Can we separate economics from the political spectrum, and can we isolate it from morality?
In short, no. Politics remains to be one of the (or in fact, THE most) important influence on our economy, a fact made even more discernible throughout the recent economic crisis. If before the two were only loosely linked, recent extortionate government bailouts have ensured that political agenda and economic are now linked far more closely than ever before.
Throughout history, different political ideologies have pursued different economic aims. Low levels of inflation, full employment and high levels of growth have all taken their turn as the focus of government economic policy. In fact, simply looking at the changing structure of industry in Britain demonstrates the conjoined nature of politics and economics- Thatcher’s closure of the mines and move away from an industrialised Britain forever changed the structure of the British economy. If it wasn’t for these actions and Britain’s subsequent shift towards tertiary industries then one could argue that Britain would have been unable to remain a significant economic player, and would fall behind in terms of competition within global markets.
Neoclassical economists believe that economics and politics are completely separate entities. This certainly seems desirable when we consider that a lot of political agenda nowadays is disguised as economic analysis- much of what we read and hear has been manufactured or twisted to make us think a certain way about a certain issue. This is particularly the case during times of heightened political awareness such as elections. Politicians have access to the exact same set of figures and statistics of course- these cannot be changed- but what can be changed is the way in which they are presented to us in order to prove a point. In short, has the use of economics in politics made us unable to trust what should be hard facts?
This idea of trust becomes yet more pertinent when we consider that trust is at the centre of what drives consumer actions. If we do not trust in the banks to keep our money safe, and in the government to protect our jobs and the value of our money, then investor confidence (and therefore investment) will plummet- not a good situation however you look at it. Add to this the persistent problem of making politics and economics clear and accessible to the average Joe consumer, and hitting a brick wall seems somewhat inevitable. As Upton Sinclair said, “it is difficult to get a man to understand something, when his salary depends upon his not understanding it.”
A crucial question in this argument is whether economics drives politics, or whether it is the other way around. Can one even exist without the other? Macroeconomics in particular addresses issues that are definitely led by political agenda- inflation, balance of payments, trade flows and economic growth in particular are of political concern on not only a national but also a global scale. In fact, the increasing influence of institutions and trading partners such as the EU and ASEAN have seen these issues achieving even more attention on a global platform, a trend that will surely only continue to increase with the ongoing financial crisis and shift towards Asian markets.
However, should we even be attempting to separate economics from morality? Surely this depends on whether we are trying to achieve maximum benefit for the consumer, or maximum benefit for the economy. Are they in fact the same thing? Does a happy consumer create a stable and well run economy?
From a long run perspective, it seems that political ideologies pass but economic cycles remain largely constant- boom and bust continues to occur globally despite changes in power structures. In the end, does economics remain largely untouched by politics? Earlier this year, the Arab Spring saw a number of countries riding the fifth wave of democracy, a move that will create yet more issues that will create controversy within both politics and economics. Perhaps it will be these Northern African countries that discover a new way of combining the two, or maybe a whole new set of problems will arise. Either way, it is clear that the turbulent relationship between economics and the political spectrum has definitely not yet found its peace.