CSS 330 - Junior Government Tutorial 

THE POLITICS OF INTERNATIONAL ECONOMIC RELATIONS

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

  

CSS 330                                                                                    Giulio Gallarotti
                                                                                                    Office Hours:
Room   PAC 421                                                                       W 10-11, F 1-2
Spring 2011                                                                               Room 309
Friday 2‑4                                                                                  Ext. 2496
                                                                                              ggallarotti@wesleyan.edu                                                                                                                    

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 three 5-page weekly papers for the first six weeks: you can choose to write papers for any three of the six weeks. 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 explanations 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

Amartya Sen, Development and Freedom, Chapters 1,2

Marguerite Robinson, The Microfinance Revolution, pp. 6-45

Joyce Jacobson,  "A Key Global Challenge: Reducing Losses due to Gender Inequality"

Elizabeth M. King, The Challenge of Women and Development

N. Anne Hill and Elizabeth King, "Women's Education and Economic Well-Being"

 

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), 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 the work of Jacobson, King and Hill on women and development 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 developed 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.