IIPE Notes ALL

IIPE NOTES 9-9

open v. closed economy

(exports - imports)/(exports + imports)

part
of the reason for the welfare state in europe is that their economies
were much more open (more exposed to vagaries in international
economics), so there's an outcry for a "buffer". large closed economies
(US, for example) don't have a similar outcry, so there's no welfare
state- because the fact that they're closed insulates them to some
extent

some of the thinkers that we'll talk about in this class

    smith

    kindleberger

    polany

    smith

    ricardo

    marx

    strange

    gilpin

    lukes

    nye

    keynes

    hayek

ideas:

    -sovereignty

steven lukes

    -the three faces of power

    -this is joseph nye's language

    -1st power-> Hard power (i can force you to do what i want you to do)

  
 -2nd power-> soft power (i can give you incentive to do what i want
you to do, but still an option of refusal, everything but the threat of
force)

    -3rd power-> structural power (so
calls it susan strange)-> i want you do do this, but i'm gonig to
set up structural incentives so that you want to do it yourself without
me even prompting you to

Markets
are human arrangements that depend on norms that PEOPLE bring to the
table, not an abstract set of arrangements that spring out of nowhere

    -geographic and cultural differences MATTER

    -you have to figure out what's immutable and what's just brought to the table as a result of prejudices or whatever

MERCANTILISM

the idea that state power and economics should coexist

    -any sort of policy that weakens the economic power of the state is bad by construction

    -it's a ZERO SUM (as opposed to positive sum) game

a legal system is extremely important for making these markets work

    -there is an APPROPRIATE role for the state in economics

    -between enforcing contracts and state sovereignty on one end and actually choosing economic winners on the other

HEGEMONY in world order

    -it could be that markets alone are not enough, but you need a dominant state to force other country's economies open

monopsony-> Dominant buyers-> can force suppliers to change prices

IIPE NOTES 9-11

Gramsci- 3rd face of power by Lukes

    -intellectual hegemony

    -STRUCTURAL POWER

Paul Pierson (Path dependency)

    -a decision maker isn't free to explore all paths at any given time

    -once you get on a certain path, you're "locked in"

        -lock in effects are considerable

    -choices made earlier to point zero define subsequent choices

        -QWERTY keyboard

    -so, in IPE, HISTORY MATTERS

Putnam 2 level bargaining

    -when we have an international agreement, we have to ratify it domestically

        -this means that if you have a divided domestic constituency, you STRENGTHEN the bargainer's advantage

  
     -basically it means that you can go off and say "my constituency
won't sign off on this, you have to give me a better deal!"

Rational Choice - Public Choice (olson)

    -distribution of benefits and costs, and their diffusion is a key element in why certain things get done or not

        -example is a 3cent tariff on auto parts

            -hurts everybody by 3 cents, but benefits auto manufacturers tremendously

    -critics talk about it as a theory- they talk about it being tautological

Wendt - Constructivism

    -explains everything?

Feminist Critique

Dependency/Dependent Development (Peter Evans)

    -the core has economic incentives to maintain the outer areas in the state they are

        -outer areas are dependent on the core

        -periphery doesn't industrialize, the CORE does

    -it's difficult to maintain the relationship just by default, you have to have people running this maintenance

        -generally there's some buy-in from the local elites as well

american vs british school

    -positivism vs historicism

        -positivism) we can test everything, can come up with answers that are statistically significan

            -causal way to do things

            -american school

        -british school rejects this

            -'social science needs to be more fluid, historically aware'

            -rejects idea that scientific laws will come forward to explain behavior

what would marx say about mortgage market meltdown?

