Political economy essay

What we now call “economy”, earlier used to be identified as “political economy”. Indeed, early economists regarded political forces not only as the ones influencing economical outcomes, but also as the determining force influencing economical development. However, with the division of economics and political science into distinct disciplines, economists abstracted from political and institutional factors and for a long period of time analyzed purely economical processes.

In the course of time another burst of interest towards political economy has arisen: lots of articles discussing the relation of politics and economy appear in economical journals (Ravenhill 176), and this tendency is becoming stronger. In my opinion, political and economical analysis on the state level is inseparable. This essay is dedicated to analysis of the economies of three countries: the United Kingdom, Uruguay and Pakistan from the point of view of political economy.

The structure of the paper is the following: key issues concerning each of the economies are outlines; then criteria for comparing the economies are elaborated and the analysis and comparison of the economies is done.

1. Economy of the United Kingdom

The United Kingdom represents a classical capitalist economy; it was ranked fifth in the list of largest economies in the world with respect to market exchange rates and occupied 6th place in terms of purchasing power parity in the world (Sawyer 108). In Europe, the United Kingdom occupied second largest place until 2007. The economy of the UK has experienced a long-term upturn during 150 years; though since 2008 the economy of the country is experiencing a recession under the influence of world economic crisis. However, the UK economy has relatively low rates of inflation, unemployment and interest rates. Financial situation in the UK is also comparatively stable: to the end of 2007, the country occupied 9th place in European Union in terms of GDP per capita. One of the weaknesses of the UK economy is the high level of income inequality; it is higher that in many of the developed countries (like those of the EU). Also, the UK economy has the world’s third largest current account deficit; thus, in 2008 the IMF forced the EU to broaden the scope of fiscal policy in order to broaden external balance. The above-mentioned facts mean that thought the UK economy is a stable one with good showing, the UK financial and external policy is not so efficient now ”“ it can be visible after analysis of recent economical and social tendencies within the country.

2. Economy of Uruguay

Uruguay is a small country located in the southeastern part of South America; there are several remarkable things about the country and its economy. First of all, almost half of the population of Uruguay lives in its capital, Montevideo. Secondly, the economy of Uruguay is most agriculturally based, and this country has very low rates of corruption and is stated to have one of the best labor conditions in the world.

Economical growth of Uruguay is rather stable, showing around 5% of GDP increase each year (Messerlin, Sauvant 26); the country reacted well to the shocks of crisis, though recently there have been some perturbations in the public. It is also worth to mention that Uruguay became one of software exporters recently, thus broadening the scope of specialization of national economy. Other figures concerning Uruguay economy are listed in Section 4 of the essay.

3. Economy of Pakistan

The economy of Pakistan is the 26th largest economy in the world in terms of purchasing power as well as the 47th largest in absolute dollar terms (Zaidi 55). This country’s economy was ranked third fastest growing one in Asia in 2005. However, the economy of Pakistan is rather unstable, mostly due to internal political troubles; only since 2000 the necessary macroeconomic measures have been taken in order to stabilize the economy; Pakistan was ranked as one of top 10 reforming countries. These measures were efficient, but time is necessary for the economy to come to a phase of growth; the situation becomes more complicated due to current economical situation in the world.

Moreover, in 2008 due to the national War on Terror in Pakistan resulted in economical decline and inflation rates raised even higher than usual; the country first time had to seek for external funding. However, the forecasts state than until 2010 the economical situation within the country is going to stabilize and the effect of the reforms will be more visible.

4. Estimate factors and comparison

In this part of the essay it is important to mention that one of three countries given for comparison belongs to quite a different segment of the world. While Uruguay and Pakistan belong to the so-called “developing countries”, the UK is one of the leaders in the sector of “developed” countries. This means that the two types of countries are at different stages of development and their comparison is not valid from the statistical point of view (the criteria of progress should be different for different types of countries). Therefore, the general criteria for the analysis have to be elaborated (the ones that are less depending on the kind of economy) and the results of comparison should be reviewed critically, not only in terms of comparison of statistical figures, but rather in respect to the dynamics of development of each country in particular.

Different factors can be chosen in order to compare economical development of the countries, but there are several key figures (Ravenhill 131) that can be used to measure the efficiency of any economy, in my opinion; they are: GDP values (basic GDP value, GDP by PPP ”“ Purchasing Power Parity and GDP per capita). The standard of life within the country also highly depends on such rates as percent of unemployed population and the number of people living below the line of poverty as well as the inflation rates. Public debt is also an important figure showing the efficiency of fiscal policy within the country. Table 1 represents the listed figures for all three countries (data of analysis relate to the results of 2007 year).

Figure / Country the United Kingdom Uruguay Pakistan
GDP value and growth rate $2787 trillion (-1.5%) $23 billion (7%) $170 billion (6.9%)
GDP by PPP $2046.78 billion $37.54 billion $504.3 billion
GDP per capita $45575 $10800 $2600
Inflation rate 3% 6.5% 12.0%
Unemployment 6.3% 10.8% 7.5%
Population below poverty line 14% 10.66% 23%
Public debt $864 billion $11.4 billion $45 billion
Rank 2 1 3

Development estimate Good compared to other 2 countries, but rather weak in the sector of developed countries Specific development, but the economy is comparatively rich and stable The country has great perspectives of development, but the economy is unstable, large risk of inflation and high poverty rates

Table 1. Comparison of economical efficiency

Conclusion

Though, in my opinion, it is not appropriate to compare the political economy of developed and developing countries since they are in different phases of their development; therefore, the economy of the UK can be reasonably compared to other developed countries such as Canada, European countries etc., but should not have equal comparison criteria with developing countries. The strategies of development for these two kinds of economical situation (developed and developing economies) are quite different and processes that take place in these countries are also very different from each other. Therefore, the results of analysis should, in my opinion, be finally divided into two groups: the analysis of the UK itself and the comparison of Uruguay and Pakistan as developing countries; from this point of view, the comparison is reasonable. According to the economical situation and numbers mentioned above, the results of the analysis show that (taking into account the difference in estimate approaches) Uruguay’s economy shows best development rates recently; second place is occupied by the UK (though if the other two countries were developed ones, this country would occupy the last place according to recent data) and the last place belongs to Pakistan.