Andrews, DM. 1994. Capital mobility and state autonomy: toward a structural theory of international monetary relations. International Studies Quarterly: 193-218.
Capital mobility, it is argued in this piece, has become restrictive enought to be highlighted as a structure in the international system. This paper introduces the "capital mobility hypothesis". Also, it argues against generalizing about the effects that capital mobility will have on all states.
In exploring others who have looked at this topic: "In essence, the central claim of these theorists is that when capital is highly mobile across international borders, the sustainable macroeconomic policy options available to states are systematically circumscribed. International financial integration, so the argument goes, has raised the costs associated with pursuing monetary policies that diverge from regional or international trends. While differences in national preferences, the causal beliefs of policymakers and institutional affiliations may help shape particular patterns of adaptation, proponents of what may be termed the 'capital mobility hypothesis' maintain that changes in the external constraint confronting all states constitute a structural cause of observed shifts in the patterns of states' monetary policy behavior over time" (193-4).
"The central claim associated with the capital mobility hypothesis is that financial integration has increased the costs of pursuing divergent monetary objectives, resulting in structural incentives for monetary adjustment" (203).
Wednesday, March 25, 2009
Webb: International Economic Structures, Government Interests and International Coordination of Macroeconomic Adjustment Policies
Webb, MC. 1991. International economic structures, government interests, and international coordination of macroeconomic adjustment policies. International Organization: 309-342.
How does increased capital mobility effect domestic macroeconomic policy coordination measures? "When different countries pursue different macroeconomic policies, it is likely that external payments imbalances, exchange rate movements, or both will result. A number of different types of policy could be used to reconcile national macroeconomic objectives with international constraints imposed by the resulting payments imbalances or exchange rate movements...Three categories of policies are relevant" (314).
External Policies: manipulation of trade and capital controls; Symptom Management: intervention in markets to control them through reserve spending, etc; Internal Policies: adjustment of domestic imbalances between savings and consumption through fiscal and monetary intervention.
See Table 4 (338) for an overview of how different policy coordination measures changed from the 60s to the 80s.
"This article demonstrates that international coordination of macroeconomic adjustment policies was at least as extensive in the 1980s as it had been in the 1960s. Because of changes in the structure o the international economy, however, there were shifts in the pattern of policy coordination: in the 1980s, payments financing coordination was less extensive, capital controls coordination was more extensive, exchange rate coordination was as extensively pursued...and, most important, monetary and fiscal policies became the focus of coordination efforts. The pattern of the 1980s reflects the fact that when international capital mobility is high, the plight of a country facing serious external imbalances can be resolved only by adjustments to monetary and fiscal policies-either those of its own government or those of the governments of other leading countries" (340).
How does increased capital mobility effect domestic macroeconomic policy coordination measures? "When different countries pursue different macroeconomic policies, it is likely that external payments imbalances, exchange rate movements, or both will result. A number of different types of policy could be used to reconcile national macroeconomic objectives with international constraints imposed by the resulting payments imbalances or exchange rate movements...Three categories of policies are relevant" (314).
External Policies: manipulation of trade and capital controls; Symptom Management: intervention in markets to control them through reserve spending, etc; Internal Policies: adjustment of domestic imbalances between savings and consumption through fiscal and monetary intervention.
See Table 4 (338) for an overview of how different policy coordination measures changed from the 60s to the 80s.
"This article demonstrates that international coordination of macroeconomic adjustment policies was at least as extensive in the 1980s as it had been in the 1960s. Because of changes in the structure o the international economy, however, there were shifts in the pattern of policy coordination: in the 1980s, payments financing coordination was less extensive, capital controls coordination was more extensive, exchange rate coordination was as extensively pursued...and, most important, monetary and fiscal policies became the focus of coordination efforts. The pattern of the 1980s reflects the fact that when international capital mobility is high, the plight of a country facing serious external imbalances can be resolved only by adjustments to monetary and fiscal policies-either those of its own government or those of the governments of other leading countries" (340).
Tuesday, March 24, 2009
Grabel: Averting Crisis?
Grabel, I. 2003. Averting crisis? Assessing measures to manage financial integration in emerging economies. Cambridge Journal of Economics 27, no. 3: 317-336.
Grabel highlights five distinct types of risk that are brought about when a country adopts neoliberal policy reforms. These are outlined in Table 1 (319) and are the following types of risk: currency, flight, fragility, contagion and sovereignty. Alternative policies are then outlined in Table 2 (322).
Grabel highlights five distinct types of risk that are brought about when a country adopts neoliberal policy reforms. These are outlined in Table 1 (319) and are the following types of risk: currency, flight, fragility, contagion and sovereignty. Alternative policies are then outlined in Table 2 (322).
Monday, March 23, 2009
Alves, Ferrari and Paula: The Post Keynesian Critique of Conventional Currency Crisis Models
Alves, AJ, F Ferrari, and LF de Paula. 2000. The Post Keynesian critique of conventional currency crisis models and Davidson's proposal to reform the international monetary system. JOURNAL OF POST KEYNESIAN ECONOMICS 22, no. 2: 207-226.
Efficient market theory provides an account of financial crises that focuses on poorly performing economic fundamentals, whether or not speculators are herding or following their own rational behavior. This post-Keynsian approach is quite different in that it focuses on the impossibility of ever fully knowing what the fundamentals are, and thus not being able to ever fully adjudicate as to exactly how the causes of the financial crisis were fundamental related. Thus, speculation is a constant and foundational part of market activity as it is currently organized.
Efficient market theory provides an account of financial crises that focuses on poorly performing economic fundamentals, whether or not speculators are herding or following their own rational behavior. This post-Keynsian approach is quite different in that it focuses on the impossibility of ever fully knowing what the fundamentals are, and thus not being able to ever fully adjudicate as to exactly how the causes of the financial crisis were fundamental related. Thus, speculation is a constant and foundational part of market activity as it is currently organized.
Abdelal: Writing the Rules of Global Finance
ABDELAL, R. 2006. Writing the Rules of Global Finance: France, Europe, and Capital Liberalization. Review of International Political Economy 13, no. 1: 1-27.
Capital controls and their promotion: Why was it true that capital controls formed the cornerstone of the monetary system after WWII but were sacrilegious in the late 90s? This paper attempts to tell that story. There is a difference between how US and European leaders presented the promotion of global capital. The Europeans wanted a more globally managed diffusion of finance while the US was much more keenly interested in an ad hoc approach. The standard story focuses on the role of the US in promoting international finance; this story focuses much more on the European players.
Capital controls and their promotion: Why was it true that capital controls formed the cornerstone of the monetary system after WWII but were sacrilegious in the late 90s? This paper attempts to tell that story. There is a difference between how US and European leaders presented the promotion of global capital. The Europeans wanted a more globally managed diffusion of finance while the US was much more keenly interested in an ad hoc approach. The standard story focuses on the role of the US in promoting international finance; this story focuses much more on the European players.
Wibbels and Arce: Globalization, Taxation, and Burden-Shifting in Latin America
Wibbels, E, and M Arce. 2003. Globalization, Taxation, and Burden-Shifting in Latin America. International Organization 57, no. 01: 111-136.
This paper explores the relationship of taxation policy in Latin America and the possible effects of globalization. "The question becomes: If capital flows and deregulation cause burden-shifting, are governments that reform tax systems rewarded with greater flows? We hypothesize that capital flows do respond to tax policy, but that markets evaluate tax systems as a whole, not just capital's burden of taxation"
The rosy assessment of tax policies that come out of Europe cannot be generalized to the rest of the world. Short-term capital needs require clear signals of country intention to be generated. This having been said, it is not entirely a dire situation for all developing countries, and there is still national room for movement and adjustment.
"In sum, globalization seems to bring a mixed bag for policymakers; it brings a broad set of constraints onto the outlines of policy but provides room for policy choices therein. The most direct evidence of this flexibility is the fact that longer-term markets seem to be less interested in the relative share of taxes paid by capital than in how market friendly tax systems are as a whole. While net capital flows have not rewarded shifts to increase the burden of taxation on labor, these flows have rewarded market-oriented reforms of tax systems. Thus, national policy-makers can attract capital by streamlining tax codes, eliminating distortionary taxes on trade, or increasing the efficiency of existing taxes, rather than contributing to ongoing trends in inequality by eliminating progressive components of tax codes" (131-2).
This paper explores the relationship of taxation policy in Latin America and the possible effects of globalization. "The question becomes: If capital flows and deregulation cause burden-shifting, are governments that reform tax systems rewarded with greater flows? We hypothesize that capital flows do respond to tax policy, but that markets evaluate tax systems as a whole, not just capital's burden of taxation"
The rosy assessment of tax policies that come out of Europe cannot be generalized to the rest of the world. Short-term capital needs require clear signals of country intention to be generated. This having been said, it is not entirely a dire situation for all developing countries, and there is still national room for movement and adjustment.
"In sum, globalization seems to bring a mixed bag for policymakers; it brings a broad set of constraints onto the outlines of policy but provides room for policy choices therein. The most direct evidence of this flexibility is the fact that longer-term markets seem to be less interested in the relative share of taxes paid by capital than in how market friendly tax systems are as a whole. While net capital flows have not rewarded shifts to increase the burden of taxation on labor, these flows have rewarded market-oriented reforms of tax systems. Thus, national policy-makers can attract capital by streamlining tax codes, eliminating distortionary taxes on trade, or increasing the efficiency of existing taxes, rather than contributing to ongoing trends in inequality by eliminating progressive components of tax codes" (131-2).
Rudra and Haggard: Globalization, Democracy and Effective Welfare Spending in the Developing World
Rudra, N, and S Haggard. 2005. Globalization, democracy, and effective welfare spending in the developing world. Comparative Political Studies 38, no. 9: 1015.
"The results show that social spending in 'hard' authoritarian regimes is more sensitive to the pressures of globalization than in democratic or intermediate regimes" (1015; from abstract).
"Our findings cast substantial doubt on the hypothesis that globalization necessarily has an adverse effect on welfare spending in developing countries. We find that political institutions and the rules governing political competition matter. In the face of increasing trade openness, in particular, authoritarian regimes are less generous than democracies with respect to social spending and do worse with respect to several key social performance indicators. Also of significance, we find that under conditions of globalization, 'intermediate' authoritarian regimes show different social spending patterns than 'hard' authoritarian regimes and in some cases, behave more similar to democracies" (1017).
Rudra, N. 2008. Welfare states in developing countries: unique or universal? The Journal of Politics 69, no. 02: 378-396.
Rudra further promotes a distinction between three types of welfare states in LDCs: productive welfare (promote market development), protective welfare (protect select interest groups) and combinations of the above.
"The results show that social spending in 'hard' authoritarian regimes is more sensitive to the pressures of globalization than in democratic or intermediate regimes" (1015; from abstract).
"Our findings cast substantial doubt on the hypothesis that globalization necessarily has an adverse effect on welfare spending in developing countries. We find that political institutions and the rules governing political competition matter. In the face of increasing trade openness, in particular, authoritarian regimes are less generous than democracies with respect to social spending and do worse with respect to several key social performance indicators. Also of significance, we find that under conditions of globalization, 'intermediate' authoritarian regimes show different social spending patterns than 'hard' authoritarian regimes and in some cases, behave more similar to democracies" (1017).
Rudra, N. 2008. Welfare states in developing countries: unique or universal? The Journal of Politics 69, no. 02: 378-396.
Rudra further promotes a distinction between three types of welfare states in LDCs: productive welfare (promote market development), protective welfare (protect select interest groups) and combinations of the above.
Wibbels: Dependency Revisited
Wibbels, E. 2006. Dependency Revisited: International Markets, Business Cycles, and Social Spending in the Developing World. International Organization 60, no. 02: 433-468.
"While increased exposure to the global economy is associated with increased welfare effort in the OECD, the opposite holds in the developing world. These differences are typically explained with reference to domestic politics. Tradables, unions, and the like in the developing world are assumed to have less power or interests divergent to those in the OECD-interests that militate against social spending. I argue that such arguments can be complemented with a recognition that developed and developing nations have distinct patterns of integration into global markets. While income shocks associated with international markets are quite modest in OECD, they are profound in developing nations. In the OECD, governments can respond to those shocks by borrowing on capital markets and spending counter-cyclically on social programs. No such opportunity exists for most governments in the developing world...Thus, while internationally-inspired volatility and income shocks seem not to threaten the underpinnings of the welfare state in rich nations, it undercuts the capacity of governments in the developing world to smooth consumption (and particularly consumption by the poor) across the business cycle" (1; from abstract).
"More specifically, I argue that exposure to international markets affects social spending in developing nations through two steps: first, by increasing the volatility of domestic economies and exposing them to severe business cycles; second, by inspiring pro-cyclical fiscal responses to downturns that imply cuts in social spending" (3).
"While increased exposure to the global economy is associated with increased welfare effort in the OECD, the opposite holds in the developing world. These differences are typically explained with reference to domestic politics. Tradables, unions, and the like in the developing world are assumed to have less power or interests divergent to those in the OECD-interests that militate against social spending. I argue that such arguments can be complemented with a recognition that developed and developing nations have distinct patterns of integration into global markets. While income shocks associated with international markets are quite modest in OECD, they are profound in developing nations. In the OECD, governments can respond to those shocks by borrowing on capital markets and spending counter-cyclically on social programs. No such opportunity exists for most governments in the developing world...Thus, while internationally-inspired volatility and income shocks seem not to threaten the underpinnings of the welfare state in rich nations, it undercuts the capacity of governments in the developing world to smooth consumption (and particularly consumption by the poor) across the business cycle" (1; from abstract).
"More specifically, I argue that exposure to international markets affects social spending in developing nations through two steps: first, by increasing the volatility of domestic economies and exposing them to severe business cycles; second, by inspiring pro-cyclical fiscal responses to downturns that imply cuts in social spending" (3).
Iversen and Cusack: The Causes of Welfare State Expansion
Iversen, Torben, and Thomas Cusack. 2000. The Causes of Welfare State Expansion: Deindustrialization or Globalization? World Politics 52: 313-349.
"It is commonplace to argue that the increasing openness of national economies has meant growing economic insecurity. This insecurity once supposedly fueled demand for larger welfare spending as a form of insurance. The rising tide of globalization, however, is now widely seen as a hindrance to a government's ability to meet these demands and even as a cause of government cutbacks. An alternative view combines this 'second image reversed' with a concern for the political power of labor and the left. This revisionist perspective suggests that the challenges promoted by globalization when met by strong left-labor power within the domestic political system combine to produce a compensation strategy that entails a large and vibrant welfare state. This paper challenges both these views. Our argument, in short, is that most of the risks being generated in modern industrialized societies are the product of technologically induced structural transformations inside national labor markets. Increasing productivity, changing consumption patterns, and saturated demand for products from the traditional sectors of the economy are the main forces of change. It is these structural sources of risk that fuel demands for state compensation and risk sharing" (313).
The economic structure of employment has shifted dramatically. There is no longer such a strong focus on agriculture or industry, two sectors that previously were quite important. This paper contends that governments have responded to this change in three ways: 1| governments have promoted the movement towards jobs in service sectors and have compensated those who take this risk; 2| promote employment in public services; 3| have not promoted public or private opportunities and have promoted things like early retirement.
"The argument that globalization leads to welfare state expansion rests on two causal mechanisms. First, trade and capital market integration is said to expose domestic economies to greater real economic volatility, which implies higher income and employment risks for workers. Second, greater labor- market risks are hypothesized to generate political demands for expansionary spending policies that will cushion and compensate people for such risks" (317). This is strange, as international labor market risk may be a substantive reality, but the most important question is whether this international labor market risk is greater than the domestic labor market risk. The authors do not find increased labor market volatility in the countries explored during this period, thus brining previous analyses into question.
"Our results strongly suggest that deindustrialization, not trade or capital market openness, is the driving force behind the expansion of government spending on both transfers and services. Nevertheless, it could be objected that deindustrialization may itself be a consequence of trade and financial openness or that it was caused by, not causing, government spending" (339).
