320 - Junior Economics Tutorial

College of Social Studies

 Spring 2013
Economies in Transition


  
John P. Bonin
Friday:  2:00 p.m. - 4:00 p.m.
Location:  PAC TBA

 

Office:  PAC 305
Office Hours:
Tuesday:              2:40 a.m. –  4:00
Wednesday:         2:00 p.m. –  4:00 p.m.
Other Times:         Possible but please make prior arrangements

Contact Information:   jbonin@wesleyan.edu or x2353

 

Week 1   Week 2   Week 3   Week 4   Week 5   Week 6   Week 7

 

Course Information

Description

The transition of the formerly centrally planned and bureaucratically managed economies of the now-defunct Soviet bloc to market economies based on private property and individual initiative is an event unparalleled in history. Each student will become an expert advisor to one transition country by researching its pre-transition background and learning in detail about its transition experiences throughout the tutorial.  At the end of the tutorial, each student will submit a country expert report dealing with a policy issue of relevance to the chosen country. 

The first week examines the beginning of transition by considering the legacies of the old, pre-transition regime and the resulting initial conditions for the transition.  In the second week, the speed and sequencing of policies are considered with a focus on the so-called trinity of liberalization, stabilization, and privatization. The third week addresses prospects for sustainable growth by analyzing the experiences of two decades of transition in thirty-one countries. In week four, each student presents a research prospectus and a progress report on the country project.  Weeks five and six are dedicated to a consideration of China, which is considered to have pursued a gradualist transition strategy.  China’s rapid economic development and impressive economic growth over a more-than-three-decade period are unprecedented in modern economic history. The final week is devoted to presentations of the students’ country reports.

Texts (available for purchase at Broad Street Books)

Gerard Turley and Peter J. Luke, Transition Economics: Two Decades On Routledge (London and New York) 2011
     (hereafter referred to as: Turley & Luke) Paper ISBN: 978-0-415-43882-7 Ebook ISBN: 978-0-203-84291-1

Barry Naughton, The Chinese Economy: Transitions and Growth, MIT Press, 2007 (hereafter; Naughton)
    
Paper ISBN10-0-262-64064-3

Other Readings  

Several articles published in (The) Journal of Economic Perspectives (hereafter: JEP) appear on the course outline that follows.  Others may be added at the instructor’s discretion. All journal articles will be accessible electronically; the ones listed below are all archived in JSTOR.  Go to Indexes section on the Wesleyan library page and type JSTOR in the search box. From the JSTOR page, browse by Title to find the journal and use the citation in the course outline to find the article.

Writing Assignments

The first week consists of a “getting-acquainted” shorter paper involving research into the legacies and initial economic situation in the student’s chosen country.  In weeks two and three, standard five-to-seven-page tutorial papers on general topics of transition economics are assigned.  All tutorial papers must be completed before the tutorial discussions. Week #4 is reserved for the research prospectus and précis of work in progress for the country report.  Weeks five and six focus on the two phases of transition/development in China with standard five-to-seven-page tutorial papers assigned.  The first of these takes a microeconomic perspective, while the second deals with macroeconomic issues.

Country Research and Final Report (12 – 15 pages)

Each student will become an expert advisor on one transitioning country.  Background information on the chosen country’s initial economic situation prior to the start of its transition is the main component of the writing assignment for week #1 and it requires basic outside research.  Some minor additional outside research for country-specific information is expected in weeks #2 and #3.  A research prospectus précis of work in progress for the final country report, which treats in depth some policy issue relevant to the country, along with a preliminary annotated bibliography are due in week #4.  The final report is due in week #7.

Writing tips are provided at the end of this syllabus; these may be useful in preparing the tutorial papers as well as the final country report.

Choosing Your Country:  From a List of Thirty-One                            

Turley & Luke provide a complete list of the 31 transitioning countries in Table 0.2 on pages 9 and 10.  You may choose any country from this list.  To help you make your choice, consult this table and Table 0.3 on page 11 to find some current economic information for all 31 countries. If you choose China as your country, you must consult with the instructor after the first tutorial to make sure that you will be considering a topic that is sufficiently different from those covered in weeks 5 and 6 of the tutorial.


Choose your country judiciously. Policy advisors who switch countries lose credibility!

