LECTURE NOTES

Poli 260

Sept. 8
Not a class on:
! -current affairs
! -international history
! -foreign policy

We will try to understand the world through general concepts.

There will be actors and variables

! -i.e. who matters, how, and when
! ! -democracies fight dictatorships
! ! -dictatorships fight other dictatorships
! ! -puzzle: democracies almost never fight other democracies

International politics is the study of relations between states.

! -ex: variations - arms race, NATO (collaborative)

Some questions we ask:

! -Why do wars begin? (How?)
! -How do countries get richer? (trade, development, globalization)

We are drowning in information.

! -We need to make connections between points of information seemingly
! unrelated.
! ! -organize, utilize information (NOT memorize)
*Frieden: globalization is choice not fact

Sept. 13/11

Lesson Plan (for the week)

-Whatʼs in the international system.

! -What are these systems?
! -How have they changed over time?
-Why does all this matter: basic concepts to understand the international system.
! -Most important: anarchy.

Two fundamental changes

-Two levels of organization/system:

! -International (relations between states).
! -Domestic (relations within states).
! ! -sorts of governments states have (democracies, autocracies)
-Two big changes:
! -International: From feudal system to imperial system to interstate system.
! -Domestic: From monarchy/autocracy to democracy (in many places).

Why these changes matter

-International system is not static.!(unlike how John says there have always been and
always will be states is not right)
! -ʻGlobalizationʼ is not that new.
-Change happens at two levels:
! -Between units (interstate relations).
! -Within units (domestic politics).
-Change happens through learning from past.
! -E.g. end of empire
! -Good thing: we are not condemned to repeat the past.
! -Bad thing: we often repeat the past anyway. (some governments now look like
! theyʼre running the same risks (economic policies such as protectionism) as the
! ones the preceded the WWs)

What is a system?
E.g. The Butterfly Effect

-Butterfly flaps wings in China.

-Small change in surrounding atmosphere.
-Small change ripples over distance.
-Can affect tornado in Manitoba.
THE POINT: small events in one place can have huge effects elsewhere.
-Two key elements:
! -Interconnectedness.
! -Uniqueness. (the whole is greater than the sum of the parts)
-Implications:
! -Unintended consequences
! ! -Double-hulled tanker: a single-hulled tanker is vulnerable to oil spills
! ! which intended to prevent accidents, however an unintended
! ! consequence is that the driver drives faster or takes more risks with the
! ! knowledge that its safe.
! -Security dilemma (next week)
! ! -States entering a competition to increase arms in the desire for security
! ! leading to the other state becoming insecure and further increasing arms
! ! capability and so on (unnecessary spending).

3 Types of International Systems

-Feudal system
! -A mess with overlapping jurisdictions with no centralized authority (consists of
! many)
-Imperial system
! -less messy because there is a core (ruler in the middle) which then rule the
! various border regions rulers
-Anarchic system
! -lack of central government (at a world level)

What is a feudal system?

(No central authority, autocracy, multiple/overlapping legal systems)

-Overlapping authorities at local level, no central authority at system-level.

! -E.g. lords and kings can tax peasants.
-System is always autocratic, not democratic.
! -Peasants (majority) have no power.
-Rule is very decentralized:
! -No common legal system (arbitrary/unpredictable).
! -Several overlapping legal systems.

What is an imperial system?

(Yes central authority, combination of democracy/autocracy, multiple/overlapping legal
systems)

-A central authority at system-level controls the policy of its peripheral states:

! -Core-periphery.
-System can combine autocracy and democracy, but always contains autocracy:
! -Can be democratic at core, autocratic at periphery (e.g. France in 19th century).
-While there is central authority, govt. functions are decentralized:
! -Several overlapping legal systems.

What is an anarchic system?

(No central authority, combination of democracy/autocracy, single/no overlapping legal
system)

-Several states interact with each other, with no central authority at system-level.
-Systems can include both democracy and autocracy.
! -Some states democratic, some autocratic.
-Rule is centralized within states.
! -Each state has its own legal system.
! -Legal systems do not overlap.

Note on anarchy

-Anarchy is not chaos.

-Anarchy means lack of central govt. (see spectrum below)
! -States canʼt call 911.
Anarchy! ! Alliance (NATO)! ! UN! ! EU! ! World Govt.

Changes in the Interstate System: Imperial to Interstate

The movement from imperial to anarchic system

-Romans built roads, provided wine (very important), and created peace (less
important).
! -I.e. centralized empires provide a variety of services that decentralized smaller
! states canʼt.
-But there was still rebellion. Why? And how did it change international politics?

The Thirty Years War (1618-1648)

-Holy Roman Empire.

-1618 - Catholics and Protestants fight in Germany.
-Richelieu supported Protestants against fellow Catholics.
-Reason of state over religious goals.
-Holy Roman empire broken up into states - France got bigger (France took part of the
dissolved states and became the single, strongest power in Europe).

Why does change from imperial to interstate matter? Ask an expert.

Uncle Henry explains:

! -Change in mindset to reason of state (raison dʼetat, Reason of State).
! ! -RoS: loyalty of state/ruler, not religion.
! ! -RoS: shared understanding between kings.
! -Reason of state is necessary to limit conflict.
! -Reason of state is necessary to limit nationalism.
! ! -RoS: loyalty to state/ruler, not people.
*Youʼre limiting the Popeʼs power, but you must make sure they donʼt become
overexcited and become disloyal to you as well.

