Political economists attempting to understand domestic macroeconomic policy often study the influence of political institutions (e.g. legislatures, executives, and judiciaries) and the implementation of public policy by bureaucratic agencies. The influence of political and societal actors (interest groups, political parties, churches, elections, and the media) and ideologies (democracy, fascism, or communism) also is gauged. Comparative analysis also considers the extent to which international political and economic conditions increasingly blur the line between domestic and foreign policies in different countries.
For example, in many countries trade policy no longer reflects strictly domestic objectives but also takes into account the trade policies of other governments and the directives of international financial institutions. Ultimately, comparative analysts may ask why countries in certain areas of the world play a particularly large role in the international economy. They also examine why “corporatist” partnerships between the state, industry, and labor formed in some states and not in others, why there are major differences in labor and management relations in the more-industrialized countries, what kinds of political and economic structures different countries employ to help their societies adjust to the effects of integration and globalization, and what kinds of institutions in developing countries advance or retard the development process. Comparative political economists also have investigated why some developing countries in Southeast Asia were relatively successful at generating economic growth whereas most African countries were not.
International political economy studies problems that arise from or are affected by the interaction of international politics, international economics, and different social systems (e.g. capitalism and socialism) and societal groups (e.g. farmers at the local level, different ethnic groups in a country, immigrants in a region such as the European Union, and the poor who exist transnationally in all countries). It explores a set of related questions (“problematique”) that arise from issues such as international trade, international finance, relations between wealthier and poorer countries, the role of multinational corporations, and the problems of hegemony (the dominance, either physical or cultural, of one country over part or all of the world), along with the consequences of economic globalization.
Every government faces tough decisions about the appropriate measures: what restrictions to impose and when to loosen them, where money will be spent and how it will be raised, and what national concerns can be limited to favor international cooperation.
These decisions have to take into account public health recommendations, economic considerations, and political constraints. Just as the policy response to the 2007–08 financial crisis varied from country to country in line with local political economy conditions, so national policy responses to the COVID-19 pandemic vary for health, economic, and political reasons.
Some of the characteristics or themes of a political economy include the distribution of wealth, how goods and services are produced, who owns property and other resources, who profits from production, supply and demand, and how public policy and government interaction impact society.
The trouble is that “the economy” doesn’t mean anything to normal people. Revisions to GDP growth forecasts leave them cold. Economic models may show that, on net and over time, immigration, competition and free trade are good. But “on net” isn’t very comforting to the person who is on the wrong side of that equation whether they are a worker in an air-conditioning factory moving jobs to Mexico, or an unskilled Londoner seeing Eastern Europeans fill service sector jobs across their city. Nor is “over time” very attractive to people who haven’t felt a serious increase in their standard of living for a decade. These people don’t want net benefits for the economy as a whole in the future: they want more money, for themselves, now. But now economics is deeply political again, and vice versa. But the skills of politicians in the field of economic persuasion have eroded in recent decades. Most were drawn to politics by social, rather than economic, issues.
Meanwhile, economics became a more technical and technocratic field. Great oratorical energy and skill has been devoted to issues of racial justice, same-sex marriage, gender equality, and so on.
