Topic outline

  • Forward and programme

    2018 was on the whole a good year for the global economy - although it was also a bad year for greenhouse gas emissions and hence climate change.

    Towards the end of the year and at the start of 2019, however, the prospects for the future look more complex: US interest rate rises have weighed on stock markets; the Chinese economy is slowing and trade war with the US is threatening and the policies of the Trump administration are continuing to disrupt the international economic order with possible significant consequences for all countries exporting to the US; Brexit could have a big impact on the UK and European economies, etc.

    This course will look at political economy aspects of these developments, from an institutional and historical perspective. The course covers several major themes, which are largely presented chronologically, as shown in the course outline below (each section takes up roughly two classes). The approach used and material covered are eclectic, which partly reflects my own reading and research, and the generally hybrid nature of political economy today (the Wikipedia page on Political economy sets this out fairly well). Hopefully, this will provide students with some understanding of the general economic issues and challenges facing the world economy today.

    Student assessment: is based on a final exam, in which students are asked to write two essays, from a choice of about 6. A past paper is available below (under the course outline).

    1/ What is economics? The crisis of stagflation in the 1970s and economics as a changing science
    i) the rise of inflation, the breakdown of the Bretton Woods system, the shift to fiat money;
    ii) the monetarist critique of fiscal policy and government spending (public choice theory, the political business cycle);
    iii) the critique of government bureaucracy and public management of the economy (the theory of bureau, the use of knowledge) .

    2/ The neoliberal paradigm
    i) the primacy of monetary policy and the emergence of the Jackson Hole consensus;
    ii) market deregulation, privatisation and the weakening of labour;
    iii) New Public Management.

    3/ The "End of History", varieties of capitalism during the Great Moderation and beyond
    i) a review of the varieties of capitalism literature in the advanced capitalist economies;
    ii) the development of Asia (the "NICs", the ASEAN countries, the development of China and India);
    iii) the Great Moderation and the imbalances of the global economy.

    4/ Financial globalisation and financial crises
    i) The growth of global capital markets (financial futures, London as an offshore centre, self-regulation by markets);
    ii) The "Third World Debt Crisis" in the 1980s, the "Asian Crisis" in 1997, LTCM, the New Economy and the Dotcom Bubble.
    iii) The 2007-2008 global financial crisis (GFC), Great Recession and aftershocks.

    5/ The changing International Political Economy (IPE)
    i) A review of the historical concepts of IPE (the American, British and radical schools);
    ii) Dany Rodrik's "Globalisation Paradox";
    iii) Brexit, Trump and the new disorder.

    6/ The contradictions of contemporary capitalism and challenges to global welfare
    i) Global trends in income growth and inequalities;
    ii) Global warming and the possibilities of alternative economic behaviours;
    iii) Dealing with a complex world.

    Nicholas Sowels

    (nicholas.sowels@univ-paris1.fr)

    22 February 2019

  • 1) The crisis of the 1970s

    This section deals with the following:
    i) the rise of inflation, the breakdown of the Bretton Woods system, the shift to fiat money;
    ii) the monetarist critique of fiscal policy and government spending (public choice theory, the political business cycle);
    iii) the critique of government bureaucracy and public management of the economy (the theory of bureau, the use of knowledge) .

    Some bibliographical sources include:

    A brief overview postded on the University of Maryland site by Allan Drazen in 2006: Political business cycles.
    See also a brief overview by A. Drazen of the Political budget cycles.

    The original paper by William Nordhaus, "The Political Business Cycle", The Review of Economic Studies, Vol. 42, No. 2 (Apr., 1975), pp. 169-190.
    A more detailed review by Allan Drazen, "The Political Business Cycle after 25 Years", NBER Macroeconomics Annual 2000, Volume 15.

    Friedrich v. Hayek's Use of Knowlege (1945)  has been a key text in supporting the idea of markets and the price mechanism in allocating resources.

    A good general overview of Public Choice Theory is provided Eamonn Butler, Public Choice - A Primer, Institute of Economic Affairs (IEA), 2012.  The IEA was one of Britain's leading think-tanks in policy debate which took place during the 1970s and that nutured the subsequent policies of the Thatcher and Major governments (1979-1997). It was set up in 1955 by the businessman Antony Fisher at the suggestion of Friedrich v. Hayek. During the 1970s, the IEA acted as an outlet for work by Milton Friedman, Hayek and other liberal thinkers.

    For a quick overview of the French Ecole de la régulation see: Théorie de la régulation by Rober Boyer, L'économiste, 2013.

    Other references mentioned in class:
    James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy, (1st edition) University of Michigan, 1962.
    John K. Galbraith, The New Industrial State, 1967.
    Marx & Engels, The Communist Manifesto, 1848 (see Part I in particular, Bourgeois and Proletarians).
    William Niskanen, Bureaucracy and Public Economics, Cheltenham, Edward Elgar, 1994.
    Dani Rodrik, Economics Rules: The Rights and Wrongs of the Dismal Science, New York, W.W. Norton, 2015.
    (A summary of his ideas in this book is available in Dani Rodrik, "Economists vs. Economics", Project Syndicate, Sept 10, 2015.)
    Adair Turner, Between Debt and the Devil: Money, Credit and Fixing Global Finance, Princeton and Oxford, Princeton University Press, 2016.

