Which theorists are connected with political economy

Arguably, with his extended concern for the division of labor, even Emile Durkheim was profoundly concerned with political economy. Although this is not the case for economics and political science, the meaning of political economy has been fairly consistent in sociology.

That is, the sociological examination of political economy has retained a focus on the intersection between the political and the economic. Theoretical emphases have shifted in the course of lively and extended debates over the state, markets, social class, culture, citizens, and globalization. Nevertheless, the central focus of political economy has persisted, as has its importance to sociological theory. In one sense, the meaning of political economy is straightforward; it refers to the intersection of the political and the economic.

Clark examines change and continuity in the meaning of the term. The classical contributors to economics routinely used the term, including David Ricardo and Adam Smith. Over the course of the 20th century, the meaning of the term has become muddied. In the late 19th and early 20th centuries, as the social science disciplines became institutionalized often by sharpening the contrast among them , the term political economy became less ubiquitous and it came to mean different things across social science disciplines.

In economics, the consolidation of neoclassical theory resulted in a focus on the rational action of individuals and a sharp conceptual divide between the political and the economic. When the term was used, it referred to policy advice that economists offered to government officials based on an analysis of the economy. Although the path has meandered, the meaning of political economy in sociology is largely consistent with the classical heritage. Sociologists interested in these topics draw on classical theorists and use the term political economy to refer to this intersection.

See also Smelser and Swedberg Clark, Barry Stewart. Political economy: A comparative approach. Westport, CT: Praeger. With consideration of competing and complementary meanings and uses of the term, Clark provides an extended examination of the manner in which political economy has been defined and used.

This examination considers both the origin of the term and changing meaning over time in both social science and historical disciplines. Pareto, Vilfredo. The manual of political economy. Capitalism instability is thus reinforced by financialization. Understood in this way, financialization does not imply economic stagnation. It does not block the system in terms of productive, technological and organizational changes. Financialization implies an increase in the instability inherent to capitalism, with periods of strong economic expansion and also deep crisis.

This more recurrent succession of mania, panic and crashes in recent decades implies a stronger role of the state in order to take actions to prevent or, at least, to restrain private losses, either through central banks, acting as big banks, or through the national treasuries, acting as big government Minsky, MINSKY, H. As evidence of financialization, Graph 1 presents the financial assets of households, nonprofit organizations and non-financial corporations in the United States directly or indirectly owned - through institutional investors - and Graph 2 shows the financial assets to the total assets of these agents between and One can observe that household and nonprofit organizations, as well as non-financial corporations, substantially increased their positions in financial assets at the beginning of the s.

This upward trend was only interrupted during the crisis, with the collapse of the dot-com bubble and the terrorist attacks in New York, and in , due to the crisis in the same year. Graph 2 Financial assets to total assets ratio - household and nonprofit organization U. In fact, the importance of financial assets started to grow in the s, in the case of non-financial corporations, and in the early s, for households and nonprofit organizations.

In both cases, the process was affected by the and crises. Regarding non-financial corporations, financial assets increased from As expected, this process affected the trend of non-operating revenues of non-financial corporations in relation to their operating gains.

Graph 3 shows the financial income 15 15 Financial income comprises the sum of interests and dividends. The importance of financial income of non-financial corporations increased considerably relative to gross operating surplus, up until After this period, a downward trend was observed, which was reinforced by the crisis.

Nevertheless, aside from the most recent crisis period, there was a significant increase between the beginning of the s and the s. Graph 3 Financial income of U. It is important to note that the trend of financial income ratio of non-financial corporations is closely related to the performance of financial assets traded, whose prices have experienced large fluctuations since the liberalization of international capital flows and deregulation of financial markets, as well as the emergence and development of product and process innovations.

In this regard, Graph 4 shows the stock market turnover ratio in markets all over the world between and 17 17 Turnover ratio is the value of domestic shares traded divided by their market capitalization. The value is annualized by multiplying the monthly average by According to the World Federation of Exchanges , p. The only exception is the case of foreign companies which are exclusively listed on an exchange, i. This turnover has increased considerably since the beginning of the s, a process that only stopped with the and crises.

As one would expect, the pace of business affected the stock price in the period mentioned. As in the case of turnover, the value of the shares of domestic companies increased quickly and significantly at the beginning of the s until the crises in the s.

