Overview of political economy

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The importance of political economy to elucidating the pathways to a low-carbon society has begun to gain attention recently. Kevin Anderson sees it as challenging the highly technical approaches that have dominated discourse:

Sadly, the growing dominance of abstract and quantitative scenarios generated by ever more complex and black box modelling has increasingly sidelined the thorny issues exposed by an understanding of political economy. Such “expert-based” and highly technical approaches have effectively closed down debate, providing instead inadequate responses to climate change that do not threaten the dominant socioeconomic paradigm.[1] Anderson, Kevin (2018): ‘Foreword’ in Peadar Kirby and Tadhg O’Mahony: The Political Economy of the Low-Carbon Transition: Pathways Beyond Techno-Optimism, Palgrave Macmillan, p. viii.</ref>

Different meanings

However, drawing political economy into debates on the low-carbon transition requires consideration of the very different ways in which the term ‘political economy’ is used in different disciplines, and clarity about what it offers to these debates. The term goes back to the origins of the discipline of economics itself: what is called ‘classical political economy’ described the approaches that emerged from the work of Adam Smith (1723-90) and dominated approaches to economic analysis up to the 1870s including the work of David Ricardo (1772-1823), John Stuart Mill (1806-73) and Karl Marx (1818-83). It was more inductive, historical and value-based than the abstract, deductive reasoning that came to dominate as economics emerged as a separate discipline at the end of the 19th century, increasingly characterised by mathematical approaches to modelling how the economy works.[2] Interestingly, Mill in his Principles of Political Economy (1848) advocated ‘the stationary state of capital and wealth’ as far preferable to ‘the increase of wealth’ with attention to greater distribution and to ‘moral and social progress’[3], a complete heresy for most subsequent economists.

Even today, the term ‘political economy’ is used to refer to very different theoretical and methodological approaches. Within the discipline of economics the term is often used to refer to the new institutionalism, effectively how institutions in the sense of rules, customs or patterns of behaviour can help or hinder the operation of markets.[4] Political economy can also be used to refer to the application of game theory and mathematical modelling to analysing political behaviour and institutions.[5] Political economy is, therefore, as Hettne puts it ‘compatible with widely different ideological and theoretical perspectives or paradigms’ and ‘was always an ideological battlefield’. However, he adds that ‘there is a consensus about what conventionally constitutes … the fundamental concern of political economy, namely the interaction of state and market’.[6] In clarifying what political economy approach is useful to analysing the low-carbon transition, the distinction of Robert W. Cox is fundamental. He sees a methodological difference between political science and economics on the one hand and political economy on the other. The two former disciplines ‘take off from some rather fixed assumptions about the framework or parameters within which actions take place – the institutional framework of politics, or the concept of the market.’ Working within these assumptions, they can offer precise answers to specific questions. This he calls ‘problem-solving theory’. Political economy, by contrast, ‘is concerned with the historically constituted frameworks or structures within which political and economic activity takes place’, standing back from the apparent fixity of the present to ask how the existing structures came into being and how they may be changing. This he calls ‘critical theory’.[7] Among the most pioneering contributions to the field of critical political economy mentioned by both Hettne and Cox is the work of Karl Polanyi (1886-1964).

International development

Applying the methods and tools of critical political economy to analyse the low-carbon transition, the most relevant experience we have is the project of international development. In the years after the second World War, this emerged as a global effort to put what came to be labelled ‘developing countries’ on a pathway to development through public policy, a key feature of which was international aid and policy advice. The IPCC Fifth Assessment Report alluded to this precedent in stating that ‘development along current global pathways can contribute to climate risk and vulnerability, further eroding the basis for sustainable development’.[8] The 2018 IPCC report on keeping warming to within 1.5°C returned to this topic with greater urgency:

The profound transformations that would be needed to integrate sustainable development and 1.5°C-compatible pathways call for examining the values, ethics, attitudes and behaviours that underpin societies. Infusing values that promote sustainable development, overcome individual economic interests and go beyond economic growth, encourage desirable and transformative visions, and care for the less fortunate is part and parcel of climate-resilient and sustainable development pathways.[9]

