Political Economy and Impacts on Cities


The term “political economy” is composed of two separate terms; politics and economy. Politics describes the distribution of power in the society, while economy describes the process of production and supply of goods and services in the society. Political economy, therefore, involves the merging of these two entities in the society; the political and the economic entities. In political economy, political institutions and the economic institutions, either by design or otherwise, come together to influence the processes of life in the community. It involves, on one level, the decisions that are made by the political institution which have a direct or indirect impact on the economic institution. Alternatively, a situation where the economic sector in the community influences the political institution, this can also be referred to as a product of political economy.

Political economy has several impacts in the society. The political decisions that are made directed at the economic sector do have several impacts on the social and other attributes of the society. It may lead to environmental impacts, for example in cases where legislations are passed that require the location of factories away from residential areas. It may also affect the social attribute of the society, for example when a lot of people lose employment due to taxes imposed on the factories. These people, majority of them, turn to crime and the social order that hitherto existed is challenged.

But perhaps there is no other place that the impacts of political economy are felt more than in the world cities. This is because the cities represent a congregation of many people, and this congregation in effect attracts a lot of economic attention. A lot of factories either open their doors in urban centers or urban centers form around cities. These economic activities, in extension, attract the attention of the political class. Politics and economics inevitably come together, and this influences the attributes, social or otherwise, of the people in the city. This paper is going to examine the impacts that political economy has on the cities.

Political Economy and Impacts on Cities

Impact of Political Economy on Cities

As urbanization takes root around the world, the political and economic sector inevitably meet. They either clash or embrace each other. Whichever form the interaction assumes, it tends to have effects on the society within which it takes place (Swanstrom, 2005). The effects are either positive or negative, depending on the nature of the interaction. The impacts are also long-lasting or short-lived, again depending on the nature of the impact.

The impacts range from externalities, where the third parties of the transaction between the two bears the impact. Others are agglomeration, where the factories and industries are located at specified regions of the city. Fragmentation involves a process where either the social or economic class of the society is subdivided. Segregation, on the other hand, is where the city’s population are separated either on the basis of their economic or social status.

Political Economy and Externalities

Externality, especially in economics, can be described as the spillover effect of any form of economic transaction in the society (Swanstrom, 2005). The effect is borne by a party that was not involved directly in the transaction, but is nonetheless close to the transaction to bear the impacts (Swanstrom, 2005).

A case in point is where a factory operations lead to air pollution. This pollution affects the people living around the area, even though they were not directly involved in the process of manufacture in the factory.

Political Economy and Impacts on Cities

Governments have stepped in and either contributed to this externality or controlled it. When the government allows factories to be opened in residential areas in the cities, this is a political economy process that negatively affects the people. The government can also ban the operations of the factories or control them, improving the environment of the city.


Agglomeration is the process where the factories or firms are located in one area of the city (Swanstrom, 2005). This includes processes where industrial areas are set up in the city that see factories operating from a localized position.

This aspect can be seen as been the direct or indirect impact of political economy. Agglomeration leads to a new geographical configuration of the city, where there are factory quarters and residential quarters (Swanstrom, 2005). The factories and businesses also benefit through the economies of scale. Since they are located near each other, they are able to attract clients and also bargain effectively with the suppliers, bringing down their operation costs further.

Political economy comes in when the government, through the local authority or any other proxy, designates areas that certain factories are supposed to operate from (Swanstrom, 2005). The firms are attracted to these regions by tax exemption and other incentives.


Political economy can also lead to segregation of the city population. When the government imposes varying land rates across the city, people will tend to congregate in areas where they

Political Economy and Impacts on Cities

can afford the rates (Swanstrom, 2005). The rich and well to do people in the city will relocate to lucrative regions, which attract bigger rates, which only the rich can afford. The poor will relocate to regions where the land rates are low and these areas also happens to be those that are dilapidated in the city (Swanstrom, 2005). At the end of the day, we have a situation where the rich and the poor are segregated in the city. There are suburbs where the rich live and the slums where the poor lives. In between the continuum, there are areas for the middle class.


The interaction between the political and the economic spheres of the society will tend to create some impacts within the same society. These impacts are either positive or negative, depending on how the interaction between the two was conducted. Impacts of political economy are felt to a larger degree in the urban centers. The structure of the cities today is greatly affected by the forces of the political economy in operation there. The impacts include segregation, agglomeration and externalities.


Swanstrom, B. C. (2005). Political economy of American urban centers. San Jose: Basic Books, 256-259.