"It is commonplace to argue that the increasing openness of national economies has meant growing economic insecurity. This insecurity once supposedly fueled demand for larger welfare spending as a form of insurance. The rising tide of globalization, however, is now widely seen as a hindrance to a government's ability to meet these demands and even as a cause of government cutbacks. An alternative view combines this 'second image reversed' with a concern for the political power of labor and the left. This revisionist perspective suggests that the challenges promoted by globalization when met by strong left-labor power within the domestic political system combine to produce a compensation strategy that entails a large and vibrant welfare state. This paper challenges both these views. Our argument, in short, is that most of the risks being generated in modern industrialized societies are the product of technologically induced structural transformations inside national labor markets. Increasing productivity, changing consumption patterns, and saturated demand for products from the traditional sectors of the economy are the main forces of change. It is these structural sources of risk that fuel demands for state compensation and risk sharing" (313).
The economic structure of employment has shifted dramatically. There is no longer such a strong focus on agriculture or industry, two sectors that previously were quite important. This paper contends that governments have responded to this change in three ways: 1| governments have promoted the movement towards jobs in service sectors and have compensated those who take this risk; 2| promote employment in public services; 3| have not promoted public or private opportunities and have promoted things like early retirement.
"The argument that globalization leads to welfare state expansion rests on two causal mechanisms. First, trade and capital market integration is said to expose domestic economies to greater real economic volatility, which implies higher income and employment risks for workers. Second, greater labor- market risks are hypothesized to generate political demands for expansionary spending policies that will cushion and compensate people for such risks" (317). This is strange, as international labor market risk may be a substantive reality, but the most important question is whether this international labor market risk is greater than the domestic labor market risk. The authors do not find increased labor market volatility in the countries explored during this period, thus brining previous analyses into question.
"Our results strongly suggest that deindustrialization, not trade or capital market openness, is the driving force behind the expansion of government spending on both transfers and services. Nevertheless, it could be objected that deindustrialization may itself be a consequence of trade and financial openness or that it was caused by, not causing, government spending" (339).
Avelino, Brown and Hunter: The Effects of Capital Mobility, Trade Openness, adn Democracy on Social Spending in Latin America
Avelino, G, DS Brown, and W Hunter. 2005. The Effects of Capital Mobility, Trade Openness, and Democracy on Social Spending in Latin America, 1980-1999. American Journal of Political Science 49, no. 3: 625-641.
"Empirical studies measuring the impact of globalization on social spending have appeared recently in leading journals. This study seeks to improve upon previous work by (1) employing a more sophisticated and comprehensive measure of financial openness; (2) using a more accurate measure of trade openness based on purchasing power parities; and (3) relying on social spending data that are more complete than those used by previous studies on Latin America. Our estimates suggest that several empirical patterns reported in previous work deserve a second look. We find that trade openness has a positive association with education and social security expenditures, that financial openness does not constrain government outlays for social programs, and that democracy has a strong positive association with social spending, particularly on items that bolster human capital formation" (625; abstract).
"Several empirical patterns emerge from our analysis. First, different measures of trade openness produce radically different results: previous empirical results based on exchange rate conversions are reversed when using a trade measure based on purchasing power parities (PPPs). Second, democracy has a strong and positive correlation with social spending. Third, financial openness does not constrain government spending on social programs. Finally, trade openness has a strong positive impact on the resources devoted to educational and social security while democracy's impact on spending results from increased expenditures for education" (625-6).
The DV they use is a combination of the % of population over 65, unemployment, the level of development, growth, urbanization, democracy, financial openness, trade openness, inflation all over gdp.
Key findings: "(1) democratic regimes spend more on social programs than do their authoritarian counterparts; (2) trade, as measured by purchasing power parities, tends to enhance rather than diminish social spending; and (3) financial openness has little systematic bearing on social spending"
"Trade openness (using PPPs) has a positive (though not always statically significant) impact on aggregate spending, and a strong positive and significant association with spending on social security and education" (637).
"Empirical studies measuring the impact of globalization on social spending have appeared recently in leading journals. This study seeks to improve upon previous work by (1) employing a more sophisticated and comprehensive measure of financial openness; (2) using a more accurate measure of trade openness based on purchasing power parities; and (3) relying on social spending data that are more complete than those used by previous studies on Latin America. Our estimates suggest that several empirical patterns reported in previous work deserve a second look. We find that trade openness has a positive association with education and social security expenditures, that financial openness does not constrain government outlays for social programs, and that democracy has a strong positive association with social spending, particularly on items that bolster human capital formation" (625; abstract).
"Several empirical patterns emerge from our analysis. First, different measures of trade openness produce radically different results: previous empirical results based on exchange rate conversions are reversed when using a trade measure based on purchasing power parities (PPPs). Second, democracy has a strong and positive correlation with social spending. Third, financial openness does not constrain government spending on social programs. Finally, trade openness has a strong positive impact on the resources devoted to educational and social security while democracy's impact on spending results from increased expenditures for education" (625-6).
The DV they use is a combination of the % of population over 65, unemployment, the level of development, growth, urbanization, democracy, financial openness, trade openness, inflation all over gdp.
Key findings: "(1) democratic regimes spend more on social programs than do their authoritarian counterparts; (2) trade, as measured by purchasing power parities, tends to enhance rather than diminish social spending; and (3) financial openness has little systematic bearing on social spending"
"Trade openness (using PPPs) has a positive (though not always statically significant) impact on aggregate spending, and a strong positive and significant association with spending on social security and education" (637).
Feenstra and Hanson: Global Production Sharing and Rising Inequality
FEENSTRA, RC, and GH HANSON. 2001. Global Production Sharing and Rising Inequality: A Survey of Trade and Wages. NBER Working Paper.
"One of the most widely-discussed public policy issues in the United States and many other industrial countries is the decline in the wages of less-skilled workers during the 1980s and 1990s, both in real terms and relative to the wages of more-skilled workers. The question is, what factors account for this change?...In this survey, we present a contrary point of view, and argue that international trade is indeed an important explanation for the increase in the wage gap. Our argument rests on the idea that an increasing amount of international trade takes the form of trade in intermediate inputs. This is sometimes called 'production sharing' by the companies involved, or simply 'outsourcing'. Trade of this type affects labor demand in import-competing industries, but also affects labor demand in the industries using the inputs. For this reason, trade in intermediate inputs can have an impact on wages and employment that is much greater than for trade in final consumer goods. As we shall argue, trade in inputs has much the same impact on labor demand as does skill-biased technical change: both of these will shift demand away from low-skilled activities, while raising relative demand and wages of the higher skilled" (1-2).
From the late 70s to the mid 90s, real wages of those with a high school education fell by 13.4%.
"One of the most widely-discussed public policy issues in the United States and many other industrial countries is the decline in the wages of less-skilled workers during the 1980s and 1990s, both in real terms and relative to the wages of more-skilled workers. The question is, what factors account for this change?...In this survey, we present a contrary point of view, and argue that international trade is indeed an important explanation for the increase in the wage gap. Our argument rests on the idea that an increasing amount of international trade takes the form of trade in intermediate inputs. This is sometimes called 'production sharing' by the companies involved, or simply 'outsourcing'. Trade of this type affects labor demand in import-competing industries, but also affects labor demand in the industries using the inputs. For this reason, trade in intermediate inputs can have an impact on wages and employment that is much greater than for trade in final consumer goods. As we shall argue, trade in inputs has much the same impact on labor demand as does skill-biased technical change: both of these will shift demand away from low-skilled activities, while raising relative demand and wages of the higher skilled" (1-2).
From the late 70s to the mid 90s, real wages of those with a high school education fell by 13.4%.
Haggard and Maxfield: The Political Economy of Financial Internationalization in the Developing World
Haggard, S, and S Maxfield. 1999. The political economy of financial internationalization in the developing world. Issues and Agents in International Political Economy 50, no. 1: 35-68.
What about the internationalization of financial markets in less developing countries? For a very long time, financial markets were constrained through capital controls especially in less developing countries. These authors point out that this is transitioning and explore its effects. Table 1 (36) offers a taxonomy of different types of liberalization.
In an H-O model, K and L are substitutes, so, when K constraints are lifted, the relative cost of K decreases domestically. In a labor-rich environment, this benefits labor. However, this becomes more complex in a multi-sector model, where benefits may be distributed relatively unevenly. "In sum, increases in international trade and investment ties and the opportunities opened by the deepening of international financial markets should increase interest group pressures for financial internationalization, including from foreign firms, while decreasing the effectiveness of government controls. Yet such broad changes are more useful in explaining general trends than they are in accounting for why specific countries liberalize when they do. Crises play an important role in this regard" (40). There is a positive feedback look when there is a crisis after liberalization, as those who want more liberalization may benefit from the crisis and become more powerful.
"As the integration of financial markets deepens, accelerated by the very policy changes that we have analyzed here, international constraints will play an increasingly role in future policy decisions, not only with regard to the capital account but also with reference to economic policy more generally" (62).
What about the internationalization of financial markets in less developing countries? For a very long time, financial markets were constrained through capital controls especially in less developing countries. These authors point out that this is transitioning and explore its effects. Table 1 (36) offers a taxonomy of different types of liberalization.
In an H-O model, K and L are substitutes, so, when K constraints are lifted, the relative cost of K decreases domestically. In a labor-rich environment, this benefits labor. However, this becomes more complex in a multi-sector model, where benefits may be distributed relatively unevenly. "In sum, increases in international trade and investment ties and the opportunities opened by the deepening of international financial markets should increase interest group pressures for financial internationalization, including from foreign firms, while decreasing the effectiveness of government controls. Yet such broad changes are more useful in explaining general trends than they are in accounting for why specific countries liberalize when they do. Crises play an important role in this regard" (40). There is a positive feedback look when there is a crisis after liberalization, as those who want more liberalization may benefit from the crisis and become more powerful.
"As the integration of financial markets deepens, accelerated by the very policy changes that we have analyzed here, international constraints will play an increasingly role in future policy decisions, not only with regard to the capital account but also with reference to economic policy more generally" (62).
Obstfeld and Taylor: Globalization and Capital Markets
Obstfeld, M, and AM Taylor. 2003. Globalization and capital markets. Globalization in historical perspective: 121-187.
Over the past 50 odd years, the rise of capital markets represent a fundamental shift in the way that global economic events impact the rest of the world. This piece wonders what relationship this increasing preeminence of global financial capital has on state autonomy.
There is clear benefit from increased capital flows from the perspective of economic theory. If, however, there is clear benefit for increased capital flows, why were they not imposed after WWII? "What explains the long stretch of high capital mobility that prevailed before 18914, the subsequent breakdown in the interwar period, and the very slow postwar reconstruction of the world financial system? The answer is tied up with one of the central and visible areas in which openness to the world capital market constrains government power: the choice of an exchange rate regime" (13).
"In most of the world's economies, the exchange rate is a key instrument, target, or indicator for monetary policy. An open capital market, however, deprives a country's government of the ability simultaneously to target its exchange rate and to use monetary policy in pursuit of other economic objectives" (14). Excellent overview of the unholy trinity on 14.
"Eventually, the very success of the Bretton Woods system in spurring international trade and the related capital movements brought about its own collapse by resurrecting the 'inconsistent trinity.' For the United States, maintaining fixed exchange rates seemed to require high interest rates and slower growth; for Germany, fixed exchange rates seemed to require giving up domestic control over inflation. Even the relatively limited capital mobility that existed by the early 1970s allowed furious speculative attacks on the major currencies. After vain attempts to restore fixed dollar exchange rates, the industrial countries moved to floating rates early in 1973" (17).
There is a discussion as to the implications of capital mobility on tax structures as well as income distribution.
Over the past 50 odd years, the rise of capital markets represent a fundamental shift in the way that global economic events impact the rest of the world. This piece wonders what relationship this increasing preeminence of global financial capital has on state autonomy.
There is clear benefit from increased capital flows from the perspective of economic theory. If, however, there is clear benefit for increased capital flows, why were they not imposed after WWII? "What explains the long stretch of high capital mobility that prevailed before 18914, the subsequent breakdown in the interwar period, and the very slow postwar reconstruction of the world financial system? The answer is tied up with one of the central and visible areas in which openness to the world capital market constrains government power: the choice of an exchange rate regime" (13).
"In most of the world's economies, the exchange rate is a key instrument, target, or indicator for monetary policy. An open capital market, however, deprives a country's government of the ability simultaneously to target its exchange rate and to use monetary policy in pursuit of other economic objectives" (14). Excellent overview of the unholy trinity on 14.
"Eventually, the very success of the Bretton Woods system in spurring international trade and the related capital movements brought about its own collapse by resurrecting the 'inconsistent trinity.' For the United States, maintaining fixed exchange rates seemed to require high interest rates and slower growth; for Germany, fixed exchange rates seemed to require giving up domestic control over inflation. Even the relatively limited capital mobility that existed by the early 1970s allowed furious speculative attacks on the major currencies. After vain attempts to restore fixed dollar exchange rates, the industrial countries moved to floating rates early in 1973" (17).
There is a discussion as to the implications of capital mobility on tax structures as well as income distribution.
Garrett and Lange: Political Responses to Interdependence
Garrett, G, and P Lange. 1991. Political Responses to Interdependence: What's" Left" for the Left? International Organization 45, no. 4: 539-564.
"One line of criticism is from scholars of international political economy. Many argue that in an era of great economic interdependence there is little scope for partisan governments to pursue distinctive and independent economic policies, even if these are desirable from the standpoint of domestic political competition. Instead, the trade openness of national economies, the integration of financial markets, the competitiveness of global markets in goods and services, and, more generally, the free flow economic resources across national frontiers in response to market forces all combine to create powerful constraints against autonomous national strategies. Furthermore, this policy convergence is often seen to center on reducing government intervention in the economy and on liberating market forces, thereby severely circumscribing...the prospects for distinctive leftist strategies" (539-40).
If one generally explores the different leftist parties of Europe, they will find that they all generally embrace market oriented solutions.
"This article argues, however, that while the effects of interdependence clearly have been great, they have not eliminated partisan economic separation between the left and the right. Ever-increasing integration of and competition in the world economy have heightened incentives for all governments to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets. This, in turn, has altered the policy instruments through which governments can pursue their partisan objectives. It has not, however, rendered these objectives infeasible" (541).
"One line of criticism is from scholars of international political economy. Many argue that in an era of great economic interdependence there is little scope for partisan governments to pursue distinctive and independent economic policies, even if these are desirable from the standpoint of domestic political competition. Instead, the trade openness of national economies, the integration of financial markets, the competitiveness of global markets in goods and services, and, more generally, the free flow economic resources across national frontiers in response to market forces all combine to create powerful constraints against autonomous national strategies. Furthermore, this policy convergence is often seen to center on reducing government intervention in the economy and on liberating market forces, thereby severely circumscribing...the prospects for distinctive leftist strategies" (539-40).
If one generally explores the different leftist parties of Europe, they will find that they all generally embrace market oriented solutions.
"This article argues, however, that while the effects of interdependence clearly have been great, they have not eliminated partisan economic separation between the left and the right. Ever-increasing integration of and competition in the world economy have heightened incentives for all governments to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets. This, in turn, has altered the policy instruments through which governments can pursue their partisan objectives. It has not, however, rendered these objectives infeasible" (541).
Hardie: The Power of the Markets?
Hardie, I. 2005. The power of the markets? The international bond markets and the 2002 elections in Brazil. Review of International Political Economy 13, no. 1: 53-77.
