 I'm Salvatore Bobona, and today's lecture is Major Schools of Political Economy, in theory and in practice. This is an introductory-level lecture meant to introduce students into basic concepts of left and right in political economic discourse. The field of political economics spans all of the social sciences and public policy as well. We might define political economics as the study of production, distribution, and exchange at the level of an entire economic system, whether that's a country or even the entire world as a world system. Unfortunately, the term political economics has the word economics in its name. Political economy is not about economics. It is about the economy, but it's about how economic rewards are distributed or allocated in political ways. It's not about how to economize, and it's not about the discipline of economics. In fact, political economy and political economics are studied by anthropologists, geographers, political scientists, and sociologists, and yes, even some economists as well. Questions of production, distribution, and exchange are always political. The question of who gets what can never be divorced from a political decision based on the political rules of the game. There's no such thing as a neutral or natural economic space. All economies are socially and politically constructed. In the political economy or any political economy, different players in the system attempt to enact rules or tilt rules in their favor. We usually think that certain ways of thinking about the game favor different kinds of players in the game. We usually think of a kind of playing field that tilts either left or right. Broadly speaking, the left is associated with pro-union, pro-uneducated, pro-worker, pro-poor kind of approaches, pro-people, if by people you mean the unwashed masses, versus the right wing is associated with pro-business, pro-educated, pro-owner, pro-rich, pro-elite points of view. All the kinds of policies that are generally pursued by the left include minimum wage policies, collective bargaining, lots of government regulation of the market, progressive systems of taxation, and that can be contrasted with the kinds of policies that are usually associated with the right. Getting rid of minimum wages, having individual bargaining, small government, a flat or even regressive tax systems in which poor people pay more than rich people. At the theoretical level, there are different theoretical systems that tend to build a case either for the left or for the right or for somewhere in between. There are many theories of political economy, but we can perhaps identify five big groupings, one around a bunch of posts, post-development, post-growth, eco-feminist, post-modern approaches on the very far left. Then classical Marxists, left-wing social democrats, kind of as the center left. Institutional economists in the center, mainstream neoclassical economics as a profession, business-friendly economics in the center right, and then at the far right, market fundamentalists who want all the rewards to go to whoever is able to garner the most power in the market. Taking each of these in turn, first, post-modernists may be questioned the relevance of the entire field of political economics. They're so far to the left that they're off the playing field entirely. Political economics, they might believe, focuses attention away from what's really important. We shouldn't even be fighting over money. We should be getting rid of money entirely. The key insight of people on the far left, these post-modern approaches, is that the very field, the very discipline of political economics reinforces a patriarchal social system that focuses on the concerns of usually men, certainly of men as a gender class, and especially of powerful men. The idea here is that once we start talking about who gets what in a political system, the battle is already lost. There shouldn't even be a system for deciding who gets what. Of course, a key criticism of this approach is that if you try to exempt yourself from the system, if you don't fight the battle, then you'll simply be slaughtered by those who will fight the battle. Key names in post-modern approaches, Wolfgang Sachs in Sociology, Susan George in Environmentalism, Claudia von Fehrloff in Eco-Feminism, these are all people who would be on the post-modern far left of the political economic spectrum. Marxists and neo-Marxists, or what might be called social democrats, claim that economic systems serve specific class interests. They would say that there are many possible economic systems. Capitalism is only one of them. We could have a better system. We could have rules of the game that benefit ordinary people more than they benefit the rich and the powerful. The key insight on the Marxist left or in the center left is that market outcomes are the result of non-economic struggles. Power in society percolates through the market system to reward some groups of people over others in the market. A key criticism of Marxian approaches to political economy is that it's hard to see how classes actually operate together. If it's really the proletariat versus the bourgeoisie, where are the bourgeoisie having their meeting in which they decide how they're going to oppress the proletariat? Key names associated with Marxian approaches are of course Karl Marx himself, but also contemporary figures like Immanuel Wallerstein and the geographer David Harvey. In the center we might find institutional economists, the most recently, most famously in recent memory, Barbara Ostrom, who is a