Fall 1998
Giulio Gallarotti
T, Th 1:10-2:30
Office Hours:
Room 421 PAC
T 4-5
Th 11-12
Office: 309 PAC
Ext. 2496
Emaill: ggallarotti@
wesleyan.edu
Online syllabus:
http://www.wesleyan.edu/
~ggallarotti/gov329.htm
I. Course Description
This course is an introduction to the study of the major
issues of international economic relations today: trade, monetary
relations, imperialism, debt, foreign direct investment,
resource cartels, development, international migration, the
environment, and the global business cycle.
Emphasis will be placed on analyzing competing theories of
international political economy. In addition, the class will
participate in simulated diplomatic bargaining exercises
on current issues of international economic relations.
II. Requirements
There will be three research papers and a midterm which
will be
held in class and be in essay form. The format of the course
will be principally discussion. Classes will be preceded by
preparation sheets which will highlight the major issues of
discussion. Weights and due dates are as follow:
Participation 25%
First Paper 25%
October 13
Second Paper 25% Due November
17
Final paper 25%
Due during final exam period
III. Readings
All readings listed on the syllabus are required and are
on reserve at the Olin Library Reserve Room. The following
are recommended for purchase at Atticus:
Charles Kindleberger, The World in Depression
Joan Spero and Jeffrey Hart, Politics of International Economic Relations,
5th Ed
Rondo Cameron, A Concise Economic History of the World
IV. The Politics of International 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, high-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
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.
V. Course Outline
Introductory Class
(September 10)
1. Theoretical Issues: Competing Approaches to
International Political Economy
(September 15)
Robert Gilpin, U.S. Power and the Multinational
Corporation,
Chapters 1,9
"Fear of Finance" A Survey of the World Economy,
Economist
September 19, 1992
2. Imperialism
(September 17)
D.K. Fieldhouse, "Imperialism: An Historiographical
Revision"
Economic History Review 14 (1961)
John Gallagher and Ronald Robinson, "The
Imperialism of
Free Trade" Economic History Review
6 (1953)
J.A. Hobson, Imperialism, Chapter 6
Stanley Lebergott, "The Returns to U.S.
Imperialism"
in Jeffry Frieden and David Lake, eds.,
International
Political Economy
Rondo Cameron, A Concise Economic History
of the World, Chapters 6, 12
3. The Interwar Period
(September 22)
Charles Kindleberger, The World in Depression,
Chapters
1,2,5-7,9,14
Rondo Cameron, A Concise Economic
History of the World, Chapter 14
4. The Post-War Order: The Rise of Bretton Woods
(September 24)
Fred Block, The Origins of International
Economic
Disorder, Chapters 1,3
Rondo Cameron, A Concise Economic History of the World, Chapter 15
Joan Spero and Jeffrey Hart, Politics
of International Economic Relations, Chapter 2
5. Issues in International Trade Relations
(September 29-October
13)
A. The Nature of Trade Relations
(September 29)
Mordechai Kreinin, "Why Nations Trade"
Peter Lindert, International Economics, Chapters 13
Giulio Gallarotti,
"Toward a Business-Cycle Model of Tariffs"
International Organization
39 (Winter 1985)
Joan Spero and Jeffrey
Hart, Politics of International Economic Relations, Chapter 3
B. Free Trade versus Protectionism: Competing
Choices
for U.S. Trade Policy
(October 1, 6)
We will watch and discuss
the special Firing Line
programs "Talking
Tough to Tokyo"
which debates current
issues in U.S.-Japanese
trade relations and
"The Debate on Free Trade" which
pits free traders
against protectionists in debating
the best course for
future U.S. trade policy-additional
readings will be handed
out for discussion
C. Simulated bargaining session on U.S.-Japanese
trade-
materials will be
handed out before class
(October 8, 13)
First Paper due October 13
6. Issues in Monetary Relations: the IMF
(October 15,20)
A. The IMF
(October 15)
We will watch the documentary
"One World, One Economy", which
explores the basic
lending and stabilization functions of the
IMF in its recent
programs for Mexico, Poland, and Ghana.
B. We will discuss the film and following
readings:
(October 20)
"Sisters in the Woods" A
Survey of the IMF and the World Bank,
Economist October
12, 1991
The Role and Function
of the International Monetary Fund
(IMF)
"The Debt Police" Time July 31, 1989
Graham Bird, “The IMF and Developing Countries” International Organization 50 (Summer 1996)
Joan Spero and Jeffrey Hart,
Politics of International Economic Relations, Chapter 6
7. Multinational Corporations
(October
22)
Joan Spero and Jeffrey Hart, Politics of International Economic Relations, Chapter 4, 8
D. Bennett and K. Sharp, "Agenda Setting
and Bargaining Power"
World Politics 32 (October 1979)
Theodore Moran, "Transnational Strategies
of Protection"
International Organization 27 (Spring
1973)
8. OPEC and the Politics of Resources
(October 27)
Stephen Krasner, "Oil is the Exception"
Foreign
Policy 14 (Spring 1974)
Theodore Moran, "Modeling OPEC Behavior:
Economic and Political
Alternatives" International Organization
35 (Spring) 1981
"The Cartel That Fell Out of the Drivers Seat"
Economist
February 4, 1989
Joan Spero and Jeffrey Hart, Politics of International Economic Relations, Chapter 9
9. International Migration
(October 29)
Peter Lindert, International Economics,
Chapter 24
10. Environmental Relations
(November 3)
Giulio Gallarotti, “It Pays to be Green:
The Managerial Incentive
Structure and Environmentally Sound
Strategies” Columbia Journal of World Business
30,4 (Winter 1995)
Wilfred Beckerman and Joanna Pasek, “The
Equitable International Allocation of
Tradable Carbon Emission Permits”
Global Environmental Change 5,5 1995
Martin Soroos, "The Commons in
the Sky: The Radio Spectrum
and Geosynchronos Orbit as Issues in
Global Policy"
International Organization 36 (Summer
1982)
"Sharing" A Survey of the Global Environment,
Economist May 30, 1992
11. North-South Relations: The Causes of Underdevelopment
(November 10, 12)
November 10
We will watch Ali
Mazrui's documentary "The Tools of
Exploitation" which
explores the relationship between
African underdevelopment
and Western colonialism.
November 12
We will discuss the
specific causes of underdevelopment
in light of the film
and following readings:
Lawrence Harrison,
Underdevelopment is a State of
Mind, Chapters 2,3,4,9
Theotonio Dos Santos,
"The Structure of Dependence"
American Economic
Review 60 (May 1970)
Robert Bates, Markets
and States in Tropical Africa,
pps. 1-29, 81-133.
Walter Rodney, How Europe Underdeveloped Africa, Chapter 4
Joan Spero and Jeffrey Hart, Politics of International Economic Relations, Chapter 5
Rondo Cameron, A Concise
Economic History of the World, Chapters 9, 10
Second Paper Due November 17
12. Presentation and Discussion of Research Projects
(November 17-December 3)
13. Managing Economic Relations: Laissez faire or regulation?
(December 8)
Javed Ansari, The Political Economy of
International
Economic Organization, Chapter 1
Giulio Gallarotti, "The Limits of International
Organization:
Systematic Failure in the Management
of International
Relations" International Organization
45 (Spring 1991)
14. Reassessing the Nature of International Economic Relations
(December 10)
Re-read Robert Gilpin, U.S. Power and
the Multinational
Corporation, Chapters 1,9
Rondo Cameron, A Concise Economic History of the World, Chapter 16
Joan Spero and Jeffrey Hart, Politics
of International Economic Relations, Conclusion