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Official Fellow: Ivano Cardinale (2012–15) – The Return of Political Economy

Ivano Cardinale was the Mead Research Fellow in Economics between 2012 and 2015. He wrote the following about his research into 'structural political economy' in the Emmanuel Review in 2014:

The challenges faced by modern societies often require understanding how the economic and political spheres overlap. This has traditionally been the domain of political economy, a discipline with a distinguished tradition, which is undergoing a new surge of interest after a long time in which the economy and polity were treated as separate domains of investigation.

But how are the economy and polity connected? Academic research and public debate often use categories of analysis developed for past economic contexts. As a result, they are often stuck in dichotomies and disputes that have lost much explanatory power. Examples abound and include state or market, austerity or expansion, and business interests or labour interests.

In my work I question these categories of analysis, aiming to open up new questions and think about new answers. In particular, I am developing an approach I describe as ‘structural political economy’.

Looking ahead requires looking back first. The starting point of my approach goes back to one of the founding moments of political economy, François Quesnay’s 1758 Tableau Économique, which contains two insights that have often been overlooked throughout the history of political economy and economics. 

First, it suggests looking at the economy as a system of interdependent sectors rather than markets. Sectors are interdependent because the output of a sector is generally used as an input by other sectors. 

Second, in the Tableau sectors are not only economic activities, but also socio-political groups. By developing Quesnay’s insights with modern tools of analysis, we can explore the deep structure of economic interests, their political representation and the political-economic paths open to societies. 

A sectoral approach would suggest that the aggregate price level may be a misleading indicator for monetary policy, because it conceals the fact that, in any time interval, some prices rise whilst others do not. A sectoral approach may thus lead to questioning the widespread adoption by central banks of inflation targeting, as this is unable to address the different liquidity needs of sectors along the business cycle.

At the political level, a sectoral approach shows that business interests are often internally differentiated. For example, sectors led by external demand, such as some parts of manufacturing, may benefit from austerity through lower inflation. However, austerity is likely to damage sectors driven by domestic demand, for example construction. 

Moreover, it is seldom recognised that export-led and domestic-demand-led sectors are interdependent. Therefore, any policy that damages a sector beyond a certain limit may jeopardise the viability of the economic system as a whole, thereby affecting all sectors of the economy. This suggests that the political representation of economic interests should take into account both particular interests and ‘systemic’ interest, so that political competition should take place within limits dictated by the necessity to keep the overall economic and social system viable. 

This approach can help to illuminate both historical and contemporary processes. For example, in eighteenth-century Britain a high level of taxation was politically sustainable because economic sectors were aware of their interdependencies and of the ‘systemic interest’ in supporting the fiscal-military state. Similar analytic schemes can be used to understand whether the main actors in the Eurozone – sectoral, national and supranational – have a systemic interest in its preservation. 

The aim of developing new analytical categories has inspired the Cambridge Research Seminar in Political Economy, a new initiative supported by Emmanuel and the Centre for Financial History at Newnham College, which I launched in 2012 together with D’Maris Coffman of Newnham and Roberto Scazzieri of Gonville & Caius. The seminar aims to provide a forum for discussion about political economy within the University and beyond. 

The Mead Fellowship in Economics at Emmanuel has provided ideal conditions for my research programme. Colleges pride themselves on the teaching environment they offer, but they also make very significant contributions to research. 

One reason, of course, is interdisciplinarity. But there is more to this than getting acquainted with the work of other Fellows and students: colleges provide a space that is intellectual without being strictly disciplinary. In a research environment that is becoming increasingly oriented towards short-term output, college space encourages thinking about the long term, which is essential for innovative research. 

The long-term orientation may have even deeper roots. I often feel that the College is a nexus of overlapping paths: of researchers and teachers, students, and Members who come back. 

By sharing the same space and feeling the connections with past, present and future, we can construct a different audience for our research. So, whilst we are concerned with what colleagues in our field consider important right now, we also think about exploring ideas that might stand and inspire future generations, by being entrusted to institutions that can preserve them for much longer than we can.

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