    -part of the evolution of the market economy

    -capitalism as a system is ultimately bad for the capitalist as well

    -marx sees capitalism as a negative sum game

IIPE NOTES 9-16

Floating market e-rates

speculation

not money

gold standard

    -failed after WWI

    -countries failed to abide by the regulations that went along with the gold standard

capital controls

bretton woods

compromise of embedded liberalism

closing of the gold window

petrodollars

eurodollars

stagflation

opportunity cost

law of comparative advantage

MFN

washington consensus

strategic trade policies

dumping

export subsidies

NTB

carousel trade sanctions

free trade/fair trade

dispute settlement panels

engagement v. sanctions

LEHMAN BROS

they declare bankruptcy

    -management gets fired, so does EVERYBODY ELSE

    -the courts sell off all of their assets, pay off their creditors in some sort of order

IIPE Notes 9-18

home bias
soverign wealth funds
hipcs
baker plan
brady plan (+bonds)
S+L crisis- resolution trust corp
structural adjustment policies
liquidity
balance of payments
credibility - confidence
IMF conditionality
capital flight
pegged currency
NAFTA
contagion- thailand - malaysia, indonesia, SK
crony capitalism v. arms length
asian financial crisis
argentine financial crisis
russian financial crisis

IIPE Notes 9/25

Millenium Challenge Acct

-US pledged to double this by 2006 and again by 2010

-one of the reasons the US is against foreign aid in general is that we feel it's SQUANDERED

-replaced by trade, economics, tied aid (aid with strings attached)

-millenium challenge has strings attached to it

-countries that receive this aid get judged on freedom (political and economic)

-other liberal qualities

-so millenium challenge aid is targeted to countries that are 'poor, but on the way up'

-to encourage democratic accountability

-so basically, money isn't going to the 'failed states'

-money doesnt go to corrupt and failed governments.. which is good but also bad

Failed States

-not just as a political/humanitarian problem anymore

-now it's a realist problem as well

-dynamite is cheap, they blow us up

-they're important!!

-no arms control

-porous borders

-no mafia/organized crime control

-not, by and large, linked into the international political economy

ISI

-import substitution policy

-instead of importing a car from the most efficient country, they make it entirely themselves

-give subsidies to domestic producers, put tariffs on foreign producers

-this means that you don't need to have currency conversion, you also gain high-skilled jobs, etc

-problem 1) CORRUPTION- subsidies bring corruption

-problem 2) NO INNOVATION- no competition, no incentive for innovation, really really poor quality

corruption

-LOTS OF IT

-especially with import substitution

transparency

-washington consensus cares about this

accountability

-washington consensus cares about this

peace through patronage

-a construct for aid

-we pay people not to attack us

-basically it's cause we're assuming he can keep the domestic peace

-nooooot necessarily a good assumption

paradox of plenty (resource curse)

-you would expect that countries like saudi arabia would be happygolucky

-they have RESOURCES

-government isnt poor

-this isn't necessarily the case

-when your money comes from selling shit, your profits BOUNCE

1) rev. volatility

2) excess borrowing

3) corruption

4) lack of diversification

-they borrow, but don't diversify with the borrowed funds

-there's a killing the goose that laid the golden egg metaphor in here somewhere

-the problem is that the country has to be sure that the staple will REMAIN valuable

-this is the East Asian Miracle

-east asian rulers sat down and ACTUALLY DIVERSIFIED and grew their economies

-they were interested in their countries' advancement rather than JUST personal gain

5) conflict

-you see lots of seperatist movements where there are natural resources to fight over

-so there's a real reason to fight- RESOURCES

6) lack of taxation - corruption

-if you're resource-rich, you don't tax your people

-so the people have NO VESTED INTEREST in the country

7) human resources

-the best and the brightest go to where the money is

dutch disease - resource boom - e-rate up - x up - capital + labor away from man. + ag. sectors - raising -

has something to do with what the resource boom has to do with the exchange rate

-you're suddenly 

production costs

J-curve - insulate reformers politically

-problem is that the initial impact of reform is negative

-it's only after a while that the reforms are good for the economy

-if people are voting at the bottom of the j-curve, they'll kick the reformers out

microfinance

-a $20 loan goes a loooong way, but means next to nothing to a bank

network externalities

-talks about how it's possible that becomes more valuable as more people join

-as opposed to the tragedy of the commons

-also responsible for geographic economic effects

-clustering of businesses (like silicon valley, etc)

