Transcript ECONOMIC DEVELOPMENT & INTERNATIONAL POLITICS …
The Democratic Peace
Democracy International Trade International Organizations
UK v. US
• Similar – Cultural – Foreign policy – Legal traditions – Car Culture???
• Opposite ends of the spectrum on – gasoline tax policy – addressing climate change
Car culture: gasoline taxes and prices per liter in 31 countries (2004):
Who needs the most gasoline per capita?
Urban v Rural
Does “need” translate into policy preference?
Policy outcome?
• We’ve got Interests & Incentives • Now, to get the policy outcome,… • We interact interests/incentives with a domestic political institution:
Malapportionment!
Malapportionment
tends to weigh RURAL preferences more than URBAN
(i.e., Proportional representation tends to weigh URBAN preferences more than RURAL) Does this have an effect on NATIONAL policy?
Test: • Does malapportionment affect: –Gasoline prices –Kyoto ratification
Kyoto Protocol
to the UN Framework Convention on Climate Change • Stabilize atmospheric “greenhouse” gas • 1997 (enter into force: 2005) • 2009: 187 states ratified • Commitment to reduce greenhouse gases: – carbon dioxide – methane – nitrous oxide – sulphur hexafluoride
Ratifiers, signers, and non
Which came first?
• Car culture?
• Malapportionment?
• Once created, however, car-culture may reinforce malapportionment • Car-culture may have other effects: –
Crash
: – It's the sense of touch.... Any real city, you walk, you know? You brush past people. People bump into you. In L.A., nobody touches you. We're always behind this metal and glass. I think we miss that touch so much that we crash into each other just so we can feel something.
• Hypothesis: car-culture exacerbates racial/ethnic tension • Operationalized: automobiles/capita inter-ethnic/racial violent crime
Main take-home from last time:
• What is it to explain?
– to state the conditions under which it always or usually takes place (perhaps probabilistically) •
The BRIDGE
– The BRIDGE between historical observations and general theory is the
substitution of
variables
for proper names and dates
Religion vs. Science (Faith vs. Skepticism)
• RELIGION & SCIENCE both respond to
mystery
• The key to religion is faith – in the religious hierarchy – in the Bible – in the Koran – Clear your mind of questions; there is no “why” • The key to science is skepticism – theories must be tested, and tested, and tested – we never achieve “Truth” with a capital T – we never “prove”
COMPARATIVE INSTITUTIONAL ANALYSIS:
The Politics of International Finance
James Raymond Vreeland School of Foreign Service Georgetown University 17
2008 Financial Crisis & The rise of the G20
Unipolarism is over.
We live in a multipolar world.
18
The future of the IMF?...
19
Changes to Global Governance
Who has the power at the IMF?
20
• Global governance is at a crossroads • G20 = arrival of the emerging markets • IMF governance is out of whack with reality
G20
• Calls for a reevaluation of the BWI vote shares • Why care about the G20?
– Doesn’t do anything – Arbitrary membership (out of date) •
Represents the arrival of the emerging markets!
• More representative?
• Who is the G20?
22
Who is the G20?
G7 + BRIC + EU + MAKTISAS 11 down, 9 to go?
NO! Only 8 to go.
Only 19 countries in the G20.
23
Wrong guesses
• EU – Spain, Poland, Netherlands • Europe – Switzerland, Norway • The bad guy – Iran • Large populations – Pakistan, Bangladesh, Nigeria • Big economies
Seats around the G20 table 25
Seats around the IMF table 2012
26
WEOG Presence
• G20: 40% • IMF Executive Board seats: 46% • IMF Executive Board votes: 58% 27
How do they do it?
• Inflated vote shares?
28
IMF vote shares have been “out of whack”
• Top 5 members: – United States (16.8%) – Japan (6.0%) – Germany (5.9%) – France (4.9%) – UK (4.9%) • Other important members: – China (3.7%) – Saudi Arabia (3.2%) – Russia (2.7%) – Italy? (3.2%) – Belgium? (2.1%) – Brazil? (1.4%) – India? (1.9%) – Turkey? (0.55%) 29
Who controls the IMF? (2010) • Top 5 members: – United States (16.7%) – Japan (6.0%) – Germany (5.9%) – France (4.85%) – UK (4.85%) • Other important members: – Italy? (3.19) – Saudi Arabia? (3.2%) – Canada? (2.9%) – Russia (2.7%) –
Belgium? (2.1%)
– China (3.65%) – India? (1.9%) – Spain? (1.4%) – Brazil? (1.4%) – Korea? (1.3%) 30
http://www.imf.org/external/np/sec/memdir/members.aspx
accessed 2 May 2012 31
1.
2.
3.
4.
5.
6.
New vote-shares (for 2012)??
Has not happened yet!
United States: 16.48
7.
Italy: 3.02
8.
India: 2.63
Japan: 6.14
9.
