Are You Struggling to Understand the Principles of Economic Ideologies?

Students pursuing economics require to study and comprehend different economic ideologies. Most of them find it daunting and overwhelming to understand various complicated theories. This blog will provide you with a complete insight into the economic ideologies. If you are struggling to write an assignment on the principles of economic ideologies, this blog will surely help you.

What is Economic Ideology?

Economic ideologies are moral positions. It determines how economies should be structured as compared to economic theories. They are the systems of a proposition concerning how economies work.

In simple words, economic ideology explains how and in what best way an economy should be organised and managed. It has distinct characteristics from economic theory that caters accurate explanatory models. Both are intertwined with one another closely.

For example, a person who believes in the Keynesian theory of economics quite may not support libertarian ideology.

How Economic Ideology Differs from an Economic System?

An economic ideology distinguishes itself from the economic theory in a normative way rather than just being explanatory in its approach. It expresses a perspective of the way an economy should operate. The aim of economic theories, however, is to create authentic and accurate explanatory models. Both of them are closely interrelated as an underlying economic ideology influences the methodology and the theory employed in the analysis.

The best way to identify an economic ideology is see whether it takes a particular and detailed economic standpoint.

For example, Anarchism cannot be considered as economic ideology. It has the features of Anarcho-capitalism as well as the features of Anarcho-communism.

Economic ideology is different from an economic system because it supports the principles of capitalist ideology. The concept of economic ideology specifies its occurrence, evolution, and relation to an economy.

Let’s look at an example:

Laissez-faire or free-market capitalism prescribes minimal public enterprise and government regulation policies in a capitalist economy. The ideology advocates a type of capitalism that is based on open competition. Open competition enables to determine the price, production and consumption of goods through supply and demand reaching effective market equilibrium. Wages and employment are determined by the labour market. The capitalist economy based on such ideologies will follow the business cycle of economic growth along with a steady cycle of crisis.

The Relationship between Politics and Economics

Economics is the study of principles of economy. Politics is a theory and the practice of influencing people through exercising of power.

If considered theoretically, economics can be non-political. An ideal economist should ignore political prejudice to provide neutral, unbiased recommendations to improve the economic performance of a country. Elected politicians could weigh up the economic suggestions, and then take decisions. Several economic issues are inherently political as they lend themselves to the formation of different opinions.

• Political ideology influences economic thoughts: Numerous significant economic issues are seen through the eyes of political beliefs. Like, some people are suspicious of government interventions instinctively. Thus, they prefer economic policies that reduce the interference of the government in the economy.

For example, supply-side economics that concentrates on deregulation and tax cuts.

Economists may prefer promoting significant equality in the society. They are also willing to encourage the intervention of government to achieve that end. If different economists are willing to report on the income tax cuts for rich people, their policy proposals will reflect their political choices.

• Economics require political support: If you are studying economics, you must have an idea of the Pigovian tax. This is a tax that makes people pay the full social cost for goods, and not just private expenses. The tax gets implemented only when it is supported politically. Like, a congestion charge was proposed in Manchester, but it was defeated heavily in the referendum. Therefore, it was not implemented.

• Microeconomics is not free of politics: Unarguably, some areas of economics are free of politics. The basic economic theories of supply and demand are not laden with political ideology. However, even in some microeconomic theories, you can notice some traces political influence. Like an issue of privatisation, it is a clear political issue. In such cases, the questions are often asked like who should control the key industries-private enterprise or the government.

• Changes in politics influence economic condition: To show how political change can influence economics we can go back to the early age of 1990s. Throughout Eastern Europe and Russia, the traditional Communist ways were abandoned. In their place, few surprising business units developed. Due to such changes in the government, places like the Czech Republic and Poland changed from being puppet states of Moscow to become significant members of the European Union.

• Economic change influencing politics: The fact cannot be ignored that as the income of people increases, their engagement with the political system increases too. The perfect example of such case can be observed in how voting rights were granted to people throughout the history of the United Kingdom. Initially, only the King had real authority. As the nobles grew wealthy, they demanded to make opinions.

Therefore, the political and economic situations of a country are interdependent and connected.

How Economic Ideology Works?

Let’s look at the ways in which economic ideology works:

• Anarchist Economics: It is a set of theories and practices of economic activity within the political philosophy of anarchism. Anarchism is anti-state. It asserts that all hierarchical power structures are corrupt. Apart from anarcho-capitalists who accept private ownership of the production, anarchists are anti-capitalists. The ideologies argue that its characteristic institutions promote and reproduce various forms of oppressive economic activity. This includes private property, hierarchical production relations, collecting private property rents, taking a profit in exchanges and collecting interest on loans. These ideologies usually endorse ownership which is possession-based rather than propertarianism.

• Social market: The social market economy is also known as Rhine Capitalism. The ideologies of social liberalism advocate it. This ideology supports a free- market economy. In such an economy, the supply and demand determine the value of goods and services. This type of economic ideology calls for a state of action in the form of a social policy that favours social insurance, unemployment benefits and recognition of labour rights.

• Casino Capitalism: Casino capitalism is the high-risk-taking and financial instability associated with financial institutions. These institutions become very large and mostly self-regulated while taking up high-risk financial investment dealings. This has been a driving motive of the investors in search of profits without production. It does not typically add to the collective wealth of an economy. Casino capitalism stands beside the idea of a speculation-based economy. Economists like Frank Sitwell believes that casino capitalism was one of the major causes of the 2008 global financial crisis.

• Neo-capitalism: This is an economic ideology which blends significant elements of capitalism with other systems. It also emphasises on government intervention in the economic system to save and reconstruct companies that are believed to be a risk to the nation. The ideology of Neo-capitalism worked in the 10 years that lead up to the Great Depression and World War II in 1964. Critics of neo-capitalism claim that the ideology tends to suppress the reserve army of labour which leads to full employment. This can undermine one of the basic principles that make capitalism work. Again, according to some critics, if the ideology of neo-capitalism were put to work, it would become corrupt immediately.

These are some of the significant ways in which the economic ideology works.

The complicated topics of economics may seem overwhelming for some students to handle. Understand the definition of economic ideologies; comprehend the relation between politics and economics to write a remarkable assignment of economic ideologies.

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