IIPE Notes 9-30

subcontracting

-companies would subcontract to mom-and-pop shops

-they absorbed most of the pain of unemployment

-you can't fire lifetime workers, so you lay off the mom-and-pop subcontractors

distribution systems

-the mom-and-pop shops were all part of this elaborate, inefficient system

-instead of having one big store that sells everything, it's all spread out

-higher wages for trucks driving in one direction, etc

-basically a means to employment

-all highly regulated, so it's hard to change

-this worked as a huge barrier to international products making their way into the market

lifetime employment

-you get low wages!

postal savings bank

MITI (now METI)

-ministry of something

-trade and investment

late developer (gerschentron)

-theory was that capitalism grew organically in britain, it's not so easy afterwards

-the later you are a developing economy, the more state intervention in the economy is necessary for capitalism to grow

-japan, germany, etc

-japan is the QUINTESSENTIAL late developer

-between 1965 and 1985, japan grew at an average rate of 8.5%, which is HUGE

-it went from being a backwater defeated country to an industrial powerhouse

lack of resources

free ride - security umbrella

market share v. profitability

-japan's downfall

-no real market control until 1996 in the financial big bang of 1996

-no company was really thinking about profitability, which was a PROBLEM

-they never had to pay real rates of return until 1996

-financial big bang (1996)

zaibatsu now keiretsu

-before the war, zaibatsu were large industrial conglomerates that were supposed to be broken up

-they turned out to be hugely efficient, so they stuck around as keiretsu

-what they were were family groups of organizations

-each
had a bank, import/export trading arm, industrial network, each had a
hard manufacturing component, did business with each other, were
organized as huge industrial holdings

-companies would do business only within the family whenever possible

-so they company could make subsidies available to struggling parts of the business

-so not "pure" capitalism

uncommon democracy

-japan is a sort of "managed democracy" or "managed capitalism"

-japan's been under effective 1-party rule for like 50 years?

"corporatism without labor"

-this is japan

-even though japan technically had labor unions, they were EXTREMELY weak

-wages were able to be kept relatively low relative to what they might have been in an open system

-basically the tradeoff for lifetime employment was low pay

international balance of payments deficit

1970 -> gov't management

int rate subsidies

asset-price bubble (1989)

-people started investing in real estate (just like in america)

-lots of successful small businesses started doing this too

-bubble was both in the stock market and real estate market

-same as what happened here

-banks hold all of these assets, and nobody knows what they're actually worth

-the Bank of Japan decided that it was too risky to let all of these banks fold

-especially because there's no real welfare system in japan

-BoJ just said to keep everybody in business and pump the country full of currency

fiscal stimulus package-> >$1 trillion after 10 years

-their idea was to pump money into the economy to force people to spend money

-there's negative real interest rates in japan

-I-rates are like 0.5%

-this still didn't work, because despite all these efforts, it was too little too late

-people were still hesitant, still saving

-now, in the last few years, it's been getting a little better, but for a loooong time nothing worked

artificially high- dollar low

-high dollar policy

-artificially boosts purchasing power

-keeps the currency's worth high

-was able to keep out foreign investments, also have booming trade

-as of 1992, the government stopped fixing the yen, it's devalued since then

"catch up" hypothesis

-if you're going off a small base, it's easy to show a lot of double digit growth year after year

-also because you're able to see what you're aiming at- using known variables, essentially

THESE ARE THINGS THE STATE DID IN JAPAN

-wage equality

-hierarchical promotion

-within a firm there was a certain amount of promotion that was to be had

-no matter the merit of the person, you get promoted at the same rate as everybody else (at least to start)

-hurts incentives to work hard

-real meritocracy (until recently)