Week 1   Getting to Know Your Country: Legacies & Initial Conditions

Turley & Luke:  Introduction and Chapters 1 & 3

Outside Research on Country

Tutorial Paper Week #1    Getting Acquainted

        Choose the transition country for which you wish to become an expert advisor and on which you will write your country research report.  Turley & Luke provide a complete list of the 31 transitioning countries in Table 0.2 on pages 9 and 10.  You may choose any country from this list.  Some current economic information is provided in this table and in Table 0.3 on page 11.  Make sure that you cover the following prompts in a well-integrated prose essay.

 

  • Provide a date for the beginning of the transition in your country and provide details to explain why this is the relevant start date.
  • Describe the salient economic features of your country at the beginning of its transition. Table 3.1 on page 135 and Table 3.2 on pages 138 and 139 in Turley & Luke (hereafter: T&L) may be helpful.
  • Regarding the imbalances and distortions inherited from the previous economic system, consult Figure 3.1 on page 137 of T& L and place your country on this four-quadrant diagram.  If you have chosen one of the countries that are already positioned on the diagram, either state your agreement with its placement or propose an alternative position.
  • Provide a detailed justification for your placement of the chosen country making sure that you identify all aspects of macroeconomic imbalances and microeconomic distortions. 
  • Based on your consideration of initial conditions, identify the most important economic problems facing the policymakers in your country at the beginning of its transition.

 

References:                Provide a short bibliography in which you list all the sources that you consulted to obtain information on your country using the standard formats used in the bibliography in T& L. Electronic sources should be identified as is done at the end of the box on page 8.    

N.B.                          The references should be put on a separate page that does NOT count toward the
                                  following page limits.

Expected Length:      No more than five (5) but at least three (3) double-spaced typewritten pages in standard
                                  font
of normal size, e.g., this assignment is typed in Times New Roman, size 12, with standard
                                  page margins.


Week 2  Transition as a “
Process”

Turley & Luke:  Chapters 4 & 5 & 6
                       Chapter 2: pp 82-84 for data only
                       Chapter 9: pp. 300 - 328

Murrell, Peter, "How Far Has Transition Progressed?”  JEP,  10:2, 1996, pp. 25 - 44.

Brada, Josef C., “Privatization is Transition - or Is It?” JEP, 10:2, 1996, pp. 67 - 86.

Tutorial Paper Week #2  Transition Strategies Meet Privatization Policies

        Using the readings in this module, explain your understanding of transition as a “process”. Country experiences with the (un)Holy Trinity of liberalization, stabilization, and privatization capture the essence of interdependencies of economic policies and the difficulties with the sequencing and speed of transition (see T&L,  p. 159, Fig. 5.1).  Discuss fully these interrelationships and their implications for the sequencing of policies and the speed of implementation.  Based on your analysis, characterize the two polar extremes of shock therapy and gradualism as overarching transitions strategies.  Conclude by classifying your chosen country’s transition strategy based on policies pursued during the beginning few years (no more than five) of its transition and defend (explain thoroughly the reasons for) your classification.  Based on Murrell’s analysis, explain how far transition has progressed in your country.

        In 1996, Brada claimed that privatization may not be such a crucial component of transition.

Using the information in the readings, compare (and contrast) the early experiences of the transition countries (on which Brada’s claim is based) with more recent data.  You may find it useful to compare the different methods of privatization chosen by the countries as catalogued in T&L, Table 6.3 with a measure of the size of the private sectors in the same countries listed in T&L, Table 2.6.  Characterize and evaluate your chosen country’s experiences with its own privatization policy by adding details from your research. Conclude by addressing the following question and supporting your answer with evidence. Do you think that the debates about how to privatize were “much ado about nothing” in retrospect?

References:    As before, provide a short bibliography listing any the sources that you consulted to obtain information about your country using the standard formats.  The references should be put on a separate page that does NOT count toward the page limits. Please follow this practice for the all future writing assignments.

Expected Length: No more than seven (7) but at least five (5) double-spaced typewritten pages in standard font of normal size.

Suggested Coverage: Roughly equal space to be allocated to each paragraph for a careful and thorough consideration of the material in the readings.  Your own country’s experiences should be used only to illustrate the points made they should but not take up any appreciable space.

 
Week 3  Transition as Outcomes: Stabilization and Sustainable Growth

Turley & Luke:  Chapters 2 & 7 & 10 and Appendix 2 (data)

Fischer, Stanley, Sahay, Ratna, and Végh, Carlos A., “Stabilization and Growth in Transition Economies: The Early Experience,” JEP, 10:2, 1996, pp. 45 - 66.

