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Political Economy

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

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Political Economy

  1. 2. <ul><ul><ul><li>Use political power to deal economic resource </li></ul></ul></ul><ul><ul><ul><li>Economic situation also influence political decision </li></ul></ul></ul>INTRODUCTION Political and economy (PE) field are mutually dependent. PE is the basis for the government in decision making.
  2. 3. Definition of Political Economy <ul><li>Two fields grafting namely political and economy </li></ul><ul><li>Economic Politics Master: </li></ul><ul><ul><ul><li>Classical: Adam Smith, David Recardo, James Stuart, Karl Marx </li></ul></ul></ul><ul><ul><ul><li>Modern: David N Balaam, Robert Gilpin, JA Frieden, I. </li></ul></ul></ul><ul><li> Wallerstein </li></ul>
  3. 4. Understanding of Politics Definition of politics <ul><li>“ Who gets what, when & how”. </li></ul><ul><li>“ The art and science of government”. </li></ul>Can be formulate as arrangements to seek, use or empowering to an individual or a group of individual.
  4. 5. Economy Insight Limited resources vs. unlimited will focus to:
  5. 6. <ul><li>Can exist in domestic level. </li></ul>Use of political power to determine distribution of limited economic resources. Involving two (2) important mechanism namely: ECONOMIC POLITICS DEFINITION
  6. 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
  7. 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
  8. 9. Conclusion PE is field which discusses how political factors can influence and produce results or economy policy or economic arrangement which influences political decisions.
  9. 10. IDEOLOGI POLITIK EKONOMI Three major ideology according Gilpin in his book ‘The Political Economy of international Relations':
  10. 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
  11. 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.
  12. 13. 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. Nationalist
  13. 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
  14. 15. 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. Marxism
  15. 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.
  16. 17. WORLD ECONOMY POLITICAL STRUCTURE Divided into 4 structures:
  17. 18. 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 Production structure
  18. 19. Safety factor in economy politics especially during the Cold War (components of the world fell into two main block: <ul><li>support US </li></ul><ul><li>support the Soviet Union/ Sosialis) </li></ul>Also means that the country can handle various threat in or out and give protection to other countries as well. Security structure
  19. 20. 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. Financial structure
  20. 21. 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 Knowledge & Technology Structure
  21. 22. Conclusion 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.
  22. 23. <ul><li>OPEC oil crisis 1970 </li></ul><ul><li>Influenced by political crisis then: Arab-Israel war (end of 1940 ‘s). </li></ul><ul><li>In 1973, war between Arab-Israel caused Arab (which is the main country in OPEC organization) to increase the world oil price </li></ul><ul><li>This was to retaliate towards the Americans and British who supported Israel </li></ul><ul><li>OPEC controls almost 85% world oil production </li></ul>
  23. 24. <ul><li>Price gambol 400% ( from $2.90 > $11.65) </li></ul><ul><li>Crisis worsened with the fall of Iran 's Shah > Ayatollah Khomenei (gambol $34 one barrel, 1200%) </li></ul><ul><li>This proves that economic activities are influenced by politic and vice versa </li></ul>
  24. 25. <ul><li>Multinational Corporation (MNCs) </li></ul><ul><li>Important in world economic development </li></ul><ul><li>Rich and can move around the whole world without restrictions </li></ul><ul><li>MNCs readily acceptable (modal injection / factories construction </li></ul><ul><li>MNCs is divided to various kinds: manufacturing (car), finance (banks, solicitor firm), technology (IBM, Microsoft). </li></ul><ul><li>Has 2 or more branches in other countries </li></ul>
  25. 26. <ul><li>Developing countries make the effort to attract outside investors (foreign direct investment-FDI) because lack of capital and skill </li></ul><ul><li>US also requires MNCs to move their economy. In the year 1980, 40% world FDI encroached US. </li></ul><ul><li>However in 1990 ‘s, FDI distribution was stable in Cold War post era </li></ul>
  26. 27. <ul><li>Basically, FDI gives positive impact to the host country: gives revolving capital, job opportunities, new market, technology transfer </li></ul><ul><li>weakness: MNCs will move to other country if the operation in the present country is more remunerative </li></ul><ul><li>For example: when China open her door to world economy, many MNCs company moved there due to cheaper labour cost </li></ul>
  27. 28. Regional 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
  28. 29. Thank you…

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


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