CSS 330
GiulioGallarotti
Spring 2010
Office Hours:
Room PAC 422
Th,F: 11-12
Friday 2‑4
Room 309
Ext. 2496
ggallarotti@wesleyan.edu
WEEK 1 WEEK 2
WEEK 3 WEEK 4
WEEK 5 WEEK 6
WEEK 7
COURSE
DESCRIPTION
This sequence in the junior tutorial covers some of the major issues in
international political economy today: trade, monetary relations, the
environment, underdevelopment, and globalization. International economic
relations will be studied in light of domestic and international
political and economic forces. Political economy constructs will be subject to
critical analysis primarily through competing theoretical perspectives and
historical background. The principal theoretical visions that will inform the
analysis will be Liberalism, Mercantilism and Marxism. Another principal goal of
this tutorial will be for students to begin research on their senior
thesis/project in the form of a 20 page research paper. Individual meetings will
be scheduled between the tutor and students to marshal the project along.
THE POLITICIZATION OF
ECONOMIC RELATIONS
Economic processes and relations do not exist in a vacuum. Given the fact that
political leaders are entrusted with guiding the material fates of their
societies, the execution of macroeconomic and foreign economic policy in nations
today is susceptible to the ebbs and flows of political discretion. The
simplified models of economists often assume political forces away, thus
arriving at what they would consider to be the optimal modes of managing the
flow of goods and services both nationally and internationally in anything but a
real-world setting. There are many examples of how politics influence (positive
economists would prefer to say "soil" rather than "influence") economic
processes and policy, some will be discussed in this course. The political
business cycle is one example. Economists have found that inflation tends to
rise toward the end of U.S. presidential terms (i.e., rise previous to
re-election periods). Is this just a coincidence? Public choice economists think
not. Empirical studies show that voters have become increasingly sensitized to,
and therefore driven by, the performance of political leaders in terms of the
economic prosperity of their nations.
One
indicator that often determines voting preferences is the level of unemployment.
Inflating an economy can bring large political benefits because it acts to
increase unemployment in circa three-quarters to one year. Incumbents therefore
derive substantial utility from causing inflation before elections, and using
the safe haven of the post-election period to bring inflation down. Hence, to
the extent that monetarist economists are correct in their theories about how
economies work, we can expect the business cycle to be predictably synchronous
with elections: it is boom before elections and bust afterward. Moreover,
empirical studies have also shown that there is a predictable relationship
between macroeconomic policy and political ideology, especially in the developed
world. Right-wing governments tend to pursue low-inflation, higher-unemployment
policies; while left-wing governments do the opposite. The transition in
political structures in the OECD from the 1970s to the 80s roughly confirms this
trend.
The thrust of the analysis of international political economic issues from the
"political" side will emanate from this theme. The political forces that shape
international economic relations will be sought and critically examined in terms
of their influence and their relationship to the more conventional economic
forces that shape policy and exchange. In studying the evolution of trade
policy in the developed world across the 19th century, we see an interesting
cycle in the trade policies of European nations and the U.S. There were various
political forces that were brewing and influencing trade policy at the time.
Most of those forces continue today. Similarly, the imperialism of the late 19th
century has conventionally been explained as the international manifestation of
advanced capitalism (a purely economic explanation). But much was going on in
international politics that suggests there were many political advantages (in
terms of the balance of power) in securing overseas territory.
The interwar Depression was an economic phenomenon, but Kindleberger argues that
the length and depth of the Depression were the result of the U.S. being
unwilling to lead the international system as an economic underwriter. What was
at the root of U.S. reluctance? This was a period of intense tariff politics
according to Schattschneider: groups were trying to use trade policy to
redistribute income toward themselves. The building of Bretton Woods presents a
similar situation, but in this case the U.S. literally built and ran a world
economic system. Many point out the economic advantages, but what of the
political advantages? A rebuilt Europe provided a pro-U.S. buffer between the
Soviet Union and the U.S. Furthermore, there were many who believed that
depression causes war. A prosperous world was supposed to be a more peaceful
one.