Tutorial Paper Week #3 Drawing Lessons from Experiences: Policies Matter But… 

        In 1996, Fischer and his IMF colleagues asserted that only price and trade liberalization coupled with macrostabilization could be achieved quickly while other elements of the reform process would inherently take time. The objective of stabilization policy is to provide the macroeconomic foundations for the resumption of growth after the “transitional recession” or early output slump and the inflationary spike following liberalization experienced by most transitioning countries (see T&L, Tables 2.2, 2.3, and 7.7).  Using evidence from the readings, compare (and contrast) the early (before 1998) experiences of the non-CIS countries and the CIS countries with respect to the output slump, inflation, and recovery.  Do you agree with Fischer and his colleagues that stabilization is both a necessary and a sufficient condition for the resumption of sustainable growth?  Why or why not?  Using the post-1998 experiences of the CIS and non-CIS countries, discuss thoroughly the interdependencies between stabilization and sustainable growth for transitioning countries (see T&L, Tables 7.1and 7.3).  In what sense are stabilization and sustainable growth true partners?  Evaluate your country’s experiences with its own stabilization policy and growth outcomes by adding details from your research.

The following prompts may prove useful in developing your argument but they need not all be addressed.

  • · What policies do the readings find to be critical for achieving macroeconomic stabilization?
  • · What role does an exchange rate anchor play in macroeconomic stabilization? 
  • · What role did external pressures play in macroeconomic stabilization in the CIS countries? 
  • · What do the readings identify as the crucial determinants of growth in transition countries?

References:    As before, provide a short bibliography listing any the sources that you consulted to obtain information about your country using the standard formats.  The references should be put on a separate page that does NOT count toward the following page limits. Please follow this practice for the all future writing assignments.

Expected Length: No more than seven (7) but at least five (5) double-spaced typewritten pages in standard font of normal size.

Suggested Coverage: Devote most of the space to a careful and thorough consideration of the material in the readings.  Your own country’s experiences should be used only to illustrate the points made but not take up any appreciable space.

Week 4  Research Prospectus and Précis of Work in Progress

A research prospectus and précis of work in progress contains three essential components.

  1. The motivation for the research and a statement of the research question. A clear statement of the focus of your research with a specification of the research question should be provided.
  2.  A statement of the research approach to be taken and the progress made should be provided.  The following questions may provide useful prompts for presenting and developing the research approach.  However, they are not intended to be a list of exam questions to be answered individually. 

 

Please use judiciously!

 

  • · How do you intend to answer the research question?
  • · What evidence will you seek?
  • · What supportive argumentation will you use?
  • · What are your anticipated results?
  • · How do you expect to support any resulting policy conclusions?

In addition, a brief statement of the work you have accomplished to date should be included.  This statement should identify any difficulties that you foresee in dealing with your research question so that the instructor can provide help in a timely manner.

    3.  An annotated bibliography. This consists of a list of sources that you have found to date for your research project.
         Each citation is accompanied by two or three sentences that link the material in the source directly to your
         research question
.  You must explain why you think that this source will be useful in dealing with your
         research question.  The references should be arranged alphabetically by the author’s last name. Be sure
         to include full information in your citations.  See the bibliography in Turley & Luke for examples of proper
         formats for citations.

Expected Length: 

              Sections 1 and 2 combined should be at least three (3) but no more than five (5) pages.

              Section 3 should be at least two (2) but no more than three (3) pages.


Week 5
China as a Transitioning/Developing Giant

Turley & Luke:  Chapter  9, pp. 328 – 344 for an overview

Naughton:      Background: Chapters 1 & 2 & 3 (skim)
                     Read:  Introduction and Chapters 4, 12 & 13

Jefferson, Gary and Rawski, Thomas, “Enterprise Reform in Chinese Industry,”
                   JEP, 8:2, (Spring) 1994, pp. 47 - 70.

 
Tutorial Paper Week #5       China: Gradualism or Procrastination?

Beginning in 1978, China began to reform its economic system in what is described as a “gradualist” transition to a market economy.  Considering only two of the (un)Holy Trinity, specifically liberalization and privatization, provide a detailed rationale for considering China to be the poster child for gradualism as a transition strategy.  In the introduction, Naughton discusses the current diversity in China and attributes it to two incomplete transitions.  In Chapter 4, Naughton divides the thirty years of reform in China into two phases; he characterizes the first phase as “reforms without losers”.  Do you agree?  Explain.  Discuss reasons for characterizing the first phase as incomplete.  What was left to be done?  Identify and explain the rationale for procrastination by the government on privatization in this phase.

