Topic outline

  • Preface

    It is a privilege and a pleasure to teach this course: a privilege, because it allows me to work with students from many countries and many parts of the world. This is enriching becauses of the views and experiences students bring to class. And it is challenging, as I permanently need to ask myself whether what I teach is really applicable to students who do not come from the old industrialised countries. It is a pleasure teaching this course also, because, in many ways, it allows me to draw on everything I have learnt since I started studying economics and politics for my Bachelor's degree at Bristol University in 1980-83.
       That was a time when monetarism had just become the main instrument of macroeconomic policy in the United States and the United Kingdom, and was being strongly contested by much of the economics profession which had grown up in the post-World War II  Keynesian world.It was therefore a moment of paradigm change, in response to the crisis of stagflation which had gripped the old industrialised world in the 1970s.
       Today's world too is still in crisis. The global financial crisis (GFC) and Great Recession may have taken place more than 10 years ago. But economic policy and most obviously monetary policy are still in crisis mode: the central banks' main short term lending rates to the markets are still at historically unprecedented levels, and there is no immediate end in sight to this. Central banks have also accumulated vast quantities of financial assets on their balance sheets, and nobody seems quite sure what exactly to do about them.
       Meanwhile, debt of all sorts (government, corporate and household) has expanded significantly - and across the world - since the GFC, and is weighing down on growth, while also limiting governments' powers to use fiscal policy.
       More generally, the dominant neoliberal paradigm has failed large sections of populations in the old industrialised countries, although globalisation has helped billions of people across the world to come out of absolute poverty, notably in Asia and China, but also in other parts of the world more recently. This is a great achievement for humanity! The true limit to this global economic development however is climate change, which raises seriously the question of de-growth.
       This course will look at some of these issues and at some economic theories which help to explain them, and the politics which shapes them. This is a stimulating and frustrating challenge. Stimulating, because the idea is to deal with real world issues and events, as they are presently unfolding. It is frustrating, because inevitably what I say and what we study in class can only be limited.But I hope that we can all work together to learn a little more.

    21 December 2019

    What is Political Economy?
    Wikipedia gives quite a good, broad definition of what Political Economy is. Academics are usually sceptical about Wikipedia as a source, but it has the advantage of being permanently challenged and reviewed by very many people, which is quite good (a group of undergraduate students even told me recently that it was their most trusted source of information). The introduction of the Wikipedia page on political economy (https://en.wikipedia.org/wiki/Political_economy) states:

    "Political economy is the study of production and trade and their relations with law, custom and government; and with the distribution of national income and wealth. As a discipline, political economy originated in moral philosophy, in the 18th century, to explore the administration of states' wealth, with "political" signifying the Greek word polity and "economy" signifying the Greek word "okonomie" (household management). The earliest works of political economy are usually attributed to the British scholars Adam Smith, Thomas Malthus, and David Ricardo, although they were preceded by the work of the French physiocrats, such as François Quesnay (1694–1774) and Anne-Robert-Jacques Turgot (1727–1781).[1]

    "In the late 19th century, the term "economics" gradually began to replace the term "political economy" with the rise of mathematical modelling coinciding with the publication of an influential textbook by Alfred Marshall in 1890.[2] Earlier, William Stanley Jevons, a proponent of mathematical methods applied to the subject, advocated economics for brevity and with the hope of the term becoming "the recognised name of a science".[3][4] Citation measurement metrics from Google Ngram Viewer indicate that use of the term "economics" began to overshadow "political economy" around roughly 1910, becoming the preferred term for the discipline by 1920.[5] Today, the term "economics" usually refers to the narrow study of the economy absent other political and social considerations while the term "political economy" represents a distinct and competing approach.

    "Political economy, where it is not used as a synonym for economics, may refer to very different things. From an academic standpoint, the term may reference Marxian economics, applied public choice approaches emanating from the Chicago school and the Virginia school. In common parlance, "political economy" may simply refer to the advice given by economists to the government or public on general economic policy or on specific economic proposals developed by political scientists.[4] A rapidly growing mainstream literature from the 1970s has expanded beyond the model of economic policy in which planners maximize utility of a representative individual toward examining how political forces affect the choice of economic policies, especially as to distributional conflicts and political institutions.[6] It is available as a stand-alone area of study in certain colleges and universities"

    Course Outline

    The following is a course outline of what we will look at in class, and more detail is given in the sections of this Epi below. These will be steadily amended during the semester, which lasts for twelve weeks. Each section will therefore be covered in two weeks.

    1/ Economics in times of crisis: the 1970s and today's on-going economic crisis
    i) What is economics? What have you learned, and how does it correspond to the reality of your society of origin?
    ii) Inflation and the paradigm changes following the stagflation in the 1970s.
    ii) Complexity theory and the search for new ideas in today's global economy.

    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 "Washington Consensus", the end of alterantive development theories, the "End of History" and "varieties of capitalism"
    i) From dependency theory and alternative development theories to the Washington Consensus.
    ii) The "End of History" and the emergence of "varieties of capitalism" literature.
    ii) New varieties of capitalism across the globe.

    4/ Money, financial globalisation and financial crises
    i) A return to the history and nature of money: the forgotten core of capitalism in the study of economics;
    ii) The rise of global finance;
    iiI) The 2007-2008 global financial crisis (GFC), Great Recession and today's "secular stagnation".

    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 the search for alternative ideas
    i) The challenge of inequality;
    ii) Global warming and de-growth;
    iii) Feminist economics.

    Updated 21 December 2019

  • 1) Economics in times of crisis: the 1970s and today's on-going economic crisis

    This section deals with the following:
    i) What is economics? What have you learned, and how does it correspond to the reality of your society of origin?
    ii) Inflation and the paradigm changes following the stagflation in the 1970s.
    iii) Complexity theory and the search for new ideas in today's global economy.

    Some bibliographical sources include:

    The stagflation of the 1970s and the critique of government policy:
    Milton Friedman, "The Role of Monetary Policy", American Economic Review 58, March 1968, pp 1-17.
    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 brief overview postded on the University of Maryland site by Allan Drazen in 2006: Political business cycles.
    A more detailed review by Allan Drazen, "The Political Business Cycle after 25 Years", NBER Macroeconomics Annual 2000, Volume 15.
    James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy, (1st edition) University of Michigan, 1962.

    The collapse of Fordism:
    John K. Galbraith, The New Industrial State, 1967.
    For a quick overview of the French Ecole de la régulation see: Théorie de la régulation by Rober Boyer, L'économiste, 2013.

    Where we are now:
    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.)
    Mervyn King, "The World Turned Upside Down: Economic Policy in Turbulent Times", Per Jacobsson Lecture, IMF Seminar, October 19, 2019


    • 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.

      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.


      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.


    • 3) The "Washington Consensus", the end of alterantive development theories, the "End of History" and "varieties of capitalism"

      i) From dependency theory and alternative development theories to the Washington Consensus.
      ii) The "End of History" and the emergence of "varieties of capitalism" literature.
      ii) New varieties of capitalism across the globe.


      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) Money, financial globalisation and financial crises

        4/ Financial deregulation and a short history of financial crises

        i) A return to the history and nature of money: the forgotten core of capitalism in the study of economics;
        ii) The rise of global finance;
        iiI) The 2007-2008 global financial crisis (GFC), Great Recession and today's "secular stagnation".

        Video in French:
        Michel Aglietta on the financial cycle and a new financial crisis (about 4 minutes), January 2020.

        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) 6/ The contradictions of contemporary capitalism and the search for alternative ideas

        i) The challenge of inequality;
        ii) Global warming and de-growth;
        iii) Feminist economics.


        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.