A Systems-Based, Production-Centered Theory of Political Economy.

Using the theory of systems as developed by Kenneth Waltz, I propose a theory of political economy. I propose a hierarchy of systems, the top level being a domestic system of political economy, which is composed of an economic system and a political system. Within the economic system, there exists a financial system and a production system. I focus in the paper on the beneficial and harmful effects of positive feedback processes. Within the production system, I emphasize the self-reinforcing, virtuous cycle characteristics of production machinery industries. These industries are the main engine of economic growth, according to my model, because of the widespread indirect effects of their innovations on the rest of the economy and the potential for exponential growth which exists because many of these machines are used to build each other. The financial system and the state can either encourage these processes or deplete the production system. The dynamics of the positive and negative feedback processes within and among these systems lead to hypotheses concerning the role of the state in the economy, the evolution and definition of Great Powers, state formation, and the advantages of democracy. [ABSTRACT FROM AUTHOR]