One more big shift

-Decline of empire reveals shift in thinking:

! -People gave loyalty to ruler/state, not foreign ruler.
! -System became anarchical, not centralized.
-But is this all? Do people think only in terms of the interests of rulers/states?
! -From monarchy/autocracy to democracy.

Definitions

-Monarchy: state governed by dynasty/ruling family

! -Etymology: ʻmonosʼ + ʻarkheinʼ (rule of one)
! -Type of autocracy:
! ! -Other types of autocracy: dictatorships.
! -E.g. Saudi Arabia.
-Democracy: rule of the people
! -Etymology: ʻdemosʼ (people) + ʻkratosʼ (power) = power of the people (there is a
! fear of unruliness associated with democracies)
! -E.g. Canada, India.
! -Difference between democracy and autocracy: when a majority votes against a
! leader the leader will actually leave office and it requires a numerical majority to
! put a leader in power.

The big year: 1989 (the Berlin Wall which went up 1961)

To summarize...

-Two big changes:

! -Feudal to imperial to anarchic systems
! -Monarchy/autocracy to democracy (in many places) (sped up in the last 20-30
! years)
-Next class:
! -Weʼll see how this matters.

Sept. 15/11

The layers of the onion: Three levels of analysis

(Or three images of international politics)

-1st image: Individual level (leaders)

! -E.g. Does the personality/psychology of Stephen Harper influence Canadaʼs
! choice of enemies?
-2nd image: domestic level (institutions)
! -E.g. How does Canadaʼs democracy affect who it trades with?
-3rd image: International level (power)
! -E.g how much can...

An Example: foreign policy

-What is foreign policy? (trade and security goals achieved through diplomacy/relation
with states)
! -Foreign policy is the totality of steps a state takes to secure its interests in its
! dealings with other states.
! -Achieving a stateʼs ends in international politics using available means.
! ! -Thereʼs a difference between FP and fantasy.
-Key components:
! -Ends: the national interest
! -Means: power and persuasion (more later).
*For a state to actually be able to influence politics internationally it has to build up its
military.

1st image

-Impact of individuals on foreign policy:

! -Effect (thing we want to explain): foreign policy
! -Cause: characteristics of individuals
-Possible individual characteristics:
! -Psychology (the type of person you are)
! ! *Foreign policy of states can be associated with the personality of the
! ! leaders (seen in Downfall clip).
! -Ideology (the ideology that leaders have may drive foreign policy)
! -Pathology (the ways in which someone is crazy can affect foreign policy as well,
! although while it may be important theorizing this is too abstract and difficult)
! ! *these are a larger problem in autocratic regimes because institutions can
! ! keep democratic leaders in check

2nd image

-Impact of domestic institutions on foreign policy:

! -Effect: foreign policy
! -Cause: domestic institutions
-Possible domestic institutions:
! -Regime-type (in Week 6)
! -Bureaucracies
! ! -In 1955, US payload was 2880 megatons (each megaton is a million tons
! ! of dynamite). (due to a bureaucratic competition between different
! ! branches of the US military wanting more clout within the same state while
! ! also creating tension with the Soviet Union)
! ! ! -That is Hiroshima times 192,000. How did this happen?
-Coalitions (e.g. lobbies, more in Weeks 8-9)
! -lobby examples: lobbies against trade with countries lacking a labor union

3rd image

-Impact of international structure on foreign policy:

! -Effect: foreign policy
! -Cause: international structure
-Possible characteristics of international structure:
! -Anarchy:
! ! -But anarchy is constant, war/peace varies
-Distribution of power (who has what, how much)

Why do we start with the 3rd image?

(it simplifies things)
-Parsimony:
! -There are few moving parts, fewer things to observe: anarchy, power.
-Constraint:
! -3rd image limits states in what they can do.
! ! -We can rule out potential actions.
-Sufficiency:
! -Much of the time, the 3rd image explains what weʼre seeking to explain.
! ! -E.g. Germanyʼs invasion of Poland in 1939.

What does the 3rd image look like?

What does John M tell us the world looks like (pg. 30-32)

1) International system is anarchic (no central authority states can call for assistance)
2) Great power have offensive capacity.
! -What is a great power (M, pg. 5) (a state that can wage war on the strongest
! state in the system with the capability of imposing great costs, maybe not win
! though, a country with nuclear capabilities)
3) States are never certain about otherʼs intentions. (states have the incentive to
misrepresent what theyʼre doing, lie)
4) Great powers want to survive. (not only do they not want to be invaded, but they want
some sort of ability to maintain their way of life, economically stable)
5) Great powers are rational. (they calculate means and ends, can make stupid
decisions but they try to get what they want with what they have)

Offense and uncertainty: A simpler picture

-I want to live (survival).

-My neighbor is wandering in her yard with a shotgun (offensive capacity).
-I donʼt know what her intentions are (uncertainty).
-Iʼm not provoking her (rational).
-I canʼt call 911 (anarchy).

What do I do?? (how does a state design a strategy to deal with these problems?)

Survival through self-help

-States canʼt rely on others for their security.

-They must protect themselves.
-They do so by increasing their power, relative to other states.

The relative gains problem

-Relative vs. absolute gains:

! -India has 100 units of power, Pakistan has 50. (ratio of power in middle)
! -Assume a transaction between India and Pakistan, where both gain 10 units of
! power.
! t =! 100 2:1 50
! t + 1 =!110 11:6 60
! -India is relatively weaker than it was before transaction.

