Political Economy of Growth: Demand, Production and Macroeconomic Policies in Advanced and Emerging Economies

Juan Manuel Campana, PhD registered at Université Sorbonne Paris Nord (USPN)

Supervisors: Prof. Dr. Eckhard Hein (HWR Berlin); Prof. Dr. Dany Lang (USPN)

Differences in the economic performance of countries and their interaction with social, institutional, and political underpinnings are the subject of study of Comparative Political Economy (CPE). This field has long been dominated by the Varieties of Capitalism (VoC) approach (Hall and Soskice 2001), which is predominantly focused on supply-side institutions and microeconomic characteristics of firms, and identifies two static representative configurations of post-Fordist advanced economies: Liberal Market Economies (LMEs) and Coordinated Market Economies (CMEs). This framework was recently contested in CPE by the Growth Model (GM) perspective (Baccaro and Pontusson 2016, Baccaro et al. 2022). This approach proposes to build their analyses on post-Keynesian (PK) macroeconomic foundations, emphasizing the role of aggregate demand and income distribution for economic growth in an era of increasing stagnation in advanced capitalist economies.

PK scholars supported this attempt by CPE to incorporate their theories, while they also clarified some theoretical and empirical misunderstandings and expanded the horizon of possible cross-fertilization (Hein et al. 2021, Stockhammer 2021, Stockhammer and Kohler 2022, Hein 2023). Multiple approaches to the study of growth regimes across countries had already been developed within the PK tradition long before the emergence of the GM perspective in CPE (Hein 2023). Recently, Hein (2023) identified four different and complementary levels of analysis within the historical-empirical study of growth:  i) national income and financial accounting growth decomposition (Hein 2011); ii) autonomous demand-led growth decomposition (Freitas and Dweck 2013); iii) growth drivers (Kohler and Stockhammer 2022), including macroeconomic policy regimes (MPR) (Fritsche et al. 2005, Hein and Truger 2005, Herr and Kazandziska 2011); iv) political economy dimension (dominant social blocs, growth coalitions, etc.) (Amable 2018, Baccaro and Pontusson 2019, 2022). While growth decomposition methodologies may provide consistent macroeconomic foundations for the analysis of growth models, growth drivers offer a direct platform for connecting with CPE analyses that consider their political economy and institutional foundations.

This research proposal stands within these debates and intends to contribute to them. Drawing on contributions from PK economics, CPE and International Political Economy (IPE), the research project will attempt to answer the following overarching research question:

How have the long-term trajectories of national growth models in advanced and emerging economies and their interaction with each other changed in the face of external and domestic crises and shocks in the 21st century? 

The objectives of the proposal that follow from the above-mentioned research question are:

  1. Identify demand-led growth regimes in advanced and emerging economies through different growth decomposition methodologies and analyse their relationship. Asses the importance of export and import structures for the dynamics of the regime, as well as the risks they may reveal.

  2. Examine the role of macroeconomic policy regimes for the emergence and change of growth regimes.

  3. Explore the political economy dimension of growth models through their socio-political foundations and the concepts of dominant social blocs and growth coalitions.

  4. Extend the scale of the analysis of objective 1 in order to identify global and regional patterns, exploring differences and similarities among countries and country groups.

  5. Analyse the productive structure foundations and environmental implications of different growth models.

The research question of the project and its objectives are relevant to contemporary debates in PK economics and CPE, and they will shed light on the divergence and dynamics of economic performance across countries.

References

Amable, B. 2018. ‘Diversity and the dynamics of capitalism’. European Journal of Economics and Economic Policies: Intervention 15 (2): 238–248.

Baccaro, L., Blyth, M., and Pontusson, J., eds. 2022. Diminishing Returns: The New Politics of Growth and Stagnation. 1st edn. Oxford University PressNew York.

Baccaro, L. and Pontusson, J. 2016. ‘Rethinking comparative political economy: the growth model perspective’. Politics & Society 44 (2): 175–207.

Baccaro, L. and Pontusson, J. 2019. Social Blocs and Growth Models: An Analytical Framework with Germany and Sweden as Illustrative Cases. Unequal Democracies, Université de Genève, Working Paper Number 7.

Baccaro, L. and Pontusson, J. 2022. ‘The politics of growth models’. Review of Keynesian Economics 10 (2): 204–221.

Freitas, F. N. P. and Dweck, E. 2013. ‘The Pattern of Economic Growth of the Brazilian Economy 1970–2005: A Demand-Led Growth Perspective’. In Sraffa and the Reconstruction of Economic Theory: Volume Two, edited by E. S. Levrero, A. Palumbo, and A. Stirati, 158–191. London: Palgrave Macmillan UK.

Fritsche, U., Heine, M., Herr, H., Horn, G., and Kaiser, C. 2005. ‘Macroeconomic regime and economic development: the case of the USA’. In Macroeconomic policy coordination in Europe and the role of the trade unions, edited by H. Hein, T. Niechoj, T. Schulten, and A. Truger, 69–107. Brussels: European Trade Union Institute.

Hall, P. A. and Soskice, D. W. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford University Press.

Hein, E. 2011. ‘Redistribution, global imbalances and the financial and economic crisis: the case for income-led recovery embedded in a Keynesian New Deal’. International journal of labour research 3 (1): 51–73.

Hein, E. 2023. ‘Varieties of demand and growth regimes – post-Keynesian foundations’. European Journal of Economics and Economic Policies Intervention 20 (3): 410–443.

Hein, E., Paternesi Meloni, W., and Tridico, P. 2021. ‘Welfare models and demand-led growth regimes before and after the financial and economic crisis’. Review of International Political Economy 28 (5): 1196–1223.

Hein, E. and Truger, A. 2005. ‘What ever happened to Germany? Is the decline of the former european key currency country caused by structural sclerosis or by macroeconomic mismanagement?’ International Review of Applied Economics 19 (1): 3–28.

Herr, H. and Kazandziska, M. 2011. Macroeconomic Policy Regimes in Western Industrial Countries. London: Routledge.

Kohler, K. and Stockhammer, E. 2022. ‘Growing differently? Financial cycles, austerity, and competitiveness in growth models since the Global Financial Crisis’. Review of International Political Economy 29 (4): 1314–1341.

Stockhammer, E. 2021. ‘Post-Keynesian Macroeconomic Foundations for Comparative Political Economy’. Politics & Society 50 (1): 156–187.

 Stockhammer, E. and Kohler, K. 2022. ‘Learning from distant cousins? Post-Keynesian Economics, Comparative Political Economy, and the Growth Models approach’. Review of Keynesian Economics 10 (2): 184–203.