An Examination of the Nexus between Politics and Economy

Akin Iwilade

Introduction

This paper addresses the nexus between politics and economy. It consists of four interlinked sections, the first of which is this introduction. In the next section, we will briefly construct a historical and theoretical context of the social science methodology for examining society. This should show how politics and economy grew to be separate fields of enquiry and why there seems to be resurgence. In the next section, we will highlight some key areas, using examples that demonstrate the nexus between politics and economy. After this, we will attempt to briefly look at the changes in the methodology of social science research and how it reflects the resurgence of the knowledge of the inextricable linkage between politics and economy. The last section concludes.

Historical and Theoretical Context

There was considerable debate in the twentieth century as regards the connection between politics and economy. Spero for instance notes that while the interaction of politics and economics is an old theme in international relations, by the late twentieth century, the study of international political economy had been neglected and; in analysis and theory, the two broad issue areas had been separated.[1]

This separation of politics from economics in the twentieth century can be explained in the context of the ideological rivalry that characterized the cold war. The liberal strand of social science research, with its tendency to deify market forces, played a significant role in promoting a view of economy that denied the political context. In an attempt to emphasise the capacity of the market economy to function effectively on its own, liberal economists tended to ignore the salience of the political framework in constructing the environment within which market forces operate.

Before the twentieth century separation of these two fields of enquiry however, scholars have traced the roots of the political economy approach to seventeenth century mercantilist theories[2] and for some, even as far back as the sixteenth century age of the physiocrats[3]. For industrial capitalism, around which the modern conception of the nexus of economics and politics emerged, the earliest origins may as well be traced to Adam Smith’s Wealth of Nations. This is important because Adam Smith’s work pioneered the focus of political economy on industrial capitalism. By making the division of labour and exchange such an important organizing concept of his analysis, he took a comprehensive view of the production process. This was important because it aided him to identify the emerging classes and the implications of the nature of their relations for politics. This tendency to place issues of production and distribution of wealth in broad social context was further advanced by the works of scholars like David Ricardo and John Miller[4] who showed concern about the increasing tension between owners of capital and the working class.

As capitalism developed and its class contradictions deepened, scholars tended to become preoccupied not with understanding capitalism but with justifying it. This led to what Rubin described as the vulgar phase of capitalism[5]. By the 19th century, scholars increasingly focussed on narrower areas of social science enquiry[6] and the gradual separation of economy from politics, in analysis and theory, if not in practice, began to surface.

The writings of Karl Marx emerged out of these contradictions and they seem to sign post the quintessential scientific interrogation of the nexus of politics and economy. The relevance of this approach to the study of society was underscored by the amount of opposition it generated from the liberal academia.

The decades immediately after Marx, the twentieth century, were critical to the eventual emergence of this separation. Joan Spero[7] notes the key issues involved in this divorce of politics and economy quite clearly when she identified the influence of liberalism; the construction of an international economic system in both the east and the west to which new states had little choice but to comply and which reduced economic conflict and the emergence of the cold war and its preoccupation with strategic and security issues.  

Since the 1970s however, there has been a resurgence in the tendency to interrogate society from a political economy perspective. Implicit in this re-emergence is the realization of the critical nexus between politics and economy. Indeed, failures in both the economic and social spheres have tended to highlight the need to initiate comprehensive reform of the international economy. This reform can however not be done without politics. By the time the new states in the third world started emerging and asserting their nominal independence in the system, the movement for reform had intensified significantly. These new states faced relatively new economic and social problems that required fresh approaches. Chief among these problems was the crisis of dependency. Dependency theorists do not see much difference between politics and economy. Andre Gunder Frank hinted as such when he noted that ‘…historical research demonstrates that contemporary underdevelopment is in large part the historical product of past and continuing economic and other relations between the satellite underdeveloped and the now developed metropolitan countries. Furthermore, these relations are an essential part of the capitalist system on a world scale as a whole.’[8] The ‘other relations’ referred to here are unambiguous. They refer to political and social relations that set the context for the economy.

