Conclusion

The main purpose of this book has been to examine and develop the theo­retical core of various approaches to political economy. Where possible, we began with a recognized body of theory in either economics or politics.

The emphasis of the book is on the diversity of approaches rather than their similarities. We have tried to identify the distinctive marks of each approach and to draw out their significance. We have not tried to integrate approaches, for instance by absorbing them into larger categories or by show­ing how the concepts of several approaches are special cases of a more general theory.

What do we mean by diversity of approaches? In general we mean that the theories examined have different key assumptions, different actors, and different explanatory and interpretive tasks. To synthesize these approaches, or to assimilate some into others, risks confusing more than is clarified. The summary following reviews each theory, highlighting its important charac­teristics and distinctive senses of political economy.

Summary

The classical economists use the term “political economy” to refer to a system of want satisfaction exhibiting two related qualities. First, it extends beyond the family, constituting a structure of mutual dependence (division of labor) among the people of the nation rather than the members of a family. Second, a political economy is held together by exchange contracts between legally independent property owners; it is a market economy.

Beyond this, the economy of the classical theory may or may not demand the attention of the public authority, and thus be subject to a political process. In classical political economy the term comes more and more to refer, par­adoxically, to depoliticized society. Political economy is part of the erosion of politics and the rise to dominance of a largely autonomous private sphere.

If the economy is political for classical theory, it is in the sense that its boundaries are established institutionally. The economy’s locus is within the boundaries established by the state. Thus the arena within which economic transactions take place, and within which the problems of production and distribution across classes are considered, is defined by the state. While classical economics broke its ties with mercantilism, it still relied to a large extent on the national state as the container of economic activity.

In his understanding of political economy, Marx is very much a classical economist. He thinks of political economy as the study of the “anatomy of civil society.” Thus, the subject matter of political economy is the nonpolitical society of the market. Marx attempts a radical critique of this nonpolitical society, less for being unpoliticized than for its failure to provide most par­ticipants with the civilized life it promises. In doing so, Marx seeks to use political economy to support, or even create, a political agenda. Even more, he seeks to demonstrate that the development of capitalist economy inevi­tably engenders a political challenge to it and a struggle over its most basic institutions.

Marxism suggests different routes for connecting the political with the economic. In Chapter 3 we discussed several possibilities, including revo­lutionary action to change the political structure, social democratic politics, and Marxian state theory. The first approach is the most radical. Politics does not refer to policies designed to compensate for limitations of market society, but instead to large-scale changes in the political structure itself.

The route of social democratic politics proceeds differently. Political prac­tice requires participation in established institutions, compromise, electoral strategies, and so forth. Participation in established institutions requires workers to accept extant institutions as tools by which to pursue labor’s goals.

Marxian state theory starts from the assumption that economic society is polarized into separate classes. Different classes represent different objective interests that cannot be compressed into a policy that pleases everyone. Unlike in pluralism, Marxian state theory emphasizes the partiality rather than in­clusiveness of the state. The issue of state autonomy emerges as a way of responding to some of the paradoxes faced by the capitalist class, particularly between individual and collective interests.

Marxian political economy houses an important tension between politics and economics. On the one hand, Marxism provides a radical critique of the organizing principle of liberal society, the self-regulating market. On the other hand, this critique is accompanied by a view of economic agents as primary. The focus on economic classes and their political significance is an example of the primacy of economics.

The end of the classical period and the rise of neoclassicism (marginalism) in the 1870s marks new departures in economics and, hence, in conceptions of how economic and political phenomena relate. The rise of neoclassical economics represents a move away from class categories toward the individual who pursues utility within the arena of consumption and profits within the productive arena. The self-seeking behavior of individuals is analyzed within market settings, both perfect and imperfect. To the extent that markets allow for individual satisfaction, politics is not implicated.

As discussed in Chapter 4, “Neoclassical Political Economy,” politics en­ters via the concept of market failure.

