Political Economics – Kinh tế chính trị


I was introduced to your blog just this morning (May 12). While browsing I happened to read your post about Political Economy and I think this is what I want to pursue in college (I am a freshman of Class of 2018).

But I need to know better before I make any important decision, so could you explain what exactly Political Economy is, and how it is different from Liberal Economy and the “economy” that is being taught in college (and if possible, differences between these two sub-fields).

Concerning my major, I am oscillating between Economics and Political Science. That is partly because of career-related interests (what job to take if I took Pol Sci – according to my mother), and partly because I’m still uncertain which field suits me better. In some way, I seem interested in political issues but only those that directly affect economical well-being of the country’s population, like (for Vietnam) interest groups and what communism/capitalism has to do with anything, but not much in diplomatic issues like the war in Middle East or public policies like Obamacare.

– Vy


Thanks to this reader’s question, it’s time for a very belated addendum to our Why Political Economics? series (here and here). Four years have gone by since the last instalment — and gone, too, are a lot of ideals and misunderstandings that I held as a second-year-in-college. So, here is a less wrong answer to Why Political Economics? from a second-year-in-PhD-studies.

I. The three types of Political Economy

Given its broad and deep lineage, the only appropriate definition of Political Economy is perhaps the study of how politics and economic decision-making intertwine. There have been three main traditions in the field.

First is mercantilism, which espouses the idea that statesmen should use economic policy to enhance their nations’ power. Mercantilism thrived in 16th-18th Europe, when the international system was thoroughly anarchic and populated with equally powerful countries. No one is ever sure about anyone else (Game of Thrones style), leading to frequent wars and ultimately the idea that economic policy is subservient to the survival of the states. While this mode of thinking has gone out of vogue a long time ago, we still see its remnants today in nationalist discourse under name of “protectionism.”

Second is the liberal economics  that dominates economic thinking today. Its famous origin traces back to Adam Smith’s Wealth of Nations, which was a direct response to the prevailing mercantilist thoughts of his time. While common sensical today, Adam Smith was a radical to propose that free trade benefits all countries (thanks to comparative advantage), and that free market benefits everyone (thanks to free price being an effective way to transmit information about what’s needed and available in the economy). These ideas are still the bedrock of modern economics, yet at the same time the practices of today’s economists are nothing like Adam Smith. (We’ll revisit below).

Third is Marxist economics, which is in turn a critique of the capitalist economy that has been ushered in since Adam Smith’s ideas. Marx critiqued numerous aspects of a capitalist economy. One is the paradoxical crisis of production, when there are enough goods for everyone yet the workers are too destitute to buy them. Another is the alienation of labor,  when individual man is but an inconsequential cog in the production line and thus unable to derive creative satisfaction from labor. Contrary to the mercantilist, for Marx, politics is subservient to economic powers: the ruling economic class promotes certain kinds of political and religious ideology in order to prolong its hegemony.

On the ruin of the Soviet Union, liberal economics raised its triumphant flag and became synonymous with Economics. Yet political economy as studied and practiced today is very unlike Adam Smith’s, and we will see how.

II. The ONE type of Political Economy (if you ask U.S. academics)

Over the 20th century economics has evolved several times in order to grapple with the gap between economic theory and reality.

Once staunch believers in free market, economists started to notice numerous market failures from causes such as natural monopoly (i.e. due to economy of scale) and informational asymmetry (i.e. sellers may have private information about the good that buyers don’t, in which case they can’t agree on a price). The existence of market failure seems to argue for government intervention. For example, the government may put in place anti-trust law or product quality regulations.

But yet again, economists noticed that governments fail, too. We view men as self-interested, maximizing actors in the economic realm — there is no reason why they would be altruistic and benevolent in the political arena. This is in fact and old idea, and as James Madison put it: “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.” Thus, a new area of study sprung up to take the economic assumptions (rational, self-maximizing agent) and methods (dominantly game theory) to investigate political behaviors. It is called Public Choice, and is what Political Economy means today.

III. So, should you study Political Economy / Political Science?

After learning a lot more about Political Economy, I am fortunate enough not to find out that I was wrong 4 years ago. I stood by the claim that, yes, it is foolish to study economic development (or any economic policy-making) without considering politics. The most that economics can give us is a description of various trade-offs, whereas which side of those trade-offs do nations end up choosing is fundamentally a political question.

Having said that, I do feel disappointed with my study of Political Economy, mainly because I came to it with very high expectation (you could see the exuding optimism in the previous instalments in the series.) I thought that if only I could get a PhD in Political Economy I would be able to finally know what countries like Vietnam would need to develop, what I could do to “change lives” and “make the world a better place.”

