nothing to do with political economy. Political economy most commonly refers to inter-disciplinary studies drawing upon history, economics, law, sociology, geography and political science in explaining how political institutions, power relations, the political environment, and the economic system influence each other.
Revival of political Economy
With the crisis of neo-liberalism and the first great depression in the third millennium that began in 2008 financial Krakatoa, we have been witnessing a revival political economy all over the world. The conventional economists who spend all their lives in researching the behavior of the economy have failed to predict the economic crisis that began in 2008. Former French President Sarkozy publicly announced that Anglo-Saxon model of free market had collapsed. Since all conventional genres have failed to reveal the secrets of the crisis, analysts look for alternative explanations in the writings of Karl Marx, J M Keynes and Hyman Minsky to understand the collapse of the world financial system. Finally, all the governments in advanced capitalistic countries were forced to resort to government intervention that include pump-priming and quantitative easing that neo-liberals criticized as a catastrophe in the heyday of neo-liberalism. Even people like Jeffry Sachs who is famous for his infamous ‘shock doctrine’ started to criticize the pure market model as non-operative and impractical. Calling himself as a ‘clinical economist’ he has traced the source of the economic evils faced by the USA (and other advanced capitalistic countries) to the "free market fallacy" leading to "Washington's retreat from public purpose"; to the "new globalisation" which cost jobs, lowered wages, and skewed rewards to the very rich; to social and ethnic fragmentation; and to the domination of politics by "corporate lobbies" and "spin masters of the media", who have distracted the American people with the "relentless drumbeat of consumerism".
We all talk about the values of inter- or trans- disciplinary nature of social sciences, multiplicity off options and expanding the enabling space. Nonetheless, when it comes to actual practice, many social scientists are for defending existing narrow boundaries for multiple reasons. The objections to political economy may come from not only this parochial mindset but also vested interests.
The writer is co-coordinator of Marx School, Colombo, Kandy and Negombo.