BABCOCK UNIVERSITY

VERONICA ADELEKE SCHOOL OF SOCIAL SCIENCES

DEPARTMENT OF ECONOMICS

FUNDAMENTALS OF POLITICAL ECONOMICS

ECON274

AKINOLA HABEEBULAHI OLAKUNLE

19/1366

DR.BOLA AROYEWUN

ON THIS DAY, 10TH MARCH, 2021.

QUESTION 01
 What is the central issue in Political economy?

Political economy deals with the interplay between economics,

law and politics, and how institutions develop in different social and
economic systems. It concerns itself with relationship between the
relationship (mutual or antagonistic) between people involved in
production of goods and services, as well as the influence of the
activities of diverse social classes on the economy. This is the pivot on
which political economy revolves. For the purpose of simplicity, the
central issue of political economy can therefore be highlighted as;

 The form of ownership of productive means (as in private or

public ownership).
 The relationship and activities of various social classes in
production process. (For example, Capitalists and workers.)
 The available means of production, distribution and consumption
of means of subsistence or wealth. (The Economic Systems).
 The interplay of elements and actors or agents of public
administration (politics) and resource allocation (economics).

The above is the central issue of political economy in the

simplest of terms. Without doubt, This short discourse will help
understand the essence of political economy as a field of study.

QUESTION2
What are the argument of political intervention in the
economy?
 Karl Marx is seen today as the chief proponent of communism
- the first stage of which is socialism. Marx is known to have advocated
that capitalist economies which allows for free enterprise and little or
no government intervention is merely a process that has transformed,
on one hand, means of production into capital (owned and controlled
only by capitalists), and on the other hand, the immediate producers of
commodities into wage earners/labourers. In this type of economy
where owners of productive means tie down labourers with wages,
exploitation is inevitable.

Hence, an economy with no government intervention is a

prearranged economy of exploitation, lawlessness and anarchy.
Political intervention is therefore crucial to the achievement of a
stable economy free from exploitation and inequality.

This proposition is based on the following arguments.

1. That government interference is vital to the attainment of full

employment level as well as to control inflation.

2. That state intervention is also needed in setting the prices of goods

and services to avoid exploitation and domination of markets.

3. Interference from the government is needed to curb artificial

monopoly.

4. It is only through political intervention that artificial scarcity caused

by greedy capitalists can be eliminated.

5. If markets and economies are left on the basis of free Enterprise,

negative checks will come into force. These checks according to Karl
Marx may be subsequent Proletariat revolution against capitalists.
6. A central power is also needed for equitable distribution of income
and material wealth.

These arguments concide with the communist world view where

state intervention is extensively accommodated. It is their strong
conviction that centralisation of power and state control of productive
means will ensure better economy growth and satisfaction.