But development is hard. Many smart people have worked on it for years without a solution. And yet that’s not even the discouraging part. What’s more disheartening about social science is that we are not sure if we are getting any closer to the solution at all. That is because:

  • Without the ability to do experiment (i.e. to re-run history) in order to hold all other factors constant, it is nigh-impossible to decisively conclude what factor is causing what.
  • Yes, there is a surge in Randomized Control Trials in development economics but 1) due to real-world limitations there are certain things we cannot randomize (e.g. political system), and 2) a successful program may fail when scaled-up (basically political actors interfered when the program became a big pot of money).
  • Social sciences study humans, and unlike atoms humans have intentions and wills that change. When something is proven in physics, it stays proven. There is no such law in economics and political science.

Of course, despite all these dead-ends the development industry continues to chug along anyway with a new way to change lives every few years. Like fashion, these development ideas come and go in circle with no clear sense of progress. Not only have we been ineffective, some would argue that developmental aid is downright harmful in some cases.

All in all, I think that Political Economy embodies the fundamentally correct insight that we need politics to understand development. However, let us not be mistaken (as I was) that we are anywhere close to achieving that understanding yet.

IV. So, should you major in Economics / Political Science?

Fascinatingly, even if you want to study Political Economy, it is not clear that you should major in Economics or Political Science.

It is important that you think about jobs. My college career was colored by my disdain for material things and my fascination with intellectual pursuit (as you can see from my old, college-era blog entries.) Looking back, I have to admit that I got the balance slightly wrong. Sure, big ideas are exhilarating, but I am not sure any amount of that can offset the months of stress unemployment will bring. (I applied for graduate school and was spared the entire ordeal, but I have seen way too many struggles.) Since most people would advise you to “try new things” and “expand your horizon,” I hope to bring back some perspective and urge you to think about where you want to be after 4 years of college. (Listen to this NPR broadcast about the economic return of different majors.)

The best way to prepare for that moment in 4 years is to learn skills, not facts. In this day and age, when everything can be looked up there is very little value in knowing a lot of facts about an area. In contrast, to learn technical skills you have to study sequentially (e.g. you need arithmetic before algebra before calculus), and the only time to do that well is in school.

(Note that even though I will be mainly talking about how to best prepare yourself as a worker, that is not the only goal of education. Minor in something that best prepare you as a human being and a citizen. In terms of social sciences / humanities, (for me) that means taking Intro to Econs, Microeconomics, Macroeconomics, a class on comparative political system, moral philosophy, and arts.)

Back to the main topic: depending on what job you want to get, below are your options.

First, if you want to get a private-sector job, a BA in political science is sort of worthless, and a BA in economics is only slightly less so (unless you go to a top research school OR work on frontier research with professors). The reason is that undergraduate political science training is heavily about facts and teach you little employable skills. Economics BA is slightly better since you will get to learn econometrics, but everything else you have to learn (e.g. microeconomic and macroeconomic theories) is of little value on the job market.

Having said that, employers do hire more Economics major, but not for the economic knowledge. Instead, the Econs label is simple a signal of quantitative skills. I thus recommend you to go straight to the quantitative skills (e.g. Econometrics, Statistics) and bypass all the economic theories that you will never use.

Second, if you want to work in the development sector, understand that it is a crowded field with low pay that typically requires post-graduate degrees. It is crowded with low pay for a reason, of course: many people are more than happy to make that sacrifice in order to do meaningful work. The best way to prepare is still to major in something quantitative (i.e. Statistics, Economics), but also take more of other electives, e.g. Political Science / Economics of Development / History, and get some development-related internships.

Third, even if you want to pursue a PhD in Political Economy, you should not major in BA Political Science. Not only are the readings in BA Political Science very outdated, the BA also does not prepare you for the increasingly quantitative and formal methods in PhD Political Science. So major in Statistics, maybe Computer Science, take multiple electives in Micro / Macroeconomics, study the area of Poli Sci that you are interested in,* and take some History classes for a reality check against the theoretical models in Econs and Poli Sci. Write a research paper in one of these electives in order to prove your interest in Political Economy and get good letters of recommendations. (You can read my entry on how to apply to PhD here.)

(* Political Science has 4 sub-fields: comparative politics (comparing systems across countries), American politics, International Relations, and Political Theory (i.e. political philosophy). If you are only interested in development, i.e. comparative politics, then it’s another reason not to major in Poli Sci so that you can bypass all the other stuffs.)

That was a lot to cover. These are the things I wish I had known four years ago, but no one was around to tell me. More troublesome is the fact that I still don’t see anyone telling college freshmen straight-talk about their career like this. Being straight talk, each paragraph of this entry can be controversial and should be more thoroughly argued in a blog post of its own. If there is any advice that does not seem clear of reasonable, I’d be happy to clarify.