In the area of cartels, people often talk about the economic preconditions of a
successful cartel, i.e., low price elasticity of demand, nonperishable goods, a
large market share. But what of the political preconditions? Can we say that the
success of OPEC owes more to favorable political and cultural conditions? In the
area of foreign direct investment, the standard business school curriculum
stresses the reasons for creating equity abroad and the way in which
international structures of production are configured. Political scientists are
much more concerned with relational issues such as the ways in which MNCs and
their host countries bargain. In this bargaining for advantage, there is a
playing out of a large constellation of political and economic forces.
Finally, many think that LDCs are poor because they lack the economic means for
progress. Students of development have conventionally approached
underdevelopment as an economic problem. The solutions to underdevelopment, they
claim, are therefore to be found in the economic realm: providing more
productive capital or technical training in regions starved for machines and
skilled labor; or increasing lending to areas where there are shortages of
money. In any case, solutions converge around the "smart" economic thing to do.
But when we look at African states, for example, we see the following things.
Agriculture in African states is both subsidized and taxed. States make it
cheaper to buy farming equipment, but at the same time reduce the disposable
income resulting from the sale of farm products. States explicitly pursue
modernization by keeping the prices of farm products depressed, but agriculture
is the most important sector in African economies.
Much recent research has been done on the politics of economic policy in
underdeveloped nations. Overwhelmingly, it shows that political factors often
drive the configuration of development policy. It explains the strange outcomes
we witness (i.e., above examples) as politically sensible: what is often
economically irrational, is politically rational. In this sense, it may be as
important to fight underdevelopment with political reform as with economic
reform.
Requirements
There will be weekly papers for the first six weeks: you can choose
to write papers in any of the weeks according to the following choice. You can
write either FOUR 4-page papers, or THREE 5-page papers. In addition, there will
be a longer 20-page research paper to be done on a topic of your choice. In the
weekly papers, you will be encouraged to bring in one additional outside reading
to inform your analysis. Participation and mastery of the readings will account
for 1/3 of your grade, the weekly papers will account for 1/3, while the final
research paper will account for 1/3. The assignments have been designed to
encourage variety in the skills and analysis which are brought to bear on the
research. Not only will students approach problems in a standard mode of
scholarly analysis but also frame some of their theses in a policy context as
well. Verbal presentations will also be included to develop public speaking
skills.
Readings
Readings will be available in folders in the CSS reading room. Many
of them will also be available electronically. One book is recommended for
purchase: Spero and Hart, The Politics of International Economic Relations,
6th Edition.
WEEK
1: The Theoretical Context: The Three Competing Pillars of Analysis
This
class wrestles with the competing visions of international economic relations
READINGS:
Robert Gilpin, U.S.
Power and the Multinational Corporation, Chapters 1,9
Robert Gilpin, The Challenge of Global Capitalism, Chapter 1
Alan Blinder, “How the Economy Came to Resemble the Model”
Christopher Chase-Dunn,
“Interstate System and the Capitalist World Economy: One
Logic or Two?
Robert Gilpin, “The Politics of Transnational Economic Relations”
Robert Gilpin presents the three major theories (or, scholarly traditions) of
international political economy: Liberalism, Marxism, and Mercantilism.
Liberals like Blinder see markets and economic exchange as pervasive in the
modern world. Mercantilists like Gilpin see the state as supreme, and that
economic exchange is still dominated by political forces rather than markets.
Marxist like Chase-Dunn espouse the prevalence of class relations: that the
unfolding of economic relations is neither neutral as Liberals claim nor state
dominated as Mercantilists claim, but reflective of a greater division of labor
which promotes uneven development within a capitalist division of labor. How
does each theory describe the nature of international economic relations? What
are the strengths and weaknesses of each theory? Which best describes economic
relations today?
Write
a five page paper in which you chose the vision which best explains economic
relations in the modern age. Using Gilpin’s summary of the rise of the second
great age of capitalism as well as one source as background on the state of the
modern international political economy, which of the three visions most
accurately describes the state of the world economy today?
WEEK
2: Trade Relations
This
class evaluates the three major competing visions of international political
economic in the context of explaining trade relations.