"The data show that international bond market investors did not exit Brazil before the elections, putting in question whether they were the source of the riser in the cost of government borrowing that Mosley and others see as indicative of the market's strength. This suggests that our understanding of the actors responsible for market movements remains incomplete. The article, therefore, challenges the idea, common within international political economy, of 'the market' as a single entity, with common actions and policy preferences. The data presented here strongly suggest 'the market' is in reality made up of multiple heterogeneous actors often lacking any unity of opinion or purpose. After Lula's election victory, market prices recovered and the data show that international investors increased their investments in Brazil, despite slower policy implementation than market practitioners desired and the new government's social agenda. This supports a questioning of the true breadth of investors' policy interests and, therefore, influence" (53; from abstract)
Mosley (2003) makes the claim that developed countries experience narrow constraints from financial markets and that developing countries experience broad constraints. This piece criticizes whether or not developing countries really experience broad constraints, arguing that Brazil was still able to operationalize its social policies. "Instead, the dramatic negative fall in market prices before the Brazilian election, which caused not only an increase in the cost of international borrowing but also a severe, at times total, reduction in its availability, suggests that the distinction between developed and developing world may more significantly be seen in the strength of overall market constraint than in its breadth" (55).
One key aspect of this study, and building upon Mosely again and others, is the disaggregation of financial and market actors and an attempt to explore their separate motivations.
"The data show that international bond market investors did not exit Brazil before the elections, putting in question whether they were the source of the riser in the cost of government borrowing that Mosley and others see as indicative of the market's strength. This suggests that our understanding of the actors responsible for market movements remains incomplete. The article, therefore, challenges the idea, common within international political economy, of 'the market' as a single entity, with common actions and policy preferences. The data presented here strongly suggest 'the market' is in reality made up of multiple heterogeneous actors often lacking any unity of opinion or purpose. After Lula's election victory, market prices recovered and the data show that international investors increased their investments in Brazil, despite slower policy implementation than market practitioners desired and the new government's social agenda. This supports a questioning of the true breadth of investors' policy interests and, therefore, influence" (53; from abstract)
Mosley (2003) makes the claim that developed countries experience narrow constraints from financial markets and that developing countries experience broad constraints. This piece criticizes whether or not developing countries really experience broad constraints, arguing that Brazil was still able to operationalize its social policies. "Instead, the dramatic negative fall in market prices before the Brazilian election, which caused not only an increase in the cost of international borrowing but also a severe, at times total, reduction in its availability, suggests that the distinction between developed and developing world may more significantly be seen in the strength of overall market constraint than in its breadth" (55).
One key aspect of this study, and building upon Mosely again and others, is the disaggregation of financial and market actors and an attempt to explore their separate motivations.
Harmes: Institutional Investors and Polanyi's Double Movement
Harmes, A. 2001. Institutional investors and Polanyi's double movement: a model of contemporary currency crises. Review of International Political Economy 8, no. 3: 389-437.
"This article constructs a model of contemporary currency crises which incorporates the role played by institutional investors and the dynamics associated with Karl Polanyi's notion of the 'double movement'. Polanyi's double movement, and its recognition of the need to integrate politics with economics, is used to explain why so many governments are prone to pursue policies that lead to a speculative attack against fixed exchange rates and why virtually every modern fixed exchange rate regime has ended in crisis. Evidence on the short-term and herd behavior of institutional investors is used to explain why contemporary currency crises do not appear to be justified by underlying economic fundamentals and why these crises do so much more damage than their earlier counterparts" (389; from abstract).
There have been more frequent currency crises since the collapse of Bretton Woods in the early 70s. There are two key features of these crises: the speculative actions that attacked the economic systems of these countries were not based on fundamentals and secondly is the severity of the damage caused by these attacks.
Overview of Mundell Flemming on 391.
Dornbusch et all promote the Washington Consensus view that low taxes, free markets and solid monetary policy will cause returns in the long-run (391).
The author explores financial crises from the perspective of Polanyi's double movement. What the double movement doesn't explain is why crises have become pronounced in the 90s. For that, the author explores the increase in herd mentality that arises from increased institutional investors.
"In policy terms, the key difference between the model presented here and those expounded by proponents of the Washington consensus relates to the viability of the different policy options contained within the unholy trinity or Mundell-Fleming thesis. Where neoclassical models focus on policy autonomy and government intervention designed to stimulate employment and protect wages as the cause of currency crises, this article has located the origins of recent crises with the policy options of capital mobility and fixed exchange rates. Many observers have argued that capital mobility has become a structural feature of the global political economy. Whether true or not, the same argument would seem to apply to democracy and, in turn, to the need for governments to retain their monetary policy autonomy. If this is the case, if both capital mobility and democracy have become structural features of the global political economy, then Polanyi's insights imply that fixed exchange rates...are no longer a viable option" (432).
UPDATE:
"...under conditions of capital mobility, governments are forced to choose between either price and exchange rate stability or monetary policy autonomy; they cannot pursue both simultaneously. For example, if a government sought to maintain a stable exchange rate, it would have to forgo the option of stimulating its economy through a monetary expansion. This is the case as an expansionary policy would cause domestic interest rates to fall below foreign rates, leading to an outflow of capital and, in turn, to a depreciation of the currency. To prevent governments from pursuing such expansionary policies (which are regarded as inflationary), proponents of the Washington consensus have often promoted institutional reforms designed to pre-commit governments to policies of price and exchange rate stability. Such measures range from granting full independence to central banks, to the adoption of fixed exchange rates, to the more drastic measure of creating a currency board" (391).
"This article constructs a model of contemporary currency crises which incorporates the role played by institutional investors and the dynamics associated with Karl Polanyi's notion of the 'double movement'. Polanyi's double movement, and its recognition of the need to integrate politics with economics, is used to explain why so many governments are prone to pursue policies that lead to a speculative attack against fixed exchange rates and why virtually every modern fixed exchange rate regime has ended in crisis. Evidence on the short-term and herd behavior of institutional investors is used to explain why contemporary currency crises do not appear to be justified by underlying economic fundamentals and why these crises do so much more damage than their earlier counterparts" (389; from abstract).
There have been more frequent currency crises since the collapse of Bretton Woods in the early 70s. There are two key features of these crises: the speculative actions that attacked the economic systems of these countries were not based on fundamentals and secondly is the severity of the damage caused by these attacks.
Overview of Mundell Flemming on 391.
Dornbusch et all promote the Washington Consensus view that low taxes, free markets and solid monetary policy will cause returns in the long-run (391).
The author explores financial crises from the perspective of Polanyi's double movement. What the double movement doesn't explain is why crises have become pronounced in the 90s. For that, the author explores the increase in herd mentality that arises from increased institutional investors.
"In policy terms, the key difference between the model presented here and those expounded by proponents of the Washington consensus relates to the viability of the different policy options contained within the unholy trinity or Mundell-Fleming thesis. Where neoclassical models focus on policy autonomy and government intervention designed to stimulate employment and protect wages as the cause of currency crises, this article has located the origins of recent crises with the policy options of capital mobility and fixed exchange rates. Many observers have argued that capital mobility has become a structural feature of the global political economy. Whether true or not, the same argument would seem to apply to democracy and, in turn, to the need for governments to retain their monetary policy autonomy. If this is the case, if both capital mobility and democracy have become structural features of the global political economy, then Polanyi's insights imply that fixed exchange rates...are no longer a viable option" (432).
UPDATE:
"...under conditions of capital mobility, governments are forced to choose between either price and exchange rate stability or monetary policy autonomy; they cannot pursue both simultaneously. For example, if a government sought to maintain a stable exchange rate, it would have to forgo the option of stimulating its economy through a monetary expansion. This is the case as an expansionary policy would cause domestic interest rates to fall below foreign rates, leading to an outflow of capital and, in turn, to a depreciation of the currency. To prevent governments from pursuing such expansionary policies (which are regarded as inflationary), proponents of the Washington consensus have often promoted institutional reforms designed to pre-commit governments to policies of price and exchange rate stability. Such measures range from granting full independence to central banks, to the adoption of fixed exchange rates, to the more drastic measure of creating a currency board" (391).
Harvy: A Post Keynesian View of Exchange Rate Determination
HARVEY, JT. 1991. A Post Keynesian view of exchange rate determination. Journal of Post Keynesian Economics 14, no. 1.
There is much out there that has explored exchange rate determination, though not very well. The monetary approach tends not to perform very well. They are not broadly useful models, though they may apply in one situation.
"It is the contention of this author that elements of a theory that can successfully explain the determination of exchange prices under the flexible rate system can be developed from the writings of various Post Keynesian scholars. This paper is intended to provide a rough outline of that approach and to spur further refinement of the model" (61).
"Davidson has emphasized the role of changing expectations in an environment of uncertainty as the key to volatility" (63). "Most important is Schulmeister's contention that those creating the bulk of the demand for foreign exchange are not those needing liquidity for international merchandise trade and investment, but instead the bank trading desks themselves" (63).
There is a distinction between the short-term expectations and the medium-term expectations of investors.
There is much out there that has explored exchange rate determination, though not very well. The monetary approach tends not to perform very well. They are not broadly useful models, though they may apply in one situation.
"It is the contention of this author that elements of a theory that can successfully explain the determination of exchange prices under the flexible rate system can be developed from the writings of various Post Keynesian scholars. This paper is intended to provide a rough outline of that approach and to spur further refinement of the model" (61).
"Davidson has emphasized the role of changing expectations in an environment of uncertainty as the key to volatility" (63). "Most important is Schulmeister's contention that those creating the bulk of the demand for foreign exchange are not those needing liquidity for international merchandise trade and investment, but instead the bank trading desks themselves" (63).
There is a distinction between the short-term expectations and the medium-term expectations of investors.
Hopper: What Determines the Exchange Rate?
Hopper, GP. 1997. What Determines the Exchange Rate: Economic Factors or Market Sentiment? Business Review 5: 17-29.
"Readers of the financial press are familiar with the gyrations of the currency market. No matter which way currencies zig or zag, it seems there is always an analyst with a quotable, ready explanation. Either interest rates are rising faster than expected in some country, or the trade balance is up or down, or central banks are tightening or loosening their monetary policies. Whatever the explanations, the underlying belief is that exchange rates are affected by fundamental economic forces, such as money supplies, interest rates, real output levels or the trade balance, which, if well forecasted, give the forecaster an advantage in predicting the exchange rate" (17).
However, it doesn't seem like exchange rates are affected by short-term fundamentals. "Economists have found instead that the best forecast of the exchange rate, at least in the short run, is whatever it happens to be today" (17).
"In this article, we'll review exchange-rate economics, focusing on what is predictable and what isn't. We'll see that exchange rates seem to be influenced by market sentiment rather than by economic fundamentals, and we'll examine the practical implications of this fact...We'll also see that volatility of exchange rates and correlations between exchange rates are predictable, and we'll examine the implications for currency option pricing, risk management, and portfolio selection" (18).
Exchange rate is supposed to be determined by current levels of monetary supplies and country output. Exchange rates are determined by what amount of money can be exchanged for a similar good in a given country. The prices of those goods are determined mainly by money supply levels. If, for example, money supply raises in one country ceteris paribus, this will raise prices in that country and will make that currency exchange at a different rate with the rest of the world. The reason that overall output is taken into consideration is because, when output rises, ceteris paribus, prices will fall (there is more out there but the same amount of money to buy it) and the currency will appreciate against the world.
This is all incredibly problematic because it's an open system and fundamentals are not actually known. Also, the model is problematic because it assumes that price levels can move freely and that they are not "sticky" (19).
Other models: Dornbusch developed the overshooting model, "...in which the average level of prices is assumed to be fixed in the short run to reflect the real-world finding that many prices don't change frequently" (19). Portfolio Balance Model: "In this approach, the supply of and demand for foreign and domestic bonds, along with the supply of and demand for foreign and domestic money, determine the exchange rate" (19-20).
News about the fundamentals may be more informative than the fundamentals (20). This news would change exchange rates if it differed from market expectation.
The key: Market Sentiment Matters in exchange rate determination.
"Readers of the financial press are familiar with the gyrations of the currency market. No matter which way currencies zig or zag, it seems there is always an analyst with a quotable, ready explanation. Either interest rates are rising faster than expected in some country, or the trade balance is up or down, or central banks are tightening or loosening their monetary policies. Whatever the explanations, the underlying belief is that exchange rates are affected by fundamental economic forces, such as money supplies, interest rates, real output levels or the trade balance, which, if well forecasted, give the forecaster an advantage in predicting the exchange rate" (17).
However, it doesn't seem like exchange rates are affected by short-term fundamentals. "Economists have found instead that the best forecast of the exchange rate, at least in the short run, is whatever it happens to be today" (17).
"In this article, we'll review exchange-rate economics, focusing on what is predictable and what isn't. We'll see that exchange rates seem to be influenced by market sentiment rather than by economic fundamentals, and we'll examine the practical implications of this fact...We'll also see that volatility of exchange rates and correlations between exchange rates are predictable, and we'll examine the implications for currency option pricing, risk management, and portfolio selection" (18).
Exchange rate is supposed to be determined by current levels of monetary supplies and country output. Exchange rates are determined by what amount of money can be exchanged for a similar good in a given country. The prices of those goods are determined mainly by money supply levels. If, for example, money supply raises in one country ceteris paribus, this will raise prices in that country and will make that currency exchange at a different rate with the rest of the world. The reason that overall output is taken into consideration is because, when output rises, ceteris paribus, prices will fall (there is more out there but the same amount of money to buy it) and the currency will appreciate against the world.
This is all incredibly problematic because it's an open system and fundamentals are not actually known. Also, the model is problematic because it assumes that price levels can move freely and that they are not "sticky" (19).
Other models: Dornbusch developed the overshooting model, "...in which the average level of prices is assumed to be fixed in the short run to reflect the real-world finding that many prices don't change frequently" (19). Portfolio Balance Model: "In this approach, the supply of and demand for foreign and domestic bonds, along with the supply of and demand for foreign and domestic money, determine the exchange rate" (19-20).
News about the fundamentals may be more informative than the fundamentals (20). This news would change exchange rates if it differed from market expectation.
The key: Market Sentiment Matters in exchange rate determination.
Saturday, March 21, 2009
Williamson: Globalization, Convergence and History
Williamson, JG. 1996. Globalization, convergence, and history. Journal of Economic History: 277-306.
From 1850 to the present, the author highlights three main stages of global growth from the perspective of convergence. "Thus history offers an unambiguous positive correlation between globalization and convergence. When the pre-World War I years are examined in detail, the correlation turns out to be causal: globalization played the critical role in contributing to convergence" (from abstract; 277).
What is the meaning of convergence? "The critical bottom line for me is whether the living standard gap between rich and poor countries falls over time. Convergence implies an erosion in this gap, at least in percentage terms. New growth theorists call this sigma-convergence. To get sigma-convergence poor countries must grow faster than rich, an event new growth theorists call beta-convergence" (279).
From 1850 to the present, the author highlights three main stages of global growth from the perspective of convergence. "Thus history offers an unambiguous positive correlation between globalization and convergence. When the pre-World War I years are examined in detail, the correlation turns out to be causal: globalization played the critical role in contributing to convergence" (from abstract; 277).
What is the meaning of convergence? "The critical bottom line for me is whether the living standard gap between rich and poor countries falls over time. Convergence implies an erosion in this gap, at least in percentage terms. New growth theorists call this sigma-convergence. To get sigma-convergence poor countries must grow faster than rich, an event new growth theorists call beta-convergence" (279).
Heichel, Pape and Sommerer: Is There Convergence in Convergence Research?
Heichel, S, J Pape, and T Sommerer. 2005. Is there convergence in convergence research? An overview of empirical studies on policy convergence. Journal of European Public Policy 12, no. 5: 817-840.
"This article reveals that there is no homogenous picture of policy convergence: Although frequently observed, empirical studies often disagree as to its extent. The representation of policy fields, geographical regions and periods analyzed differ, which makes an overall assessment of policy convergence impossible. The comparability is further constrained by differences in the operationalization and research methods applied by scholars in this field" (from abstract; 817).
The scholarship on convergence is born from a variety of schools with various interests and various approaches. These authors are interested in research projects that focus on empirical results stemming from convergence, and does not make the same set of rigorous distinctions between different kinds of convergence that Knill makes (2005). On pages 820-3 the authors list all of the studies that they explore, their issue area focus, their regional focus, the period in question and whether or not convergence was found.