Why does India care about relative gains?

-Relative gains affect relative power.

! -Relative power: Capabilities/wealth compared to other states.
-Relative power = influence
! -Stronger you are, easier for you to coerce.
! -Stronger you are, harder for other to challenge.
-You can gain absolute power, yet lose influence.
-Power is a means to an end, not an end in itself. (power doesnʼt help you except for
getting what you want)

How the relative gains problem matters

-Goal of states: “to prevent others from achieving gains in their relative capacities.”
! -State care about position, as well as about utility.
-Lesson: States often leave absolute gains on the table because they donʼt want to
concede relative gains.
-Consequence: Leaving absolute gains on the table increases distrust - states look like
they are out to get each other even when they are just trying to secure themselves.

What do states want under anarchy?

-Power = security.
-Most powerful = most secure.
-States try and become most powerful state (hegemon):
! -Regional hegemon (most powerful within a certain geographic subsystem in the
! world, such as US for western hemisphere or the change in regional hegemons
! in Europe with hegemons being knocked down ex: Britain, Germany)
! -Global hegemon (the effort to become the global hegemon leads to states
! becoming distrustful and forming alliances against you)
-Ideal situation:
! -A state wants to be a regional hegemon, while no other state is a regional
! hegemon (e.g. USA).
! ! *The US, while a regional hegemon, has made alliances in east Asia
! ! to prevent the creation of a regional hegemon in that part of the world, or
! ! NATO preventing Russia from becoming a regional hegemon in its area.

What self-help leads to...

-All states try and increase their offensive power to achieve security.
-Each state tries to become the most powerful state.
-They make each other insecure, often causing war:
! -This is what John M calls ʻthe tragedy of great power politicsʼ.
! -This is the security dilemma, which weʼll discuss next time.

Tragedy of GPP is not because...

-If there is war, it is not always because one or both sides want it.
-War is often an unintended consequence of the way the system works.
-This is a change from earlier understandings of conflict.
-Freud: conflict as natural.
! -You can repress human instinct for destruction for some time, but it emerges.

Realism

-Realism is an approach to understanding international politics that stresses:

! -3rd image (distribution of power between states)
! -Material power (how many guns/bombs you have)
-What is unimportant in realism:
! -Domestic politics: all states are expected to behave in similar fashion when
! faced with similar international environment (pressures).
! ! *in the case where State A is pitted against State B, regardless of
! ! domestic politics if State B is much stronger State A should surrender
! -Ideas: states are not affected by ideas or identities (e.g. religion, democracy,
! human rights)

Sept. 20/11

Strategy, Game Theory, and The Security Dilemma

Poli 260: Week 3

Lesson plan (for the week)

-The puzzle: is war inevitable?

! -Jervis: most important article in IR.*(know it)
-Thinking strategically.
! -Various games: chicken and prisonerʼs dilemma.
-A tool for thinking strategically: game theory.
! -How does it work?
! -Why does it matter?
-The security dilemma - how we get to war (and how to prevent it).

The anarchic world (from last time)

-States live in a world characterized by:

! -Anarchy, uncertainty, offense.
-In this world, states seek security (survival).
! -They may not want war.
-States try to maximize relative power. (they want to be the most powerful state)
! -They try and become the hegemon.
-Problem: Only one state can be a hegemon.
-States seeking security make each other insecure.
! -This is the security dilemma.

Why are we not all dead? (Jervis, pg. 170)

-John M says: “the structure of the international system forces states which seek only to
be secure to act aggressively towards each other.”
! -I.e. wars are inevitable.
-Yet, weʼre still alive:
! -Wars are uncommon.
! -States cooperate on a lot of issues.
-How and when do wars happen?
-How and when does cooperation happen?

War as strategy

-Wars donʼt just happen mechanically or randomly.

-States calculate the costs and benefits of their actions. (try to get what they want with
the means they have at their disposal)
! -What do they gain from war?
-States base their decisions on the decisions of other states.
! -How will the other state react?

Example: the railway at Seistan (Jervis, pg. 167, fn 1).

-A British officer writes of the possibilities of British or Russian railway building on the
Persia-Afghanistan border:
! 1) If we build a railway and they donʼt, we gain defensive advantage at high cost.
! 2) If they build a railway and we donʼt, they gain offensive advantage at high cost.
! 3) If we both build railways, no one has an advantage, but both have incurred
! high costs.
! 4) If neither built railways, no one has advantage, and no one has incurred costs.

What are the best options for the British?

1) British build, Russians donʼt. (advantage)

2) Both donʼt build. (status quo, no cost)
3) Both build. (status quo, cost incurred)
4) British donʼt build, Russians build. (disadvantage)
-lack of cooperation and certainty leads to status quo at high cost
States have choices, but...

-Anarchy doesnʼt force a state to act in a certain way:

! -The British donʼt have to build a railway.
-Choices depend on other stateʼs choices:
! -If the Russians build a railway, the British have to build a railway, even though
! neither gains an advantage, and both incur costs.
-Big lesson: choices can be suboptimal (less than what you ideally want).
-War is not inevitable, but states often have to choose between war and peace with
costs. (the avoidance of war is sometimes costly in itself)

Wars are not inevitable

-States can gain from fighting.

