Overview
Political economy influences other aspects of political interaction.Throughout the discussions, the influence of domestic and international economic institutions and the idea of economic interdependence appear as important factors when examining political decision-making. The contemporary discussion on the level of government involvement in the economy begins after WWII with the theoretical debate between those who believe governments should have some control of the economy, the Keynesians,and those who believe government should stay out of the economy, the Chicago School of Economics influenced by Hayek (Cran, Sullivan, Stiers, & Yergin, 2002). The Keynesians won out, and most governments enacted some level of government control over the economy. In Europe, this became control over the "commanding heights" of the economy, or those areas that are necessary for production, like oil, steel, electricity, etc. Even in the United States, government regulations and controls influenced the price of commodities and items like airline tickets. In the 1970s, advanced economies began to slow, resulting in what was called "stagflation"-a combination of stagnation in the market along with the inflation of prices (Cran et al., 2002). Margaret Thatcher and Ronald Reagan heralded in a change, following Hayek and Friedman's ideas (the Chicago School of Economics) on keeping the government out of the economy.
Deregulation became the norm, creating short term constraints in economic development, but longer term benefits for some of the populations. Over time, domestic and international policies moved toward these market ideas, influencing economic development worldwide (Cran et al., 2002).The real long-term benefits of less government controls over the market are still beingdebated. With the worldwide economic downturn in 2008, many countries faced austerity measures that drastically reduced standard of living benefits. Questions arose on whether
governments should have more control over markets and economies, especially in the areas where personal greed influences improper or illegal behavior. Many of the foreign policy interactions between states include trade agreements. The level of tariffs, price fixing, and openness of markets influences domestic production and foreign supply. The United States imports roughly three times as much goods in dollars to China than it is able to export, creating an ever growing trade deficit (U.S. Census Bureau).
However, U.S. industries invest heavily in China, like General Motors, with China being a significant part of their market share (Morrison, 2014). The China-U.S. example also reflects the complex relationship between trading partners, with the United States promoting more open and free trade while China continues to enact protectionist policies (Morrison, 2014).
International organizations like the World Trade Organization (WTO), the World Bank, and the International Monetary Fund (IMF), greatly influence the economic relationships between and among states and domestic policy decisions. As part of the requirement for IMF investment, states must show how they are applying economic reforms, which often means more open and democratic policies and structures. The WTO creates structures and opportunities for trade relationships for member states, while the World Bank provides funds for economic development. Debate surrounds the effectiveness of each of these organizations as opportunities for development and trade or institutions focused on the benefiting persons, groups, and states already holding power.nstructions
Please answer the following questions on the Theories of Economic Development .
Evaluate competing theoretical and methodological perspectives/approaches used in the readings to answer questions about political economy. Compare and contrast three theoretical or methodological approaches and consider which approach provides the best means for understanding the decision-making process regarding political-economic issues in order to formulate a direction for future policy. You may use other sources of information beyond the material provided(readings) but the article readings must be the major sources used in the assessment. Support for your position/argument will be drawn from scholarly,academic sources using APA style citations.
(1). Formulate (propose solutions) future policy actions to address economic and development issues.
(2). Why is your solution best for the real-world practice of politics? Justify your claims and includes specific details.
(3). Accurately formulate policy actions to address economic and development issues direction for the future and includes specific details.