From our standpoint, the contribution of Keynes that is most significant for political economy is his demonstration of the limitations of the self­adjustment mechanisms of a market economy. In other words, market econ­omies do not fully exploit their productive potential. They often do a poor job of bringing wants and means together. The depression of the 1930s suggested that persistent unemployment could occur. Keynes’s model of unemployment shows that the self-correcting market mechanism can break down.

A change in our collective judgment concerning the market’s capacity for self-adjustment places a number of vital issues on the political agenda. The most notable of these involve the role of government in securing incomes and investment. The Keynesian critique illuminates the way in which the organization of labor and capital markets becomes contested terrain.

Chapter 6, “Economic Approaches to Politics,” considers an extension of neoclassical ideas, particularly rational self-interest, into the political domain. Individuals are seen as goal-seeking and choosing creatures operating in dif­ferent environments. When the goods in question are public and the rules are provided by political institutions, the arena is by definition political. Joining the tools of rational choice analysis with individual behavior within political settings provides one version of political economy. The method is economic. The field of activity - the arena - is political.

The economic approach to politics culminates a methodological principle embodied in neoclassical economics. The idea of rational self-interest becomes focal and is harnessed to the analysis of politics.

What is economic in neoclassical political economy is the market, or more precisely, voluntary exchange within market settings. What is economic in the economic approach is rationality. The political content in both cases is supplied by a particular arena, institutional setting, or way of organizing - by the state or public organization (rather than by the market and private exchange). Politics and economics do not refer to qualitatively different ob­jects. Instead they reflect comparative institutional specializations in markets and states and methods and subject matters.

The last three approaches - power-centered, state-centered, and justice­centered, take some further steps in the direction of establishing the autonomy of politics, though not without significant limitations. In all three approaches, the political is more central, more autonomous, less capable of being derived from the economic or societal.

Power approaches see relations of power and domination in the market, between the market and the state, and within the state itself. Economic agents (firms, pressure groups) may exert their power (through votes or lobbying) over the political process or over other economic agents (other firms), or over consumers in imperfectly competitive markets.

In a broad view of power, power is nearly everywhere. The problem is not where to find it but what to ignore. How does one draw the boundary between the political and nonpolitical if power is always present? This prob­lem is often solved in an ad hoc way by limiting the scope of power analysis to settings involving the state or processes intended to affect state policy.

State-centered approaches take political institutions, especially authorita­tive central political institutions, as pivotal in the definition of politics. Politics is what goes on within the state, or between the state and society. What kinds of political economy flow from this conception? There are numerous possi­bilities centering on interrelations between the state and the economy, reg­ulation of the economy and economic actors, the effect of economic actors on state policy, distributional effects of policy on economic resources, and traditional macroeconomic policy along Keynesian lines. State-centered ap­proaches need not treat politics as primary, or even autonomous. The focus on the state may be central at the same time that the causal forces driving state action are located in society.

The justice-centered approach goes the furthest in turning the tables on economy-centered approaches. The starting point is justice and rights rather than self-seeking and efficiency. Justice does not emerge out of the “natural” self-seeking forces within society. The state plays an important role in es­tablishing justice and determining the boundaries of the political and eco­nomic. If the economic realm is identified with self-seeking, with what can be freely traded by economic agents, rights and obligations impose limits to the scope of free exchange. Thus the very act of determining what is political and what is economic is political. This approach shifts our attention away from political economy defined as interaction between politics and economics toward political economy as the political processes shaping the proper scope of economic action.

The diversity of approaches

Respecting the diversity of approaches means that we have not been sym­pathetic to “totalizing missions,” whether emanating from economics or pol­itics. Two such missions involve power and individual rationality. According to the first conception, power is everywhere, particularly in economic rela­tions. The economy is presented as a “system of power” masquerading as voluntary exchange. People and firms enter the market not as abstract, equal individuals but as property owners with access to vastly different amounts of capital, raw materials, labor, and technology. Furthermore, implicit rules (for example, residual product goes to the capitalist) benefit some more than others. From the starting point of inequality of assets, rules, and outcomes, the conclusion is drawn that the economy is through and through a system of power.