  • 2) THE NEOLIBERAL PARADIGM

    This section examines three broad issues

    i) the primacy of monetary policy and the emergence of the Jackson Hole consensus;
    ii) market deregulation, privatisation and the weakening of labour;
    iii) New Public Management.


    Core reading:

    Charles Bean et al., "Monetary policy after the fall", paper presented at the Federal Reserve Bank of Kansas City Annual Conference, Jackson Hole, Wyoming, 28 August 2010.

    Nigel Lawson, "Economic Policy: The British Experiement", (The Mais Lecture), June 18, 1984.

    House of Commons Library, Privatisation, Research Paper 14/61, 20 November 2014 (p 1-14).

    James P. Pfiffner, "Traditional Public Administration versus The New Public Management: Accountability versus Efficiency", published in Institutionenbildung in Regierung und Verwaltung: Festschrift fur Klaus Konig, A. Benz, H. Siedentopf, and K.P. Sommermann, eds.(Berlin,Germany: Duncker & Humbolt, 2004), pp. 443 - 454.

    Frédéric Marty, "La privatisation des services publics : fondements et enjeux", Regards croisés sur l'économie, 2007/2 (n°2), page 269.


    Other references mentioned in class:

    Rober Boyer, Economie politique des capitalismes : théorie de la régulation et des crises, Paris, La Découverte (coll. Manuels), 2015.

    David Cameron, "The expansion of the public economy: a comparative analysis",  The American political science review, volume 72, No 4, December 1978, pp 1243-1261.

    David Osborne and Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector, 1992.


  • 3A) The "End of History", varieties of capitalism and the Great Moderation (1989 to 2007-2009)

    Classes 5 and 6 of the course this year (2016-2017) look mainly at the "Varieties of Capitalism" which were identified by numerous authors in the period that ran from the fall of the Berlin Wall in 1989, through to the 2007-2008 financial crisis and subsequent Great Recession, a period that is often referred to as the Great Moderation.

    The classes are an introduction into the study of different types of capitalism. Video material has been recorded which you can follow in your own time and at your own pace. There are a total of 10 short videos (roughly equivalent to two classes).


    Key bibliographical references:

    Crouch, C., "Models of Capitalism", New Political Economy, Vol. 10, No.4, December 2005

    Schröder, M., "Integrating Welfare and Production Typologies: How Refinements of the Varieties of Capitalism Approach call for a Combination of Welfare Typologies", Jnl Soc. Pol, 38 1, 19-43, 2008. (SCROLL DOWN)


    Other reading material:

    Albert, M. Capitalisme contre capitalisme, Seuil, 1991,

    Amable, B., Les cinq capitalismes : Diversité des systèmes économiques et sociaux dans la mondialisation, Paris, Seuil, 2005. (The first 3 chapters are essential reading.)

    Coates, D., Models of Capitalism, Cambridge: Polity Press, 2000.

    Esping Andersen, G., The Three Worlds of Welfare Capitalism, Princeton, New Jersey,  Princeton University Press, 1990.

    Francis Fukuyama, "The End of History", The National Interest, Summer 1989.

    Francis Fukuyama, "US against the world? Trump's America and the new global order", The Financial Times, November 11, 2016.

    Hall, P., and Soskice, D., (eds), Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, Oxford, Oxford University Press, 2001. (The introductory chapter of this book is essential reading, and may be consulted on-line here).

    Streech, W., "The Crises of Democratic Capitalism", New Left Review 71, Sept Oct 2011

    Streeck, W., VIDEO, "Has Capitalism Seen its Day?", Anglo-German Foundation Lecture, at the British Academy, 23 January 2014.

    • 4) Financial globalisation and financial crises

      4/ Financial deregulation and a short history of financial crises
      i) The growth of global capital markets (financial futures, London as an offshore centre, self-regulation by markets);
      ii) The "Third World Debt Crisis" in the 1980s, the "Asian Crisis" in 1997, LTCM, the New Economy and the Dotcom Bubble.
      iii) The 2007-2008 global financial crisis (GFC), Great Recession and aftershocks.


      For some essential reading see:

      Spencer Anderson, "A history of the past 40 years in financial crises", International Financing Review, 06 August 2013.

      Tim Besley and Peter Hennessy et al., Letter to the Queen explaining why nobody had expected the financial crisis, British Academy, 22 July 2009.

      Craig S. Hakkio, "The Great Moderation 1982 - 2007", Federal Reserve Bank of Kansas City, November 22, 2013.

      Ben Bernanke, "The Global Savings Glut and the U.S. Current Account Deficit", Remarks at the Sandridge Lecture, Virginia Association of Economists, Richmond, Virginia, March 10, 2005.