-people would take entrance exams to college which would determine where they went

-people who went to the best colleges got ministry jobs, so they were well-run

-amakudari-> older workers got parachuted down into lesser positions, so young people transitioned seamlessly

large scale retail store law 2000

-this was a way to get around the distribution network problem that prevented foreign companies from selling goods

IIPE NOTES 10-2

Little Dragons

    -asian countries that end up going towards japanese model

Lucky timing

    -an explanation that looks at the fact that little dragons
were starting to develop at a time where consumer goods were in HUGE
demand

US Security umbrella

    -they didn't have to spend their money on national defense, because the US covers them

external threats

    -presence of external threats had a way of unifying the country against a common enemy

        -CHINA

destruction of old order

    -happened as a result of WWII

        -because the elite class was wiped out

            -collaboration with japanese, kicked out and exiled, whatever

nationalism- no ethnic conflict

    -ethnically homogenous countries, for the most part (except malaysia and indonesia)

    -'we're all in it together' mentality

    -sharing of productivity growth

policy learning/ex of japan/ex colony exp

    -being colonized by japan gave ex-colonies a familiarity with japanese institutions

        -helped them be more comfortable adopting progressive institutions

confucianism

    -religion that promotes collective work together

WORLD BANK REPORT

macroeconomic stability

    -world bank says that this is the main reason for the little dragons' success

    -macro stability was never in question

    -meddling by the state never threw into question the stability

    -inflation was ~1/2 what it was in other developing countries

openness to international economy

    -singapore was HUGELY open

low taxes

    -it's better to set a realistic tax rate that people will comply with rather than an unrealistic one that people will evade

    -gotta be something easy to comply with because there's no huge bureaucracy to enforce

    -so you see low taxes but really high compliance rate

state allocation of resources

    -through the same mechanisms a japan

    -artificially repressing consumption by the people

        -as the standard of living could have grown, they just suppressed consumption

    -people didnt start consuming to their potential until much labor

    -they deliberately targeted industries in which they did NOT have a comparative advantage

high savings rate

    -a result of no-welfare-state

    -families take care of elderly parents, people save for retirement

    -basically there is no state unemployment, no state disability, no state retirement

        -incentivizes savings

equality-income ratio

    -extremely equal spread of income

education/infrastructure

    -the kinds of literacy rates that were achieved by the little dragons are incredible

    -even after the crash, these countries have some of the highest literacy rates

exchange rate manipulation

no politics of left (eg min wage)

    -no min wage, no welfare state, reduced consumption, forced savings
authoritarian governments forced savings

    -all of ^ comes with this territory

    -govts need legitimacy

        -lots of different ways to get this

        -authoritarian govts got legitimacy by creating favorable socioeconomic conditions 

    -this is not DEMOCRATIC legitimacy

land reform

    -it was possible because of the absence of entrenched interests

    -the war having taken off the japanese occupation

    -leaves an 'open field', opportunity for the govt to redistribute land equally

bureaucratic competence/honesty

    -why didn't the elites do what every other elite class did- become corrupt?

        -nobody really knows

        -people look at nationalism and confucianism to explain it, but eh...

strong business/government ties

countries that count as little dragons?

    -singapore, hong kong, taiwan, korea

        -they got started about 10 years earlier than this next group

    -malaysia, thailand, indonesia, vietnam, NEVER burma or phillipines

IIPE NOTES 10-7

EU


Free Trade Area
    -trade within your country without borders
NAFTA
Customs Union
    -can't have different tariffs at points of entry in your market
Economic and Monetary Union
    -all member states (except UK and Denmark) are required to join monetary union and Euro
        -this means UNIFIED monetary policy
    -ECB makes decisions based on EUROZONE data, not specific country data
        -ECB members arent supposed to vote on national basis, but on EURO basis
        -but things dont usually happen except by consensus
            -so ECB is MUCH LESS RESPONSIVE than Fed
    -also, ECB ONLY has a mandate to fight inflation, not to promote growth (like the fed)
    -what are the benefits?
        -economics of scale
            -HUGE market opened up
        -smaller countries are insulated to some degree from the world economy
EFTA
    -European Free Trade Area
        -basically an alternative club that didn't want the political implications of the EU
    -problem was that EFTA provided no large trading partners to trade with
        -so UK and them just joined the EU
CAP
Euro