A second approach, derived from neoclassical economics, attempts to show that economics and politics can be accommodated within a single decision­making principle of human behavior, one based on individual rationality. If individuals can order alternatives within market settings, surely they can do the same for politics. The individual is a goal-seeking entity in both cases. What is different are the constraints and opportunities of political and market settings. Politics and economics become unified in the sense that both are assimilated into a single behavioral principle - not in the sense that politics and economics are theorized as causally related.

There are numerous problems with the imperial visions of both power and individual rationality. The greatest share of economic theorizing, from Adam Smith to modern neoclassical thought, has concerned legally voluntary ex­change to improve conditions among economic agents. Since power as typ­ically conceived involves threats to make agents worse off, power and voluntary exchange do not go together easily. The exchange approach can

be made consistent with the power focus by substituting “power to” for “power over.” The accommodation is achieved, however, by a conceptual stretching that renders the concept of power virtually useless. The focus on individual rationality achieves political economy in a formal way. It passes over the distinctions between economics and politics and reduces its own motivation to take up the challenge of how the two spheres are related.

Having rejected these unification attempts, where does this leave us? We argue that economics and politics differ not only in method or institutions (market, state), but also in terms of the objects and processes central to each.

For the sake of illustration, let us focus on markets. Markets are arenas within which voluntary exchange takes place. Here individuals come together as owners of property. They relate to one another as opportunities for personal satisfaction. The market is often defended on the grounds that it is the realm of freedom. Within the market, individuals are allowed to pursue their wants subject to constraints of property rights and initial ownership. Belief in the theorem that market institutions foster efficient allocation leads some econ­omists to argue for expansion of the market. Thus, publicly owned factories, schools, prisons, and public lands are all open to free-market scrutiny of their efficiency.

The distinction between private and public goods is important for assessing the limits of the market. However, drawing this distinction according to the technical criteria favored by neoclassical economists (for example, the cri­terion of excludability) is deeply problematic. Even some goods that are technically excludable may resist placement within the market. We do not mean that activities concerning such goods cannot take place within the mar­ket. Rather, there may be normative and political objections to so doing. We have in mind three kinds of goods: those where “buying and selling” are corrosive of the good itself; those where goods are too connected to persons and identity, that is, integral; and those that are in some sense linked to shared values and collective provision.

The mechanism of buying and selling allows individuals to pursue con­sumption and profit with a minimum of political-legal interference, subject mostly to the constraints given by the distribution of assets, information, and technology. Individual agents are free to pursue goods without arbitrary intervention by political authority and without being pressed to explain or justify their wants. Whether a person wants a red Porsche convertible or a gray Volvo station wagon is not the business of the selling agents. The market offers great scope to individual autonomy.

However, certain goods are not readily adaptable to the market provision. There are some goods where “buying and selling” tend to undermine the enjoyment of the good, even how we think about it. Can one really buy compliments, love, friendship, and respect? In the extreme case, market provision may be logically inconsistent with how we think and feel about these goods. Thus, “paid compliments” may be an oxymoron if one views authenticity and sincerity as critical. Similarly, what troubles some people about purchasing intimate phone conversations is that intimacy means some­thing more than quiet, suggestive conversation between perfect strangers. To be clear, we do not suggest that the state is the proper arena for these goods either. Indeed, the dichotomy between market and state is clearly inadequate to accommodate the full range of human interaction, as Walzer (1986) and others argue.

A second category of resistant goods relates to the integrity of persons and the different norms governing relations among friends or family on the one hand, and economic agents on the other. The integrity of persons is seen most clearly in cases of sale of sexual favors (prostitution), “renting a womb” to carry a fertilized egg, or selling one’s labor to the highest bidder in cir­cumstances where the outcomes matter in some moral sense. The lawyer or academic consultant who works for a cause he or she does not believe in not only sells his labor, he also relinquishes his identity.