The connection between economics has been heightened since the collapse of the cold war. In the first place, the ideological frameworks around which economic policy is made seem to have collapsed in such a way that a homogenous theory of development, capitalist growth, seems to be emerging. Indeed the international financial institutions of Breton Woods have gone through a process of transformation so much so that by the 1980s, they began to link issues of governance and politics to economic development. The conditionalities imposed by these institutions on many third world states were a signal that capitalism had gone full circle. It had returned to the classical interrogation of society through its political and economic framework. Conditionalities like democratization, respect for human rights, and good governance clearly illustrate the re-emergence of the policy focus that links politics to economy. Within the context of adjustment, these policies did not necessarily promote economic development as many studies have shown[9] but their failures do not necessarily reflect a weakness in the proposal for linking economic issues with politics. They infact demonstrate the dialectical relationship between them. 

The globalization era, with its increasing mainstreaming of issue-linkages and regime complexes in the analysis of society, tends to highklight the more the links that connect politics to the economy. In this regard, it is becoming increasingly obvious that issues like economic development being negotiated in the WTO has many political implications. For instance, it has implications for human rights, climate change, good governance anfd indeed democracy. The process of negotiation is in itself deeply entrenched in politics and diplomacy.

What the above shows is that not only policy makers but also scholars have had to engage the question of the linkage between politics and the economy. In the next section, we will look at some specific issues that further demonstrate this.

The Relationship between Politics and Economy

 

As noted by Joan Spero, students of international politics who have examined the interaction between politics and economics have not always examined the way economic reality shapes politics.[10] The idea that economic conditions are the principal determining factors of the character of political relations has however been quite popular with many development scholars.[11] Implicit in this theoretical understanding of the nature of social relations had always been a perception of economic conditions having primacy over all social relations. In the end, this perspective confronts society in a very broad historically specific context so much so that it establishes a linkage between economic reproduction and about all types of social relations man may imagine. From religion to tradition, this school is convinced of the primacy of economic conditions. 

In spite of this tendency to view economic conditions as being the most important, there are three ways in which political factors shape economic outcomes. In the first instance, neither economy nor politics can exist in abstraction. There has to be an economic and political super structure that sets the rules of engagement and that determines the nature of that engagement. In this sense, as Spero notes, the structure and operation of the international economic system is, to a great extent, determined by the structure and operation of the international political system.[12] Political concerns also tend to shape economic concerns. The political concerns of climate change for instance have significant implications for economic policies. The need to go green will entail dramatic changes in the nature of technology and indeed all factors of the production process. This is perhaps why the ongoing climate change talks at Copenhagen have not produced and may not produce any dramatic agreements. In and of themselves, international economic relations are actually political relations. Like international political interaction, international economic interaction is a process by which state and non state actors manage or fail to manage their conflicts and by which they cooperate or fail to cooperate to achieve common goals.[13]These three dimensions of international economics to a large extent sufficiently demonstrate the critical nexus between economics and politics.

Spero identified two principal political characteristics that shaped economic interaction during the mercantilist period. The first was the development of powerful nation states from the ruins of medieval Europe who focussed on consolidating their power both internally and within the international system. The intense but limited competition between these emerging centralized political units was also so much during the mercantilist period that the economic arena became the key arena of conflict[14]. The pursuit of power was thus carried out through the pursuit of national economic power and wealth. The search for colonies was also a largely economic agenda that had far reaching political ramifications even outside Europe.

Beyond merely shaping economic systems, political factors also influence economic policies. The sighting for instance of a petroleum refinery in Kaduna in northern Nigeria, hundreds of miles away from the oil rich Niger Delta region cannot be understood rationally in economics except if viewed through the prism of politics. On a broader spectrum, the aid policies of key donor states tend to reflect their political concerns and priorities and this has significant implications for effeciency[15].  Even transnational nongovernmental organizations for which a ‘doing good’ thesis of altruism is often constructed[16] have been shown to commodify their humanitarian activities[17] further demonstrating the inevitable linkages between politics and economics.