      Mervyn King, "Trusting in Money: From Kirkcaldy to the MPC", Speech, The Adam Smith Lecture, 29 October 2006.

      Michael McLeay, Amar Radia and Ryland Thomas, "Money in the modern economy: an introduction", Bank of England Quarterly Bulletin 2014, Q1 (see the pdf text on this page).

      Michael McLeay, Amar Radia and Ryland Thomas, "Money creation in the modern economy", Bank of England Quarterly Bulletin 2014, Q1.

      Hyman Minsky, "The Financial Stability Hypothesis", The Jerome Levy Economics Institute of Bard College, May 1992.

      Maurice Obstfeld and Kenneth Rogoff, "Global Imbalances and the Financial Crisis: Products of Common Causes", November 2009.

      OECD, In It Together: Why Less Inequality Benefits All, Paris 2015: See Chapter 1 in particular.

      Jerome Powell (Chair of the Fed), Monetary Policy-: Normalization and the Road Ahead, March 08, 2019, speech at the SEIPR Economic Summit, Standford California.

      Matthew Sherman, "A Short History of Financial Deregulation in the United States", CEPR, July 2009.

      Laurence Summers - see his Harvard webpage on "secular stagnation".

      Daniel Tarullo, "Financial Regulation Since the Crisis", Speech at the Federal Reserve Bank of Cleveland, December 02, 2016.

      Yanis Varoufakis, "Trump, the Dragon, and the Minotaur", Project Syndicate, November 28, 2016.


      Other texts mentioned:

      Michel Aglietta et André Orléan, La Monnaie entre violence et confiance, Paris, Odile Jacob, 2002.

      David Graeber, Debt: the First 5000 years, Brooklyn/London, Melville House, 2011, (paperback 2012).

      Mervyn King, The End of Alchemy: Money, Banking and the Future of the Global Economy, London, Little Brown, 2016.

      Paul Krugman, "Want Growth? Speak English: THAT CERTAIN JE NE SAIS QUOI OF LES ANGLOPHONES", April 1999 (listed  on Krugman's archived web page at MIT, retrieved 23 March 2018).

      Felix Martin, Money: The Unauthorised Biography, London, Vintage Books, 2013 (an excellent and fun read!).



    • 5) The changing international political economy

      This unit will provide a short overview of some of the key elements of International Political Economy. Part of the unit will look in greater detail at recent work by Dany Rodrik.


      i) A review of the historical concepts of IPE (the American, British and radical schools);
      ii) Dany Rodrik's "Globalisation Paradox";
      iii) Brexit, Trump and the new disorder.


      References:

      Michael Veseth, "What is International Political Economy?", September 2002. (Updated version in 2015, here.)

      David Dollar, "The future of U.S.-China economic ties", Report, Brookings, October 4, 2016.

      Graham Allison, "The Thucydidies Trap: Are the U.S. and China Headed for War?", The Atlantic, Sept 24, 2015.

      Dani Rodrik, "Trump : les économistes doivent faire leur mea culpa sur la mondialisation", La Tribune, 18/11/2016.


      Other reading material:

      Christian Chavagneux, Economie politique international, Paris, Repères, La découverte, 2004.

      Benjamin Cohen, International Political Economy: An Intellectual History, Princeton University Press, (2008).




    • 6) The contradictions of contemporary capitalism and challenges to global welfare

      i) Global trends in income growth and inequalities;
      ii) Global warming and the possibilities of alternative economic behaviours;
      iii) Dealing with a complex world.

      Reading material:

      International Monetary Fund, Fiscal Monitor: Tackling Inequality, October 2017.

      Jonathan M. Harris, Brian Roach and Anne-Marie Codur, The Economics of Global Climate Change, Global Development And Environment Institute, Tufts University, 2015.

      Branko Milanovic, Global Inequality: A New Approach for the Age of Globalisation, Belknap Press, 2016.

      Thomas Piketty, Le capital au XXIe siècle/Capital in the Twenty-First Century, Seuil/Belknap, 2013/2014. Click here for a slide presentation.

      Jerome H. Powell, "Monetary Policy: Normalization and the Road Ahead", speech at the SIEPR Economic Summit, Stanford Institute of Economic Policy Research, Stanford, California, March 08, 2019.

      Nicholas Sowels, "Changes in Official Poverty and Inequality Rates in the Anglophone World in the Age of Neoliberalism", Angles, 15 January 2019.

      The Stern Review (2006), see the Executive Summary and more if you wish.

      World Inequality Report 2018.








    • 7a) Achive: Comparative capitalisms introduction

      The first three videos provide some introductory remarks to the literature on comparative capitalisms and its context.
    • 7b) Archive: core texts

      This section summarises a number of the main ideas presented by key authors in the literature on comparative capitalisms during the years of the Great Moderation, and more especially between the fall of the Berlin Wall and the 2007-2008 financial crisis.
    • 7c) Archive: Other Capitalisms and the Ongoing Global Crisis

      This section looks briefly at new and emerging capitalisms, and ends by examining the ongoing crisis of today's global capitalism.