Political Economy and Development

SummaryTermsEssential QuestionsHeadlinesMajor Theories and IdeasPast AP QuestionsComparative Chart


This page covers political economy and development. Political economy is a term for how the politics and economics intertwine and affect each other. The two are correlated; a change in one will most likely elicit a change in the other. This page defines basic comparative terms that measure the size, strength, and equality of an economy. It then describes the two main political economic approaches, free markets and state led markets, and covers three theories for how welfare states emerge. Development describes how a society changes and progresses, usually measured in terms of economic growth. This page defines terms related to levels of development in a country, and covers other ways to measure development, such as social indicators, standards of living, or equality of different groups. It then covers four theories for why states develop.

Dickovick, James Tyler, and Jonathan Eastwood. Comparative Politics Integrating Theories, Methods, and Cases. Oxford University Press, 2016.


The Two Approach

The best way to compare and contrast the different types of political economics is to think about the the role of the state in a country’s economy. The two main types are market-led economy and state-led economy. In a market-led economy, free markets are encouraged, and private actors (from individuals to corporations) play an important role with no governmental intervention. In a state-led economy, government’s intervention hold the economy under restrictions. One popular argument is that free markets are the basis for creating wealth.

Essential Questions

  • What is the role of the welfare state in an advanced, industrialized country versus a developing country?
  • What factors influence whether a country has a market or state led economy?
  • How does a market led economy affect government systems in a state?
  • What is the role of the market versus the state in promoting development?
  • What of our 6 countries has the largest market promoting development?


Joseph C. Sternberg “Consumers Make Their Own Case Against Abolishing Cash.” The Wall Street Journal, Dow Jones & Company,( 15 Mar. 2018)

Daron Acemoglu and James A. Robinson. “Uncultured.” Foreign Policy, (Aug. 2012).

Susan Lund and Arend Van Wamelen. “Lions on the Move.” Foreign Policy (1 Sept. 2012). 

Past Questions

Short Answer #4,  2007 Topic: Command vs. Market Economy Questions, Sample Answers 

Country Context #8, 2008 Topic: Economic Liberalization in Mexico and Russia Questions, Sample Answers

Short Answer Concepts #2, 2010 Topic: Indicators for Economic Development  Questions, Sample Answers

Major Theories/Ideas-

Welfare Capitalism

In this excerpt, Andersen classifies three types of welfare states, corporatist, liberal, and social democratic, and describes how they form. Liberal welfare states, dominated by the liberal work ethic and favorization of markets, have modest social insurance plans and mainly serve lower income, working class people. Corporatist welfare states are conservative and provide fewer services for families; the benefits they do have encourage motherhood, and rights are tied to class/status. Socially democratic welfare states provide programs to all regardless of class or status, and are committed to an equality of social benefits. They take direct responsibility for caring for citizens unable to support themselves, and attempt to guarantee employment. Andersen argues that types of welfare states vary in different countries based on the nature of class mobilization, class political coalition structures, and the history of institutionalization of welfare.

“Gøsta Esping-Andersen.” Social Science Space, Sage Publications, 26 Feb. 2015, www.socialsciencespace.com/2015/02/25-years-of-three-worlds-of-welfare-capitalism/.

Gøsta Esping-Andersen,“The Three Worlds of Welfare Capitalism.” found in Tyler Dickovick and Jonathan Eastwood, Comparative Politics: Classic and Contemporary Readings (Oxford University Press, 2017) 65–69.

Using the Market For Social Development

Milton Friedman, in this reading, looks at the advantages of policy changes to create more free and private markets. He offers theories of how to reduce government role in economy. These theories include, partial vs. total decontrol, Gradualism vs. Shock Treatment, and finally addresses overcoming political obstacles.  In the introduction Friedman defines terms such as “the market”, “free private markets”, and “privatization”.

Comparative Chart

The Russian Federation United Mexican StatesThe People’s Republic of China The Federal Republic of Nigeria The United Kingdom of Great Britain and Northern Ireland The Islamic Republic of Iran 
GDP per capita (PPP)24,00616,0071,440 4,71038,90118,497
GNI per capita (PPP)22,54017,74015,5005,74042,10017,370
Infant mortality rate per 1,000 live births101614124518
Regime type Has a democratic structure, but is authoritarian in practiceDemocraticAuthoritarian (Bureaucratic)DemocraticDemocraticAuthoritarian (theocracy)
Literacy Rate (%)More than 9993.595.151.1More than 9985
Human development index rank 5771911521475

James Tyler Dickovick and Jonathan Eastwood. Comparative Politics Integrating Theories, Methods, and Cases. (Oxford University Press, 2016) page number? 

“Indicators.” The World Bank Data, The World Bank Group, 2018, data.worldbank.org/indicator/.