Finally, as defined by Donald Puchalla, [18] international politics refers to the patterns of interaction between and among states. As with all politics, international politics involves rule setting and goal seeking behaviour that largely determines who gets what. To the extent therefore that international economic relations involves the interaction of different actors in goal seeking pursuits that are sometimes mutually reinforcing and at times mutually exclusive, it is difficult to abstract international politics from international economic relations, or indeed any politics from economics.

 While the international scene easily shows these arguments, they are quite visible in the domestic arena too. To a large extent, the political relations of social forces within states are reflective of the character of economic relations. The state which is the main arena of political contestations ideally exists for the purpose of mediating the inevitable conflict that arises as a consequence of economic reproduction. In this wise, the connection of economics to politics becomes much more visible. 

How then has modern social science methodology evolved to reflect this nexus? That problematique is what will be confronted in the next section. 

 Modern Social Science Methodology: Primacy of Political Economy?

 In reaction to the failure of classic liberal theory to not only provide answers to the question of the rapid development of third world states but also to reduce the growing gap between rich and poor in the developed industrialized states, social science methodology has evolved resistance theories that encourage fundamental changes to the extractive and distributive character of the economic process.

 It is important to note that these new theories are significant in that they emphasise a reconnection of economics with politics. They argue that economic conditions bear an inextricable linkage with the political super structure so much so that a dialectical relationship exists.

The changes that saw the division of the economic and political fields in the examination of society did not only affect nomenclature but also affected the technique, methodology and value assumptions of the social sciences.

Literature in both the field of economics and politics have evolved to take for granted the linkage between the two. There is however a whole world of difference between recognizing the salience of economics in politics and actually engaging social questions from the political economy perspective. In a sharp critique of the former, Howard and king point out that:

The last ten or fifteen years have seen the beginnings of a crisis in orthodox economic theory. Rigorous, technically sophisticated and sometime elegant, modern theory is increasingly seen by both academic economists and students to be trivial, arid, irrelevant, methodologically unsound, and suspect in its political assumptions and implications.[19]

 This statement captures the broad outlines of the debate about the role that politics should play in the examination of economics and vice versa. It however reflects the existing consensus on the salience of politics in economics. The emerging challenges of globalization and the intensifying resistance to it is resurrecting the ghost of the ultimate tension between the political economy approach and liberal economics. We cannot say for sure whether political economy will become a mainstream methodology anytime soon. But recent events like the ongoing crisis in the global economy seem to be signalling an end to the Washington consensus of cold market economics. The bailing out of the various banking systems by the states underscores the unique place of the political context in shaping the economy. This may yet encourage a stronger resurgence of political economy as the preferred method of enquiry.           

Conclusion

This paper has examined the critical nexus of politics and economics. It traced the historical and theoretical context of the methodology of political economy and looked at key dimensions of that linkage. It also briefly examined the changes in methodology in the light of the emerging global system.

The above demonstrates the salience of economic conditions to the character and nature of political relations. This view of society presents unique opportunities that allow social phenomena to be explained through the all pervasive process of economic reproduction. It is safe to assume that politics and economics will remain inextricably linked far into human evolution.

 References

Ake Claude (1981), A Political Economy of Africa, Lagos: Longman

Bangura Yusuff (1992) ‘Authoritarian Rule and Democracy in Africa: A Theoretical Discourse’, In: Gibbon P. et al (eds). Authoritarianism, Democracy and Adjustment: The Politics of Economic Reform in Africa, Uppsala: The Scandinavian Institute of African Studies, pp 39-82

Cooley A. and Ron J. (2002). The NGO Scramble: Organizational Insecurity and the Political Economy of Transnational Action, International Security, Vol. 27, No. 1, pp 5-39

Fisher W. (1997). “Doing Good? The Politics and Anti-politics of NGO Practices”, Annual Review of Anthropology, Vol. 26, pp 439-64