political scientist who won the Nobel Prize for Economics for her centrist institutional economics. Institutional economics as a discipline emphasizes that economic activities don't occur in a vacuum. The government has a role in regulating society, and not just the government, but civil society does as well. The key insight is that institutions matter. Key criticism is that institutions are only defined as good if we like the outcome. I mean it's hard to disprove an institutionalist's claim, it's hard to say in advance what institutions will turn out to be good ones. Key names in institutional economics, I mentioned Barbara Ostrom, she had not yet won the Nobel Prize when I created these lectures, but also Manker Olson, Douglas North, Darren Asimoglu. Neoclassical economists usually use formal theoretical models based on a rational choice understanding of how people behave. Neoclassical economics is the center right, the respectable right wing of the political spectrum. Neoclassical economists believe that prices are ultimately driven by supply and demand. If you've taken economics 101 in a conventional economics department, you've studied neoclassical economics. Now a key insight is that people do in fact respond to economic incentives. It is true that people are rational utility maximizers. The key criticism is that that's not all they are. People have much more to them than just economic rationality, and in fact economic rationality may only be a small part of what people are about. Key names in the development of neoclassical economics are people like Vilfredo Pareto who developed the concept of Pareto optimality on which all of neoclassical economics is based, the economist Alfred Marshall, contemporary economists like Robert Solow. On the far right of the spectrum are market fundamentalists, sometimes called neoliberals, though neoliberalism means many different things as well, but market fundamentalists who argue that markets aggregate knowledge and markets know best. We should always trust the decisions and the allocations that are made in markets because markets know more than any of us do as individuals. The key insight is that market prices do contain information. If you want to know what is scarce in the world, look to market prices. If market prices are rising, then something has to be economized on. If a market price is falling, it means that the world has too much of that thing. But a key criticism is that markets are prone to booms and busts, to bubbles. There's lots of follow the leader behavior. Market prices don't always accurately reflect the world. If market prices accurately reflected the world, then we would see the world advancing every time the stock market went up 20% and we would see the world coming to an end every time stock markets collapsed. Key names associated with market fundamentalism, Friedrich Hayek, Milton Friedman, and Alan Greenspan, the chair of the United States Federal Reserve Board at the time of the global financial crisis in 2008, sorry, just before the global financial crisis in 2008. These different philosophies, these different academic and intellectual underpinnings lead to different policies being implemented in practice. And here I'm going to turn to the geographer Patrick Bond. Now Patrick Bond is himself a Marxist or maybe even a post-Marxist philosopher on the very far right, far left end of the spectrum, but his categorization of these five approaches and how they translate into policy has become, I think, a standard way of looking at the world. Patrick Bond identifies five parallel ideologies in contemporary political economic practice. And he divides them into two types, the center and left, which are civil society perspectives that place an emphasis on people, and the right and far right, which instead put an emphasis on control, on governing, on governmentality rather than organic governance by the people for the people. He calls these five approaches the global justice movements, third world nationalism, post-Washington consensus in the middle, Washington consensus, and a resurgent right wing on the right. Global justice movements correspond to those post-approaches to political economy, post-modern, post-feminist approaches to political economy that operate outside the sphere of organized national politics. This is a photo I took at Occupy, Wall Street, Washington, D.C. encampment. Global justice movements don't usually try to seize political power to promote a program. They're arguing that we need a whole new configuration of politics. On the center left, third world nationalism has been a movement to resist the domination of rich countries, and this is usually inspired by Marxian political thought. Take of Chavez's Bolivarian Republic in Venezuela, the Marxian movements in Ecuador and Bolivia, even the Workers' Party in Brazil, which under Lula da Silva, before it collapsed in a corruption scandal, under Lula da Silva had promoted policies that dramatically improved the well-being of poor people in Brazil. Third world nationalist movements usually have a Marxian approach to resisting global economic forces for the benefit of ordinary people. In places like in France and in Germany, this takes a form of not so much a third world nationalism as a social democracy, a popular social democracy. As I am speaking in early June 2016, in France there are major strikes nationwide demanding better working conditions for ordinary people. The post-Washington consensus is based on the dominant centrist view of the economy as something that is shaped by