"This article reveals that there is no homogenous picture of policy convergence: Although frequently observed, empirical studies often disagree as to its extent. The representation of policy fields, geographical regions and periods analyzed differ, which makes an overall assessment of policy convergence impossible. The comparability is further constrained by differences in the operationalization and research methods applied by scholars in this field" (from abstract; 817).
The scholarship on convergence is born from a variety of schools with various interests and various approaches. These authors are interested in research projects that focus on empirical results stemming from convergence, and does not make the same set of rigorous distinctions between different kinds of convergence that Knill makes (2005). On pages 820-3 the authors list all of the studies that they explore, their issue area focus, their regional focus, the period in question and whether or not convergence was found.
Holzinger and Knill: Causes and Conditions of Cross-National Policy Convergence
Holzinger, K, and C Knill. 2005. Causes and conditions of cross-national policy convergence. Journal of European Public Policy 12, no. 5: 775-796.
The study of policy convergence started in the 60s, but grew rapidly in the 90s as European integration and globalization became important phenomena. There is, however, very little robust understanding of the causes and contexts in which policy convergence occurs. "This deficit can be traced to two problems. First, as Seeliger (1996) argues, much more emphasis has been placed on the presentation of empirical results than on systematic theory-building. Second, policy convergence is a rather heterogeneous research field, with scholars coming from different academic backgrounds and disciplines" (775).
Table 1 on 777 explains a relationship of measures of convergence. Table 2 (778) points to different ways that these measures can be conceptualized and measured (Degree of Convergence, Convergence Direction and Convergence Scope). Imposition, Internal Harmonization, Regulatory Competition, Transnational Communication, Independent Problem-Solving are all seen as different reasons that convergence in policy can arise. See Table 4 (793) for an overview. This table combines the different ways convergence can be measured (Table 2) with the different drivers of convergence (previous sentence).
The study of policy convergence started in the 60s, but grew rapidly in the 90s as European integration and globalization became important phenomena. There is, however, very little robust understanding of the causes and contexts in which policy convergence occurs. "This deficit can be traced to two problems. First, as Seeliger (1996) argues, much more emphasis has been placed on the presentation of empirical results than on systematic theory-building. Second, policy convergence is a rather heterogeneous research field, with scholars coming from different academic backgrounds and disciplines" (775).
Table 1 on 777 explains a relationship of measures of convergence. Table 2 (778) points to different ways that these measures can be conceptualized and measured (Degree of Convergence, Convergence Direction and Convergence Scope). Imposition, Internal Harmonization, Regulatory Competition, Transnational Communication, Independent Problem-Solving are all seen as different reasons that convergence in policy can arise. See Table 4 (793) for an overview. This table combines the different ways convergence can be measured (Table 2) with the different drivers of convergence (previous sentence).
Knill: Introduction: Cross-National Policy Convergence
Knill, C. 2005. Introduction: Cross-national policy convergence: concepts, approaches and explanatory factors. Journal of European Public Policy 12, no. 5: 764-774.
"While there is a broad consensus on the definition of convergence as 'the tendency of societies to grow more alike, to develop similarities in structures, processes, and performance' (Kerr 1983: 3), the empirical and theoretical assessment of policy convergence is generally hampered by the use of different, partially overlapping concepts (Tews 2002). Policy convergence is equated with related notions, such as isomorphism, policy transfer or policy diffusion. This terminological variety often coincides with analytical confusion" (3).
The author highlights two concepts, those of policy transfer and policy diffusion. Both of these focus on process and are less concerned with outcome, thus making analysis and conclusion partially complex. On page 5 there is an overview of different kinds of policy convergence.
"While there is a broad consensus on the definition of convergence as 'the tendency of societies to grow more alike, to develop similarities in structures, processes, and performance' (Kerr 1983: 3), the empirical and theoretical assessment of policy convergence is generally hampered by the use of different, partially overlapping concepts (Tews 2002). Policy convergence is equated with related notions, such as isomorphism, policy transfer or policy diffusion. This terminological variety often coincides with analytical confusion" (3).
The author highlights two concepts, those of policy transfer and policy diffusion. Both of these focus on process and are less concerned with outcome, thus making analysis and conclusion partially complex. On page 5 there is an overview of different kinds of policy convergence.
Ruggie: At Home Abroad, Abroad at Home
Ruggie, JG. 1995. At home abroad, abroad at home: international liberalisation and domestic stability in the new world economy. Millenium: Journal of International Studies 24, no. 3: 507.
Ruggie presents a brief argument about how Carr and Polanyi, though being polar opposite in much of their thought, agreed about the effect of self-regulating market solutions post WWII. This was termed by Ruggie to be the embedded liberal compromise, where states would protect their domestic policies from external shocks from the market, but would also pursue broadly liberal policies internationally. The success of this system, which promoted fixed exchange rates and autonomous monetary policy, eventually led to the rise of the movement of capital and floating exchange rates.
"In this article, I develop a provisional schematic formulation of this new world economy's key institutional features and consequences. I focus on three sets of issues in particular: the growing role of domestic domains as issues over contention in international economic policy; the denationalization of control over significant decisions regarding production, exchange, and employment; and the growing difficulty experienced by governments in living up to their part of the domestic social compact on which post-war liberalization has hinged" (508).
The Financial Times and the Economist both wrote in late 1990s about how, even while we were experiencing the most robust of capitalist situations, that the reality of welfare capitalism was still quite clear: "These two British publications are among the most irrepressible and articulate advocates anywhere of free markets and free trade. What, then, possessed them to worry about the economic security of workers and sustaining welfare capitalism, and, even more curiously, to suggest that governments have a role to play in achieving those objectives? The answer is surprisingly simple. Both realize that the extraordinary success of post-war international l liberalization has hinged on a domestic social compact between state and society. Both see that this social compact is everywhere fraying; and both fear that if it unravels altogether, so will international liberalization" (523).
"The new world economy that has emerged over the past few decades poses significant challenges to governments because it is disembedded in several key dimensions. The first is in its policy templates: the mental maps of spaces and structures within which policy-makers visualize the basic contours of their world...The second, related source of disembeddedness is the world of policy-making itself. International as well as domestic economic policy targets are increasingly elusive because instrumentalities are no longer as effective. This loss of efficacy, in turn, reflects the fact that the theoretical, conceptual, and statistical bases of policy too often still reflect previous policy templates and the cause-effect relations that pertained in that earlier world. Last, the new world economy is increasingly disembedded from the domestic social compact between state and society on which the political viability of the post-war international economic order has hinged. Policy attitudes towards the new world economy have shifted in the direction of neoliberalism to an extent that is beginning to be of concern even to staunch guardians of market orthodoxies in the leading financial journals of Britain and the United States" (525).
"Constructing a contemporary analogue to the embedded liberalism compromise will be a Herculean task" (525).
Ruggie presents a brief argument about how Carr and Polanyi, though being polar opposite in much of their thought, agreed about the effect of self-regulating market solutions post WWII. This was termed by Ruggie to be the embedded liberal compromise, where states would protect their domestic policies from external shocks from the market, but would also pursue broadly liberal policies internationally. The success of this system, which promoted fixed exchange rates and autonomous monetary policy, eventually led to the rise of the movement of capital and floating exchange rates.
"In this article, I develop a provisional schematic formulation of this new world economy's key institutional features and consequences. I focus on three sets of issues in particular: the growing role of domestic domains as issues over contention in international economic policy; the denationalization of control over significant decisions regarding production, exchange, and employment; and the growing difficulty experienced by governments in living up to their part of the domestic social compact on which post-war liberalization has hinged" (508).
The Financial Times and the Economist both wrote in late 1990s about how, even while we were experiencing the most robust of capitalist situations, that the reality of welfare capitalism was still quite clear: "These two British publications are among the most irrepressible and articulate advocates anywhere of free markets and free trade. What, then, possessed them to worry about the economic security of workers and sustaining welfare capitalism, and, even more curiously, to suggest that governments have a role to play in achieving those objectives? The answer is surprisingly simple. Both realize that the extraordinary success of post-war international l liberalization has hinged on a domestic social compact between state and society. Both see that this social compact is everywhere fraying; and both fear that if it unravels altogether, so will international liberalization" (523).
"The new world economy that has emerged over the past few decades poses significant challenges to governments because it is disembedded in several key dimensions. The first is in its policy templates: the mental maps of spaces and structures within which policy-makers visualize the basic contours of their world...The second, related source of disembeddedness is the world of policy-making itself. International as well as domestic economic policy targets are increasingly elusive because instrumentalities are no longer as effective. This loss of efficacy, in turn, reflects the fact that the theoretical, conceptual, and statistical bases of policy too often still reflect previous policy templates and the cause-effect relations that pertained in that earlier world. Last, the new world economy is increasingly disembedded from the domestic social compact between state and society on which the political viability of the post-war international economic order has hinged. Policy attitudes towards the new world economy have shifted in the direction of neoliberalism to an extent that is beginning to be of concern even to staunch guardians of market orthodoxies in the leading financial journals of Britain and the United States" (525).
"Constructing a contemporary analogue to the embedded liberalism compromise will be a Herculean task" (525).
Friday, March 20, 2009
Cao: Convergence, Divergence, and Networks in the Age of Globalization
Cao, X. 2006. Convergence, Divergence, and Networks in the Age of Globalization: A Social Network Analysis Approach to IPE.
"Convergence denotes a process wherein distinctive domestic institutions and economic policies fade away over time, giving away to common economic structures whose efficiency and universality produce super strength in the market...Divergence, on the other hand, refers to persistent and maybe increasing diversity of national policies and institutions among which the efficiency-mandated minimalism is only one of the many varieties" (1).
"Empirical studies following this fashion unsuprisingly leave us with confusion by revealing a mixed picture of convergence-divergence caused by economic forces of globalization...We still have to ask why and how convergence has happened in some countries, in some policy areas (but to different extents), but not others?" (2).
The author explores the convergence-divergence debate by exploring the relationship different countries have with regard to the international system; how are different countries engaged with the global system?
"The empirical findings indicate that proximity in IGO [inter-governmental organizations; number of shared memberships, closer countries are in the 'web' of inter-governmental connections (12)] networks ahs the most consistent converging effect on domestic economic policies. We also find that network position similarly induces convergence through the network of transnational portfolio investment. Trade, the most intensively studied network in international political economy, has no consistent effects on convergence in domestic economic policies. Given the fact that most of the works on convergence-divergence to date use some measure of trade exposure to capture the extent a country is subject to the pressure of globalization, the finding of this research on trade reminds us that the research in this area might have to target some new sources of globalization pressure" (22).
"Convergence denotes a process wherein distinctive domestic institutions and economic policies fade away over time, giving away to common economic structures whose efficiency and universality produce super strength in the market...Divergence, on the other hand, refers to persistent and maybe increasing diversity of national policies and institutions among which the efficiency-mandated minimalism is only one of the many varieties" (1).
"Empirical studies following this fashion unsuprisingly leave us with confusion by revealing a mixed picture of convergence-divergence caused by economic forces of globalization...We still have to ask why and how convergence has happened in some countries, in some policy areas (but to different extents), but not others?" (2).
The author explores the convergence-divergence debate by exploring the relationship different countries have with regard to the international system; how are different countries engaged with the global system?
"The empirical findings indicate that proximity in IGO [inter-governmental organizations; number of shared memberships, closer countries are in the 'web' of inter-governmental connections (12)] networks ahs the most consistent converging effect on domestic economic policies. We also find that network position similarly induces convergence through the network of transnational portfolio investment. Trade, the most intensively studied network in international political economy, has no consistent effects on convergence in domestic economic policies. Given the fact that most of the works on convergence-divergence to date use some measure of trade exposure to capture the extent a country is subject to the pressure of globalization, the finding of this research on trade reminds us that the research in this area might have to target some new sources of globalization pressure" (22).
Wednesday, March 18, 2009
Way: Political Insecurity and the Diffusion of Financial Market Regulation
Way, Christopher R. 2005. Political Insecurity and the Diffusion of Financial Market Regulation. Annals of the American Academy of Political and Social Science 598: 125-144.
"Domestic financial market liberalization--the process of designing a regulatory framework for markets that determine who gets and grants credit and at what prices--has swept the world as part of the spread of neoliberalism over the past three decades. Combining the acute political needs of insecure leaders with the specific dynamics of domestic financial market reform suggests that politically insecure governments will provide surprisingly likely to initiate reforms, proving to be potent agents of diffusion in the right circumstances. My results indicate that the combination of political insecurity, regional trends toward reform and the prominence of IFI policy advice in policy discourse together make a powerful combination encouraging the diffusion of domestic financial market reform" (1).
Standard descriptions for this diffusion have been mostly top down or bottom up.
"I argue that the economic boom associated with financial market liberalization can provide an important source of political strength for insecure governments, meaning that they can have a surprisingly strong attraction to liberalization. Combining the acute political needs of insecure leaders with the specific dynamics of domestic financial market reform suggests that politically insecure governments will prove surprisingly likely to initiate reforms, proving to be potent agents of diffusion in the right circumstances" (2).
"Domestic financial market liberalization--the process of designing a regulatory framework for markets that determine who gets and grants credit and at what prices--has swept the world as part of the spread of neoliberalism over the past three decades. Combining the acute political needs of insecure leaders with the specific dynamics of domestic financial market reform suggests that politically insecure governments will provide surprisingly likely to initiate reforms, proving to be potent agents of diffusion in the right circumstances. My results indicate that the combination of political insecurity, regional trends toward reform and the prominence of IFI policy advice in policy discourse together make a powerful combination encouraging the diffusion of domestic financial market reform" (1).
Standard descriptions for this diffusion have been mostly top down or bottom up.
"I argue that the economic boom associated with financial market liberalization can provide an important source of political strength for insecure governments, meaning that they can have a surprisingly strong attraction to liberalization. Combining the acute political needs of insecure leaders with the specific dynamics of domestic financial market reform suggests that politically insecure governments will prove surprisingly likely to initiate reforms, proving to be potent agents of diffusion in the right circumstances" (2).
Hanson: What happened to fortress Europe?
Hanson, BT. 2003. What happened to fortress Europe?: external trade policy liberalization in the European Union. International Organization 52, no. 01: 55-85.
Many feared that, with the integration of Europe, there would be an inward focus for trade as price incentives would push producers to trade with their European community as tariffs fell. This was refered to as Fortress Europe.
"What is most remarkable about European trade policy in the 1990s is that, despite ominous warnings and theoretical expectations, fortress Europe has not been built. To the contrary, this article shows that since the late 1980s not only have few new trade barriers been erected, but external trade policy in Europe has been significantly liberalized in recent years, even in politically and economically sensitive sectors. This marks a significant departure from the past and occurred at a time when liberalization was least expected" (56).
"I argue that European integration has played a considerable role in the liberalization of European external trade policy by changing the institutional context in which trade policy is made, creating a systematic bias toward liberalization over increased protection" (56).
Many feared that, with the integration of Europe, there would be an inward focus for trade as price incentives would push producers to trade with their European community as tariffs fell. This was refered to as Fortress Europe.
"What is most remarkable about European trade policy in the 1990s is that, despite ominous warnings and theoretical expectations, fortress Europe has not been built. To the contrary, this article shows that since the late 1980s not only have few new trade barriers been erected, but external trade policy in Europe has been significantly liberalized in recent years, even in politically and economically sensitive sectors. This marks a significant departure from the past and occurred at a time when liberalization was least expected" (56).
"I argue that European integration has played a considerable role in the liberalization of European external trade policy by changing the institutional context in which trade policy is made, creating a systematic bias toward liberalization over increased protection" (56).
Cavanagh, Anderson, Serra and Espinosa: Happily ever NAFTA?
Cavanagh, J, and S Anderson. 2002. Happily Ever NAFTA? Foreign Policy 132: 58-60.
The Bad Idea that Failed: Cavanagh and Anderson
"Looking back on its nearly nine years of existence, has NAFTA delivered or disappointed?" (58).