READINGS:
Spero and Hart, The Politics of International Economic Relations,
Chapters 3,7
Mordechai Kreinen, “Why Nations Trade”
Giulio Gallarotti, “Toward
a Business-Cycle Model of Tariffs”
Paul Krugman, “The Illusion of Conflict in International Trade”
Peter Lindert, International Economics, Chapter 13
Richard Rosecrance, “The Trading State-Then and Now”
Theotonio Dos Santos “The Structure of Dependence”
Kreinen explains the pure theory of trade. According to this theory or
explanation, the best possible situation for the entire world is for nations to
be trading freely (i.e., don’t impose quotas on goods nor tax them). What is
the essential logic of this vision of trade? What are the advantages of free
trade for this nation? What are the disadvantages for this nation? Do the
advantages outweigh the disadvantages? Similarly, Krugman and Rosecrance
believe that the conflictual side of trade is over-blown and that free trade
will be a pervasive force to be reckoned with. If indeed free trade is the best
policy, why does no major nation practice free trade? Indeed Gallarotti’s and
Lindert’s explanation for trade barriers suggest that protectionism is the rule
rather than the exception? Dos Santos, in typical Marxist fashion, sees the
perpetuation of free trade as a means of exploitation. Hence, all three views of
trade (Liberal, Mercantilist, and Marxist) are represented in the readings.
Liberals see free trade as fairly widespread and mutually beneficial to all
nations. Mercantilists see free trade as limited and potentially harmful to a
great many nations. Marxists see free trade as beneficial to developed nations
at the expense of less developed nations. A good sense of trade relations in the
post-war period can be obtained from Spero and Hart, Chapters 3 and 7.
Write a five-page paper as if you are the trade minister of a particular less
developed nation (select any nation) and frame the paper in terms of an optimal
trade policy for your nation based on the particular vision (Lib, Merc or Marx)
you espouse. For those who write papers, be prepared to give a short
presentation of your trade plan.
WEEK
3: Monetary Relations and the IMF
This class will look critically at the IMF and attempt to frame viable reforms
for the embattled institution.
READINGS:
IFI Advisory Commission “Report” Alan Meltzer, Chair
Graham Bird, “The International Monetary Fund and Developing
Countries”
IMF, “The Role and Function of the IMF”
Ismail-Sabri Abdalla, “The Inadequacy
and Loss of Legitimacy of the IMF”
Spero and Hart, The Politics of International Economic Relations,
Chapters 2, 6
Derive a sense of the role and principal functions of the IMF and consider the
main points of criticism brought to bear on the organization. The IMF has been
both hailed and vilified with respect to its role in promoting economic
development in LDCs. But in all cases, observes espouse the need for fundamental
reforms. One of the most comprehensive recent call for reform was sponsored by
the American Government: the Meltzer report. While many economists hail the
report as carrying important solutions for the problems of the IMF, many see the
reforms as disastrous because they do not address the real needs of the poorest
nations due to its reliance on market mechanisms and demanding conditions for
financial soundness.
Write a five-page recommendation to the Board of Governors of the IMF, the
highest decision making body in the organization, containing your own plan for
reform.
WEEK
4: The Environment
This class explores the political economy of the global environmental problem.
READINGS:
Giulio Gallarotti, “It
Pays to be Green: The Managerial Incentive Structure and Environmentally Sound
Strategies”
Robert Solow, “Sustainability: An Economist’s Perspective”
Julian Simon, “The Infinite Supply of Natural Resources”
Garrett Hardin, “The Tragedy of the Commons”
Thomas Homer-Dixon, “Cornucopians Versus Neo-Malthusians”
Andrew Dobson, Green Political Thought, Chapter 3
The environmental movement is no longer unchallenged. While the doomsayer
Neo-Malthusians preached the dire consequences of environmental degradation for
years without eliciting strong public critiques, recent years find a growing
wave of skepticism about these dire predictions about the course of
industrialization. In fact, a recent wave of Cornucopian (Gallarotti, Simon,
Solow) backlash has suggested that the environmental problem has many self
correcting qualities that make the kind of economic retrenchment suggested by
the Neo-Malthusians (Hardin, Homer-Dixon, Dobson) unnecessary. Rather than being
the culprit, growth and industrialization holds the key to solving the
environmental problem. According to this view, growth and the environment can be
self-reinforcing, rather than inconsistent with one another.