The lessons from the international development project can therefore be an indispensable aid to knowing how best to develop the pathways global society now has to take. Central to these lessons is making visible the ways that power relations underpinning development success were structured, or that help account for lack of success. In his survey of trends in development theory from the 1950s to the early 2000s, Nederveen Pieterse makes the point that ‘development thinking has been, more or less successively, state-led (classical political economy, modernization, dependency), market-led (neoliberalism) and society-led (alternative development)’. This recognises that all approaches to development rest on political economy configurations, namely on particular interrelationships between state, market and society. He adds that ‘it is increasingly understood that development action needs all of these in new combinations’[10] (emphasis in original). This applies equally to actions to enable countries to transition to a low-carbon society. The crucial question, therefore, is what combinations of state, market and society might best enable that transition to take place. Yet such discussion is almost entirely missing in the discourse on the low-carbon transition.  

Low-carbon pathways

One example, by Strachan and Foxon, relates to options for low-carbon energy transitions which can be based on Market Rules, on Central Co-ordination or on Thousand Flowers, each of which offer very different pathways.[11] Applying these to the transition to a low-carbon society and economy requires asking: will it be built primarily on the rules of the market, on the central co-ordination of the state or on the creative endeavours of the countless groups and individuals engaged in a myriad of different forms of civil society activism? Or, perhaps more accurately, on what mix of these elements will it be built? The answers to these key political economy questions force an examination of much wider features of our society that are mostly ignored in the transition literature. Chief among these is that fact that a hyperfinancialised form of neoliberalism has dominated the global political economy over recent decades. This has inevitably structured the dominant attempts to reduce GHG emissions, using the rules of the market to create incentives to reduce carbon emissions. This has been described as climate capitalism, ‘a model which squares capitalism’s need for continual economic growth with substantial shifts away from carbon-based industrial development’.[12] This political economy model rests on the power of market actors such as corporations and pension funds but has also involved extensive state involvement in creating the rules and incentives for the market. Civil society projects, such as those which benefit from carbon offsetting for example, constitute another leg of this model. Major questions have been raised about the adequacy of this model to achieve a low-carbon transition. Foremost among these is the evidence contradicting the claim that economic growth can go hand in hand with emissions reductions.[13] Gough broadens the focus beyond emissions reduction to include reducing inequalities and promoting wellbeing, and he finds ‘a tragic contradiction between growth, climatic instability and egregious inequality’.[14]

Moving beyond a market-dominant model requires a far more interventionist state, write Bailey and Preston, with the ‘capability to develop, through inclusive processes, a national transformation project and translate this into discrete plans, targets and policy measures’.[15]

Duit et al. refer to this as the ‘environmental state’ and they identify four dimensions: a system of regulation; an administrative apparatus; a corpus of ideas and expert knowledge; and a site for authoritative decision-making with lobbying, consultation and negotiation around defining and deciding on environmental issues, all of them focused on achieving a low-carbon society.[16] It is also recognised that the scale of social transformation required will entail changes at supranational as well as at subnational levels. The German Advisory Council on Global Change (WBGU) advocates the mainstreaming of climate change policy at EU level and ‘a stronger commitment to transformative policies across all organisational units’.[17] (WBGU, 2011: 219).

The environmental state constitutes a second political economy model, centred on a strong and transformative state. However, the WBGU also recognises that such a state needs an active citizenry ‘with more extensive opportunities to have a voice, to get more involved in decision-making processes, and to take on a more active role in politics’.[18] This can be called an ‘ecological citizenship’ and moves into a third political model, one in which citizens are empowered to hold the state to account and to incubate the projects that hold the lessons for how society is to transition to a low-carbon future. While the term innovation is regularly invoked in regard to science and technology, the transition to a low-carbon society is also dependent on a lot of social innovation, experimenting with new ways to live within our ecological footprint. This is well illustrated in the 2019 Ecolise report on how communities are catalysing social, economic and ecological transformation in Europe.[19] Such innovations ‘expand the range of alternatives people may choose from. What emerges is a participatory society that includes, but goes beyond, both participatory democracy and consumer activism’.[20]

Low-carbon models in embryo

Different political economy models to enable the transition to a low-carbon society already exist in embryo therefore. However, such configurations of market-state-society need to be brought much more to the fore of public discussion, political decision-making and social struggle. Fashioning a political economy model ‘is not something that competent officials can get done quietly and efficiently, out of the public view, as citizens go about their everyday business. On the contrary, it is an inherently political process – for it requires societal decisions about desirable ways of life, and about how benefits and burdens are to be shared among different communities and different generations, and between humankind and other inhabitants of this planet’.[21] Nothing better illustrates the urgent necessity of drawing a political economy framework of analysis to the centre of discussions on the low-carbon transition.