Consumerism is no longer all around us. It’s us. From mundane observations of daily impulsive buying, to sociological analysis of high status associated with having “stuff”. As often is the case, such ubiquity exudes a sense of commonness, and ultimately, also tragically, soon elicits acceptability.

“No, that’s absurd!” My classmate John in International Political Economy protested, “We are not mindless infants being coaxed, nay, indoctrinated by capitalism into psychotic buying spree. Granted, we consume a lot of stuff that we don’t need. But isn’t that just called higher standard of living? Sure I don’t have an innate demand for an iPod, a big screen TV, or a SUV – but as long as those stuff make me happy enough to decide to buy them, then it is a rational decision.

Jon, incidentally a economics major (I can’t help but notice), seems to offer here a formidable defense that promises to exonerate all forms of consumerism. I buy ’em because I want ’em- such is the argument, often clothed in economic terms such as “increased utility”.

Let’s pause here and think for a moment. If the fact that you want to do something is enough to constitute the rationality of your decision to do it – then is there any decision at all that can be called “irrational”? – your sense of logic mumbles, apprehensively under the menacing figure of common sense.

YES, your sense of logic is right (as always; and thus should be listened to more often.)

A decision already implicates free will. Because of that, if we accept Jon’s justification of rationality as “because I want it”, then rationality is built right into the concept of a decision itself. Thus, the two concepts of rationality and decision become inseparable, and thereby effectively negating the possibility of any irrational decision. And if there is not any irrational decision, then there is not any rational decision either – but only decision.

Let’s clear up this philosophical thicket a little bit. How about counterexamples (ah, they do wonders!) that prove the existence of “irrational decision”? Well, I just decided to buy my 5th house. “Doesn’t matter,” John says, “because that newest house clearly raises your utility enough for you to buy it (despite the decreasing marginal utility of being the 5th.)”

To push it further – well, I just decided to buy that 5th house, which pushes me into financial ruin. “Doesn’t matter,” John retorts, “if you had anticipated your financial disaster and yet still proceeded, it means that you had rationally weighed the utility of that 5th house against the potential troubles. If you hadn’t anticipated the mess due to incomplete information, it is even more rational at the deciding moment to buy the 5th house.”

To push it further still – well, I just decided to buy that 5th house, whose price is substantially higher than others available (which I am fully aware of.) “Doesn’t matter,” John persists, “you might have gained non-financial satisfaction from the transaction, such as the smugness of careless spending. Given the fact that no two goods are identical, the decision is even more defensible – there might just be something about this house that you like it.”

Thus, I have demonstrated that no matter how outrageous your decision is, you can still defend its rationality by resorting to say: “I did get satisfaction out of that.” And because rationality in this sense (i.e. Jon’s definition) does not give any new information about decision, “rational decision” is a redundant and meaningless term. Therefore, you cannot justify your buying decision as rational simply because you believe that you want that iPad, or because you believe it will make you happier. Such is a fatally flawed, yet plausibly presented, argument that is accepted by who-knows-how-many social science students that do not equip themselves with the precision and subtlety of philosophy.

Whereas a capitalistic society does not strive much to encourage your rationality, it spends substantial resources to facilitate your rationalization. The 2nd counterexample eerily harks back to the immediate cause of the Great Recession, in which banks helped people rationalize their spending with cheap credit and dubious financial advice. The 3rd counterexample hints at advertising, the infamous midwife of consumerism, whose goal is none but indoctrinating consumers with brand/design differentiation. There is no doubt that some design improvement or differentiation is concrete and legitimate – but think how many people are constantly trying to have the newest stuff just because it is cool to do so? That very attitude is the smoking gun of the consumerist indoctrination.

These last words should be reserved to clear away any suspicion that being a economics major somehow makes John less precise or less subtle. I do not mean to say so. However, for many economics dilettantes, terms such as “rational decision” or “increased utility” have been so frequently and axiomatically mentioned that their precise meanings are being abused. So just think twice about what you say, John. (That I did not tell him in class.)

Edit (09/22/10): Replace the Starcraft 2 and girlfriend counterexamples, which are neither relevant nor even funny.

The message is mildly interesting, while the writing is exceedingly prosaic. This is more of a french exercise than of a political economic treatise – so read on at your own risk.

Le problème de chômage reste un sujet que beaucoup de gouvernements affrontent dans le monde actuellement. Personne ne désire le chômage, mais peu réussit à l’éradiquer. En essayant d’améliorer la situation, les gouvernements et les organisations sociales dépensent prodigalement de temps et d’argent, mais le résultat reste minimal. Pourquoi ça ? Pourquoi le problème persiste bien que tout le société essaye ? C’est un question que les économistes ne peuvent pas répondre tout seul (ils sont ce qui concevaient ces politiques futiles, n’est-ce pas ?) Afin que nous comprenions le problème de chômage, il est nécessaire de consulter les économistes politiques, dont sagesse leur permet de reconnaître que le chômage n’est pas simplement un phénomène économique mais aussi un sujet social.