! -If Britain builds a railway, they will have the advantage.
-But they can also gain from cooperation.
! -If neither build the railway, neither is worse off.
-States donʼt always have to fight.
-Strategy involves picking when to fight, and when to cooperate.
! -But remember about uncertainty.
-Letʼs work out how to do this.

Winning in uncertainty: Ask an expert

-What did you see?

! -Uncertainty about capability: robber didnʼt know if Harry had a bullet.
! ! -Robber could go free.
! -Certainty about resolve: robber knew if Harry had a bullet, Harry would shoot.
! ! -Robber could die.
-How did he win?
! -Strategy, intimidation, played on the uncertainty of his opponent.

Robberʼs options

-Harry has a bullet (50% probability):

! -Surrender - live in jail (100% chance of living)
! -Fight - die (50% chance of death)
-Harry doesnʼt have a bullet (50%)
! -Surrender - live in jail (100% chance of living)
! -Fight - live and go free (50% chance of freedom)
-Between Freedom and Death there is the chance of jail (variance in outcomes).
! Free! ! Jail! ! Death
-Robber took 100% chance of living in jail to a 50% chance of freedom/50% chance of
death

Dirty Harry and the anarchic world

-In a crisis, state A wants state B to concede territory - B can fight or fold.
! -B fights: 50% chance of conquering A/50% chance of being conquered by A.
! -B folds: 100% chance of loss of some territory.
-Ideally, A will show B that A is much stronger, so B wonʼt fight at all.
-This is difficult because:
! -Secrecy: A doesnʼt want to show whole hand.
! -Uncertainty: B may not understand Aʼs signal.

How does A win like Harry?

-B doesnʼt know what A has.

-B can only know Aʼs resolve to use what he has.
-Therefore, given uncertainty about capabilities, A must show B that A is resolved to use
what A has, even if B doesnʼt know what A has.
! -Thatʼs what Dirty Harry did: show resolve to use what he had.
-B is forced to choose whether he will run the risk.
! -Is he feeling lucky?

Dealing with uncertainty

-Tragedy of GPP: wars happen despite each state seeking security.

! -Problem is uncertainty: A can never be sure that B is seeking security alone.
-You canʼt solve this problem.
! -I.e. uncertainty/offense/anarchy are constants.
-Hereʼs how you deal with it (call Harry):
! -Signal resolve (means and will to defeat aggression).
! -Build reputation.
! ! -This works as well with greedy opponents (next week).

Lessons for international politics

-War/peace are not binary choices:

! -Absence of war is not a sign that everyone loves each other.
! -Absence of war may reflect high costs (weʼll look at this next week).
! -E.g. Cold War
-War is not inevitable, but peace is not cheap.
-States may still have incentives to fight war.

Thinking strategically: How to negotiate

-You have three (!) job offers at a similar wage. You like A more than B, and B more than
C (A > B > C). But you want to negotiate a higher wage. What do you do?
! -You go to C first and ask for a raise, then B telling them about the increased
! offer from C, and lastly go to A telling them about the offer from B. Hopefully A will
! give you a raise and you will get the job you want.
Game Theory

-Preferences
-Actions
-Outcomes
-Rational actors have preferences and act so that the outcome is as close to their
preferences as possible.
-Game theory is a tool to help achieve better outcomes.

Preferences and rank ordering

-Every interaction has several outcomes.

! -E.g. 2 player games have 4 outcomes
-Every player has an order of preferences - rank ordering.
! -Always rank order your preferences.
-Each playerʼs rank ordering is different and mutually exclusive.
! -E.g. Aʼs best outcomes is often Bʼs worst.

Sept. 22/11

Last time...

-War/cooperation is outcome of interdependent decision:

! -I.e. what you do depends on what you think the other guy will do.
-Importance of resolve/reputation.
! -Maintaining resolve to ensure peace can be costly.
-Today: some games to figure this out.
! -Chicken and Prisonerʼs Dilemma.
! -Leads to security dilemma and, if time, offense/defense.

Strategic and Suboptimal

-Two characteristics of a game

! -Strategic: decisions based on otherʼs decisions/expectation of otherʼs decisions.
! -Suboptimal: sometimes both sides donʼt get what they want, in order to prevent
! the other side gaining advantage.
! ! -E.g. British and Russians both build railway in Afghanistan.

The game itself

-Two greasy-haired fellow, A and B, driving cars at each other.

-First to swerve (cooperate) is the chicken. Guy who keeps going (defects) impresses
ONJ (Olivia Newton John).
-What happens? What is the best combination?
Rank ordering

1. DC (player defects, other cooperates)

2. CC (both swerve and are both chickens)
3. CD (player swerves and other continues, position of chicken)
4. DD (both go straight and die, mutual death)

Lessons

-Is there a dominant strategy (something each player should do every time)?
! -No because it changes situationally and makes you predictable making it easier
! for the other player to win. Always being known to swerve will make it so the
other person knows your reputation and goes straight, however playing someone who
doesnʼt know your reputation may go straight which can be detrimental to both of you.
-Why does this matter?
! -Importance of reputation.
! ! -If the other guy thinks you will swerve, you will always lose.
! ! -If you donʼt swerve, you could crash.