"More than eight years of monitoring reveal that, yes, the accord has boosted investment and trade...And yes, increased international competition may have helped fuel the dramatic rise in labor productivity rates during the 1990s...But workers, communities, and the environment in all three countries have suffered from the agreement's flaws" (58).
"Why have increased trade and investment failed to reduce poverty or raise wages? Part of the answer is that in a globalized marketplace, highly mobile employers have even more power to suppress workers who fight for their faire share of the benefits. And these firms often find allies among governments desperate for foreign investment" (58).
There is no increased spending on the environment. There are wider income gaps. "We argue that strong controls were needed to ensure that trade and investment supported social goals, rather than the narrow interests of large corporations" (59-60).
The Proof is in the Paycheck: Serra and Espinosa
"NAFTA's fundamental objectives as a free trade and investment pact have been achieved" (60). They speculate that this investment spurned on productivity gains in the 90s. They don't agree with claims that NAFTA has harmed the environment, wages or agriculture.
NAFTA cannot be blamed for small farmer poverty in Mexico, as this is a path-dependent problem. NAFTA cannot be blamed for a fall in real Mexican wages b/c the measurement was wrong. NAFTA cannot be blamed for falling environmental spending b/c that was a problem from long ago as well. NAFTA cannot be blamed for rising inequality and the authors argue that "Hard data show that trade liberalization tends to improve income distribution" (62).
Nice Theories, Sad Realities: Cavanagh and Anderson:
NAFTA is not just about trade and investment flows. The evidence you provided was inadequate.
More Accuracy Less Activism: Serra and Espinosa:
No, you're wrong.
The Bad Idea that Failed: Cavanagh and Anderson
"Looking back on its nearly nine years of existence, has NAFTA delivered or disappointed?" (58).
"More than eight years of monitoring reveal that, yes, the accord has boosted investment and trade...And yes, increased international competition may have helped fuel the dramatic rise in labor productivity rates during the 1990s...But workers, communities, and the environment in all three countries have suffered from the agreement's flaws" (58).
"Why have increased trade and investment failed to reduce poverty or raise wages? Part of the answer is that in a globalized marketplace, highly mobile employers have even more power to suppress workers who fight for their faire share of the benefits. And these firms often find allies among governments desperate for foreign investment" (58).
There is no increased spending on the environment. There are wider income gaps. "We argue that strong controls were needed to ensure that trade and investment supported social goals, rather than the narrow interests of large corporations" (59-60).
The Proof is in the Paycheck: Serra and Espinosa
"NAFTA's fundamental objectives as a free trade and investment pact have been achieved" (60). They speculate that this investment spurned on productivity gains in the 90s. They don't agree with claims that NAFTA has harmed the environment, wages or agriculture.
NAFTA cannot be blamed for small farmer poverty in Mexico, as this is a path-dependent problem. NAFTA cannot be blamed for a fall in real Mexican wages b/c the measurement was wrong. NAFTA cannot be blamed for falling environmental spending b/c that was a problem from long ago as well. NAFTA cannot be blamed for rising inequality and the authors argue that "Hard data show that trade liberalization tends to improve income distribution" (62).
Nice Theories, Sad Realities: Cavanagh and Anderson:
NAFTA is not just about trade and investment flows. The evidence you provided was inadequate.
More Accuracy Less Activism: Serra and Espinosa:
No, you're wrong.
Subramanian and Wei: The TWO Promotes Trade, Strongly but Unevenly
Subramanian, A, and SJ Wei. 2007. The WTO promotes trade, strongly but unevenly. Journal of International Economics 72, no. 1: 151-175.
"This paper furnishes robust evidence that the GATT/WTO has had a powerful and positive impact on trade. The impact has, however, been uneven. GATT/WTO membership for industrial countries has been associated with a large increase in imports estimated at about 30% of world trade. The same has not been true for developing country members, although those that joined after the Uruguay Round have benefited from increased imports. Similarly, there have been asymmetric effects among sectors, with WTO membership associated with substantially greater imports in sectors where barriers are low. These results are consistent with the history and design of the institution, which presided over significant trade liberalization by the industrial countries except in sectors such as food and clothing; l largely exempted developing countries from the obligations to liberalize under the principle of special and differential treatment; but attempted to redress the latter by imposing greater obligations on developing country members that joined after the Uruguay Round" (1).
They argue that Rose's analysis is incomplete in two distinct ways: firstly, the gravity equation must include country-fixed effects, as earlier identified by Anderson and van Wincoop (2003). Additionally, the study should take into consideration the asymmetric ways in which the WTO has worked to improve trade liberalization post WWII. Making these modifications, they find robust evidence that the WTO improves trade.
Three types of liberalization asymmetries: "...between developed and developing countries; between developing countries that join the WTO before and after the Uruguay Round; and between sectors where the TWO has been effective in bringing down trade barriers and those...where it has been less effective" (3).
Use extended gravity model.
Their DV is different from Rose and is imports instead of total trade, which they "deflate" (8) through the US consumer price index.
"One of our main and robust findings is that industrial country WTO membership is associated with greater trade. In our sample, however, all industrial countries are WTO members. How can we be sure that we are picking up a WTO effect rather than an industrial country effect?" (16-7). They try to minimize this through their covariates, but it's still a possibility.
"There is a separate question of whether industrial country liberalization would have taken place without the GATT/WTO. This paper does not and cannot address this question" (17).
"This paper furnishes robust evidence that the GATT/WTO has had a powerful and positive impact on trade. The impact has, however, been uneven. GATT/WTO membership for industrial countries has been associated with a large increase in imports estimated at about 30% of world trade. The same has not been true for developing country members, although those that joined after the Uruguay Round have benefited from increased imports. Similarly, there have been asymmetric effects among sectors, with WTO membership associated with substantially greater imports in sectors where barriers are low. These results are consistent with the history and design of the institution, which presided over significant trade liberalization by the industrial countries except in sectors such as food and clothing; l largely exempted developing countries from the obligations to liberalize under the principle of special and differential treatment; but attempted to redress the latter by imposing greater obligations on developing country members that joined after the Uruguay Round" (1).
They argue that Rose's analysis is incomplete in two distinct ways: firstly, the gravity equation must include country-fixed effects, as earlier identified by Anderson and van Wincoop (2003). Additionally, the study should take into consideration the asymmetric ways in which the WTO has worked to improve trade liberalization post WWII. Making these modifications, they find robust evidence that the WTO improves trade.
Three types of liberalization asymmetries: "...between developed and developing countries; between developing countries that join the WTO before and after the Uruguay Round; and between sectors where the TWO has been effective in bringing down trade barriers and those...where it has been less effective" (3).
Use extended gravity model.
Their DV is different from Rose and is imports instead of total trade, which they "deflate" (8) through the US consumer price index.
"One of our main and robust findings is that industrial country WTO membership is associated with greater trade. In our sample, however, all industrial countries are WTO members. How can we be sure that we are picking up a WTO effect rather than an industrial country effect?" (16-7). They try to minimize this through their covariates, but it's still a possibility.
"There is a separate question of whether industrial country liberalization would have taken place without the GATT/WTO. This paper does not and cannot address this question" (17).
Tuesday, March 17, 2009
Lake: Power and the Third World
Lake, DA. 1987. Review Essay: Power and the Third World: Toward a Realist Political Economy of North-South Relations. International Studies Quarterly: 217-234.
Reviews Hart's book and Krasner's article. Both take a position against world systems theory and dependency theory by positing the neglected role of power in establishing north-south relations. "The policies of North-South relations, these two authors tell us, are not economically predetermined. Power and bargaining matter both analytically and practically" (218).
"Realists assume, first, that the international system is anarchic, or composed of sovereign states responsible to no higher authority; second, that states are rational, unitary actors; and, third, that states seek power and calculate their interests in terms of power" (218).
The article continues and expands upon these assumptions by exploring the NIEO.
Reviews Hart's book and Krasner's article. Both take a position against world systems theory and dependency theory by positing the neglected role of power in establishing north-south relations. "The policies of North-South relations, these two authors tell us, are not economically predetermined. Power and bargaining matter both analytically and practically" (218).
"Realists assume, first, that the international system is anarchic, or composed of sovereign states responsible to no higher authority; second, that states are rational, unitary actors; and, third, that states seek power and calculate their interests in terms of power" (218).
The article continues and expands upon these assumptions by exploring the NIEO.
Sunday, March 15, 2009
Balaam and Veseth: Introduction to International Political Economy
Balaam, DN, M Veseth, and University of Puget Sound. Faculty of the International Political Economy Program. 1996. Introduction to international political economy. Prentice Hall Upper Saddle River, NJ.
Undergrad text that introduces IPE. Very standard: realism, liberalism, marxism, and they throw in rational choice for good measure.
"In simple terms, we define IPE as the study of a fundamental tension between and dynamic interaction of two spheres of life, which we can variously call 'society and individuals,' 'politics and economics.' or 'states and markets,' Any way you say it, political economy is about the lines that both connect and divide national interests from individual self-interest" (3).
Undergrad text that introduces IPE. Very standard: realism, liberalism, marxism, and they throw in rational choice for good measure.
"In simple terms, we define IPE as the study of a fundamental tension between and dynamic interaction of two spheres of life, which we can variously call 'society and individuals,' 'politics and economics.' or 'states and markets,' Any way you say it, political economy is about the lines that both connect and divide national interests from individual self-interest" (3).
Katzenstein, Keohane and Krasner: International Organization and the Study of World Politics
Katzenstein, PJ, RO Keohane, and SD Krasner. 1998. International organization and the study of world politics. International Organization: 645-685.
Excellent overview of the history of IPE. I picked and gleaned what I wanted.
The authors make a distinction between general theoretical orientations ("...they suggest relevant variables and causal patterns that provide guidelines for developing specific research programs" (646)), specific research programs ("...link explanatory variables to a set of outcomes, or dependent variables" (646)) and general theoretical orientations ("...such as realism, Marxism, liberalism, statism, pluralism, historical institutionalism, rational choice institutionalism, and constructivism..." (646)).
Post Gilpin: "Each perspective gave pride of place to a different explanatory variables: the distribution of power for realists, the interests of different groups for liberals, the structure of the economy, or, more simplistically, the interests of capitalists for Marxists. Each perspective emphasized different causal relations: power and coercion for realism, mutual agreement and contracting for liberalism, mechanisms of exploitation for Marxism" (657).
"Statism is a general theoretical orientation that has generated several specific research programs, all of which assert the autonomy of state institutions...Statism gave greater attention to state institutions, especially those charged with maintaining the stability and well-being of the polity as a whole. The state could be conceived of as an actor, not simply an arena in which conflicting societal interests struggled to secure their preferred policy objectives" (666).
As IPE moves through history, foci changes: there is group of scholars that explore domestic institutions and their relation to international economic systems, for example. There is the emergence of the constructivist school of thought after the fall of the USSR. There is then a kind of turn towards post-modernity.
Excellent overview of the history of IPE. I picked and gleaned what I wanted.
The authors make a distinction between general theoretical orientations ("...they suggest relevant variables and causal patterns that provide guidelines for developing specific research programs" (646)), specific research programs ("...link explanatory variables to a set of outcomes, or dependent variables" (646)) and general theoretical orientations ("...such as realism, Marxism, liberalism, statism, pluralism, historical institutionalism, rational choice institutionalism, and constructivism..." (646)).
Post Gilpin: "Each perspective gave pride of place to a different explanatory variables: the distribution of power for realists, the interests of different groups for liberals, the structure of the economy, or, more simplistically, the interests of capitalists for Marxists. Each perspective emphasized different causal relations: power and coercion for realism, mutual agreement and contracting for liberalism, mechanisms of exploitation for Marxism" (657).
"Statism is a general theoretical orientation that has generated several specific research programs, all of which assert the autonomy of state institutions...Statism gave greater attention to state institutions, especially those charged with maintaining the stability and well-being of the polity as a whole. The state could be conceived of as an actor, not simply an arena in which conflicting societal interests struggled to secure their preferred policy objectives" (666).
As IPE moves through history, foci changes: there is group of scholars that explore domestic institutions and their relation to international economic systems, for example. There is the emergence of the constructivist school of thought after the fall of the USSR. There is then a kind of turn towards post-modernity.
Gilpin: Global Political Economy
Gilpin, R, and JM Gilpin. 2003. Global political economy: Understanding the international economic order. Orient Longman.
"Whereas economics is primarily concerned with efficiency and the mutual benefits of economic exchange, international political economy is interested not only in those subjects but also in a broader range of issues. IPE is particularly interested in the distribution of gains from market activities; neoclassical economics is not. Although, at least over the long term, every society gains absolutely from the efficient functioning of international markets, the gains are seldom distributed equally among all economic actors, and states generally are very much concerned over their own relative gains. Whereas economists regard markets as self-regulating mechanisms isolated from political affairs, specialists in IPE are interested in the fact that the world economy has a considerable impact on the power, values, and political autonomy of national societies. States have a strong incentive to take actions that safeguard their own values and interests, especially their power and freedom of action, and they also attempt to manipulate market forces to increase their power and influence over rival states or to favor friendly states" (77).
"Whereas economists and economic analysts are generally indifferent to the role of institutions in economic affairs...the nature of the international institutions and those international regimes that govern international markets and economic activities constitute a central concern of international political economists. As regimes may significantly affect the distribution of gains from economic activities and the economic/political autonomy of individual states, states-especially powerful states-attempt to influence the design and functioning of institutions in order to advance their own political, economic, and other interests. Thus, the study of international political economy presumes that states, multinational corporations, and other powerful actors attempt to use their power to influence the nature of international regimes" (77-8).
"Whereas economics is primarily concerned with efficiency and the mutual benefits of economic exchange, international political economy is interested not only in those subjects but also in a broader range of issues. IPE is particularly interested in the distribution of gains from market activities; neoclassical economics is not. Although, at least over the long term, every society gains absolutely from the efficient functioning of international markets, the gains are seldom distributed equally among all economic actors, and states generally are very much concerned over their own relative gains. Whereas economists regard markets as self-regulating mechanisms isolated from political affairs, specialists in IPE are interested in the fact that the world economy has a considerable impact on the power, values, and political autonomy of national societies. States have a strong incentive to take actions that safeguard their own values and interests, especially their power and freedom of action, and they also attempt to manipulate market forces to increase their power and influence over rival states or to favor friendly states" (77).
"Whereas economists and economic analysts are generally indifferent to the role of institutions in economic affairs...the nature of the international institutions and those international regimes that govern international markets and economic activities constitute a central concern of international political economists. As regimes may significantly affect the distribution of gains from economic activities and the economic/political autonomy of individual states, states-especially powerful states-attempt to influence the design and functioning of institutions in order to advance their own political, economic, and other interests. Thus, the study of international political economy presumes that states, multinational corporations, and other powerful actors attempt to use their power to influence the nature of international regimes" (77-8).
Krugman: Pop Internationalism
Krugman, PR. 1996. Pop internationalism. Mit Press.
Written in the mid 90s, this slight text responds to a mountain of literature that paints globalization out to be an area of zero-sum competition between states who look more like companies than nations. Krugman presents a standard liberal account for the lack of substantial growth in real wages since the 70s (slower growth in production) and trade theories of comparative advantage to explain how international trade is an arena of overall gains, and not gains that can best be analogized with military battles, etc.
Written in the mid 90s, this slight text responds to a mountain of literature that paints globalization out to be an area of zero-sum competition between states who look more like companies than nations. Krugman presents a standard liberal account for the lack of substantial growth in real wages since the 70s (slower growth in production) and trade theories of comparative advantage to explain how international trade is an arena of overall gains, and not gains that can best be analogized with military battles, etc.
Gilpin: The Political Economy of International Relations
Gilpin, R, and JM Gilpin. 1987. The political economy of international relations. Princeton University Press Princeton, NJ.
"Over the past century and a half, the ideologies of liberalism, nationalism and Marxism have divided humanity...The conflict among these three moral and intellectual positions has revolved around the role and significance of the market in the organization of society and economic affairs" (25).