Le défaut à le raisonnement des économistes est tellement clair qu’ils ne le voient pas. Qui décide les politiques économiques ? Pas les économistes, mais les politiciens, dont but n’est pas directement une meilleure économie, mais ses réélections. Qui participe à l’économie ? Pas les économistes, mais les gens ordinaires, qui ne comprennent pas les graphes et les équations, et dont actions dépendent seulement des informations incomplètes et imprécises. En plus, le fait que ces groupes des acteurs, les politiciens et les citoyens, ne soient pas puissant également – celles soient plus organisées, celles soient moins mobilisées – contribue à faiblir la main invisible que l’économistes classiques adorent. Tout le monde veut vraiment maximiser sa valeur économique comme prédit, mais pas tout le monde possède le fort politique nécessaire pour l’accomplir. Donc, il est probable qu’un groupe désorganisé doit souffrir le chômage au lieu d’une autre.

Quel est un exemple ? Les États-Unis sont notoirement connu pour une absence de politiques qui améliorent la mauvaise situation des gens inemployés. Beaucoup croient que c ‘est simplement l’esprit Américain : on doit être responsable de sa propre vie. Mais ce raisonnement est trop naïf. Demandez quelques gens inemployés, qui dorment dans la rue, qui ont peu à manger, et qui combattent à survivre chaque jour, s’ils ne veulent pas d’aide. En plus, même si nous sommes d’accord avec la supposition que les Américains n’ai nullement envie de ni aider ni recevoir l’aide, pourquoi ils adoptent cet idéologique dès le début reste inexpliqué.

Pour déchiffrer cette mystère économique, il faut que nous nous demandions : qui bénéficiera si le gouvernement décide à améliorer le chômage ? La réponse est claire : les inemployés. Ce qui est moins clair est la nature désorganisé de ce groupe : en essayant à survivre chaque jour, ils n’ont pas la capacité de s’amasser et exprimer son vouloir politique collectivité. A quoi s’ajoute le fait que les retraités, qui ne bénéficieront pas directement de moins de chômage, soient particulièrement organisés. Ils ont beaucoup de temps libre et beaucoup de ressources financières, tous deux sont le plus indispensable ingrédient d’un groupe politique puissante. Mais encore, l’économie qui consiste plus de service que de manufacture des Etats-Unis demande une provision stable de travailleurs bon-marchés et inhabiletés. Cela veut dire une seule chose : les entreprises, une autre groupe organisée, n’ont pas non plus besoin d’aider les inemployés.

Pour résumer d’un mot : les problèmes économiques, comme le chômage, ne peuvent pas être résolues si on n’examine pas ses conséquences politiques. Qui gagnera ? Qui perdra ? Et surtout, qui possède le fort politique ? Reconnus par quelques-uns, ignorés par la majorité, ces questions nous apportons plein de révélations quand nous essayons de combattre le chômage, un problème qui est capable de déstabiliser sérieusement notre système économique et social.

I. Background and motivation

1. The significant role of FDI in Vietnam’s economic renovation and development

As part of its economic reform in late 1980s, Vietnam opened up its economy for FDI with the 1986 Law on Investment, leading to an explosion of FDI inflows, dampened only by the 1997 Asian crisis, and has picked up a strong pace again in 2003. As in other developing countries, FDI has played an instrumental role in Vietnam’s economy, providing the needed capital, technology, and management skills. The contribution of FDI can be convincingly proven by the observation that the foreign-invested sector has accounted for almost one fifth of the annual real output growth of Vietnam in 1996-2005.

Moving beyond purely economic rationale, FDI has also secured a political momentum that ensures its continuing legitimacy within an otherwise divisive leadership. This legitimacy is of great significance, especially when considered against the context of a still plan-influenced, directive economy that may easily change course due to an ideological surge or a political concern. It allows us to safely assert that FDI has had and will have long-lasting impact upon the economic and political landscape of Vietnam.

2. Consistent administrative decentralization regarding FDI policies

In 1995, the Eight Plenum of the Central Committee endorsed decentralization, which includes the devolution of planning/management and of financial responsibilities to the local governments. Coupled with the fact that Vietnam, as a relatively small country, has 63 provinces, each with its own administrative, legislative, and judicial units, this decentralizing trend allows and encourages provincial autonomy, and hence, provincial variation and competition. In areas specifically relevant to FDI, laws passed in the first half of 2000s give the Chairman of provincial People’s Councils the vast authority to grant or recover land use rights, grant investment certificate, approve development plan, approve land price, assess environmental impact, etc.