How to play chicken (But there are no guarantees)

-The ʻthreat that leaves something to chance.ʼ

! -Throw out the steering wheel
! ! -This is what Harry did: force the other person to make the last move.
! -Build reputation
! -Behave irrationally (sometimes winning can depend on having a reputation to
! behave unpredictably and sometimes even irrationally)

Is Chicken the only game in international politics?

-In chicken, mutual defection is worst outcome

! -Being chicken (CD) is better than dying (DD).
! -Chicken only describes a nuclear exchange.
-However, in international politics, being chicken (CD) can be the worst outcome.
-Letʼs describe a game where mutual defection is not the worst outcome.
! -I.e. DD > CD.
! -This represents a lot of interactions betweens states.

The Game Itself

-Two criminals are arrested on charge of bank robbery. They are put in two cells and the
DA tells them:
-If you rat on your partner (defect), and your partner stays silent (cooperate) you will go
free and your partner gets 25 years.
-Vice versa if your partner rats (D) and you stay silent (C).
-If you stay silent (C) and your partner stays silent (C), you will both get 5 years for the
lesser charge of owning a weapon.
-If you rat and (D) your partner rats on you (D), you will both get 10 years for the
robbery.
Rank ordering

1. You rat, she stays silent (DC) - 0,25

2. You stay silent, she stays silent (CC) - 5,5
3. You rat, she rats (DD) - 10,10
4. You stay silent, she rats (CD) - 25,0
! -This is the suckerʼs payoff.
DC > CC > DD > CD

What happens?

-Is there a dominant strategy in this game?

! -Is there a move a player will take in each game?
-YES: Defect.
-Is there an equilibrium solution?
! -Is there a move both players will take in each game?
-YES: DD (even though they are both worse off than if they stayed silent).

Why does this matter?

-In a PD game between states:

! -DC = conquering other state/gaining advantage.
! -CC = peace.
! -DD = costly war/no advantage (e.g. UK-Russia railway).
! -CD = being conquered/being at disadvantage.
-Opportunity: A state can gain more by cheating than by cooperating (DC), depending
on what the other state does.
-Fear: States donʼt want to be exploited (CD).

Examples of PD in international politics

-When are there advantages in cheating:

! -Truces (an end to the actual fighting)
! ! -Between 1914-2001, 1/3 of truces broke down (56/188; Source: Reiter,
! ! 2009).
! -Arms agreements (often broken)
! -Kyoto accord (bringing down emissions at a cost to your state)
-Lesson: under anarchy, it is impossible to guarantee states will deliver on their
promises (commitment problem).

Importance of commitment problem

-Timing of war and duration of war:
! -Say state A is gaining strength.
! -B worries that when A is stronger, no one can stop Aʼs aggression, even if A
! promises peace.
! -B declares preventive war/continues war.
! ! -Preemptive war is a response to a clear and present danger or something
! ! in the imminent future and is conducted in self-defense. This is allowed in
! ! international laws of war.
! ! -Preventive war situation is I may not be attacked but if the state becomes
! ! stronger later and attacks me I will not be able to defend myself. This is
! ! illegal by international law.
-Application to civil wars:
! -Weak government institutions that cannot stop factions from attacking each
! other.
! -Factions donʼt disarm, and tensions remain.
! ! -This is why civil wars last a long time.

Why donʼt states always cheat? 1 - Iterated games

-If interactions were one-shot, states would always cheat (think of PD game you
played).
-BUT, states donʼt interact just once.
-What happens when you play PD more than once?
! -Lessons from tutorials
! -You observe, react to, and remember the other playerʼs actions.
! -Importance of reputation

Why donʼt states always cheat? 2 - Costs of cheating

-How do you make cheating stop, and cooperation happen?

! -Increase the costs of defecting. (threaten them with destruction and prove your
! resolve)
! -Increase the benefits of mutual cooperation.
-CC - increase gains (opportunity costs)
! -Focus on trade.
! -If you increase the gains of cooperation you are also raising the opportunity cost
! of defection.
! -Alliances raise the costs of mutual defection.
-CD/DC - decrease gains from conquest
! -Canʼt affect costs if you donʼt fight.
! -Be poor (?) - unlikely
-DD - increase costs (deterrence)

Sept. 27/11

Poli 260: Week 4 - The Balance of Power

Lesson plan (for today and next Tuesday)

-RIP: Wangari Maathai (1940-2011).

-Logistical announcements:
! -Next weekʼs tutorial: reading on Vista (Week 5).
! -Essay information online today.
1. What is the balance of power?
2. What types of balancing behavior are there?
3. How does the balance of power help us understand war and peace?
! -We will analyze this using WWI and WWII.

Recall from last week...

-Outer layer of onion: Under anarchy, there is always a commitment problem (there is
no central authority that can enforce agreements, hence states have reason to act).
-Situations states want to avoid:
! -CD: being conquered
! -DD: costly war (opportunity costs)
-Situations states want to be in:
! -CC: cooperation
! -DC: conquering the other state
-How do states prevent the other side from defecting?

To prevent other side from defecting...

-States wonʼt attack if cost of war exceeds benefits.