Russia: 2.59
China: 6.07
10. Brazil: 2.22
Germany: 5.31
11. Canada: 2.21
France: 4.02
12. Saudi Arabia: 2.01
United Kingdom: 4.02
13. Spain: 1.92
14. Mexico: 1.80
15. Netherlands: 1.76
16. Korea: 1.73
17. Australia: 1.33
18. Belgium: 1.30
32
Who controls the IMF? (2010) • Top 5 members: – United States (16.75%) – Japan (6.23%) – Germany (5.81%) – France (4.29%) – UK (4.29%) • Other important members: – Italy? (3.16) – Saudi Arabia? (2.80%) – Canada? (2.56%) – Russia (2.39%) –
Belgium? (1.86%)
– China (3.81%) – India? (2.34%) – Spain? (1.63%) – Brazil? (1.72%) – Korea? (1.37%) 33
But real distortions also occur in the
elections
for the Executive Board
34
Appointed & Elected Directors
• Appointed: – US, Japan, Germany, France, UK • Elected: – China, Saudi Arabia, Russia • Regionally elected (ad-hoc) – Australia • South Pacific, New Zealand, Korea, Uzbekistan – Brazil • Latin American countries – Togo • African countries – Iran • Afghanistan, Algeria, Ghana , Morocco, Pakistan, Tunisia 35
Really ad-hoc elected Directors:
• Italy – Greece, Malta, Portugal, San Marino, Albania , & Timor Leste • Belgium – Austria, Luxembourg, Belarus , Hungary , Kosovo , Czech Republic Slovak Republic , Slovenia , & , Turkey • Netherlands – Armenia , Cyprus , Bosnia and Herzegovina Georgia , Israel , , Macedonia , Bulgaria , Moldova , Croatia , Montenegro , Romania , & Ukraine • Switzerland – Azerbaijan , Serbia , Kazakhstan Tajikistan , & , Kyrgyz Republic Turkmenistan , Poland, 36
How do they do it?
• Foreign aid?
37
Buying Bretton Woods
James Raymond Vreeland
Georgetown University
Paper prepared for presentation at the AidData Conference, University College, Oxford, March 22-25, 2010 38
Switzerland?
• New IMF member (1992) – Bloc does not have deep historical ties other than joining around the same time – Data for the entire period are available • Switzerland has added incentives – Out of the EU, out of the G20 39
Average amount of Swiss aid going to poor countries (GDP/capita<$2200, 1993-2008)
15 $12.04 million 12 9 6 3 0 $7.71 million Non-Swiss-bloc n=1,321 Std dev=9.41
Swiss-bloc n=72 Std dev=19.99
t=3.50
p<0.00
40
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Figure 2: Comparison between country-years receiving any Swiss aid versus those that did not
0.46
0.77
n=3,515 Std dev=0.50
Non-IMF block n=83 Std dev=0.42
Swiss IMF block
t=-5.65
Pr(|T| > |t|)=0.00
41
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Figure 7: Azerbaijan before & after joining the Swiss block
0.88
0.00
n=2 Std dev=0.00
Non-IMF block
t=-3.53
Pr(|T| > |t|)=0.00
n=16 Std dev=0.34
Swiss IMF block 42
Figure 8: Kyrgyzstan before & after joining the Swiss block
0.94
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
0.00
n=2 Std dev=0.00
Non-IMF block
t=-5.16
Pr(|T| > |t|)=0.00
n=16 Std dev=0.25
Swiss IMF block 43
Figure 9: Turkmenistan before & after joining the Swiss block
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
0.25
0.00
n=2 Std dev=0.00
Non-IMF block
t=-0.77
Pr(|T| > |t|)=0.45
n=16 Std dev=0.45
Swiss IMF block 44
Figure 10: Uzbekistan before & after joining the Swiss block
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
0.81
0.00
n=2 Std dev=0.00
Non-IMF block
t=-2.78
Pr(|T| > |t|)=0.01
n=16 Std dev=0.40
Swiss IMF block 45
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
0.50
Figure 11: Tajikistan before & after joining the Swiss block
0.93
n=4 Std dev=0.58
Non-IMF block
t=-2.18
Pr(|T| > |t|)=0.04
n=14 Std dev=0.27
Swiss IMF block 46
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
0.67
Figure 12: Serbia before & after joining the Swiss block
1.00
n=12 Std dev=0.49
Non-IMF block
t=-1.49
Pr(|T| > |t|)=0.16
n=5 Std dev=0.00
Swiss IMF block 47
The risk:
Irrelevance of the IMF in a Multi-Polar world!
48
Regional Monetary Funds?
Lipscy, Phillip Y. 2003. Japan's Asian Monetary Fund Proposal.
Stanford Journal of East Asian Affairs
3 (1):93-104.
http://www.youtube.com/watch?v=HyrTypTRDbk 49
Asian Monetary Fund Proposal?
