Haramaya University

Collage of …..
Department…..

Discuss the main Difference Between National Political

Economy: The America, Japan and Germany Case

By Hikma Nuru

Submitted to: Mr.

Submission Date:

Haramaya, Ethiopia
Feb, 2023
Table of Contents
1. What Is Political Economy?.....................................................................................................1

1.1 Types of Political Economy..............................................................................................2

2. Political Economy of America.................................................................................................2

2.1 The main components of the US political economy.........................................................3

3. Japan’s Political Economy.......................................................................................................3

3.1 The main elements of the political economy of Japan......................................................5

4. Germany’s Political Economy..................................................................................................5

4.1 The main economic policies of Germany.........................................................................6

5. The Main Difference between the Political Economy of America, Japan and Germany.........6

References........................................................................................................................................8

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1.1 What Is Political Economy?
National political economy is the study of how different economic factors interact to produce
patterns of economic growth, development, and prosperity. It encompasses a wide range of
topics, from the role of taxation in economic policy to the impact of trade on the economy.
National political economy is a complex field, and there is no one definitive answer to any
question it raises. However, understanding how different economic factors interact is essential
for making sound decisions about how to promote economic growth and development. One
important area of national political economy is macroeconomic policy. This involves the
government's use of financial tools, such as tariffs and subsidies, to influence overall economic
activity. Macroeconomic policy can have a significant impact on both short- and long-term
outcomes, and it must be carefully calibrated in order to achieve the desired results. Another key
area of national political economy is trade policy. This involves the government's efforts to
promote or restrict trade in order to promote economic growth or protect domestic industries.
Trade policies can have a significant impact on both domestic and international prices, and they
must be carefully crafted in order to achieve the desired outcomes. National political economy is
an important tool for policymakers looking to improve the economy overall. By understanding
how different economic factors interact, policymakers can craft policies that will have the
desired effects – whether that's promoting growth or protecting domestic industries Political
economy is an interdisciplinary branch of the social sciences. It focuses on the interrelationships
among individuals, governments, and public policy.

Political economists study how economic theories such as capitalism, socialism, and

communism work in the real world. Any economic theory is a means of directing the
distribution of a finite amount of resources in a way that benefits the greatest number of
individuals. These ideas can be studied both theoretically and as they are used in the real world.
In the real world, public policy is created and implemented around these economic theories.
Political economists study both the underlying roots of these policies and their results. In a
wider sense, political economy was once the common term used for the field we now
call economics. Adam Smith, John Stuart Mill, and Jean-Jacques Rousseau all used the term to
describe their theories. The shorter term "economy" was substituted in the early 20th century
with the development of more rigorous statistical methods for analyzing economic factors.

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2.1 Types of Political Economy

Political economy is a branch of social science that studies the relationship that forms between a
nation's population and its government when public policy is enacted. It is, therefore, the result
of the interaction between politics and the economy and is the basis of the social science
discipline.

As mentioned above, there are several notable types of political economies:

 Socialism: This type of political economy promotes the idea that the production and
distribution of goods and wealth are maintained and regulated by society, rather than a
particular group of people. The rationale behind this is that whatever is produced by
society is done so because of those who participate, regardless of status, wealth, or
position. Socialism aims to bridge the gap between rich and poor, eliminating the ability
of individuals or groups to control the majority of power and wealth.
 Capitalism: This theory advocates profit as a motive for advancement and the ability of
free markets to regulate and drive the economy on their own. The idea behind capitalism
is that private individuals and other actors are driven by their own interests—they
control production and distribution, set prices, and create supply and demand.
 Communism: Individuals often confuse communism with socialism, but there is a
distinct difference between these two theories. Communism was a theory developed
by Karl Marx, who felt that capitalism was limited and created a big divide between rich
and poor. He believed in shared resources, including property. Unlike socialism,
however, under communism production and distribution are overseen by the
government.

3.1 Political Economy of America

The political economy of the United States is a complex and highly developed system of laws,
institutions, and practices that shapes the production, distribution, and consumption of goods and
services. The political economy of the United States is unique in its size, diversity, and
complexity. The political economy of the United States is shaped by a number of factors
including its history, geography, economic structure, and political system. The United States has

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 a long history as a capitalist country. The country's economic structure is characterized by a high
level of private enterprise and a strong emphasis on market forces. The United States has a
strong political system with an extensive array of institutions that affect economic activity. These
include the federal government, state governments, businesses, unions, and marketplaces. The
political economy of the United States has had a significant impact on the world economy. The
country's economic policies have had a significant impact on global trade and investment
patterns. The country's political system has had a significant impact on international relations and
the development of global institutions.

