Being a Political Economy major, I have always been fascinated with the relationship between economics and politics. My courses have taken me into great depth about the differing views of many different classical and neo-classical theorists on this very topic. Whether it is Adam Smith who believed the market mechanism was completely separate from social relations, Friedrich List’s nation state policies or even Keynesian fiscal and monetary policies, all theorists tussle with the relationship between politics and economics.
However, despite all of these theorists having deeply fascinating insights into the peculiar relationship, I have often found it difficult to see how we can apply them to live markets today and how to interpret them in these modern times.
I know that it would have been impossible for most of the theorists I have studied to predict the impact of twitter on the market but I believe this graphic I came across on Bloomberg shows not only how politics drives economics but also that humans and markets are interdependent on one another.
In this graphic we can see how that just simple political moves such as phone calls, negotiation talks and even tweeting can greatly impact the live market (In this case the MSCI -All Country World Index). It is staggering to see how the world stock market is at the fingertips of President Trump and the remarkable power he has through social media.
Therefore, I think I have to divert from some of the old theorists I have studied such as Adam Smith and fully accept that the economic market is completely driven by politics. The fact that the market seems to be waiting attentively on Trump’s every move is just one of many examples to show that politics drives economics.
Eclectic Economics 