The and crises had a significant impact on the financial markets. The impacts would have been even worse, however, if it were not for the quick responses from central banks and national treasuries, in order to avoid an even deeper devaluation of the financial wealth and thus harmful effects on credit, consumption and investment.

Graph 6 presents the assets of the Federal Reserve System Fed , the central bank of the United States, between and At the beginning of the crisis, the Fed sought to prevent the liquidity crisis from turning into a solvency crisis of financial market institutions - this was carried out through the provision of liquidity to banks and quasi-banks, mainly insurance companies and investment banks.

When the worst of the crisis was over, the Fed continued to pump liquidity into the system in an attempt to stimulate credit and the level of economic activity. These operations, known as Quantitative Easing QE , occurred in three rounds. The first began in November , the second in November , and the third in September Graph 6 depicts the increase of Securities Held Outright, which comprises the securities bought by the Federal Reserve from banks and other financial market institutions.

These QE operations are unique not only because of the amount of securities purchased, but also because of their quality. In fact, if in the past the Fed used to hold only lower-risk US Treasury securities, this has changed and the central bank portfolio also began to include higher-risk private securities. The counterpart of the increase in Fed assets, and as a consequence of its liquidity provision to the financial market, was the increase in its liabilities led by the increase in bank reserves.

This is due to the fact that, when buying the assets from banks, the Fed increases liquidity available to these institutions in order to stimulate them to enlarge the supply of credit for consumption and investment. In addition, the US Treasury acted promptly. Given the extension of the crisis, these actions had considerable negative effects on the fiscal results.

As already pointed out, financialization as a systemic pattern of wealth results in an increase in the instability that characterizes the capitalist system, reinforcing the movements of expansion, but also of contraction. During this process, some groups benefit more than others. The high concentration of financial wealth leads to a considerable increase in social inequality, even more so in the absence of adequate policy interventions. Cambridge Journal of Economics, v.

Thomas Piketty and the Search for r. Historical Materialism, v. Capital in the twenty-first century. In fact, as Erturk et al. General introduction: Financialization, coupon pool and conjuncture. Financialisation at work. London, UK: Routledge. Thus, the gains from the valorization of financial assets and from the increase in income associated to this process reinforce the unequal distribution of income and wealth over time.

Although developed countries tend to show a lower degree of income concentration relative to underdeveloped ones, most of the countries considered have experienced a worsening of income distribution.

Although the level of income of all groups considered increased up until the outbreak of the crisis in , the income of the richest groups did so more rapidly and sharply relative to the income of the poorest groups, in the period considered. It is also important to observe that after the outbreak of the crisis, the income of the poorest groups fell quickly and pronouncedly relative to the income of the richest groups.

Lastly, Graph 11 shows the level and the composition of household wealth per quintiles in the OECD countries in Financialization is the systemic pattern of wealth in capitalism in place since the collapse of the Bretton Woods agreement.

It is a pattern in which the valorization of financial assets involves not only the operations carried out by financial institutions, but also by households and productive enterprises, affecting their decisions on borrowing, spending and allocation of wealth among different classes of assets, with different degrees of liquidity and expected returns.

In other words, money that simultaneously generates more money in the productive, commercial and financial spheres. This exacerbates the tension between expansion and crisis, already typical of the capitalist system; and 5 the relevant amount of financial wealth in the portfolios of various economic actors has made the countercyclical intervention of national states increasingly necessary in the context of crisis.

However, these interventions often do not have the desired effects, since they impact fiscal results before economic recovery has been re-established. Thus, and contrary to the most recent interpretations of financialization, it can be concluded that the widespread financial logic, impacting all key actors in the system, does not imply an inexorable tendency of the system to stagnate, but rather an increase in its instability, exacerbating the ups and downs of business cycles, as well as crises.

This is because expenditure and borrowing decisions of companies and households have become increasingly sensitive to current and expected fluctuations in financial asset prices, which determine changes in output, income and employment levels. This new historical and logical context in the economy, one of much greater complexity, implies a more prominent role of the state through central banks and national treasuries in order to relieve the perverse economic and social effects of the process, even though the political action brings about new challenges.

The final result of this process is totally undetermined and open to history. Abrir menu Brasil. Economia e Sociedade. Abrir menu. E-mails: bragajcs uol. E-mail: paulowwolf gmail. Abstract The end of the Bretton Woods agreement led not only to changes in the international economic relations, but also in the very way in which capitalism functions.