institutions. Another manifestation of that has been flexibility policies. People arguing that the best kind of labor market is one underpinned by a generous welfare system that allows people to work as independent contractors because they know they can always fall back on the welfare system when necessary. All sorts of such arrangements for getting the institutions right, whether it's flexibility in the Netherlands and Denmark or other policies in other parts of the world, the nudge policies that have been popular in the United States and United Kingdom, these are all centrist institutionalist approaches to making day-to-day policy that broadly benefits people by pushing their individual behaviors in directions preferred by the people coming up with the policies. On the center right is the Washington consensus. This was perhaps the dominant policy approach in the 1990s whereas the post-Washington consensus is maybe then the dominant approach of the 2000s. The Washington consensus of the 1990s was that markets should be open. There should be liberalization that markets, if not no best, at least markets are the best way to serve people. There should be less government regulation. There should be free, open currency exchanges and lower taxes on the wealthy. This center-right set of policies that spread around the world. Here's an example of the Washington consensus in action when countries like Latvia and the other countries of Eastern Europe became independent after 1989. They generally implemented the kinds of policies promoted by the Washington institutions like the International Monetary Fund. As you can see, they ended up with tax systems that taxed low wages much more than they taxed high wages. So we can compare the wage taxation in Latvia, which very quickly goes up from 0 to 46 percent with the wage taxation system in Australia, which starts out very low. People have relatively low taxes all the way until they get to be relatively wealthy. The Latvian policy represents much more the Washington consensus, whereas Australia maybe represents more the post-Washington consensus. And finally, the resurgent right wing has promoted markets above everything else. A key example might be the California natural gas market liberalization. In California in the early 2000s, natural gas was simply made a tradable commodity, resulting in enormous price swings as private companies most prominently Enron, which later went bankrupt and not only went bankrupt but the heads of it were prosecuted for fraud. The idea was that private companies knew best how to deliver services and markets like the California natural gas market were simply cornered by corporations who were free to do whatever they wanted in a completely open market but an open market in which they had enormous power. So five perspectives, five sets of policies. I said before the 1990s, maybe in the 1970s, those Marxian inspired third world nationalist social democratic center left was dominant. By the 1990s, the Washington consensus, the center right had become dominant. In the 2000s, we even saw a brief swing towards market fundamentalism and the far right. A lot of people think we've made me move back towards the center right, maybe even towards a centrist post-Washington consensus. But I think that these left right, this left right spectrum of political economics theories and political economics practices is actually becoming obsolete as the 21st century develops. Instead I've started talking about the emergence of a new theoretical and policy era, what I'm calling the American Tiansha. Tiansha is a word I'm borrowing from Chinese international relations theory. It means all under heaven or essentially a global world system. This American Tiansha, this American world system is no longer one of left and right because it's instead a system of center and periphery. The American Tiansha is a cultural system that values adherence to Anglo-American liberal norms above all else. So the important thing is not whether someone is left or right, whether someone is a poor worker or a rich industrialist. The important thing is to be respected and to have a place in the Anglo-American cultural system. Thus American workers who are organized in unions in the United States are powerful in a way that maybe capitalists in developing countries are not powerful because those American workers have access to the levers of the American state machinery. The political economy of the system thus becomes a scramble for power in the American system as opposed to a battle of left versus right. It's a battle of center versus peripheries or maybe center versus periphery single, one big outer edge of the world. This new configuration is beyond left and right. We've seen a shift because we no longer live in an economic system. Left and right are terms that refer to the world market. The whole premise of left and right political economics is that there's a world market with a playing field that can be tilted either towards left or towards the right. I think what we see now instead is not a world market but a world polity, a political system that is apportioning rewards from the center and as a result instead of left, right we see a shift to center periphery. I would say that we no longer live in a political economy. We now live in an economic polity and what we really will need in the 21st century is a new science of economic politics. Thank you for listening. You can find out more about me at my website, salvaturbabonus.com, where you can also sign up for my monthly newsletter on global affairs.