Finally, market-provison is distinct in that it fosters a particular orientation to others and a particular method of expressing dissatisfaction with buyers and sellers. The mode of orientation is voluntary exchange. This principle is closely related to the standard mode for expressing dissatisfaction, namely “exit” (Hirschman, 1970; Anderson, 1990: 184). If the consumer dislikes price, quality, or mere existence of a commodity, he or she exercises the power to search elsewhere. Aggregate consumer decisions to buy commodities are seen as “votes” for certain products and producers. The option of dia­logue, argument, or persuasion hardly exists as an independent form of influence. Consumers communicate with producers indirectly, through cast­ing and withholding their dollars, rather than through direct verbal com­munication and persuasion.

Politics and markets differ in numerous ways in addition to their respective specializations with respect to public and private goods. Consider the kinds of goods most appropriate to state provision. In addition to goods implicated by market failures, there are goods that are in principle divisible and ex­cludable that may be assignable to the state sector. For example, think of the arguments for publicly provided medical care, government-run prisons, and public education. Individuals may want the government to guarantee medical care to all persons in a society. Membership in a political system (citizenship) rather than property holding in a market becomes the crucial condition for consumption. Those who believe in the superiority of public provision may make their case in terms of need and entitlement rather than want and efficiency.

The previous example raises two issues. One issue relates to the debate between those who argue that wants are wants, more or less intensely felt, and those who see classes of qualitatively different wants. For the former, the intensity continuum runs from the faintest preference to the most deeply felt need. The second issue relates to who shall enjoy benefits - those with money to pay or those in a particular membership category (citizens). The two issues are usually linked in that those who recognize classes of wants have to consider modes of satisfaction appropriate to each. This generally, though not necessarily, includes state provision.

Politics and the state sector are also marked by different modes of orien­tation. Coercion is often at the basis of compliance. In the market, people comply because it is in their interest to do so. It would not do well to renege on contracts since reputation counts in the long run. In politics people may have an incentive to free ride on a public benefit, or what is often lost sight of, they may resist a policy because it represents a loss for them.

However, there is more to politics than coercion. Through politics people also relate through collective expression of shared ideas such as care for the disabled, certain expressions of world order, and minimal and uniform con­ditions for criminals. In this sense, care for the environment, the destitute, and criminals is more appropriately assigned to the state sector than to the market. Since a clean environment is something that a society as a whole may stand for, government should provide for it out of public monies. Rather than depend on the collection of contributions by Greenpeace canvassers, the state should express society’s convictions on such matters.

The question whether prisons should be privatized or not raises another issue, that related to justice and standard conditions for criminals. If a prison is privatized it becomes an economic entity, a firm operating within an en­vironment of competitive accumulation. Pressures to cut back on expenses for food, recreation facilities, guards, and nonproductive physical plant may increase. Some prisons may become more efficient, in the sense that they will manage a given number of inmates at lower costs. But whatever their crime, prisoners are not merely property. Certain minimum standards should be met and this is better assured with public provision.

Finally, while market exchange is assessed by criteria relating to the pursuit of utility, the political system is more complicated. There are ideas of justice, minimum provision, equality (before the law), and democratic participation. Rights and obligations engender different norms than do preferences. Thus, there are bans on trading rights even if such trades are Pareto-superior. In addition, civic participation is not only an instrumental activity, designed to achieve goals outside of itself (Elkin, 1985). It may also be valued in its own right, as expression of the shared values in which society’s members participate.

The foregoing considerations point up the need for political economy to deal with the categorical distinction between politics and economics, and to take that distinction seriously. The distinction clearly has a normative ground­ing and normative implications. It corresponds to the classification of wants into qualitatively different groups, and to a distinction between private and public more complex than usually employed. Developing the classification of wants (and needs), the normative grounding for a theory identifying the tasks appropriate to different institutions, and a more complex and mean­ingful distinction between public and private should be made an important part of the agenda of political economy.

The burden of this book has been to identify and develop the differences among political economy traditions. Our project is based on a foundation that sees politics and economics as not reducible to one another. It also respects distinct understandings within politics and economics. The different approaches analyzed have broad points of contact, but they do not reduce one to another, nor are they easily assimilated into more general approaches. We hope we have added something to the clarification of the approaches discussed, and we look forward to the debates ahead.