"These three ideologies are fundamentally different in their conceptions of the relationships among society, state, and market, and it may not be an exaggeration to say that every controversy in the field of international political economy is ultimately reducible to differing conceptions of these relationships" (25).
The word "ideology" is explicitly used to reference these different schools of thought because the word "theory" doesn't carry enough weight. Ideology captures the relationship between the positive and the normative.
"Although scholars have produced a number of 'theories' to explain the relationship of economics and politics, these three stand out and have had a profound influence on scholarship and political affairs. In highly oversimplified terms, economic nationalism...which developed from the practice of statesmen in the early modern period, assumes and advocates the primacy of politics over economics. It is essentially a doctrine of state-building and asserts that the market should be subordinate to the pursuit of state interests. It argues that political factors do, or at least should, determine economic relations. Liberalism, which emerged from the Enlightenment in the writings of Adam Smith and others, was a reaction to mercantilism and has become embodied in orthodox economics. It assumes that politics and economics exist, at least ideally, in separate spheres; it argues that markets--in the interest of efficiency, growth, and consumer choice--should be free from political interference. Marxism, which appeared in the mid-nineteenth century as a reaction against liberalism and classical economics, holds that economics drives politics. Political conflict arises from struggle among classes over the distribution of wealth. Hence, political conflict will crease with the elimination of the market and of a society of classes" (25).
"All forms of economic liberalism...are committed to the market and the price mechanism as the most efficacious means for organizing domestic and international economic relations" (27).
Assumptions: spontaneous market development; individuals form the foundation of society; they are rational in a specific way; there is free information; there is a tendency towards stability; there are always absolute gains to trade.
Nationalism: "Its central idea is that economic activities are and should be subordinate to the goal of state building and the interests of the state. All nationalists ascribe to the primacy of the state, of national security, and of military power in the organization and functioning of the international system" (31).
Viner (1958) quote: "'I believe that practically all mercantilists, whatever the period, country, or status of the particular individual, would have subscribed to all of the following propositions: (1) wealth is an absolutely essential means to power, whether for security or for aggression; (2) power is essential or valuable as a means to the acquisition or retention of wealth; (3) wealth and power are each proper ultimate ends of national policy; (4) there is long-run harmony between these ends, although in particular circumstances it may be necessary for a time to make economic sacrifices in the interest of military security and therefore also of long-run prosperity'" (32).
"Whereas liberal writers generally view the pursuit of power and wealth...as involving a tradeoff, nationalists tend to regard the two goals as being complementary" (32). (this passage references Knorr (1944))
The nationalist is keenly interested in industrialization.
"As Robert Heilbroner (1980) has argued, despite the existence of...different Marxisms, four essential elements can be found in the overall corpus of Marxist writings. The first element is the dialectical approach to knowledge and society that defines the nature of reality as dynamic and conflictual; social disequilibria and consequent change are due to the class struggle and the working out of contradictions inherent in social and political phenomena...The second element is a materialist approach to history...The third is a general view of capitalist development; the capitalist mode of production and its destiny are governed by a set of 'economic laws of motion of modern society.' The fourth is a normative commitment to socialism" (35).
"In a world of competing states, the nationalist considers relative gain to be more important than mutual gain" (33).
Thursday, March 12, 2009
Rodrik: One Economics-Many Recipes
Rodrik, D. 2007. One economics-Many recipes. Globalization, institutions, and economic growth. Princeton University Press.
Why do some countries grow faster than other countries? One must look at national politics to understand the diverse causes of growth. Countries that are able to harness the power of globalization are those that are likely to grow the most effectively.
"First, this book is strictly grounded in neoclassical economic analysis. At the core of neoclassical economics lies the following methodological predisposition: social phenomena can best be understood by considering them to be an aggregation of purposeful behavior by individuals...interacting with each other and acting under the constraints that their environment imposes" (3).
The book then explores three major issues: economic growth, institutions and globalization. The first two were not of great interest to me.
"On the plus side, the global expansion of markets promises greater prosperity through the channels of division of labor and specialization according to comparative advantage...But globalization also undercuts the ability of nation-states to erect regulatory and redistributive institutions, and does so at the same time that it increases the premium on solid national institutions" (196).
Globalization: Rodrik posits a trilemma for globalization. In this world, there are three possibilities for the future of globalization that rely on the interaction of three different variables, only two of which can be a reality at the same time. The three variables are the following: integrated national economies, the nation state or mass politics. If the world is made up of integrated national economies and mass politics, a kind of global federalism emerges. If the world is made up of integrated national economies and the nation state, the Friedman golden-straightjacket will be imposed. If the world is comprised of nations and mass politics, then a world described as the Bretton Woods compromise (ala no capital mobility, monetary policy autonomy and fixed exchange rates) will emerge.
"...I suggest two different paths, one appropriate for the short to medium term, and the other for the long term. The first path consists of re-creating the Bretton Woods compromise: under this scenario, we would accept the continued centrality of the nation-state, and therefore combine international rules and standards with built-in opt-out schemes...The long-term path is one of global federalism: since this scenario obviously lies far in the future, it allows our imagination to run freely" (204-5).
Why do some countries grow faster than other countries? One must look at national politics to understand the diverse causes of growth. Countries that are able to harness the power of globalization are those that are likely to grow the most effectively.
"First, this book is strictly grounded in neoclassical economic analysis. At the core of neoclassical economics lies the following methodological predisposition: social phenomena can best be understood by considering them to be an aggregation of purposeful behavior by individuals...interacting with each other and acting under the constraints that their environment imposes" (3).
The book then explores three major issues: economic growth, institutions and globalization. The first two were not of great interest to me.
"On the plus side, the global expansion of markets promises greater prosperity through the channels of division of labor and specialization according to comparative advantage...But globalization also undercuts the ability of nation-states to erect regulatory and redistributive institutions, and does so at the same time that it increases the premium on solid national institutions" (196).
Globalization: Rodrik posits a trilemma for globalization. In this world, there are three possibilities for the future of globalization that rely on the interaction of three different variables, only two of which can be a reality at the same time. The three variables are the following: integrated national economies, the nation state or mass politics. If the world is made up of integrated national economies and mass politics, a kind of global federalism emerges. If the world is made up of integrated national economies and the nation state, the Friedman golden-straightjacket will be imposed. If the world is comprised of nations and mass politics, then a world described as the Bretton Woods compromise (ala no capital mobility, monetary policy autonomy and fixed exchange rates) will emerge.
"...I suggest two different paths, one appropriate for the short to medium term, and the other for the long term. The first path consists of re-creating the Bretton Woods compromise: under this scenario, we would accept the continued centrality of the nation-state, and therefore combine international rules and standards with built-in opt-out schemes...The long-term path is one of global federalism: since this scenario obviously lies far in the future, it allows our imagination to run freely" (204-5).
Barnett and Finnemore: Rules for the World
Barnett, MN, and M Finnemore. 2004. Rules for the world: international organizations in global politics. Cornell Univ Pr.
"Our goal in writing this book is to understand better why IOs behave as they do. Most international relations theory provides surprisingly little help in this regard" (2).
"Scholarship on organizations generally (not just IOs) has made it abundantly clear that organizations routinely behave in ways unanticipated by their creators and not formally sanctioned by their members. Organizations that start with one mission routinely acquire others" (2).
"In this book we develop a constructivist approach to understanding IO behavior that provides a theoretical basis for treating IOs as autonomous actors and helps explain the power they exercise in world politics, their propensity toward dysfunctional, even pathological, behavior, and the way they change over time. We ground our analysis on the fact that IOs are bureaucracies. Bureaucracy is a distinctive social form of authority with its own internal logic and behavioral proclivities" (3).
As they are looking at IOs specifically through the lenses of bureaucracies, they focus on four areas: autonomy, power, dysfunction and change. Autonomy: how separate are the activities of IOs from the institutions that created them, states? They are autonomous to a degree, but not absolutely. Power: they us a constructivist approach, so IOs help to create social reality, thus conferring upon them power of at least a certain kind. Dysfunction: yes. It is not entirely the fault of state directives misaligning IOs mandates, but is also the result of internal bureaucratic institutional tendencies. Change: standard IR would say that change happens in IOs when states mandate that change. This is partially true, and misses a good deal of the point of understanding IOs as separate institutions with their own path dependencies and internal momentum.
"In sum, we can better understand what IOs do if we better understand what IOs are" (9).
There are four characteristics of bureaucracies (the combination of the French word for table and the Greek word for rule): hierarchy, continuity, impersonality and expertise (17-8).
Autonomy/Authority of IOs: delegated authority, moral authority, expert authority
Power of IOs: organizational, meaning making, norm diffusion
Disease of IOs: "irrational rationalization", overreliance on bureaucracy, insulation, internal cultures/norms coupled with path dependency
Change within IOs: Can understand through a concept of change being internal/external or material/cultural. The same set of variables can help understand IO dysfunction as well.
"Our goal in writing this book is to understand better why IOs behave as they do. Most international relations theory provides surprisingly little help in this regard" (2).
"Scholarship on organizations generally (not just IOs) has made it abundantly clear that organizations routinely behave in ways unanticipated by their creators and not formally sanctioned by their members. Organizations that start with one mission routinely acquire others" (2).
"In this book we develop a constructivist approach to understanding IO behavior that provides a theoretical basis for treating IOs as autonomous actors and helps explain the power they exercise in world politics, their propensity toward dysfunctional, even pathological, behavior, and the way they change over time. We ground our analysis on the fact that IOs are bureaucracies. Bureaucracy is a distinctive social form of authority with its own internal logic and behavioral proclivities" (3).
As they are looking at IOs specifically through the lenses of bureaucracies, they focus on four areas: autonomy, power, dysfunction and change. Autonomy: how separate are the activities of IOs from the institutions that created them, states? They are autonomous to a degree, but not absolutely. Power: they us a constructivist approach, so IOs help to create social reality, thus conferring upon them power of at least a certain kind. Dysfunction: yes. It is not entirely the fault of state directives misaligning IOs mandates, but is also the result of internal bureaucratic institutional tendencies. Change: standard IR would say that change happens in IOs when states mandate that change. This is partially true, and misses a good deal of the point of understanding IOs as separate institutions with their own path dependencies and internal momentum.
"In sum, we can better understand what IOs do if we better understand what IOs are" (9).
There are four characteristics of bureaucracies (the combination of the French word for table and the Greek word for rule): hierarchy, continuity, impersonality and expertise (17-8).
Autonomy/Authority of IOs: delegated authority, moral authority, expert authority
Power of IOs: organizational, meaning making, norm diffusion
Disease of IOs: "irrational rationalization", overreliance on bureaucracy, insulation, internal cultures/norms coupled with path dependency
Change within IOs: Can understand through a concept of change being internal/external or material/cultural. The same set of variables can help understand IO dysfunction as well.
Shiller: The subprime solution
Shiller, RJ. 2008. The subprime solution. Princeton University Press.
The subprime crisis is a real-estate bubble that spread to finance. It has produced conditions that are potentially catastrophic, and needs to be addressed in a serious and direct way.
This is not, however, a crisis that should signal the retreat from finance capitalism. In fact, we should be doing more to create infrastructures that promote markets that are designed to mitigate risk. We should also be increasing transparency and moving towards a situation where the system is able to avoid the promotion of bubbles through increased information. As in Shiller's other work, there is a heavy focus on the psychological aspects of market behavior.
"The key to the subprime solution, to preventing future crises like the current one, as well as mitigating its aftereffects, is democratizing finance--extending the application of sound financial principles to a larger and larger segment of society, and using all the modern technology at our disposal to achieve that goal" (115).
In the index, there is no mention of either derivatives or collateralized debt obligations.
The subprime crisis is a real-estate bubble that spread to finance. It has produced conditions that are potentially catastrophic, and needs to be addressed in a serious and direct way.
This is not, however, a crisis that should signal the retreat from finance capitalism. In fact, we should be doing more to create infrastructures that promote markets that are designed to mitigate risk. We should also be increasing transparency and moving towards a situation where the system is able to avoid the promotion of bubbles through increased information. As in Shiller's other work, there is a heavy focus on the psychological aspects of market behavior.
"The key to the subprime solution, to preventing future crises like the current one, as well as mitigating its aftereffects, is democratizing finance--extending the application of sound financial principles to a larger and larger segment of society, and using all the modern technology at our disposal to achieve that goal" (115).
In the index, there is no mention of either derivatives or collateralized debt obligations.
Shiller: Irrational Exuberance
Shiller, RJ. 2006. Irrational exuberance. Princeton University Press.
"How we value the stock market now and in the future influences major economic and social policy decisions that affect not only investors but also society at large, even the world. If we exaggerate the present and future value of the stock market, then as a society we may invest too much in business startups and expansions, and too little in infrastructure, education, and other forms of human capital. If we think the market is worth more than it really8 is, we may become complacent in funding our pension plans, in maintaining our savings rate, in legislating an improved Social Security system, and in providing other forms of social insurance" (xii).
The author presents a wide variety of evidence to show that the stock market is currently overvalued by historical standards. Part of the argument is that the investors who are part of the stock system to not understand the constructed nature of markets, and that their growth does not necessarily represent the underlying value of assets. Human psychology plays a clear role in determining stock prices, and the author makes the claim that investment has become irrational and exuberant.
The book goes through a wide variety of explanations for the causes of this excessive investment in equities.
"How we value the stock market now and in the future influences major economic and social policy decisions that affect not only investors but also society at large, even the world. If we exaggerate the present and future value of the stock market, then as a society we may invest too much in business startups and expansions, and too little in infrastructure, education, and other forms of human capital. If we think the market is worth more than it really8 is, we may become complacent in funding our pension plans, in maintaining our savings rate, in legislating an improved Social Security system, and in providing other forms of social insurance" (xii).
The author presents a wide variety of evidence to show that the stock market is currently overvalued by historical standards. Part of the argument is that the investors who are part of the stock system to not understand the constructed nature of markets, and that their growth does not necessarily represent the underlying value of assets. Human psychology plays a clear role in determining stock prices, and the author makes the claim that investment has become irrational and exuberant.
The book goes through a wide variety of explanations for the causes of this excessive investment in equities.
Wednesday, March 11, 2009
Woods: The Globalizers: The IMF, The World Bank, and Their Borrowers
Woods, N. 2006. The Globalizers: The IMF, The World Bank, And Their Borrowers. Cornell University Press.
"The IMF and World Bank are targets of endless criticism. Left-wing groups denounce them as tools of US imperialism. Antiglobalization websites accuse them of enforcing global capitalism. Right0wing think tanks accuse the Fund and Bank of supporting corrupt elites and governments that cripple their economies, maul their environments, and oppress their people. In 20045 it was revealed that even the terrorist group Al Qaeda may have planned an attack on the institutions" (1).
There are three reasons that these IOs do not successfully carry out their ostensibly noble mandates: Firstly, they do not stand in isolation and are influenced by powerful governments; secondly, the technocrats who make up these institutions are shaped by a certain kind of institutional milieu which goes on to shape the ethos of the institution; finally, they have to contend with the governments that they work with on a level of equality, and they cannot impose their will. These all lead to obvious problems. The author refers to this with the chapter sub title "Riding Three Horses at Once".
"There is no incontrovertible evidence that the IMF and World Bank know what is good for their borrowing countries. More important, there is even less evidence that what they know translates into what they require of governments. Overall, powerful states set the boundaries within which the IMF and World Bank work. Within those parameters, professional economists and staff draw up the details. They work with an eye on the political masters of the institutions and equally with a view to promulgating their own and institutions interests. They express their solutions in the language of professional economists. Once solutions are defined, staff take their mission into the field. There they must coerce or persuade borrowing governments to undertake prescribed measures. Their influence in the short term depends on local conditions and whether politicians have an interest in using Fund or Bank resources or conditionality to bolster a particular position or policy" (6).