Rawski and Jefferson conclude their analysis of the first phase of enterprise reforms in China with this optimistic statement:  “… the current acceleration in the tempo of industrial reform, with its new focus on establishing conditions similar to standard market arrangements, may open the way to harnessing China’s potential for further gains in industrial productivity without creating intolerable political tensions or social costs.”  What changes were not anticipated by Rawski and Jefferson that support Naughton’s more pessimistic characterization of the second phase as “reforms with losers.”?   To probe further Naughton’s distinction between the two phases, relate the outcomes from policies undertaken in the first phase to subsequent enterprise reform policies introduced in the second phase. Discuss the consequences of these enterprise reform policies undertaken in the second phase and identify any resulting distortions.  Establish the sense in which the second phase of enterprise reforms leaves incomplete China’s transition to a mature, developed market economy.  Identify and explain the rationale for any continued procrastination on enterprise reform.

Expected Length: No more than seven (7) but at least five (5) double-spaced typewritten pages in standard font of normal size.

Suggested Coverage: Roughly half of the space to be allocated to each paragraph above.  Please note that the material in the second paragraph is devoted to enterprise reform only. 
        

Week 6 China as a Global Economic Powerhouse

        Turley & Luke
:  Chapter  9, pp. 357 – 368 for an overview

Naughton:   Chapters 6, 16 & 17 & 18 & 19 & 20

Tutorial Paper Week #6   China: Opening Up With Impressive (Sustainable?) Growth

        In the last three decades, the speed of China’s economic development and its growth rates of GDP are without precedent in history.  Using information from the readings, identify the main macroeconomic engines (determinants) of China’s rapid growth during this thirty-year period.  Did the primary engine of growth change from the first to the second phase? Discuss the aggregate sectoral changes during these three decades and the role played by globalization in China’s growth story in each of the two phases. Be sure to include relevant data from Naughton and from the handouts distributed at last week’s tutorial meeting.

        Provide an overview of the emergence of China as a global economic powerhouse.  Include the roles played by international trade, international finance, and domestic finances using the concepts and relationships discussed in last week’s tutorial session.  Discuss fully the interrelationships among the important macroeconomic relationships.  Be sure to include relevant data from Naughton and the handouts.  Returning to Naughton’s statement about incomplete transitions, identify the major aspects of the Chinese economy that continue to impede the completion of its transition to a mature, developed market economy.

        Conclude your essay with a brief assessment of whether China’s current transition path is leading the country toward a harmonious society, which is the overarching policy goal adopted by the Chinese Communist Party at its Sixth Plenum meeting (see T&L, p.368).  Does a harmonious society differ from a mature, developed market economy?  What is left to be done for China to achieve its stated goal?

Expected Length: No more than seven (7) but at least five (5) double-spaced typewritten pages in standard font of normal size, e.g., this assignment is typed in Times New Roman, size 12, with standard page margins.

Suggested Coverage: Roughly equal space to be allocated to each of the first two paragraphs above.  No more than one page to the last paragraph.

                                   

Week 7  Country Expert Research Report

 Expected Length:  Twelve to Fifteen pages with a bibliography at the end that is not included in the page count.

                                                                               WRITING TIPS

1.  Every paper should have an integrative theme in the introductory paragraph. The integrative theme specifies the
     position that will be taken and defended; hence, it serves as a selection tool to guide the writer in determining
     what to include in the final version of the paper.

Write no paper wihout an integrative theme.


2.  The easiest way to develop a strong argument is to force differences.  Sometimes this can be done effectively
     in a point-counterpoint framework.  Evidence and well-structured logical arguments are the foundations of
     good analytical writing.


Make sure that your paper deals with the topic in sufficient depth.


        3.  Each paragraph must have its own integrity and be brought to closure.  A paragraph is NOT a laundry list of
             assertions. Nor should a point-counterpoint development be left unresolved to drift into oblivion.

 

You should be able to state the basic point of each paragraph using a four-word phrase.

 

Each paragraph must bring the point to closure.
CONCLUDE a paragraph; don’t simply end it.

  4.  A paper is like an hourglass.  The introduction begins from a broad perspective to motivate the paper and
       narrows by stating the integrative theme. The body of the paper develops fully and solidly the position in
       the integrative theme. Paragraphs make individual points; they are arranged sequentially to support and
       defend as strongly as possible the position taken. The conclusion does not simply restate the position or
       recapitulate what has been done.  Rather the conclusion should convince the reader that the writer has
       supported the position compellingly. 

 

Convince the reader of the strength of your analysis in the conclusion.

 

FROST YOUR CAKE!