The Relationship between Democracy and Free market: A Political approach to Economics
Political economy is a branch of economics which studies the relationships between individuals and society and between markets. Political economy thus can be understood as the study of how a country is managed or governed by acknowledging both political and economic factors. Paul Phillips, the author of, "Inside Capitalism: An Introduction to Political Economy" introduces the concept of political economy and the importance of political economic policy in society. In addition, he explains the reasoning behind the economic woes in North American society in a politically economical context. The defining feature of a North American society is democracy, and its' free market economy. The author examines how the economic elite in society benefits from the current structure of the free market by participating in political activity. Examining economic institutions today, it appears that a free market thrives in a democratic climate. The idea of a free market is democratic in theory, however, the manifestations that stem as a result of the neoliberal approach to economics plays an integral role in the power imbalance present in capitalist societies.
Political economy is primarily concerned with how political forces affect the economic outcomes. Political economy seeks to provide answers to give one the tools to fully understand world issues and break them down to their important components. According to Phillips, the political approach to economics is integral to understanding the way the economy functions, "the economy cannot be understood or studied independent of the distribution of economic and political power and of the social and political institutions that shape its operations (Phillips, p. 1). Phillips highlights the importance of understanding politics from an economic perspective. In Philips view, the political economy is a powerful force that shapes one's way of life. Phillips contends that Canadians overlook the profound impact of a politically economic framework: "Most people take the politicaleconomic world we live in for granted, viewing it as some sort of natural evolution of a market economy" (Phillips p. 1). Phillips asserts that although Canadians live in an economy shaped by politics, few Canadians understand the critical role the political economy plays on everyday life. The political approach to economics allows for a broader view of the economy and its social impact. The author uses political critically to examine the democratic institution that favours a free market, and outlines the consequences of economic liberalism.
The democratic system in its purest form entails freedom. It is a system in which the government consists of elected representatives that are selected by the majority of the population. In a similar vein, the free market is an economic system where privately owned businesses compete in an unrestricted environment with...