"The IMF and World Bank are targets of endless criticism. Left-wing groups denounce them as tools of US imperialism. Antiglobalization websites accuse them of enforcing global capitalism. Right0wing think tanks accuse the Fund and Bank of supporting corrupt elites and governments that cripple their economies, maul their environments, and oppress their people. In 20045 it was revealed that even the terrorist group Al Qaeda may have planned an attack on the institutions" (1).
There are three reasons that these IOs do not successfully carry out their ostensibly noble mandates: Firstly, they do not stand in isolation and are influenced by powerful governments; secondly, the technocrats who make up these institutions are shaped by a certain kind of institutional milieu which goes on to shape the ethos of the institution; finally, they have to contend with the governments that they work with on a level of equality, and they cannot impose their will. These all lead to obvious problems. The author refers to this with the chapter sub title "Riding Three Horses at Once".
"There is no incontrovertible evidence that the IMF and World Bank know what is good for their borrowing countries. More important, there is even less evidence that what they know translates into what they require of governments. Overall, powerful states set the boundaries within which the IMF and World Bank work. Within those parameters, professional economists and staff draw up the details. They work with an eye on the political masters of the institutions and equally with a view to promulgating their own and institutions interests. They express their solutions in the language of professional economists. Once solutions are defined, staff take their mission into the field. There they must coerce or persuade borrowing governments to undertake prescribed measures. Their influence in the short term depends on local conditions and whether politicians have an interest in using Fund or Bank resources or conditionality to bolster a particular position or policy" (6).
Strange: Mad Money
Strange, S. 1998. Mad Money. Manchester University Press.
This is a wide ranging tale of financial markets gone wild. States no longer have the power, capabilities and/or will to control the forces of free flowing capital. The causes of this crisis, while being decisions made by actors, are generally seen as being deterministic. The solution to the problem requires swift and bold action.
Written after the SE Asian crisis of '97, this book contains much that should be considered in today's economic climate, and much that remains hyperbole.
The book begins by explaining why the author understands the current organization of the financial system to be "mad". One moment it is manic, the other it is depressed. The output of the system is, in effect, insane.
The themes of Casino Capitalism are explored: volatility; we're all "involuntary gamblers"; arose from 5 decisions that really weren't decisions.
Markets have outgrown the constraints of government. This is not the only problem that has become too large, complicated or forceful to move beyond the capacity of states to regulate (environment, technology, etc).
All areas of the economy move to the rhythm of finance. States have much less control over finance than they had previously. Financial concentration is increasingly a problematic reality. Excess leads to "moral contamination" (181). There are widening gaps (income gaps, gaps between large and small business, between large and small states).
This is a wide ranging tale of financial markets gone wild. States no longer have the power, capabilities and/or will to control the forces of free flowing capital. The causes of this crisis, while being decisions made by actors, are generally seen as being deterministic. The solution to the problem requires swift and bold action.
Written after the SE Asian crisis of '97, this book contains much that should be considered in today's economic climate, and much that remains hyperbole.
The book begins by explaining why the author understands the current organization of the financial system to be "mad". One moment it is manic, the other it is depressed. The output of the system is, in effect, insane.
The themes of Casino Capitalism are explored: volatility; we're all "involuntary gamblers"; arose from 5 decisions that really weren't decisions.
Markets have outgrown the constraints of government. This is not the only problem that has become too large, complicated or forceful to move beyond the capacity of states to regulate (environment, technology, etc).
All areas of the economy move to the rhythm of finance. States have much less control over finance than they had previously. Financial concentration is increasingly a problematic reality. Excess leads to "moral contamination" (181). There are widening gaps (income gaps, gaps between large and small business, between large and small states).
Tuesday, March 10, 2009
Brander and Spencer: Export Subsidies and International Market Share Rivalry
Brander, JA, and BJ Spencer. 1984. Export subsidies and international market share rivalry.
This paper explores subsidizing exports and presents a model that explores the effects of such substitution. Export subsidies is very attractive to countries for a variety of reasons. One problem that may arise is a balance of payments shift. However, the authors note that the increased revenues from the artificially cheaper good will offset this. The only way around these problems is through negotiation in order to establish agreements that abolish these export subsidies. However, even if there are agreements, there is incentive to cheat.
"What the paper shows is that noncooperative behaviour provides incentives for such policies, but these policies are jointly suboptimal from the point of view of producing nations taken together" (19).
This paper explores subsidizing exports and presents a model that explores the effects of such substitution. Export subsidies is very attractive to countries for a variety of reasons. One problem that may arise is a balance of payments shift. However, the authors note that the increased revenues from the artificially cheaper good will offset this. The only way around these problems is through negotiation in order to establish agreements that abolish these export subsidies. However, even if there are agreements, there is incentive to cheat.
"What the paper shows is that noncooperative behaviour provides incentives for such policies, but these policies are jointly suboptimal from the point of view of producing nations taken together" (19).
Kirshner: Currency and Coercion in the Twenty-First Century
KIRSHNER, J. 2005. Currency and Coercion in the Twenty-First Century.
Much of the work done on monetary issues and power has focused on the periods between WWI and 1989. This work has a different, much more current, focus. "In the early twenty-first century, however, two conditions, less salient during those seventy-five years, are of dramatically increased significance: globalization and uni-polarity...The goals of this chapter are to illustrate the continued role of monetary power and to assess the nature of this transformation" (from abstract).
"This paper argues that although the consequences of globalized finance are profound, those consequences recast rather than reduce the significance of monetary diplomacy in contemporary international relations. By shifting the analysis from an almost exclusive focus on state-to-state interactions to one that places much greater emphasis on the relationship between states and markets, it can be illustrated that even in an era of globalization international monetary relations remain an area of political competition. As long as there are states and money, states will attempt to manipulate monetary relations to advance their political objectives" (1).
The three independent variables that were explored in Kirshner's Currency and Coercion book are also explored: the effect of globalization on 1) currency manipulation; 2) monetary dependence; and 3) strategic disruption.
Currency manipulation: a very interesting story of manipulation of the Dinar is told. "As illustrated by the events described above, there is good reason to believe that currency manipulation will continue to be a feature of International Relations under globalization" (6).
Monetary Dependence: There is arguably even greater competition among states to become a central currency within the global order after unipolarity.
Strategic Disruption: This still exists. See the US' insistence that all states reduce capital controls. Once again, this does not take the same form as in the pre 1990 world of bipolarity.
"In sum, the contemporary international system is characterized by globalization and unipolarity. Financial globalization in particular recasts the nature of monetary power and the practice of monetary diplomacy. But it does not provide an escape from politics-even under globalization, international relations will continue to feature currency manipulation, monetary dependence, and strategic disruption. As long as there are states and currencies, the monetary system will remain an arena of political conflict" (17).
Much of the work done on monetary issues and power has focused on the periods between WWI and 1989. This work has a different, much more current, focus. "In the early twenty-first century, however, two conditions, less salient during those seventy-five years, are of dramatically increased significance: globalization and uni-polarity...The goals of this chapter are to illustrate the continued role of monetary power and to assess the nature of this transformation" (from abstract).
"This paper argues that although the consequences of globalized finance are profound, those consequences recast rather than reduce the significance of monetary diplomacy in contemporary international relations. By shifting the analysis from an almost exclusive focus on state-to-state interactions to one that places much greater emphasis on the relationship between states and markets, it can be illustrated that even in an era of globalization international monetary relations remain an area of political competition. As long as there are states and money, states will attempt to manipulate monetary relations to advance their political objectives" (1).
The three independent variables that were explored in Kirshner's Currency and Coercion book are also explored: the effect of globalization on 1) currency manipulation; 2) monetary dependence; and 3) strategic disruption.
Currency manipulation: a very interesting story of manipulation of the Dinar is told. "As illustrated by the events described above, there is good reason to believe that currency manipulation will continue to be a feature of International Relations under globalization" (6).
Monetary Dependence: There is arguably even greater competition among states to become a central currency within the global order after unipolarity.
Strategic Disruption: This still exists. See the US' insistence that all states reduce capital controls. Once again, this does not take the same form as in the pre 1990 world of bipolarity.
"In sum, the contemporary international system is characterized by globalization and unipolarity. Financial globalization in particular recasts the nature of monetary power and the practice of monetary diplomacy. But it does not provide an escape from politics-even under globalization, international relations will continue to feature currency manipulation, monetary dependence, and strategic disruption. As long as there are states and currencies, the monetary system will remain an arena of political conflict" (17).
Kirshner: Globalization, American Power, and International Security
Kirshner, J. 2008. Globalization, American Power, and International Security. Political Science Quarterly 123, no. 3: 363-389.
How will increasing globalization affect American security? "Switching from polo on horseback to water polo does not change the principals or the objectives, but the contest is still profoundly transformed by the change in setting. Some players, for example, might have been much better riders than they are swimmers" (363).
"This paper draws three principal conclusions: First, globalization, in aggregate and on average tends to reduce the autonomy and capacity of states, although in some ways states may find their powers enhanced. Second, because the processes of globalization affect various states (and their relative capacities) differently, globalization affects the balance of power between states. In particular, as the biggest fish in a more open pond, the United States emerges as relatively more powerful than other states. However, and third, the United States, nevertheless, finds its own autonomy and capacity encroached upon by the processes of globalization, and will attract both more violent resistance and political opposition to its international ambitions" (363).
Definition: "...an array of phenomena that derive from unorganized and stateless forces but that generate pressures that are felt by states" (364).
This paper argues that globalization is a contingent phenomena that is not unique to history in the broadest sense. However, while it may not be unique, that does not mean that it is not one of the most pressing issues of the day.
This article in an excellent overview of globalization and security issues, though it does not focus enough on what I am currently working. ABSOLUTELY read this if you are interested in globalization, conflict, balance of power, the US and the changing nature of power politics.
How will increasing globalization affect American security? "Switching from polo on horseback to water polo does not change the principals or the objectives, but the contest is still profoundly transformed by the change in setting. Some players, for example, might have been much better riders than they are swimmers" (363).
"This paper draws three principal conclusions: First, globalization, in aggregate and on average tends to reduce the autonomy and capacity of states, although in some ways states may find their powers enhanced. Second, because the processes of globalization affect various states (and their relative capacities) differently, globalization affects the balance of power between states. In particular, as the biggest fish in a more open pond, the United States emerges as relatively more powerful than other states. However, and third, the United States, nevertheless, finds its own autonomy and capacity encroached upon by the processes of globalization, and will attract both more violent resistance and political opposition to its international ambitions" (363).
Definition: "...an array of phenomena that derive from unorganized and stateless forces but that generate pressures that are felt by states" (364).
This paper argues that globalization is a contingent phenomena that is not unique to history in the broadest sense. However, while it may not be unique, that does not mean that it is not one of the most pressing issues of the day.
This article in an excellent overview of globalization and security issues, though it does not focus enough on what I am currently working. ABSOLUTELY read this if you are interested in globalization, conflict, balance of power, the US and the changing nature of power politics.
Mantzavinos, North and Shariq: Learning, Institutions, and Economic Performance
Mantzavinos, C, DC North, and S Shariq. 2004. Learning, institutions, and economic performance. Perspectives on Politics 2, no. 01: 75-84.
"In this article, we provide a broad overview of the interplay among cognition, belief systems, and institutions, and how they affect economic performance. We argue that a deeper understanding of institutions' emergence, their working properties, and their effect on economic and political outcomes should begin from an analysis of cognitive processes. We explore the nature of individual and collective learning, stressing that the issue is not whether agents are perfectly or bounded rationally, but rather how human beings actually reason and choose, individually and in collective settings. We then tie the processes of learning to institutional analysis, providing arguments in favor of what can be characterized as 'cognitive institutionalism'" (from abstract).
"In this article, we provide a broad overview of the interplay among cognition, belief systems, and institutions, and how they affect economic performance. We argue that a deeper understanding of institutions' emergence, their working properties, and their effect on economic and political outcomes should begin from an analysis of cognitive processes. We explore the nature of individual and collective learning, stressing that the issue is not whether agents are perfectly or bounded rationally, but rather how human beings actually reason and choose, individually and in collective settings. We then tie the processes of learning to institutional analysis, providing arguments in favor of what can be characterized as 'cognitive institutionalism'" (from abstract).
Vaubel: A Public Choice Approach to International Organization
Vaubel, R. 1986. A public choice approach to international organization. Public Choice 51, no. 1: 39-57.
"Traditional" approaches to understanding the impact of international organizations rely on the following, according to the author: without IOs, international externalities would not be controlled, international economies of scale would not be exploited and typically a game theory assumption is used to show that something is needed to reduced the negative possibility of prisoners' dilemma. "These arguments are logically impeccable but misleading incomplete and often misapplied" (40).
Why these are lacking is explained.
All international organizations are staffed by bureaucrats who are interested in pursuing their own policies.
"The purpose of this paper has been to develop a positive theory of international organization which can supplement the conventional normative theory used as a positive theory" (52).
"It does not imply that international organization is generally undesirable. But it can be used to emphasize the advantages of decentralized policy making and to warn against a naive internationalism which welcomes international agreements for their own sake...International organization can be and is abused, and the cause is not any occasional lack of virtue among politics but a systematic built-in tendency towards collusion at the expense of the citizens" (53).
"Traditional" approaches to understanding the impact of international organizations rely on the following, according to the author: without IOs, international externalities would not be controlled, international economies of scale would not be exploited and typically a game theory assumption is used to show that something is needed to reduced the negative possibility of prisoners' dilemma. "These arguments are logically impeccable but misleading incomplete and often misapplied" (40).
Why these are lacking is explained.
All international organizations are staffed by bureaucrats who are interested in pursuing their own policies.
"The purpose of this paper has been to develop a positive theory of international organization which can supplement the conventional normative theory used as a positive theory" (52).
"It does not imply that international organization is generally undesirable. But it can be used to emphasize the advantages of decentralized policy making and to warn against a naive internationalism which welcomes international agreements for their own sake...International organization can be and is abused, and the cause is not any occasional lack of virtue among politics but a systematic built-in tendency towards collusion at the expense of the citizens" (53).
Stone: The Scope of IMF Conditionality
Stone, RW. 2008. The Scope of IMF Conditionality. International Organization 62, no. 04: 589-620.
Is the IMF autonomous, controlled by the hegemon, or something else?
Two models are tested regarding IMF conditionality: A public-choice model and an informal governance model. "Public-choice critics argue that the Fund is an out-of-control agency that seeks to maximize its importance by imposing the highest levels of conditionality the market will bear. To the contrary, we find that the Fund has refrained from exploiting the vulnerability of particular countries to maximize the scope of conditionality. Alternatively, critics of major-power influence in the IMF claim that conditionality reflects the interests of the major shareholders rather than the needs of borrowing countries. We find evidence of US influence, which operates to constrain conditionality, but only in vulnerable countries that are important recipients of US aid. In ordinary countries under ordinary circumstances, broad authority is delegated to the Fund, which adjusts conditionality to accommodate local circumstances and domestic political opposition" (from abstract).
Some of the standard critiques of the IMF is that it is either a rogue institution imposing its will on sovereign states, or it is a tool of the most powerful states. Which of these is true, as they are mutually exclusive?
They don't find evidence for the rogue IO explanation, which are, "...derived from a public choice perspective" (1). "The puzzle that the power politics school is unable to explain is why weaker states participate in international organizations, if their policies simply reflect the preferences of the powerful. In order for institutions to be useful to powerful states, they must elicit voluntary participation, which means that there must be sufficient agreement about common purposes that weaker states can expect to benefit from cooperation" (1-2).
"We develop an alternative view, which we call informal governance. International organizations operate according to two parallel sets of rules: formal rules, which embody consensual procedures, and informal rules, which allow exceptional access for powerful countries. In this view, the danger embodies in delegation is not that the agency will run out of control, but that it will be captured by the most powerful state in the system" (2).
A history of IMF autonomy is covered.
"Our conclusions support our model of informal governance and are inconsistent with the public-choice inspired model of bureaucratic rent seeking" (41). The US is a major impact on IMF policies, especially when correlated with US aid giving.
