Economics Sample Essay on International Political Economy

International Political Economy

            Democracy, internationalization of the market and globalization are some of the concepts that determine the functioning of the international political economy. It is often said that one cannot divorce economics from politics and a close examination of the interplay between these factors in the global economy reveals that there is a degree of truth to the claim. Democracy remains the most practiced form of government just as market liberalization is entrenched in most economies. Despite its promises, democracy at both the government and market levels has failed to solve the problem of inequality in income distribution. This paper discusses why democracy has failed to reduce income inequality.

            The late twentieth century has seen massive ideological shift and greater polarization within the political system, for example, in the US house of Congress; the voting patterns of legislators can be measured with reference to pre-determined ‘ideal point.’ Linear graphical presentation of these patterns since late 19th century to the 21st century reveals that conservatives have increasingly voted to the right whereas liberals have voted to the left of the ‘ideal point.’ According to Poole (2005), the increasing levels of polarization and ideological shifts affect income distribution. This is partly because politics between Democrats and Republicans has shifted policy concerns from social welfare to other issues such as race, gender and sexual orientation.

            According to McCarty, Poole and Rosenthal (2006), a relationship exists between participation in the voting exercise and income inequality. One observation is that the majorities of the poor are not United States citizens, and second is that among the poor population who are citizens, the voter turnout during polls is reportedly low. This implies that the populations with higher income participate in the election more frequently than their low income counterparts. The low income status of this section of the population is seen as both a cause and effect of their voting patterns. This means that the policies to combat income inequality are designed to favor the high income earners who exhibit increased participation in polls.

            Campaign donations and political outcomes also have a bearing on income distribution. Individuals, organized labor and corporations often make electoral funding. Both the democrats and republicans get their funding from wealthy individuals. Surveys conducted over time reveal that the amount of donations a candidate or party receives depends largely on the ideologies and policy positions they promise to champion once elected to office. The rich, who contribute the highest, therefore, have policies on inequality skewed to their favor.

            The way in which the political system is instituted determines its reaction to the issue of inequality. According to Persson, Roland and Tabellini (2000), systems that are presidential-congressional in nature often have high levels of inequality and the use of proportional representation is a viable remedy to reduce the levels.

            Internationalization of markets due to globalization has also played a role in abetting inequality. Globalization creates interdependence between economies such that an economic shock in one economy spreads to others via ripple effect. According to Piketty and Saez (2003), economic depression has led to increasing inequality. Globalization in the financial sector has also increased inequality because the rich are able to avoid taxes that are a redistributive tool. The consequences of globalization do not promote equal rights for all because the evidence suggests that the rich continue to benefit.

            Politics plays an important role in public policy formulation and one way to ensure effective policy to curb inequality is to eliminate the polarizations between the liberals and conservatives. All population must also engage actively in the voting process and finally there must be legislation to regulate the percentage of donations for elections.