Political Economy

Published January 23, 2013 by Mayrbear's Lair


Some scholars define political economy as the application and practice of formal economics. In other words, it is the so-called rational actor model to all types of human behavior, particularly socio-political behavior. The economic theory of politics, often referred to as public choice, can be used to integrate economic and political studies of international relationships, since public choice is part of a larger endeavor which seeks to apply a rational behavior approach (Talani, 2004).


After World War II, Western European countries invested in the welfare of their citizens through elaborate public policy measures and with expensive public budgets (Hay & Wincott, 2012).  They redistributed wealth in a variety of ways that included: (a) levies on progressive income taxes, (b) authorizing high minimum wages, (c) the encouragement of collective bargaining rights from unions, (d) placing value-added taxes on luxury expenditures, and (e) providing social benefits for health care, housing and other areas (Light & Reynolds, 2011).  The political economy of the continental European model is a system that offers fewer jobs, but the jobs are of more value.  In addition their citizens rely on their governments to redistribute sufficient benefits preserving public peace.  The downside of this methodology is powerful governments, higher taxes, large bureaucratic organizations and a tendency to lean towards authoritarian solutions during times of political unrest.


America, on the other hand, creates a plethora of jobs many however, are low-waged positions. The Anglo-American political economy model constitutes a wide pendulum reflective in the small amount of individuals who control enormous wealth on the one side with a vast amount of people experiencing great levels of poverty on the other.  Making matters worse, the enormous injection of money to stimulate the US economy and bail out failing corporations forced the US to incur the largest debt since the Second World War (Allen, 2011).  The disadvantages of this model are the social costs that stem from these tactics and inequality which in turn stimulates an environment that encourages citizens to experience instability, anxiety, and despair, that then leads to behavior to include gang activity in urban areas, terrorist and other predatory criminal conduct.


In conclusion, if given a choice between what we call the Anglo-American political economy to that of the continental European model, perhaps with the expansion of globalization, we could instead, choose to find a way to integrate the best of both with the intent to frame a new international political economic system.  By combining the best of both economies in an effort to create a better system, the future could transform into a more flourishing world;  one that includes a plethora of better paying jobs with a political/social system that allows everyone the same opportunities to experience an abundant life that comprise benefits for higher education, housing and health care.



Allen, M. (2011). The American political economy. New York, NY: Taylor & Francis.

Hay, C., & Wincott, D. (2012). The political economy of European welfare capitalism. London UK: Palgrave Macmillan Publishing.

Light, P., & Reynolds, C. (2011). Driving social change: How to solve the world’s toughest problems. Hoboken, NJ: John Wiley & Sons, Inc.

Talani, L. (2004). European political economy. Burlington, VT: Ashgate Publishing Company.

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