! -You donʼt want to lower benefits of conquest.
-So you raise costs of war.
! -Deterrence. What is deterrence?
! ! -Threatening with force a high cost to avoid someone doing something
! ! they would otherwise do.
! -Compellence: the threat of the use of force to get Tanya to do something she
! would otherwise not want to do.
-How do you do this?
! -Increase capability.
! -Signal resolve.
! -This brings us to: The Balance of Power
When a group of states (of more or less equal strength) are obliged to deal with one
another, there are only two possible outcomes either one state becomes so strong that
it dominates all the others and creates an empire, or no state is ever quite powerful
enough to achieve that goal. In the latter case, the pretensions of the most aggressive
member of the international community are kept in check by a combination of the
others; in other words... (Pg. 20)

Decoding that statement

-Remember: states seek to be a hegemon to ensure survival.
! -States behave aggressively for security.
! -If unchecked, outcome is empire.
-Who prevents this (Remember: anarchy = commitment problem?)
! -Other states (self help)
-How do you prevent this without costly war?
! -Join forces with other states: alliance.

The purpose of the balance of power

-Balance of power prevents rise of hegemon.

-Balance of power preserves/defends status quo.
! -It may/may not prevent war (Uncle Henry).
-States create alliances to raise the costs of war for a potential aggressor (deterrence).
! -Logic: fighting 3 states is harder than fighting one.
-In a balancing coalition, states pool resources for the common defense.
-In a balancing coalition, states must credibly commit to defend each other.

What the balance of power responds to

-Shifts in the distribution of power.

! -Rising power.
! -Declining power.
-Mismatch between distribution of power and distribution of benefits.
! -The strongest states set up the international system to their benefit (e.g. UN
! Security Council).
! -Rising powers are cut out of the benefits. (Chinaʼs access to oil)
! -Rising powers challenge to gain benefits (ʻmy turnʼ).
! ! -This is called ʻrevisionism.ʼ (a challenge of the status quo)

Two types of states

-Status quo:
! -Most powerful states either in present or immediate past.
! -Gets benefits >= relative power.
! -More likely to balance.
-Revisionist:
! -Most powerful state either in present or future.
! -Gets benefits < power.
! -More likely to be balanced against. (the status quo powers join together against
! the revisionist)

Does BoP prevent war?

-Short answer: NO
! -Weʼll see how in detail later.
-BoPʼs purpose is to prevent rise of hegemon.
! -This can happen through fighting war, and subduing rising power (e.g. Iraq in
! 1991).
! ! -There was fear that Iraq would become a regional hegemon and so there
! ! was an alliance created that used war to balance the power.
-BoP can limit wars.
! -E.g. Korea: when China allied with North Korea, US reduced war in Korea.
-BoPʼs role is to prevent change to the status quo.

Key points

-Alliances based on capabilities, not ideology.

! -E.g. USA supported dictators against USSR.
-Alliances are flexible.
! -USSR supported Germany then joined Allies.
-Lesson: Alliances respond to change in distribution of power.

Types of alliance behavior: Who to join

-Balancing: joining the status quo.

! -Strategy for stronger states.
! -Goals is to stop aggression altogether.
! -Done for survival.
-Bandwagoning: joining the revisionist.
! -Strategy for weaker states.
! -Goal is to join forces with the aggressor. (in order to profit from the post-war
! settlement)
! -Done for profit/survival.
*A reason not to stay neutral is to avoid offending both sides because one will win and
you may be attacked regardless.

Varieties of balancing

-Internal balancing
! -Increasing oneʼs own military capabilities (rather than joining with anotherʼs).
-External balancing: directly pooling resources with others (your enemy is my enemy).
! -E.g. US-led coalition against Iraq in 1991.
-A variant of external balancing:
! -Offshore balancing: supporting allies near potential aggressor. (sending money,
! guns, etc.)
! ! -E.g. US sending aid to Saudi Arabia to balance Iran.

Varieties of bandwagoning

-Why states bandwagon:

! -Fear: you think a rising power will win a war, so you donʼt want to anger it.
! -Profit: you think a rising power will win a war, and you want to profit from it.
-Types of bandwagoners:
! -Lambs: join rising power to maintain power.
! -Jackals: join rising power to increase power.

Problems of the balance of power

-Under the security dilemma, we saw that states have incentives to defect, potentially
leading to war.
! -Commitment problem (fear that other defects later).
! -Benefits of conquest (DC).
-But the commitment problem also means states have incentives to not cooperate in an
alliance.
! -This can lead to a lack of balancing.

Why donʼt they cooperate?

Two problems of the balance of power:

1. Collective action.
2. Coordination.
Both these problems lead to behavior called:
! -Buck-passing: getting another state to shoulder the burden of deterring or
! defeating a threatening state (John M, pg. 13) (the refusal to join or contribute to
! an alliance)

Quick point of clarification of readings

-John M makes two points:

! -Balancing and buck-passing are two types of balancing/alliance behavior (pg.
! 156-159).
! -There is no such thing as bandwagoning (pg. 139-140).
-There are two types of alliance behavior.
! -Balancing: joining status quo states to prevent rising power/maintain existing
! distribution.
! -Bandwagoning: joining rising power to profit from change in distribution of
! power.
-Buck-passing is not a type of balancing.
! -Buck-passing is a refusal or failure to balance.

Collective action

-What is collective action?

! Collective action is when everyone in a group benefits from a good, but someone
! has to contribute to it, and there is no neutral authority enforcing compliance
! (commitment problem).
-Ideally, all will contribute.
-But there are incentives to contribute nothing - get a free ride - and benefit from others
contributing.
! -Commitment problem.