As Chair of an EPA Committee on Energy Policy making a recommendation to the
President on a viable energy policy for the U.S. over the next 25 years,
construct a viable plan (five-page paper) based on the evidence in the readings.
Hence, if you side with the Cornucopians, your plan will encourage liberal
energy use which promotes economic growth. Alternatively, if you side with the
Malthusians, you will be much more reserved in the use of energy and the
promotion of environmentally-hazardous economic growth. Those who write papers
be prepared to give a short presentation of your plan.
WEEK 5:
Underdevelopment
This class will consider some of the most recent solutions to the problem of
underdevelopment.
READINGS:
Spero and Hart, The
Politics of International Economic Relations, Chapters 5,8
Martha Nussbaum, Women and Human Development, Introduction
and Chapter 1
Amartya Sen, Development and Freedom, Chapters 1,2
Marguerite Robinson, The Microfinance Revolution, Chapter 1
Underdevelopment has long been addressed with one principal weapon:
government-to-government aid. Nothing has yet shaken the solution of aid from
its lofty perch. Yet, by almost all accounts, this solution has failed miserably
in promoting development. More recent thinking has espoused more grass-roots
solutions to the problem of poverty in the developing world. Marshaled on the
rhetoric of human development (Sen and Nussbaum), these solutions have sought to
substitute visions of bottom-up development for the trickle-down strategies
which underlie government-to-government aid. The goal here is to invest in
social capital and infrastructure, thereby producing more capable and prosperous
individuals, which in turn will galvanized local economies. Eventually, the
local growth will manifest itself on a national level. On a more logistical
level, the idea has latched onto microfinance as a viable champion. Through
small-scale lending at the local level, the foundations for national development
can be created. One interesting twist to the story is the role of women. In
fact, some microfinance arrangements have been directed exclusively at groups of
women with what many think have been stellar results (the Grameen Bank in
India). The logic of Nussbaum’s analysis of the economic and social repression
of women suggests that the liberation of women would represent a crucial
economic engine of growth for the economies of less developed nations.
You are the Chief Economic Minister (CEM) of your nation. Your assignment, in a
five-page paper, is to choose a less development nation and map out a plan of
development for this nation as its CEM. It may be a synthesis of the visions
represented in the readings, or be based on other criteria if you wish. Will
your plan pay special attention to women as an engine of growth? Those who write
papers, be prepared to give a short presentation of your plan.
WEEK
6: Globalization
This class looks at differing views of the nature and implications of
globalization.
READINGS:
Walter LeFeber, Michael
Jordan and the New Global Capitalism, Chapters 2,6
Giulio Gallarotti, “The
Advent of the Prosperous Society: The Rise of the Guardian State and Structural
Change in
the World Economy"
Sam Huntington “The Clash
of Civilizations”
Leslie Sklair, “Sociology
of the Global System”
Martin Khor, “Global Economy and the Third World”
Robert Cox, “Global
Perestroika”
Richard Barnet and John Cavanagh, “Homogenization of Global Culture”
Technology and communication have made the world smaller. Is this new “global
world” a drastic change from what has previously existed. LeFeber and Sklair
talk of the global society being created by modern capitalism. The modern
transnational corporation is spreading both goods and ideas, such that national
boundaries will crumble in the wake of common images and practices. While
LeFeber fails to make many value judgments about the implications of this
emerging global society, Sklair, Cox, and Khor take a more pejorative view of
such a society as a manifestation of Western-capitalist imperialism. Gallarotti
and Huntington think that there is much more resilience to the state and to
cultural identity than the globalist perspective admits. For Gallarotti, the
resilience of the state will mean that the world will not change as much as
globalists predict in the near future. For Huntington, it will change, but the
divisions will be along cultural rather than national lines. Barnet and Cavanagh,
alla Le Feber and Sklair, would reject Huntington’s divisions, saying that the
global culture of the future will be homogeneous. Which view or combination of
views do you think is correct?
Your assignment is to sift through the competing evidence and carve out your own
view of the nature of globalization in a five-page paper.
WEEK
7: Research Presentations
Students
will make presentations to the class on their research projects.