Besides opportunities, there are also great incentives for provinces to compete as well. Fiscal decentralization allows local governments to wholly collect land rent, and partially collect profit tax and income tax from high-income earners. Equally important is the political influence gained with the ability to attract FDI, thanks to budgetary autonomy and favorable reputation.

Are there empirical evidences of increasing provincial competition? Officials’ remarks and recent studies suggest a positive answer. Vũ Hồng Phúc, Minister of Planning and Investment, publicly advocates provincial competition in attracting FDI. Data also shows that since the promulgation of decentralization laws, FDI registered boomed, both in absolute terms and in percentage growth, while the percentage of FDI implemented, interestingly, declined markedly. This suggests that provinces may be engaging in a race to attract FDI that involves immature and permissive approvals.

To conclude, it can be said that decentralization succeeds in turning locals into corporatist actors, who are self-reliant, self-aware, and self-interested. Yet along with efficiency and local dynamism, the new entrepreneurial nature of local governments naturally induces competition as well. Therefore, this research intends to measure the impact of decentralization upon provincial competition, and the factors that cause this impact to vary across provinces.

II. The Theory

My research posits that the impact of decentralization upon provinces’ policies to attract FDI varies substantially in accordance with provincial capacity. “Capacity” means the capability of provinces to coordinate, and to deliver public goods and services that are instrumental to investment. To confirm this theory, it is necessary to perform two steps: 1) determine the ways with which provinces can attract FDI, then 2) examine how variations in capacity affects the policy choice of provinces among these instruments.

I divide the possible means for provinces to attract FDI into two categories: 1) concessionary, including low land price, tax holidays, and lax regulation; and 2) developmental, including administrative reform and provision of public goods. Even though the central government has been emphasizing the role of decentralization in fostering local governments’ developmental policies, in an intensely competitive atmosphere, there are real risks that locals will engage in highly concessionary policies, which do not require the strenuous process of capacity-building.

This leads to my main hypothesis that local governments with low capacity will have to rely more heavily upon concessionary policies. The differentiation between locals with high and low capacity should be most apparent in land price and tax holidays, which directly affect provincial budgets. Since labor and environmental regulations are of a lesser concern, locals’ capacity may not be vigorously channeled into this area, leaving a less sharp distinction.

III. Methodology

1. Measuring the independent variable

To measure capacity, I rely mainly on the annual Provincial Competitive Index, jointly produced by the USAID and the VNCI. The index ranks provinces based on their cumulative scores on 9 sub-indices: entry cost, land access and security of tenure, transparency and access to information, time costs of regulatory compliance, informal charges, proactivity of provincial leadership, business support services, labor and training, and legal institutions. I will further dissect the sub-indices in order to select measurements that specifically and accurately reflect coordination capacity. (For example, land access, measuring how easy it is to access land, may be affected by laxness in approval rather than bureaucratic coordination, and hence, will be left out.)

2. Measuring the dependent variable

First of all, to assure that any variations in the dependent variable is attributable to the independent variable, I control all others variables that may prompt locals to engage in concessionary policies, e.g. geography, size, GDP, and infrastructure. This ascertains that these provinces seek the same kind of FDI (hence, facing the same amount of pressure to concede).

Quantifying land price and tax concessions should be quite easy and concrete. I will seek data from the General Statistics Office and local government to discern any variation in current absolute values as well as historical relative trend.

Measuring lax regulation is a more complicated matter. Firstly, since locals are only responsible for implementing national laws, and not for setting the standards per se, laxness is much less concretely measurable. Secondly, data on the resolution of labor and environment violations are not readily available due to political sensitivity. Thirdly, the rigor with which locals punish infringement may be confounded by factors other than capacity, e.g. corruption.

Due to these constraints, I intend to substitute with the number of labor complaints and environment violations. Even though this measurement admittedly does not point to regulatory laxness, it does reflect a willingness of locals to approve potentially damaging projects. By tightly controlling other variables that may affect number of complaints and violation, I will make this measurement a better reflection of the variation in permissiveness.

IV. Research plan

1st and 2nd week – Review most recent literature; request data from governments.
3rd week
– Devise a more accurate measurement of capacity, based on the PCI.
4th week
– Design pairs of provinces for comparison.
5th and 6th week
– Gather and analyze data on land price and tax concessions (dependent variable).
7th and 8th week
– Gather and analyze data on labor complaints and environmental violations (dependent variable).
9th and 10th week
– Finalizing data analysis and writing a report

V. Concluding remarks

This research, first and foremost an academic work, will supplement the “race to the bottom” analysis by recognizing the impact of varying capacity in shaping the decentralization experience in FDI policies. Viet Nam is an apt test site for this effect, due to its heavy reliance on FDI, its consistent decentralization (albeit not without tension within the ruling party), and its fragmented sub-national administration. The findings should be relevant to other developing countries as well, most of which need FDI and consider decentralization.