Three examples

1. Roommates: everyone benefits from a clean house (collective good), but someone
has to clean.
2. Police: everyone benefits from law and order, but someone has to pay taxes.
3. Alliances: everyone benefits from avoiding war, but someone has to commit
resources.
Which example is NOT a collective action?
! 2 because there is an authority to enforce.

Collective action problem

-A collective action problem arises when some people end up paying the costs, and all
get the benefit.
! -These are called free riders.
-E.g. member of an alliance who doesnʼt contribute to the common resource pool, but
benefits from the collective security.

NATO as an example: war with Iraq

How is this free-riding?

-There is collective action:

! -Many states, including NATO, declared war on Iraq.
-There is a collective good:
! -Everyone benefits from Iraq losing the war - price of oil drops/Saddam is put
! back in box.
-But US is disproportionately paying for it.
! -US responsible for almost 3/4 troops deployed.
Other states are free-riders on USʼ dime, or have passed the buck to the US.

Free-riding can cause worse problems

In 1991, the coalition still won the Iraq war - US picked up the buck.
-When allies fear free-riding (buck-passing), a collective action problem can become a
coordination problem.
-Coordination problem: members of an alliance all benefit if everyone sticks together.
(the fear that everyone else will buck-pass)
! -But if everyone fears buck-passing, everyone will buck-pass.
! -If everyone buck-passes...
! -If there is no alliance, everyone loses. How?
Coordination problem in alliances

-Expecting others to free-ride, no one joins an alliance (buck-passing).

-Expecting others to free-ride, a main power cuts a deal with the aggressor.
! -Alliances break down.
-The aggressor can attack, because the costs of war are not high enough to deter them.
! Coordination problem leads to war

Coordination problems -> war

-Alliances can break down in 2 ways:

1. A great power can end an alliance because it feels no one else is paying for it.
2. A great power can cut a deal with the aggressor because cutting a deal is cheaper
than deterring the aggressor.
-If alliance breaks down, aggressor can attack, because cost of war is less.
! ! Coordination problems can lead to war.

The 3 Cʼs: Three problems in international politics

-Commitment problem:
! -Everyone benefits from peace, but, in absence of third party enforcer, no side
! can trust the other to refrain from war.
The other two problems stem from commitment problem:
-Collective action problem:
! -Everyone benefits, but some people pay, and others donʼt.
-Coordination problem:
! -Everyone would benefit, but no one wants to move first, so no one moves, and
! no one benefits.

Difference b/w collective action and coordination problems - 1

Two players (A & B), who both benefit from action Z that they both have to pay for.
-Collective action problem: B doesnʼt pay the costs because she thinks A will pay.
! -Free-riding in alliance: weaker states know stronger states will pay, so they
! donʼt.
-Coordination problem: B doesnʼt pay the costs because she thinks A wonʼt pay.
! -Development problems: a steel firm doesnʼt build a factory because it thinks
! car-makers wonʼt build trucks.

Sept. 29/11

A World Without Nuclear Weapons (guest lecturer)

-Half the worldʼs population lives in a nuclear weapons state.

Nuclear Terrorism “real and urgent threat”

18 known attempted thefts; security lapses
-Pakistan, 2001: scientists meet with bin Laden
-Russia: Ongoing issues with corrupt/incompetent officials
-US, 2007: “deeply disturbing” major nuclear gaffe

-20% of the worldʼs 442 nuclear power stations are in areas of significant seismic
activity.
-Fukushima protestors urge Japan to abandon nuclear weapons.
-German nuclear power plants to close by 2022.

-A deficits mount, “world spending on nuclear weapons surpasses $1 trillion per decade.

Non-Proliferation Treaty (NPT)

Bargain Balance Bridge
-Article VI Legal Obligation “pursue negotiations in good faith... to nuclear disarmament

NPT 1995 Extension

1. Systematic and progressive efforts towards elimination
2. Comprehensive Nuclear Test Ban Treaty by 1996
3. “Early conclusion” of negotiations for fissile material ban

This program was STALLED because of 9/11 and George Bush went back on his
predecessorʼs intentions.

Support for Global Ban

-Two-thirds of all national governments have already voted at the UN to begin
comprehensive negotiations
-76% of people in 21 countries, including the five major nuclear powers say yes
-The European Parliament.
-Mayors of Peace representing 5,000 cities
-UN Secretary-General Ban Ki-moon

Obstacles
-Power politics: How is it that the 5 Security Council states are the same five who are
nuclear weapons states?
-Profit-driven military-industrial complex (profitable businesses who have strong
influences punish politicians who donʼt vote how they may want them to).
-Virtual mainline media blackout
-Public fear and insecurity

Nuclear Weapons States ignoring world court decision

-The International Court of Justice said, “...an obligation to conclude negotiations for
elimination of nuclear weapons.”

Ban Ki-Moonʼs 5-Point Proposal

1. A new convention... mutually reinforcing instruments
2. Summit on nuclear disarmament
3. CTBT: rooted in legal obligations
4. Accountability and transparency
5. Progress: limiting missiles, space weapons, and conventional arms
-He wanted to begin a conference in 2014 for negotiations but it was BLOCKED by the
major powers who wish to hold off.

2010 NPT Review Conference

-The conference “NOTES” considerations of negotiations...

