The political economy of industry

This chapter examines the political economy of industry, which we define as the relationship between production organisation and the power structure it generates. The political economy approach to industry highlights production organisation and its effects on both productivity and the dynamics of the whole economic system. More specifically, production organisation determines division of labour and its effects on workers’ specialisation and their modes of employment. This also determines how workers’ ‘skill, dexterity and judgement’ (Smith) can be applied and has important consequences for the distribution of power in societies. The chapter builds on the contributions of Classical Economists and applies the classical framework to explaining current evolutions in manufacturing. Particular attention is given to the work of Adam Smith, who is seen as the forerunner of a modern approach to the political economy of industry.