Is the IMF autonomous, controlled by the hegemon, or something else?
Two models are tested regarding IMF conditionality: A public-choice model and an informal governance model. "Public-choice critics argue that the Fund is an out-of-control agency that seeks to maximize its importance by imposing the highest levels of conditionality the market will bear. To the contrary, we find that the Fund has refrained from exploiting the vulnerability of particular countries to maximize the scope of conditionality. Alternatively, critics of major-power influence in the IMF claim that conditionality reflects the interests of the major shareholders rather than the needs of borrowing countries. We find evidence of US influence, which operates to constrain conditionality, but only in vulnerable countries that are important recipients of US aid. In ordinary countries under ordinary circumstances, broad authority is delegated to the Fund, which adjusts conditionality to accommodate local circumstances and domestic political opposition" (from abstract).
Some of the standard critiques of the IMF is that it is either a rogue institution imposing its will on sovereign states, or it is a tool of the most powerful states. Which of these is true, as they are mutually exclusive?
They don't find evidence for the rogue IO explanation, which are, "...derived from a public choice perspective" (1). "The puzzle that the power politics school is unable to explain is why weaker states participate in international organizations, if their policies simply reflect the preferences of the powerful. In order for institutions to be useful to powerful states, they must elicit voluntary participation, which means that there must be sufficient agreement about common purposes that weaker states can expect to benefit from cooperation" (1-2).
"We develop an alternative view, which we call informal governance. International organizations operate according to two parallel sets of rules: formal rules, which embody consensual procedures, and informal rules, which allow exceptional access for powerful countries. In this view, the danger embodies in delegation is not that the agency will run out of control, but that it will be captured by the most powerful state in the system" (2).
A history of IMF autonomy is covered.
"Our conclusions support our model of informal governance and are inconsistent with the public-choice inspired model of bureaucratic rent seeking" (41). The US is a major impact on IMF policies, especially when correlated with US aid giving.
Steinwand and Stone: The International Monetary Fund: A Review of the Recent Evidence
Steinwand, MC, and RW Stone. 2008. The International Monetary Fund: A review of the recent evidence. The Review of International Organizations 3, no. 2: 123-149.
"We review studies of participation in IMF programs, design of IMF conditionality, implementation and enforcement of IMF conditions, conventional program effects and catalytic effects. At every stage, we find substantial evidence of the influence of major IMF shareholders, of the Fund's own organizational imperatives, and of domestic politics within borrowing countries. We conclude that very little is known with certainty about the effects of IMF lending, but that a great deal has been learned about the mechanics of IMF programs that will have to be taken into account in order to obtain unbiased estimates of those effects" (from abstract).
There is an overview of critics of the IMF on page 124.
"The functionalist perspective, which is the one most widely adopted in the IMF literature, emphasizes the element of common interest in cooperation [Keohane]...Institutions, in this perspective, arise as solutions to collective action problems..." (126). "In contrast, the structural approach emphasizes differences in national interests and the distribution of power [Krasner}...Structural explanations treat the existence of conflicts of interest as fundamental, although the particular reasons for conflict vary with the international context" (126). "The public choice framework [Vaubel]...emphasizes the perverse incentives created by principal-agent relationships under incomplete information. The objectives of international bureaucrats are to increase their power, prerequisites and organizational slack, and elected officials delegate authority to them in order to escape their own accountability to voters. It is often argued that the IMF is able to provide political cover for governments that want reform but face opposition at home [Puntnam, Haggard, Kaufman, Vreeland] (127).
There is a review of the variables covered in IMF analysis by a variety of authors.
Conclusion: selection effects in methodology are quite important. Further research topics are then posited.
"We review studies of participation in IMF programs, design of IMF conditionality, implementation and enforcement of IMF conditions, conventional program effects and catalytic effects. At every stage, we find substantial evidence of the influence of major IMF shareholders, of the Fund's own organizational imperatives, and of domestic politics within borrowing countries. We conclude that very little is known with certainty about the effects of IMF lending, but that a great deal has been learned about the mechanics of IMF programs that will have to be taken into account in order to obtain unbiased estimates of those effects" (from abstract).
There is an overview of critics of the IMF on page 124.
"The functionalist perspective, which is the one most widely adopted in the IMF literature, emphasizes the element of common interest in cooperation [Keohane]...Institutions, in this perspective, arise as solutions to collective action problems..." (126). "In contrast, the structural approach emphasizes differences in national interests and the distribution of power [Krasner}...Structural explanations treat the existence of conflicts of interest as fundamental, although the particular reasons for conflict vary with the international context" (126). "The public choice framework [Vaubel]...emphasizes the perverse incentives created by principal-agent relationships under incomplete information. The objectives of international bureaucrats are to increase their power, prerequisites and organizational slack, and elected officials delegate authority to them in order to escape their own accountability to voters. It is often argued that the IMF is able to provide political cover for governments that want reform but face opposition at home [Puntnam, Haggard, Kaufman, Vreeland] (127).
There is a review of the variables covered in IMF analysis by a variety of authors.
Conclusion: selection effects in methodology are quite important. Further research topics are then posited.
Grabel: Policy Coherence or Conformance?
Grabel, I. 2007. Policy Coherence or Conformance? The New World Bank International Monetary Fund World Trade Organization Rhetoric on Trade and Investment in Developing Countries. Review of Radical Political Economics 39, no. 3: 335.
Policy coherence is explored in this article. It is argued that the term has been abused, and that much of what it is referred to would be better suited by the term "conformance".
"This article has three objectives: (a) to define the concept of coherence and trace its usage in policy debates historically and up to the present; (b) to explore how the concept is being institutionalized or codified through cooperation among the International Monetary Fund, World Bank, and World Trade organization...and through recent bi-and multilateral trade agreements; and (c) to offer the beginnings of a critique of what I see as the use and abuse of the concept. I will argue that the concept of coherence today is code for another and altogether different goal: policy conformance" (336).
These three institutions have worked together to promote trade liberalization in such a coherent way that they may end up working against their original mandates. This is completed partially through the at least tacit, if not explicit, approval of the US.
Coherence should be a concept with no explicit telos, but the policies implemented by these institutions have all ended up moving in a very explicitly direction. "Properly understood, policy coherence should entail an understanding of the uniqueness of diverse national contexts; of path dependence, institutional embeddedness, and stickiness; recognition that there exists multiple paths to development; and respect for national policy space" (340).
Policy coherence is explored in this article. It is argued that the term has been abused, and that much of what it is referred to would be better suited by the term "conformance".
"This article has three objectives: (a) to define the concept of coherence and trace its usage in policy debates historically and up to the present; (b) to explore how the concept is being institutionalized or codified through cooperation among the International Monetary Fund, World Bank, and World Trade organization...and through recent bi-and multilateral trade agreements; and (c) to offer the beginnings of a critique of what I see as the use and abuse of the concept. I will argue that the concept of coherence today is code for another and altogether different goal: policy conformance" (336).
These three institutions have worked together to promote trade liberalization in such a coherent way that they may end up working against their original mandates. This is completed partially through the at least tacit, if not explicit, approval of the US.
Coherence should be a concept with no explicit telos, but the policies implemented by these institutions have all ended up moving in a very explicitly direction. "Properly understood, policy coherence should entail an understanding of the uniqueness of diverse national contexts; of path dependence, institutional embeddedness, and stickiness; recognition that there exists multiple paths to development; and respect for national policy space" (340).
Rose: Do we really know that the WTO increases trade?
Rose, AK. 2004. Do we really know that the WTO increases trade? American Economic Review 94, no. 1: 98-114.
This paper explores whether a handful of global trade regimes actually has an impact on international trade flows. "An extensive search reveals little evidence that countries joining or belonging to the GATT/WTO have different trade patterns than outsiders. The GSP [Generalized System of Preferences] does seem to have a strong effect, and is associated with an approximate doubling of trade" (from abstract).
"While theory, causal empiricism, and strong statements abound, there is, to my knowledge, no compelling empirical evidence showing that the GATT/WTO has actually encouraged trade" (1).
"To summarize, I have been unable to find evidence that membership in the GATT/WTO has a strong positive effect on international trade" (12).
This paper explores whether a handful of global trade regimes actually has an impact on international trade flows. "An extensive search reveals little evidence that countries joining or belonging to the GATT/WTO have different trade patterns than outsiders. The GSP [Generalized System of Preferences] does seem to have a strong effect, and is associated with an approximate doubling of trade" (from abstract).
"While theory, causal empiricism, and strong statements abound, there is, to my knowledge, no compelling empirical evidence showing that the GATT/WTO has actually encouraged trade" (1).
"To summarize, I have been unable to find evidence that membership in the GATT/WTO has a strong positive effect on international trade" (12).
Ruggie: Taking Embedded Liberalism Global: The Corporate Connection
Ruggie, JG. 2002. Taking Embedded Liberalism Global the Corporate Connection. John F. Kennedy School of Government, Harvard University.
Ruggie traces a bit of history regarding embedded liberalism. The core: "...economic liberalization was embedded in social community" (1).
The problem of this new world is that governments are overwhelmed by the size and scope of global capitalism. It is nigh impossible to construct a similar pact with governments as was organized through the Bretton Woods conference. "Embedding the global market within shared social values and institutional practices represents a task of historic magnitude. The reason is obvious: there is no government at the global level to act on behalf of the common good, as there is at the national level. And international institutions are far too weak to fully compensate. Accordingly, this chapter examines the role of certain social processes and movements in triggering the emergence of more inclusive forms of global governance. Specifically, I focus on the contribution of the dynamic interplay between civil society, business and the public sector of the issue of corporate social responsibility" (2-3).
"The burden of my argument, with due appreciation for the irony, is that the corporate sector, which has done more than any other to create the growing gaps between global economy and national communities, is being pulled into playing a key bridging role between them. In this process, a global public domain is emerging, which cannot substitute for effective action by states but may help produce it" (3).
"When we reflect on how hard it was and how long it took to institute the original embedded liberalism compromise at the national level, the prospect of achieving a similar social framing of global market forces seems exponentially more daunting" (27).
"I have argued that, as a result of the expansion of civil society and its engagement with the corporate sector, a global public domain is emerging. I take that to mean an area inhabited by various actors for whom the territorial state is not the cardinal organizing principle..." (28).
"Haltingly anbd erratically, something akin to an embedded liberalism compromise is being pulled and pushed into the global arena, and the corporate connection is a key element in that process" (29).
Ruggie traces a bit of history regarding embedded liberalism. The core: "...economic liberalization was embedded in social community" (1).
The problem of this new world is that governments are overwhelmed by the size and scope of global capitalism. It is nigh impossible to construct a similar pact with governments as was organized through the Bretton Woods conference. "Embedding the global market within shared social values and institutional practices represents a task of historic magnitude. The reason is obvious: there is no government at the global level to act on behalf of the common good, as there is at the national level. And international institutions are far too weak to fully compensate. Accordingly, this chapter examines the role of certain social processes and movements in triggering the emergence of more inclusive forms of global governance. Specifically, I focus on the contribution of the dynamic interplay between civil society, business and the public sector of the issue of corporate social responsibility" (2-3).
"The burden of my argument, with due appreciation for the irony, is that the corporate sector, which has done more than any other to create the growing gaps between global economy and national communities, is being pulled into playing a key bridging role between them. In this process, a global public domain is emerging, which cannot substitute for effective action by states but may help produce it" (3).
"When we reflect on how hard it was and how long it took to institute the original embedded liberalism compromise at the national level, the prospect of achieving a similar social framing of global market forces seems exponentially more daunting" (27).
"I have argued that, as a result of the expansion of civil society and its engagement with the corporate sector, a global public domain is emerging. I take that to mean an area inhabited by various actors for whom the territorial state is not the cardinal organizing principle..." (28).
"Haltingly anbd erratically, something akin to an embedded liberalism compromise is being pulled and pushed into the global arena, and the corporate connection is a key element in that process" (29).
Steffek: Embedded Liberalism and its Critics
Steffek, J. Embedded liberalism and its critics. Palgrave Macmillan.
This text explores the relationship between international and domestic governance of global trade and financial architectures. It argues that the embedded liberalism that arose after WWII was an admission that governance should be both domestic and international. The author goes on to claim that many see this order as being normatively wrong, as it benefits the development of the north and disregards the development of the south. What is needed is a program that is both domestic and international that focuses on "redistributive multilateralism (2).
On embedded liberalism: "This blueprint for the construction of international institutions centers on the idea that international cooperation should be designed in such a way as to achieve a high degree of liberalization at the international level to facilitate the creation of a world market. At the same time it should allow states to maintain a national welfare system that can cushion the adverse effects of global liberalization. Upon closer inspection Ruggie's conception of embedded liberalism has two sides. On the one hand, it is a very general normative framework that defines appropriate goals and scope of international institutions. On the other hand, the term is also used to describe some specific institutional arrangements that were built according to this generative grammar. Embedded liberalism thus became almost a synonym for the original Bretton Woods order and the 1947 General Agreement on Tariffs and Trade (GATT)..." (4).
The author argues that, while the actual structure of this global system has changed, the normative foundations have not. The author argues that embedded liberalism has at least two distinct futures: that of being embedded within governance, ie., through a global Marshall plan, or being embedded in business, as promoted through Ruggie and his Corporate Connection idea.
This text explores the relationship between international and domestic governance of global trade and financial architectures. It argues that the embedded liberalism that arose after WWII was an admission that governance should be both domestic and international. The author goes on to claim that many see this order as being normatively wrong, as it benefits the development of the north and disregards the development of the south. What is needed is a program that is both domestic and international that focuses on "redistributive multilateralism (2).
On embedded liberalism: "This blueprint for the construction of international institutions centers on the idea that international cooperation should be designed in such a way as to achieve a high degree of liberalization at the international level to facilitate the creation of a world market. At the same time it should allow states to maintain a national welfare system that can cushion the adverse effects of global liberalization. Upon closer inspection Ruggie's conception of embedded liberalism has two sides. On the one hand, it is a very general normative framework that defines appropriate goals and scope of international institutions. On the other hand, the term is also used to describe some specific institutional arrangements that were built according to this generative grammar. Embedded liberalism thus became almost a synonym for the original Bretton Woods order and the 1947 General Agreement on Tariffs and Trade (GATT)..." (4).
The author argues that, while the actual structure of this global system has changed, the normative foundations have not. The author argues that embedded liberalism has at least two distinct futures: that of being embedded within governance, ie., through a global Marshall plan, or being embedded in business, as promoted through Ruggie and his Corporate Connection idea.
Friday, March 6, 2009
Wood: Empire of Capital
Wood, EM. 2003. Empire of Capital. Verso.
If one makes arguments of the nature that the US is an imperial body, they are routinely countered that the US does not control any territory. This is, of course, true. However, this misses the fact that there is an imperial force at work in the world, that it originates and derives power from the system hegemon and that it all operates within the capitalist system.
Wood highlights the driving power of capital to continually search for higher returns as being the ultimate source of global imperialism. This imperialism does not have the same characteristics as did previous imperialistic eras; no longer is there a search for territory or direct rule. Instead, this imperialism is a control of a different and more amorphous type: the logic of capitalism.
Military expansionism is another piece of this puzzle: the US in particular possesses massive amounts of military power, and this is used as the ultimate prop for regulatory frameworks that are necessary for the further promotion of capitalism.
If one makes arguments of the nature that the US is an imperial body, they are routinely countered that the US does not control any territory. This is, of course, true. However, this misses the fact that there is an imperial force at work in the world, that it originates and derives power from the system hegemon and that it all operates within the capitalist system.
Wood highlights the driving power of capital to continually search for higher returns as being the ultimate source of global imperialism. This imperialism does not have the same characteristics as did previous imperialistic eras; no longer is there a search for territory or direct rule. Instead, this imperialism is a control of a different and more amorphous type: the logic of capitalism.
Military expansionism is another piece of this puzzle: the US in particular possesses massive amounts of military power, and this is used as the ultimate prop for regulatory frameworks that are necessary for the further promotion of capitalism.
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