Article Analysis of The Political Economy of Household Debt & the Keynesian Policy Paradigm by Matthew Sparkes (Essay Sample)

📌Category: Articles
📌Words: 1066
📌Pages: 4
📌Published: 14 June 2022

In the purview of this essay, we will explore the article “The Political Economy of Household Debt & the Keynesian Policy Paradigm” by Matthew Sparkes. We will be focusing on the methodology present and extrapolate its use to better explore its applications in political economy issues. To facilitate this dialogue, the introductory sector will be brief overview of the main ideas explored in the article, before advancing into an extended analysis on case studies and the concept of process tracing as a methodology as well as the authors motivation to use it in his research. Secondly, we will be looking into questioning the decisions of using case studies as a methodology, followed by the different possible uses for process tracing, considering the advantages and challenges met by this type of method, before some concluding remarks.

In his research, Matthew demonstrated how household debt and homeownership were central to the political climate of Britain since the 50’s, and how these two concepts shaped its political economy patterns of the post-world war II era. Firstly, establishing that Britain’s Financialised Debt-Driven Growth Model, “lead by corporate profits increasingly generated from financial activities rather than production, as it began an emphasis on finance-led regimes of accumulation and increased public engagement with financial services” (Sparkes, 2020, p. 3), which resulted in an increased importance of homeownership, both in the impact it had on election campaigns and on policies applied afterwards. It was common belief by constructivists that this increased importance could be traced to a series of liberal reforms that happened throughout the 1980s, which involved the radical restructuring of the financial sector. Following this approach, one could assume a clear bifurcation on policy making between the Keynesian and neoliberal economic policymaking eras, as they believed it to be a clear distinction from highly restricted credit access during Keynesianism to a highly liberalized market under the neoliberal government of Thatcher.

Matthew argues against the constructivist views, stating that the “ideas underpinning Britain’s financialised growth model emerged in the Keynesian era itself, when government turned to finance to solve its growth problems, and that these radical restructurings are the endpoint of the change and not its main point” (Sparkes, 2020, p. 3). While acknowledging their contribution in explaining Britain’s development under neoliberalism, he points out tree major flaws when accounting how Keynesianism played an impact in getting to that point, arguing household indebtedness did not emerge under neoliberalism, as in percentage terms, household debt increased more during the Keynesian era than the neoliberal one (figure 1). Secondly, he looked of the critical understatement of the role household debt played to Britain’s debt-driven growth model, as well as the overestimation that the repression of household debt had in the Keynesian era. Lastly, he stated that their views lacked awareness of how socio-political worked as a circular influence, as widening access to household debt worked as both the motivation factor for the voting population and the consequential policies behind politicians’ electoral aspirations (Sparkes, 2020, p. 5). It is within this last part in mind he then focused his research on exploring “whether the significant rise in household debt during the Keynesian period was driven by political parties’ attempts to garner voter legitimacy for specific economic policies, and if these developments influenced voter’s political preferences” (Sparkes, 2020, p. 6). He does this by applying case studies as a methodology to develop a temporal and causal analysis of the sequences of events that constitute the process of interest’ (Falleti 2016, p. 4). 

Process tracing is a set of procedures for formulating and testing explanations with case studies, in which the analysis uses these procedures to make causal inferences and create explanation for certain historical developments (Mahoney, 2015). When attempting to study the extent of which social actors played an important role in policy-making, the author looks to gather empirical data focused on household debt policies applied by political actors in order to influence voter’s expectations. In order to study the information processing strategies that underlie individuals’ choices the author methodology must rely on historical data, qualitative and/or quantitative data in order to extrapolate on into causal relationships between actors. 

For this objective, the author uses the methodology of process tracing. This “provides a plausible way to represent and account for historical trajectories; it builds social actors and multiple causal timelines into explanatory accounts; and it offers a richer sense of how earlier outcomes shape later ones” (Howlett, 2006, p.6). Allowing for a proper analysis on how both competing political parties in the UK locked itself into a tug of war between constant fluctuation of relaxation and restrictive credit access policies due to constraining economic factors and public support for homeownership. His choice to apply this methodology relates to the objective of demonstrating that there is no single point, which transitioned policies from Keynesian to the economic foundations for the debt-driven growth model of neoliberalism, rather that it was a continuous process. This methodology helps detect, analyze and interpret social occurrences, which in the beginning are presented with a plethora of possible outcomes. The range of this possible options is then narrowed down over time in the face of self-reinforcing (Sydow, 2012, p.176), as one option becomes clearly the best possible solution, such as how in the 50’s and 60’s focusing on pro-homeownership policies were clearly the most favorable when it came to gathering electorate support. These solutions created by events, which trigger one another into a path-flow, which is a course of events interrelated on different levels of analysis caused by momentum. 

The incremental pro-homeownership policies facilitated the growth of household debt, which may have irreversibly pushed the UK into neoliberalism. As the Labour party’s image of being pro-austerity and anti-prosperity led to the conservatives win power, which led them to pursue an aggressive strategy of homebuilding throughout the 1950s. This event then left Labour in an existential crisis, where they could “return to old socialist values risking electoral defeat or adopt a new strategy based on out-doing the Conservatives on several of their own policies in order to generate political support” (Sparkes, 2020, p. 10). Labour’s was already faced with a clear optimal choice, and as such, their natural extension and deepening of these policies to keep being electorally competitive laid the political foundations for the Conservatives to make their own shift further to the right in opposition of their more centrist approach. However, constraining economic factors did not allow Labour to fulfil on the promises they led on, making conservatives double down on their opposition in order to get the upper hand, which lead to the first attempt to liberalize the British economy. This entire sequence of events “can be thought of as sequences of moments of changes in ideas and knowledge that alter actor interests and preferences. Thus, the overall master narrative of policy-making is one of problem solving and learning” (Howlett, 2006, p.10) in which the concept on increasing returns facilitated political decisions into a particular path which ultimately locked parties into a lock-in trajectory into neoliberalism.

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