4.1 The main components of the US political economy

1. Monetary policy - This is the process by which the Federal Reserve, or other central
banks, use their tools such as interest rates, money supply and exchange rates to influence
economic activity.
2. Fiscal policy - This is the process by which the government uses its spending and
taxation policies to influence economic activity.
3. Trade policy - This is the process by which the government sets rules and regulations for
international trade, such as tariffs and quotas.
4. Financial regulation - This is the process by which the government establishes standards
and rules for financial institutions such as banks and insurance companies.
5. Labor market regulation - This is the process by which the government sets rules for
labor, such as minimum wage and work hours.
6. Monopolistic regulation - This is the process by which the government establishes laws
that restrict competition in areas like price gouging or anti-trust law (monopoly).

5.1 Japan’s Political Economy

Japan's political economy is structured as a parliamentary constitutional monarchy. The country

is governed by a Prime Minister and a bicameral legislature consisting of the House of
Representatives and the House of Councilors. The executive branch is headed by the Prime
Minister, who is appointed by the Emperor, and the legislative branch is composed of elected
representatives from each of the prefectures. The judiciary is independent and consists of a

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Supreme Court and several lower courts. The economy is largely market-based and heavily
regulated, with government intervention in certain areas such as banking and finance. Japan's
currency is the Japanese yen (JPY). And its population is 127 million. The country is a member
of the G7, the G8 and the OECD, and has been consistently one of the world's largest economies
since World War II. Japan has an unemployment rate of only 3%, meaning that it is ranked as
having one of the lowest unemployment rates in the world despite a population of around 127
million people. Japan's per-capita GDP in 2013 was $40,800 USD according to World Bank
estimates. The Japanese economy is one of the world’s most highly diversified and
industrialized. The country has a very high level of economic development, ranking first in the
world in terms of GDP per capita (nominal) as of 2017. Japan is also one of the few countries to
have maintained its economic stability during the global financial crisis. The Japanese economy
is dominated by services and manufacturing, with agriculture playing a relatively small role. The
country has a very high level of industrialization and a relatively low level of agricultural
production. The manufacturing sector accounts for about three-quarters of GDP and employs
about 60% of the workforce. The service sector, including tourism and finance, employs about
40% of the workforce and contributes about two-thirds to GDP. The Japanese economy is highly
diversified, with exports accounting for about 40% of GDP and imports accounting for about
60%. The major export products are electronics, machinery, vehicles, chemicals, metals, and
food products. Major import products are oil and oil products, machinery and equipment, metals,
minerals, and foodstuffs. The Japanese economy has been characterized by stable growth rates
over the past several decades. Inflation rates have been low and interest rates have been
relatively low, which has helped to maintain high levels of household savings. In recent years,
however, the Japanese economy has slowed down due to weak global demand. The main
components of the Japan political economy include the central government, local governments,
and private sector institutions. The central government is responsible for economic policy, fiscal
affairs, and external relations. Local governments are responsible for local public works and
social welfare activities. Private sector institutions such as large corporations play a major role in
the economy by providing employment opportunities, investing capital, and conducting research
and development activities. In addition to these components, individuals also play an important
role by participating in market activities and contributing to economic growth through
consumption and investment decisions. .The central government includes institutions such as the

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 Cabinet, Diet, ministries, and agencies. The Cabinet is headed by the prime minister and consists
of a number of ministers who head various ministries. Other important political institutions
include the legislature (Diet), which is elected every four years; and constitutional courts that
review government policies and make judgements on constitutionality. The Diet is responsible
for passing fiscal laws with regard to taxation, public expenditure, and other matters that fall
under its jurisdiction.

6.1 The main elements of the political economy of Japan

1. The Japanese Constitution, which provides the foundation for the country's political and
economic system.
2. The banking system, which provides credit and capital to businesses and individuals.
3. The government, which sets policies and regulations for economic activity.
4. The corporate sector, which is responsible for producing goods and services and
providing employment.
5. The labor market, which is composed of both regular and temporary employees.
6. The export sector, which is responsible for generating foreign currency earnings.
7. The tax system, which is used to fund the various sectors of the economy.

The primary goal of economic policy is to maintain an economic climate conducive to economic
growth or a stable level of income distribution. In order to achieve this goal, governments
implement policies that are aimed at stimulating investment, increasing exports, and improving
productivity. Along with these goals comes the expectation that increasing production will
ultimately increase wages and create more jobs in the economy.