  1. Anderson, Kevin (2018): ‘Foreword’ in Peadar Kirby and Tadhg O’Mahony: The Political Economy of the Low-Carbon Transition: Pathways Beyond Techno-Optimism, Palgrave Macmillan, p. viii.
  2. Backhouse, Roger E., 2002): The Penguin History of Economics, Penguin, chapter 7.
  3. Mill, John Stuart (1970): Principles of Political Economy, Penguin [original 1848], pp. 111, 113, 116.
  4. Reardon, Jack, Maria Alejandra Madi and Molly Scott Cato (2018): Introducing a New Economics: Pluralist, Sustainable and Progressive, Pluto Press, pp 7-8.
  5. O’Brien, Robert and Marc Williams (2013): Global Political Economy, Palgrave Macmillan, 4th edition, pp. 25-26.
  6. Hettne, Björn (1995): ‘Introduction: The International Political Economy of Transformation’ in Björn Hettne ed.: International Political Economy: Understanding Global Disorder, Zed Books, pp. 1-30, quote at p. 2.
  7. Cox, Robert W. (1995): Critical Political Economy’, in Björn Hettne ed.: International Political Economy: Understanding Global Disorder, Zed Books, pp. 31-45, quotes at p. 32.
  8. IPCC (2014): Climate Change 2014: Synthesis Report, IPCC.
  9. Roy, J. et al. (2018): ‘Sustainable Development, Poverty Eradication and Reducing Inequalities’, in: Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty, IPCC, p. 475.
  10. Nederveen Pieterse, Jan (2001): Development Theory: Deconstructions/Reconstructions, Sage, p. 17.
  11. Strachan, Neil and Timothy J. Foxon (2012): ‘A Low-Carbon Transition’, in Horace Herring (ed.): Living in a Low-Carbon Society in 2050, Palgrave Macmillan, pp 75-91.
  12. Newell, Peter and Matthew Paterson (2010): Climate Capitalism: Global Warming and the Transformation of the Global Economy, Cambridge University Press, p. 1
  13. See, for example, Tim Jackson and Peter. E. Victor (2019): ‘Unraveling the claims for (and against) green growth’, in Science, 22nd November, 2019: 950-51; Jason Hickel and Giorgos Kallis (2019): ‘Is Green Growth Possible?’, in New Political Economy, April 2019: https://doi.org/10.1080/13563467.2019.1598964, accessed 19th April 2019.
  14. Gough, Ian (2017): Heat, Greed and Human Need: Climate Change, Capitalism and Sustainable Wellbeing, Edward Elgar, p. 83.
  15. Bailey, Rob and Felix Preston (2014): ‘Stuck in Transition: Managing the Political Economy of Low-carbon Development’, Chatham House Briefing Paper, February 2014, pp. 2,3.
  16. Duit, Andreas, Peter H. Feindt and James Meadowcroft (2016): ‘Greening Leviathan: the rise of the environmental state?’, in Environmental Politics, Vol. 25, No 1, pp. 1-23.
  17. WBGU (2011): World in Transition: A Social Contract for Sustainability, WBGU, p 219.
  18. WBGU (2011): World in Transition: A Social Contract for Sustainability, WBGU, p 209.
  19. Penha-Lopes, Gil, and Tom Henfrey, eds (2019): Reshaping the Future: how communities are catalysing social, economic and ecological transformation in Europe. The First Status Report on Community-led Action on Sustainability and Climate Change, Ecolise.
  20. De Schutter, Olivier (2014): The EU’s Fifth Project: Transitional Governance in the Service of Sustainable Societies, p. 29: http://www.srfood.org/images/stories/pdf/otherdocuments/Framing4.pdf, downloaded 19th February 2015.
  21. Meadowcroft, James (2010): ‘Who is in Charge here? Governance for Sustainable Development in a Complex World’, in Journal of Environmental Policy & Planning, Vol. 9, Nos. 3-4, pp. 299-314, quote at p. 313.