At the same time, this research cannot escape its implicit role of a policy assessment. More than five years have passed since the first signs of vigorous decentralization; now is the prime time for the impact to be felt and the debate to be raised. Even though the state has been highlighting developmental policies as the product of decentralization, concessionary policies are the concomitant risk. High cost of excessive concessions, if found, would suggest that the government should preclude or discourage these concessions, in order to channel the pressure of competition into improving locals’ developmental capability.


There, my baby research.

A full version of my research proposal, including proper footnotes, tables, and bibliography can be downloaded here. Due to the five-page limit of the submitted proposal, there may be some minor differences. The version posted in this entry is the most extensive version that I was able to salvage from my old files. A 5-page proposal clearly does not possess much persuasive power; there is only so much room for claims and not enough for evidences. I was, therefore, compelled to make difficult choices in editing. I am fully aware of, and (somewhat) (haha) apologetic for this shortcoming.

This proposal is also much less ambitious than my initial intentions. I believe that the development of FDI unfolding in Vietnam is much richer, and much more interesting than the issues superficially addressed here. I will probably elaborate more on the some other intriguing puzzles, and on what forces me to resign with  (haiz I should probably say resolve on) this particular topic.

Not that my wondrous, erudite, charming, patriotic professor (a classically trained violinist too!) would ever run across this entry, I am deeply grateful for her help, insights and encouragements. Any mistakes (oh, there are quite a few) are entirely my own.

(Picture a bar scene or a formal according to your taste. As long as there is a little alcohol and beauty involved.)

Bạn liều lĩnh vụng trộm một cái nhìn vào mắt nàng. Một cách đương nhiên như mọi câu chuyện vẫn thế, hẳn nàng phải rất đẹp. Và tất nhiên, trông nàng thể nào cũng phải thoáng một chút buồn sâu kín. Bạn chẳng dám nhìn lâu, vì đôi mắt rất sâu và thật trong, khiến bạn lo sợ chết chìm (hay thèm thuồng ngụp lặn?) trong mắt ấy. Bạn muốn ví nó như một hồ nước trong, nhưng ngại ngần cái lối ví von cũ mèm làm hoen mất vẻ đẹp tinh khôi của nàng. Bạn ngồi loay hoay gọi tên cảm xúc. Và vụng về nạt nộ con tim phản chủ.

Bắt chuyện. Bạn nghĩ. Nhưng chuyện gì? Bạn nguyển rủa thời tiết hôm nay không nắng cũng chẳng mưa. Bạn bực mình ti vi toàn cướp giật và khủng bố. Phụ nữ, bạn lần giở trong óc cuốn Tâm lý bạn gái đọc từ hồi phổ thông, thích được cảm thấy quan tâm và chú ý. Bạn xem xét ý định khen nàng trông thật xinh, khen đôi mắt đen, mái tóc dài và nụ cười trong veo. Nhiều quá, không bắt chuyện thế được. Bạn cáu kỉnh. Ai cho phép nàng đẹp thế?

Rốt cuộc, bạn quyết định ít nhất cùng phải nói chào nàng. Bạn hít một hơi sâu, nhấp một ngụm whiskey (hay ăn một thìa rượu nếp tùy bạn, chuyện uống mình không ép vì mình cũng hem uống). Nhưng nàng đang mải nhìn đi đâu ấy. Bạn hít một hơi thứ hai. Nàng quay lại đây rồi. Bạn nửa mừng nửa lo. Hít nốt hơi này thôi nhé. Và bạn nhắm mắt, hít một hơi dài thật dàiiiiii. Đếm ngược. Ba, hai, . . .

Chào anh – Nàng mìm cười, khẽ thôi, nhưng cũng đủ làm đôi nước hồ xao động.

– Chào em – Bạn mừng rỡ như sắp được … chết đuối.

Khi ấy, người phục vụ đổi đĩa nhạc, và tất nhiên, chẳng có lí do gì đế nó không phải là một bản nhạc trữ tình.

Nàng và bạn nói chuyện dăm ba câu, cũng đương nhiên (cái này thì đương nhiên thật), khi hai sinh viên gặp nhau, loanh quanh thể nào nàng cũng:

– Thế anh major gì? Nàng hỏi, quý phái đến hờ hững.

– Political Economics em ạ.

– Thế ạ? Nàng ngạc nhiên thú vị. Thế đấy có phải là Econs không anh? Đôi hồ nước đã thôi xa xăm, và long lanh sóng sánh như trong đêm trăng xuân.

Không, không đâu em. Bạn cười hiền. Nó khác và hay hơn nhiều lắm.