• Going back to the aftermath of the US/IMF bailout of Mexico in 1995: TEQUILA CRISIS • Japanese policy-thinkers/makers begin thinking about an “Asian Monetary Organization” ($20 billion) • Why? – Believed that the US would not act as vigorously in the event of a crisis in Asia • • Then: East Asian Financial Crisis http://www.xtimeline.com/timeline/Asian Financial-Crisis 50
51
Why did Japan (not US or EU) lean towards liquidity provision in the East Asian Crisis?
25% of Japanese lending to all developing countries went to Thailand!
52
Japan’s position at the IMF re: Indonesia
•
Japan opposed major structural reforms
(eliminate national projects, reduce subsidies, restructure financial structure) • Japan supported a loan package to
stabilize
the exchange rate •
IMF ignored Japan
53
54
“Asian sense of solidarity”
AMF vision
• $100 billion • 10 members: – Australia , China, Hong Kong, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Thailand – NOT the United States – Secretary of State Summers to MOF official Sakakibara: –
“I thought you were my friend!”
55
Flash-forward
: March 2010
Chiang Mai Initiative
• A
multilateral
currency swap arrangement • Members: Association of Southeast Asian Nations (ASEAN), China (including Hong Kong), Japan, and South Korea • ASEAN members: http://www.aseansec.org/74.htm
• Foreign exchange reserves pool of US$120 billion • Launched: March 2010 The ASEAN flag 56
Power:
• Matters in international institutions • But emerging markets have outside options • Can we keep China at the table?
• Or does China go for outside options?
57
Aside
• How do you “see” China?
• What does China “look” like?
58
Rise of the Rooster
59
Will China play this game?
• Increasingly using foreign aid & access to Chinese markets for political goals • Recognition of Taiwan • Dalai Lama • Liu Xiaobo • Chiang Mai
alternative
60
One more triangle…
Is this a “Bretton Woods” Moment?
1918 1929 1944 Treaty of Versailles (1919 –20): League of Nations World War II (1939-45) Keynes begins discussions on an “international loan” United Nations (1945) Stock Market Crash!
Bretton Woods: IMF/World Bank (1944) Smoot-Hawley (1930) Beggar-thy-neighbor GATT: 15 years from crash to institutional solutions… 1947
1980 1990 2000 2008 2023?
Latin American Debt Crisis (1982) 2008 Financial Crisis Tequila Crisis (1995) “Bretton Woods” moment… 2023?...
East Asian Financial Crisis (1997-1999) Or beyond?
Lay out architecture now, so we’re ready when it comes…
Think Big about Global Governance!
Regionalism before globalism?
Wrap up
68
Why should you care?
• Globalization of capital flows • Financial crises plagued the 20 th century • Bailouts will continue • Tension between – Providing liquidity – Preventing MORAL HAZARD • Solution:
conditionality
– 1944-1970s conditionality light – 1980s & 1990s conditionality heavy – 2008… conditionality light?
•
What will it be like when the shoe is on the other foot?
69
The course take-away:
• Institutions matter… • How do international institutions matter?
– Solve collective action problems?
– Informational role?
– Facilitate foreign policy goals?
– Obfuscate the pursuit of political goals?
• How do domestic political institutions matter?
– Shape the survival strategies of political leaders 70
Analytical toolkit
• TRILEMMA • Time-inconsistent preference problems – “Commitment” problems – Remember Ulysses and the sirens – USING INTERNATIONAL ORGANIZATIONS TO “LOCK-IN” OR INFLUENCE POLICY • Veto players (stability of policy) • Stability of democracy
in rich democracies
• Objectives of leaders: stay in power!
– The optimal strategy to fulfill this goal depends on incentives/constraints shaped by institutional context • “Controlling” for variables (holding conditions constant) 71
Winners & Losers
• Greater economic integration power of “Winners” greater • Economic integration greatest at the Regional Level • So look for regional cooperation • You are winners from globalization!
72
Thank you
WE ARE GLOBAL GEORGETOWN!
73
Figure 1: Seats around the IMF Executive Board (by Director's total vote share, 2010)
Rwanda, 1.3% Argentina, 2.0% India, 2.4% Brazil, 2.4% Iran, 2.4% Russia, 2.7% Switzerland, 2.8% United States, 16.7% Sierra Leone, 3.0% Japan, 6.0% Saudi Arabia, 3.2% Egypt, 3.2% Germany, 5.9% Denmark, 3.4% Korea, 3.4% France, 4.9% Thailand, 3.5% Canada, 3.6% China, 3.7% Italy, 4.1% United Kingdom, 4.9% Spain, 4.4% Belgium, 5.1% Netherlands, 4.8% 74
Egypt
Seats around the IMF table (2012)
Argentina Mexico Brazil United States Togo Lesotho Saudi Arabia Germany India China France Singapore United Kingdom Japan Belgium Iran Russia Switzerland Denmark Canada Australia Italy Netherlands 75