7.1 Germany’s Political Economy

The political economy of Germany is characterized by a highly developed free-market economy,

a strong social welfare system, and a social market economy. Germany has the fourth-largest
economy in the world and is one of the world’s leading exporters. It has a modern infrastructure
and is highly competitive in terms of labor costs and productivity. The German government
pursues both fiscal and monetary policies that are aimed at maintaining price stability, promoting
economic growth, and reducing unemployment. Germany is a member of the European Union

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 (EU) and the Eurozone, and its currency is the euro. .Germany’s economy is the largest in
Europe and ranks among the top in the world. Germany’s export sectors include advanced
machinery and high-tech goods, chemicals, electrical equipment, cars, pharmaceuticals and
medical devices. The service sector contributes about three-quarters of gross domestic product
(GDP). Most Germans work in white collar professions such as science and engineering; it is
said that one of five scientists worldwide works in Germany. As a leading exporter of high-tech
products and automobiles, Germany benefits from a highly developed automotive industry with
thousands of suppliers that includes foreign auto parts manufacturers.

8.1 The main economic policies of Germany

1. Fiscal Policy – Germany’s fiscal policy is based on the principles of fiscal discipline and
balanced budgets, with the goal of managing public finances responsibly.
2. Monetary Policy – The European Central Bank (ECB) is responsible for setting monetary
policy for the Eurozone, of which Germany is a member. The ECB’s main objective is to
maintain price stability.
3. Trade Policy – Germany is an active participant in the global economy, with a focus on
free trade and open markets.
4. Labor Market Policies – The German labor market is characterized by high degrees of
labor market flexibility and the country’s extensive system of social benefits.
5. Employment Protection – The German ESA enshrines core labor standards such as paid
annual leave, limits on working hours, and rights for part-time workers and job protection
for workers in temporary employment.
6. Social Protection Policies – Germany has a universal health care system called the
Gesetzliche Krankenversicherung (GKV) which provides coverage to all its citizens at
little to no cost to them, including those outside of the country’s borders

9.1 The Main Difference between the Political Economy of America, Japan and Germany

The political economy of America is largely based on free-market capitalism, with an emphasis
on individual freedom and private property. Japan’s political economy is based on a mix of free
market capitalism and government regulation, with an emphasis on maintaining a strong export

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based economy. Germany’s political economy is based on a combination of free-market
elements and social welfare programs, with an emphasis on the collective interests of workers
and their families. .“The political economy of England is largely based on free-market
capitalism, with an emphasis on individual freedom and private property. England’s political
economy is based on a mix of free-market capitalism and government regulation, with an
emphasis on maintaining a strong export-based economy. Australia’s political economy is
largely free-market capitalism, with government regulation being used to preserve the country’s
natural resources and prevent monopolies from taking control over the market. Canada's political
economy is based primarily on a mixture of mercantilism and social welfare programs, with an
emphasis on national defense. In America, the economy is market-oriented, with a strong
emphasis on free trade and private enterprise. Government intervention in the economy is
limited, and the government plays a relatively small role in economic decision-making. In Japan,
the economy is heavily regulated, with significant government intervention in economic
decision-making. The government is heavily involved in setting prices and directing investment.
There is also a strong emphasis on exports and international trade. In Germany, the economy is
characterized by a mix of the state and the market. There is a heavy level of government
intervention in economic decision-making, with businesses heavily regulated and closely
monitored. There is a large role for public enterprises, industry groups, trade associations and
syndicates.

The United States has a market-based economy that is driven by private enterprise and is largely
driven by the principles of supply and demand. The country's economic policies are largely
focused on encouraging economic growth and stability through fiscal, monetary, and regulatory
policies. These include tax policies, government spending, and regulations on investment,
banking, and trade. The government also provides incentives to businesses in order to promote
economic growth, such as subsidies and tax breaks. The Federal Reserve System is responsible
for setting interest rates, managing the money supply, and regulating the banking system. In
addition, the US government has established trade agreements with most of its major trading
partners. The United States has a large, open economy with many companies that import and
export goods and services. It is the world’s top producer of oil, natural gas, coal and wind power;
the second-largest in nuclear power; third-largest importer of manufactured goods; a premier

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destination for foreign direct investment (FDI); a net exporter of services; one of the largest
economies in terms of purchasing power parity (PPP) GDP. The country ranks among the top
countries in GDP per capita and GDP per worker. There are a number of main political economic
differences between America, Japan and Germany. America is a much larger economy than
either Japan or Germany, and has a much higher level of economic development. America also
has a much more open economy than either Japan or Germany, with a much greater degree of
competition and innovation. Germany is considerably more economically integrated with its
European neighbors than America is, and has a more centralized government than America does.
Finally, Germany has a much higher level of social welfare than either America or Japan does

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