Real Economy vs Symbol Economy

THE UNIVERSITY OF THE WEST INDIES

CAVE HILL CAMPUS

Faculty of Social Sciences

Department of Government, Sociology & Social Work

GOVT 3015: International Politics and Political Economy

Name: Alanna Payne (410000564)

Lecturer: Dr. Wendy C. Grenade

Date: 13th April, 2012

Regional Integration arrangements are necessary but problematic. Use the case of the current Euro Zone crisis to critically analyse this statement.

The term ‘real’ economy can be defined as the physical side of the economy which is concerned with producing goods, services and resources on which jobs, incomes and consumer spending depends. This side is concerned with tangible resources. Material resources are used to produce the goods and services that make the satisfaction of wants and needs possible.

The term ‘symbol’ economy which is sometimes referred to as the paper economy can be defined as the monetary or financial side (which is the money, money matters and money equivalents) of the economy. The symbol economy also deals with credit, deficits and taxes. This side of the economy, therefore, includes financial markets, exchanges, and various types of economic activity that deal with or mostly based on legal or paper claims on physical assets rather than the physical goods themselves. The term paper economy is often used because these legal claims historically have been pieces of paper. Since technology has progressed, much of the paper has been given way to electronic data storage. The vast majority of activities for the paper economy take place through financial markets.

Financial markets trade the legal claims that represent ownership of the goods, services, and resources which are exchanged in product and resource markets. Moreover, when legal claims are traded, income is diverted. Governments or individuals who purchase legal claims lose some of their income and those selling legal claims income has increased. A main...