For more information on the U. The transition from quantity to quality: a neglected causal mechanism in accounting for social evolution. Proceedings of the National Academy of Sciences, v. Is a finance-led growth regime a viable alternative to Fordism?

A preliminary analysis. Economy and Society, v. A primer on finance-led capitalism and its crisis. Capitalisme, Institutions, Pouvoirs, n. Some stylized facts on the finance-dominated accumulation regime.

Review of International Political Economy, v. The macroeconomics of finance-dominated capitalism and its crisis. Financialization: the economics of finance capital domination. London: Palgrave Macmillan UK, Political determinants of international currencies: what future for the US dollar? Companies may also issue new securities guaranteed by receivables from these operations. According to Serfati , p. Financial dimensions of transnational corporations, global value chain and technological innovation.

Journal of Innovation Economics, v. It is worth noting that banks have become real "financial supermarkets". Making sense of financialization. Owner-manager conflict and financial theories of investment instability: a critical assessment of Keynes, Tobin, and Minsky.

Journal of Post Keynesian Economics, v. Resurrection of the rentier. New Left Review, v. Corporate governance adrift: a critique of shareholder value. The crisis of neoliberalism. Cambridge, Mass: Harvard University Press. Stagnation and financialization: the nature of the contradiction. Gross operating surplus is a profit-like measure that shows business income after subtracting total intermediate inputs, compensation of employees and taxes on production and imports less subsidies from total in-dustry output.

Turnover ratio is the value of domestic shares traded divided by their market capitalization. Review of Radical Political Economics , v. BORD, V. Economy and Society , v. A temporalidade da riqueza Economia e Sociedade , Campinas, n. American Journal of Agricultural Economics , p. Proceedings of the National Academy of Sciences , v. Annual Review of Financial Economics , v. Novos Estudos Cebrap , n. Economia e Sociedade , Campinas, v. Mill combined economics with philosophy.

He believed in utilitarianism —that actions that lead to people's goodwill are right and that those that lead to suffering are wrong. In essence, he believed that economic theory and philosophy were needed, along with social awareness in politics in order to make better decisions for the good of the people.

Some of his work, including "Principles of Political Economy," "Utilitarianism," and A System of Logic" led him to become one of the most important figures in politics and economics. Political economy became an academic discipline of its own in recent years. Research by political economists is conducted in order to determine how public policy influences behavior, productivity, and trade.

Much of their study helps them establish how money and power are distributed between people and different groups. They may do this through the study of specific fields such as law, bureaucratic politics, legislative behavior, the intersection of government and business, and regulation. The study may be approached in any of three ways:. Modern applications of the political economy study the works of more contemporary philosophers and economists, such as Karl Marx. As mentioned above, Marx became disenchanted with capitalism as a whole.

He believed that individuals suffered under regimented social classes, where one or more individuals controlled the greater proportion of wealth.

Under communist theories, this would be eradicated, allowing everyone to live equally while the economy functions based on the ability and needs of each participant.

Under communist regimes, resources are controlled and distributed by the government. Most people confuse socialism and communism. It's true there are some similarities—notably, that both stress bridging the gap between rich and poor, and that society should relegate equilibrium among all citizens.

But there are inherent differences between the two. While resources in a communist society are owned and controlled by the government, individuals in a socialist society hold property. People can still purchase goods and services under socialism, while those who live in a communist society are provided with their basic necessities by the government.

The term political economy refers to a branch of social sciences that focuses on relationships between individuals, governments, and public policy. It is also used to describe the policies set by governments that affect their nations' economies. The main concern of political economy is to determine the relationship between governments and individuals, and how public policy affects society. This is done through the study of sociology, politics, and economics.

Some of the characteristics or themes of a political economy include the distribution of wealth, how goods and services are produced, who owns property and other resources, who profits from production, supply and demand, and how public policy and government interaction impact society.

The types of a political economy include socialism which states that any production and wealth should be regulated and distributed by society , capitalism where private owners control a nation's industry and trade for profit , and communism the theory where all property is publicly-owned and everyone works based on their own needs and strengths. Adam Smith is generally considered the father of economics and the father of the political economy.

Oxford Bibliographies. International Monetary Fund. Comparing Economic Systems. Internet Encyclopedia of Philosophy. Adam Smith Institute. Stanford Business. The College of New Jersey.