By Graham Vanbergen: As a discipline, political economy originated in moral philosophy, in the 18th century, to explore the administration of states’ wealth and power.
The term political economy is derived from the Greek polis, meaning “city” or “state,” and oikonomos, meaning “one who manages a household or estate.” The political economy can therefore be understood in more simplistic terms as the study of how a country, the public’s household—is managed or governed, taking into account both political and economic factors. It means that those in office are making decisions that really do affect how our lives are lived.
The earliest works of the philosophy of the political economy are usually attributed to the British scholars Adam Smith, Thomas Malthus, and David Ricardo. Political economists have been largely sidelined since the late 1970s with the rise of ‘neoliberal capitalism’ or ‘Thatcherism’ as many would understand it.
However, the relationships between individuals and society and between markets and the state are fully interconnected. Practically everything in the lived world you can think of is political and almost everything has an economic value – even if it falls to or starts at nil. This ranges from the chair you sit on, tap water, the air we breathe and the food we eat – to housing, education, health and security. Everything in life has political policy driving regulation. This is more so now than ever.
The distribution of power and wealth is determined by the processes that create, sustain and transform these relationships. Take, for instance, the privatisation of water.
At the beginning of the 19th century, most waterworks in the UK were built, owned, and operated by private companies. The introduction of various parliamentary regulations led to the government assuming control of the industry, with the responsibility for most (but not all) waterworks and sewerage systems being passed to local government by the beginning of the 20th century. One of the earliest proponents for the nationalisation of the water supply and sewerage (WSS) system was Joseph Chamberlain, who argued in 1884 that “It is difficult, if not impossible to combine the citizens’ rights and interests and the private enterprise’s interests because the private enterprise aims at its natural and justified objective, the biggest possible profit.” Chamberlain was right.
Local government subsequently maintained responsibility for most water supply and all wastewater services—assisted by central government subsidies—until 1974, when the ten regional water authorities (RWAs) were created, through Geoffrey Rippon’s Water Act 1973 under Edward Heath’s Conservative government.
Up to that time, water was considered a public health necessity—rather than a commodity—and potable water was supplied “with the goal of universal provision that was priced on a concept of social equity: household supply was not metered, and bills were linked to property value.
The Conservative government of the day had originally proposed water privatisation in 1984 and again in 1986, but strong public feeling against the proposals led to plans being shelved to prevent the issue from influencing the 1987 general election. Having won the election, the privatisation plan was “resurrected and implemented rapidly.”
Fast forward to today. We now know that English water companies have handed more than £2bn a year on average to shareholders since they were privatised three decades ago. And yet, in search of ever-higher profits, the water companies in England admitted to more than 370,000 effluent and contaminated water spillages last year.
Politically, the Conservatives were committed to privatising the water system. They did so without a specific mandate, and facilitated escalating profits to shareholders from consumers who had no (free market) choice, only to find huge environmental damage and the taxpayer on the hook for cleaning up and the NHS dealing with avoidable ill-health events. England and Wales were the first countries in the world to fully privatise water. Since water privatisation, the vast majority of people agree that it has been a disaster. Even ten years ago – before mass effluent dumping became the new norm – nearly three-quarters of the public thought renationalisation was the only answer.
There are advantages and disadvantages to the privatisation of public services. Some services should never be privatised, such as education, justice, emergency services, policing and national security and many would argue health and energy. The media, both published and broadcast, think tanks and charities along with other institutions all play a part in the political economy.
It is these power relations and their connections to achieving the desired ends of political ideology through an economic exchange that define much of our everyday lives. Its applicability to reality and the distribution of resources so that the material wants of society are satisfied is what helps to define the success of a country.
Analyzing our political economy and its applicability to reality exposes whether we live in a country defined by democracy, justice, liberty and fairness – to name a few of the principles of Western societies. For instance, the enemy of liberty is consolidated, concentrated, government power and the perfect balance of democracy is that the centres of power should be set against one another, such that no power can dominate but merely act as a counterbalance. When these ideologies swing too far, disunity reigns, which can lead to all sorts of political, economic and social problems. Brexit, whether eventually proved right or wrong – is an example of an ideology that led to many of the aforementioned problems.
By providing information about the political economy, its successes and failures, we can see how political policy, driven by either vested interests or national interest really works. This is the Raison d’être of The Economic Times – just as the United Kingdom faces a rapidly changing world involving the geopolitical world order, the climate crisis challenge, technology, the future of work along with domestic problems such as immigration, crime, welfare, taxation, etc and of course Brexit.