Fox Jonathan (2000). “Civil Society and Political Accountability: Propositions for Discussion” , Working Paper, Notre Dame, In: Hellen Kelloggs Institute for International Studies, University of Notre Dame

Frank Andre Gunder (1972), The Development of Underdevelopment, In: Cockcfrot James et. al (eds.) Dependence and Underdevelopment. New York: Anchor Books, 1972

Howard M.C and King J.E (1975), The Political Economy of Marx, London: Longman 

Ihonvbere Julius (ed.) (1989), The Political Economy of Crisis and Underdevelopment in Africa: Selected Works of Claude Ake, Lagos: JAD Publishers

Jevon William (1871), Theory of Political Thought, London: Sage

Lenin Vladimir (1984), Imperialism, The Highest Stage of Capitalism, Progress Publishers: Moscow

Maren M.  (1997). The Road to Hell: The Ravaging Effects of Foreign Aid and International Charity, New York: Free Press

Maurice Dobb (1937), Political Economy and Capitalism, Longman: London ; Claude Ake

Onimode Bade (1985), An Introduction to Marxist Political Economy, London: Zed Books

Puchalla Donald (1971), International Politics Today, New York: Dodd Mead

Rubin Isaac, A History of Economic Thought

Spero Joan (1977), The Politics of International Economic Relations, London: George Allen and Unwin


[1] See Joan Spero (1977), The Politics of International Economic Relations, London: George Allen and Unwin

[2] Ibid, p.1

[3] See Julius Ihonvbere (ed.) (1989), The Political Economy of Crisis and Underdevelopment in Africa: Selected Works of Claude Ake, Lagos: JAD Publishers, p.29

[4] Ibid, p.29-30

[5] See Isaac Rubin, A History of Economic Thought, p.381

[6] See for instance William Jevon (1871), Theory of Political Thought

[7] Joan Spero (1977), op.cit, p. 1

[8] See Andre Gunder Frank (1972), The Development of Underdevelopment, In: Cockcfrot James et. al (eds.) Dependence and Underdevelopment. New York: Anchor Books, 1972, p. 3.

[9] See for instance Yusuff Bangura (1992) ‘Authoritarian Rule and Democracy in Africa: A Theoretical Discourse’, In: Gibbon P. et al (eds). Authoritarianism, Democracy and Adjustment: The Politics of Economic Reform in Africa, Uppsala: The Scandinavian Institute of African Studies, pp 39-82

[10] See Joan Spero, op.cit, p.4

[11] See for instance Maurice Dobb (1937), Political Economy and Capitalism, Longman: London ; Claude Ake (1981), A Political Economy of Africa, Lagos: Longman, Vladimir Lenin(1984), Imperialism, The Highest Stage of Capitalism, Progress Publishers: Moscow and  Bade Onimode (1985), An Introduction to Marxist Political Economy, London: Zed Books

[12] Joan Spero, op.cit., p.4

[13] Ibid

[14] Ibid,p.5

[15] See for instance M. Maren (1997). The Road to Hell: The Ravaging Effects of Foreign Aid and International Charity, New York: Free Press

[16] See for instance Fisher W. (1997). “Doing Good? The Politics and Anti-politics of NGO Practices”, Annual Review of Anthropology, Vol. 26, pp 439-64

[17] See Cooley A. and Ron J. (2002). The NGO Scramble: Organizational Insecurity and the Political Economy of Transnational Action, International Security, Vol. 27, No. 1, pp 5-39;  Fox Jonathan (2000). “Civil Society and Political Accountability: Propositions for Discussion” , Working Paper, Notre Dame, In: Hellen Kelloggs Institute for International Studies, University of Notre Dame

[18] Donald Puchalla (1971), International Politics Today, New York: Dodd Mead, p.1

[19] See M.C Howard and King J.E (1975), The Political Economy of Marx, London: Longman

About akin iwilade

i am human
This entry was posted in 1. Bookmark the permalink.

One Response to An Examination of the Nexus between Politics and Economy

  1. Pingback: Economy Of Africa - Topic Research, Trends and Surveys

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s