Political Economy refers to the interface between political and economic power in a given society that influences the growth and development prospects of that very society. According to Pranab Bardhan (1999) political economy refers to the dissemination of political and economic power in a given society and how such a rearrangement influences the directions and patterns of growth and development and policies and programmes that bear on them. Economic development is highly correlated with political economy of a country. Every nation undertakes a sequence of welfare and development works so as to bring positive changes in the economy, improve standard of living and quality of life of its citizens. The role of the political economy cannot be neglected as far as growth and development of a nation is concerned. In the entire process of growth and development, political economy of a country is the main protagonist as it plays main role in the functioning of an economy. However, it has been observed that the political economy of developing countries in general and India in particular is very unstable for past many decades or so because the benefits accruing from the growth and development activities have not generated the desired outcome, and have failed to bring about a positive as well as desired change in the different aspects of lives of the people which has raised the queries and concerns regarding the role and efficacy of the state and put a question mark on the political economy of these countries. The quest for alternative paths to economic development so as to bring trickle-down effect (a theory that says benefits for the wealthy trickle down to everyone else) has been on the top list of the political economists. Modern public-private partnership models and structures have emerged as the last resort to maintain the political economy of underdeveloped or developing economies.
Consequently, the basic and fundamental approach to bring a good connection between political economy and economic development has experienced large changes in contemporary times which recognizes the importance of political economy in economic development and economic governance and political governance linkage as a key indicator to economic development. It is very important to realize the fact that sound understanding of political economy is essential food for the recipe of economic development. Good political economy is essential for sustainable development and that sound economic policies, firm democratic institutions receptive to the needs of the people and improved infrastructure which are the product of good political economy are the basis for sustained economic growth, poverty alleviation and employment creation. And that freedom, peace and security, domestic stability, respect for human rights, including the right to development, the rule of law, gender equality and market oriented policies and an over-all commitment to fair, objective and democratic societies are also achieved under the arena of good political economy. Bad political economy has two outcomes- bad economy and bad governance/ bad polity which misleads the path of growth and development, and has inconsistent bearing on the general masses, particularly weaker sections of the society. Hence, developing nations must develop strategies and policies to improve the political economy so as to alleviate poverty and improve income, employment and output levels.
The essence of good connectivity between political economy and economic development is realization of social and human welfare or maximization of social advantage. In fact, the understanding of the political economy and economic development aim at benefiting the citizens and if both fail in providing benefits to citizens then such understanding is futile activity. Political economy and economic development are complementary as we cannot separate the two. We can expect good development results only in the presence of good political economy and in a good interface between political economy and economic development because as far as good political economy is concerned, it ensures equal participation of people in decision making, both political and economic decision making related to development programmes which reflects the freedom and choice expansion of people.
In recent years, development has underwent a paradigm shift from mere economic expression to value loaded expression which is complete picture of human development. But, it is not the development alone which has underwent a paradigm shift, political economy too has underwent a paradigm shift. Charles Maier rightly advocates that a political economy approach cross-examines economic principles to reveal their sociological and political properties. Consequently, political economy has underwent a paradigm shift from mere political-economic expression to political-economic-sociological expression which is complete picture of free economy and strong state (Gamble, 1988). The quality of political economy depends upon local politics and public activities. The role of the public is not confined to influencing or challenging the policies, pronouncements, verdicts, proclamations and decisions of the government. Rather, public has to play a constructive and conclusive role in the political economy and overall development of society so as to reduce inequality of all kinds. Dreze & Sen (1996) argue that public action has the potential of making a government truly accountable and transparent. Accordingly, governance can be guaranteed and reinforced by public action, or active participation of people in the process of governance and development. Citizens must not forget that the role of the government is very important to build institutions to help facilitate the involvement of people in the maintenance of political economy of a country and in the entire process of governance.
There is bi-way causality between political economy and economic development. That is to say that political economy causes economic development and economic development causes political economy. Development which is all inclusive and sustainable will lead to good political economy and political economy which is good will cause economic development which is sustainable and all inclusive. In modern times, good political economy and economic development are equally dominant. In other words, in the contemporary times, good political economy is economic development driven and economic development is good political economy driven, implying that good political economy spreads as and when economic development takes place and economic development spreads as and when good political economy takes place. Good political economy facilitates economic development, and in turn economic development ensures the furtherance of good political economy.
Political economy perceptions can benefit us in the development of better precision about the forces stimulating and hampering better developmental consequences. Furthermore, it can help us to focus on what better contributions could be made to build up current or prospective drivers of economic growth and economic development. Accordingly, in order to maintain political economy of a country we need to bring a good interface between political economy and economic development.
Binish Qadri is Research Scholar, Department of Economics, Central University of Kashmir,