Trade Diversion - redirected trade
    -basically this means that production is redistributed
        -factories relocate, all that good stuff
            -it's "costly" to certain nations to redistribute production

revolutions from above (negotiated) poland, hungary, ussr/russia
revolutions from below (radicals in the street) germany, czecholsovakia, rumania
J-curve



Comecon Countries
    -equivalent of western europe integration for countries that were trading with USSR (Russia)
    -all of these economies had complete redirection of trade towards the soviet economy
        -not diversified at all
        -they just made a certain thing for USSR and that was pretty much it
    -problem was that if you don't have prices, you have no indicators of efficiency
        -basically people knew their product was gonna be bought, so no reason to innovate/make more efficient, etc
        -so basically these countries were just feeders into some portion of the soviet economy

IIPE NOTES 10-9



Voucher Privatization

oligarchs

shock therapy

j-curve

information cascades

poland roundtable



breznev doctrine 1968

gorbachev doctrine 1989

"sinatra doctrine"

solidarity 1980

lech walesa

speed of transitions

initial condition

Pans Club/IMF conditionality


IIPE NOTES 10-14

QUESTION TIMES

Prof

    -Thurs Oct 16, 4-5pm RTBA

Rasim

    -Fri Oct 17 4-5pm RTBA

Office Hours

HER

    -Tues/Thurs 1-2pm Greenhouse 210

Rasim

    -Wed 9-11 466 Merg

EXAM

    -blue book exam

    -1 section of IDs

        -1 paragraph or less, what it is and why it's important

    -~3 essays

NOTES

Demand v. Supply

Decentralized Network Economies

Can companies be responsible?

Why don't states cooperation on transnational crime?

Opaque Numbers

Recordkeeping

Problems with Legal Migration?

    -the US doesn't put criteria based on skills or anything like that

        -something like a lottery?

    -canada DOES, however

        -we need nurses, for example

    -one of the reasons why europe regulates migration so much is because of their huge welfare state

        -it's EXPENSIVE to take these people

Brain Drain

    -problem with legal migration

    -problem is that the migrants use up scarce university resources in other countries and pulling them to canada or the EU

    -this is a problem in the EU

        -don't want to create a brain drain, so there are some sorts of labor restrictions

Assimilation

Diaspora

    -it's a large ethnic group that is actually outside the country    

        -people from the same country 'helping each other out'

        -it actually becomes an economic argument

        -CHINATOWN, for example

Remittances

    -people come to america for the sole purpose of working and sending money back home

Human Trafficking

    -slaves and shit

    -labor trafficking is the most common

        -dude who employs mexican day laborers, for example

    -also bonded labor

    -involuntary servitude

        -people are kept as laborers for fear that if they escape, their family will be killed (for example)

Debt Bondage

    -human trafficking

    -you 'pay' someone to take you across borders to a different country

        -you work off your debt in service

Forced Child Labor

Child Soldiers 

    -lots of them in africa and also the middle east

    -300,000 children are child soldiers today

        -fight for whatever group captures them

IIPE NOTES 10-16



Gilpin: "Every economic system rests on a particular political order, its nature cannot be understood aside from poltics."

Cox: "Theory is always FOR someone and FOR some purpose"

what do liberals want the government to do?

    -TRANSPARENCY

    -act as officiator

        -guarantee contracts, etc

    -milton friedmanite- LOWER TAXES, CUT SPENDING

    -keynes- shoulda regulated to start with, now just SPEND TO GET OUT OF RECESSION