– Ưm, em cứ tưởng anh lại cũng học Econs cơ. Nàng hơi nghiêng đầu, và khẽ xoay người về phía bạn. Thế nó khác như thế nào hả anh?

Bạn xích ghế lại gần nàng (tất nhiên là để nàng nghe cho dễ.) Và trước khi bắt đầu ba hoa*, bạn chột dạ nhớ lại mấy năm trước nếu chọn Econs thì bây giờ không biết sẽ thế nào. Và bạn cũng bồn chồn nhớ lại một cái entry hoang tưởng trên một cái blog vu vơ đã khiến bạn để ý đến Political Econs ra sao.

Những chuyện ấy thì không đương nhiên chút nào hết. Đều là do mình tính cả rồi đấy.

* Bạn muốn biết ba hoa thế nào thì xem ở đây. Nerds’ version, đừng trách oan mình không báo trước đấy nhé.

Yes, why indeed. Why study such a field that is unpopular at best, obscure at worst, and not to mention being stigmatized? Well, I have to admit, those adjectives means attraction to me rather than aversion, just as the popularity, the commonness and the hegemony of Liberal Economics rings a banal note. Yet my obsession with unorthodoxy is not boundless and groundless – that it may nudge me to give an interested look into a non-conformist idea does not mean it dictates an automatic adoption (which explains why I have not run around naked or pierced my nose, my belly button, or whatever they pierce these days.) In other words, Why look into Political Economics – because it is a new perspective. But Why study Political Economics? – that I will seek to explain with no more delay.

From an academic standpoint, Political Economics wields a much greater explanatory power than Liberal Economics. Even though I have reached that conclusion mainly through my case-by-case acquaintance with both, I did attempt to present a few general and fundamental reasons whose legitimacy you readers can judge with logical reasoning and without extensive background knowledge.

One, economic decisions in real life are not made by economists, but by political institutions. There is much more that comes into play rather than purely economic rationale. To investigate the real world with a politically insulated tool that is liberal economics is, therefore, very naïve. That is not to say economists are ignorant of their apolitical assumption – they are not; and indeed, for every science it is necessary to adopt a certain sets of foundational assumption upon which further work be built. However, there is a point at which your assumption becomes too gross for your ensuing work to be a meaningful description of the world.

Two, humans are saturated with values and interests that, comically, do not count in liberal economics. Equality, compassion, nationalism, political legitimacy, etc. all manifest in and exert influence upon economic decisions. This is why governments have gone beyond the prescribed role of maintaining stable macroeconomics factors and into making policies that redistribute wealth, nurture an industry, or even preserve a political order. This is why nations have not been content with their niches assigned accordingly to comparative advantages, but have striven to construct their own competitive strength. That is why China has adopted an uncanny developmental path without a domestic private sector. That is why Vietnam has placed Dung Quat Refinery at a less than economically efficient location. How much of that, I wonder, can liberal economics explain?

Three, liberal economics was developed along with Western industrialization, a very different historical context that shows not few incongruences with today economies. Western economic and political success and its consequent hegemony have indubitably endowed liberal economics, its child, with an infallible legitimacy that we so often assume to be universal, despite its obvious historical particularity. This orthodoxy in perspectives has an armor that is more dogmatically unyielding than we would like to admit – indeed, how much has changed within the economics department to accommodate the real, vibrant and unprecedented (both in speed and nature) development of East Asian miracles or today China? The armor of self-perpetuating orthodoxy has been too impenetrable for the moribund core it protects to be noticed, or rather, to be admitted.

Four, in late developers with a transitional economy like that of Vietnam, politics inarguably plays an even more instrumental role. The legacy of a heavy-handed state is not yet to wither away, the decision-making process has not yet matured enough to be rational, and economic policy, as many others, is a political negotiation at its core. Therefore, recommendations made by liberal economists are all good and true, only useless, since their adoption has little to do with their merits. Economists, after all, do not run the world.

Five, well, it may not be a good idea for economists to run the world either. Because liberal economics, amoral, valueless, and apolitical as it is, resembles a rulebook rather than a theory on how to conduct our society. If we increase money supply, interest rate will fall; if we increase government spending this much, output will rise this much; or, to conclude, if we do this, that will happen. But whether would we want that certain thing to happen liberal economics does not say. It assumes that we all want a higher output, more income, more return, without realizing that within a relentless pursuit of those things, there lay regional disparity, exploitative investment, or unsettling materialism.

For a reconciliatory note, I recognize that there are indeed people who study Economics because they love it. And don’t take me wrong: I have an utmost respect for passion. I would argue, however, that the unnaturally high rate of students majoring in economics suggest a certain degree of affected interest. If you have faith in Economics, please do not hesitate to go forward. But if you find something else more appealing, or believe there is a better way to reconstruct our view of the world, why let the popular thing enslave yourself?

