GOVERNMENT 329
 
INTERNATIONAL ORGANIZATION
 
 
    WESLEYAN UNIVERSTIY
 
 
 
 
 
 
 
 
 
e-mail Giulio Gallarotti
 
 

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