It is hardly debatable that FDI is instrumental in the modernizing and industrializing endeavors of late developers. Newly industrializing countries need FDI for capital, which their young domestic economies simply cannot provide enough however high the savings rate; for technology and managerial skills, which they severely lack after years of backwardness; and for foreign market penetration, which would be otherwise impossible for neophytes with low-tech products and little business connections.

It is dangerously convenient enough to go from there to the conclusion that FDI is always and inherently the driving force of economic development (note how that assertion actually sounds commonplace and sensible.) This statement makes a fallacious jump by overlooking three things: 1) the interest of foreign investors is not developmental in its nature (but profit-making), 2) not every FDI and its accompanying business model entails the same spillover effects (e.g. technology and managerial skills diffusion, cultivation of local suppliers, etc.) and 3) a development that relies exclusively on capital accumulation is inefficient and ultimately unsustainable. These theoretically erroneous assumptions lead to concrete and severe mistakes in policies that equate a quantitative increase of FDI with economic development.

Besides a lack of technical knowledge, political expediency certainly encourages this kind of calculated naïveté, since politicians always need a clean, simple measurement to beguile the public and maintain their legitimacy. A too effective propaganda, a too well constructed alternative reality then often takes revenge upon its own creator in a viral process of deception and self-deception, which results in a saturating misunderstanding of FDI.

The stated theoretical issues and their real entailing problems are not new; they have persisted along with the existence of FDI. For example, there has always been a competition between governments (state vs. state, local vs. local) for FDI, and therefore, a bargain leverage for investors. This is due to two reasons: 1) labor and facilities are less mobile than capital (i.e. investors can easily switch to wherever offers most benefits) and 2) FDI is a limited resource.

But what is new is that globalization has exacerbated this problem so much it has been dubbed “the race to the bottom.” In competing for FDI, governments have to keep lowering their gain, relaxing labor laws, and giving investors more autonomy, etc. They have increasingly little say on their own fate. This weakening position of governments and labors are due to several factors particular to this era.

One, with financial innovation, capital is now more mobile than ever. Large amount of capital can move with such incredible speed. Against the backdrop of much stickier institutional change and of necessarily limited human processing capacity, this increase in capital fluidity is no longer quantitative. Foreign investors now have a new, qualitatively different leverage in bargaining with governments.

Two, late developers need much more capital than their predecessors. Facing an ever widening technological and infrastructural gap, and an established division of labor, developing countries have a huge start up cost, which they simply cannot finance on their own. This problem is rather intuitive and by no means new. Even in the early days of capitalism, while British industrial revolution could be financed simply by individual, medium-scaled factories, Germany and France, the “late developers”, needed a wholly new kind of heavily capitalized, long-term minded investment bank to support their industrializing attempt.

Historical contingencies also contribute to today developers’ heavy reliance on FDI. The ending of the Cold War marks the ending of the U.S. financial assistance and trade-deficit tolerance reserved for its allies (South Korea, Japan, Taiwan). Freed from its developmental responsibility, the U.S. now aggressively demands financial and trade liberalization through the World Bank and the IMF. This leaves developing countries further susceptible to FDI, since the states can no longer restrict the forms or amounts of foreign investments.

Three, decentralization, an accompanying aspect of modernization, has induced a fiercer competition between local governments. Decentralization has done precisely what it has been designed for: making local states more self-reliant, more self-aware, and more self-interested. But besides the positive effect of greater efficiency, this new entrepreneurial nature of local states inadvertently turns them into Game Theory players in a destructive race to attract capital.

Four, the emerging political economy of China particularly crave for FDI. The developmental mission of China is quite convoluted: it wants a developed economy, but resists a growing private sector, which poses potential threat to the ruling power. Therefore, China has ingenuously used FDI as a replacement of domestic businesses: it is an economic development without a cultivation of national entrepreneurs. Due to its political cause, China’s massive demand for FDI is not likely to subside, making the shortage of FDI more intense and foreign investors more powerful.

How much of these theories have been translated into real change in the dynamics between states and FDI? There is substantial literature that deals with competition between ASEAN and China, and between Chinese local states, which confirms waves after waves of liberalization, in terms of relaxation of labor law, domestic content requirements, etc. Quite counterintuitively, FDI has often brought worse working conditions and minimal spillover effect on domestic economies of today developers.

I am quite interested in how this darker side of FDI plays out in Vietnam political economy. Part of the reason is that researches on FDI in Vietnam that I’ve read so far almost solely use technical statistics or economic equations to confirm the effects of FDI without understanding at all its causes or dynamics. I’ll reserve my rant on how naïve this politically insulated approach is in the case of a country such as Vietnam for another time.