Model Treaty (in Securing Our Survival)

-Grew out of the International Court of Justice 1996 Advisory opinion

Model Nuclear Weapons Convention

1. Never under any circumstance to use or threaten to use nuclear weapons
2. Not “develop, test, produce, otherwise acquire, deploy, stockpile, retain, or transfer”
nuclear materials
3. Time periods for phased elimination
4. International Agency for the Prohibition of NUclear Weapons
5. Verified by International Monitoring System
6. Urgency of the nuclear weapons problem demands active involvement now

-A world that has already produced complicated systems to enhance the economic,
trade and social benefits of globalization is certainly capable of producing a law to stop
the destruction of globalization.

August 2011: Rajiv Gandhi Action Plan for total elimination of nuclear weapons revived

New Generation - New Attitudes

-Develop critical thinking
-Appreciation of diversity
-Concern for justice
-Tolerance for uncertainty
-Capacity for creativity
-World awareness

The Culture of Peace: If you want peace prepare for peace.

Alliance of Civilizations (?)

Military Industrial Complex

Oct. 4/11

Plan for the week..

-Today: finish up on Balance of Power.
! -Recap a few things on coordination/collective action/commitment problems.
! -Go over World Wars.
-Thursday: start on International Organizations.
! -Why are there IOʼs.
! -Functions of some IOʼs.
-NOTE: May cut down IOʼs to 1 lecture.

The 3 Cʼs: Three problems in international politics (from last time)

-Commitment problem:
! -Everyone benefits from peace, but, in absence of third party enforcer, no side
! can trust the other to refrain from war.
The other two problems stem from commitment problem:
-Collective action problem:
! -Everyone benefits, but some people pay, and others donʼt (free-riders).
-Coordination problem:
! -Everyone would benefit, but everyone thinks others will free-ride, so no one
! moves, and no one benefits.

Difference b/w collective action and coordination problems - 1 (last time)

Two players (A & B), who both benefit from action Z that they both have to pay for.
-Collective action problem: B doesnʼt pay the costs because she thinks A will pay.
! -Free-riding in alliance: weaker states know stronger states will pay so they donʼt.
-Coordination problem: B doesnʼt pay the costs because she thinks A wonʼt pay.

Difference b/w collective action and coordination problems - 2

-Collective action:
! -Who doesnʼt contribute?: The weak donʼt contribute because they an get
! something for free.
-Coordination:
! -Who doesnʼt contribute?: The strong donʼt contribute because they think they
! will be left paying for everyone else.

Recapping...

-Balance of power is strategy to maintain status quo distribution of power.

! -Deter rising powers by raising cost of revisionism.
-Two types of balancing behavior:
! -Balancing
! -Bandwagoning
-Two problems for alliances -> buck-passing:
! -Collective action
! -Coordination
! -Both stem from commitment problem (and anarchy)

The balance of power in history

-The balance of power developed as a way to regulate the European state system after
the fall of the Roman empire (1648).
-How it worked in Europe prior to 1900:
! -Flexible, interlocking alliances
! -Disregard of public opinion
! -Divisions between France, UK, Russia (any combination of these three would be
! able to dictate to Europe threatening the survival of the rest of Europe creating
! potential insecurities and alliances against the three as well as the fact that these
! three lacked trust between each other).
-The problem: rise of Germany and Russia

How did WWI start?

Logic of balance of power, according to Blackadder

-Two blocs deterring each other:

! -UK/France/Russia on one side
! -Germany/AH on other (Austria-Hungary)
-High cost of war.
! -War lasted 4 years, over 20 million casualties.
-Low chances of success.
! -General stalemate: Ostrich died for nothing. (Germany lost but was generally
! unoccupied vs. the occupation in 1945)
-How did WWI happen anyway?
! -I.e. was the plan bollocks?

Recall what the balance of power responds to

-Shifts in the distribution of power.

! -Rising power. (Germany)
! -Declining power. (France and UK relative to Germany)
-Mismatch between distribution of power and distribution of benefits
! -The strongest states set up the international system to their benefit (e.g.
! colonies).
! -Rising powers are cut out of the benefits. (UK and France had most colonies
! and because Germany had recently become independent of Prussia, it came late
! to the game)
! -Rising powers challenge to gain benefits:
! ! -This is called ʻrevisionism.ʼ

Structural factors leading up to 1914

-Rising powers change European balance.
-Britain and France dominant powers in Europe.
-German unification (1871)
! -Germany was stronger than France/UK, but had fewer colonies: “sausage
! factory in Tangyanika”.
-Rise of Russia (this is the shifting structure)
! -Russia seeking territory in Far East.
-Power becomes unbalanced:
! -Actual power (Germany) are not getting the benefits of what they think they
! should have.

Alliances pre-1914

-Germany allied with Austria-Hungary (and Italy).

! -Triple Alliance.
-France allied with Russia.
! -Goal was to box Germany in: Germany couldnʼt fight on two fronts
! simultaneously.
-UK was wooed by both sides.
! -UK would tip the balance.
-UK joined France-Russia, forming the Triple Entente.
! -UK wanted to box Germany in too (defensive).
! -Germany felt threatened (security dilemma).

Why did Germany declare war on Russia AND France?

-Motives:
! -Germany wanted to change the distribution of benefits.
! -Germany felt insecure.
! ! -Knew AH was declining.
! ! -Felt encircled by Triple Entente.
-These lead to same conclusion (recall John M): to deal with insecurity, states aspire to
be the hegemon:
! -Germany sought to be hegemon to maintain its security.

Did Germany think it could win?

-Germany underestimated costs of war.

! -Cult of offensive - idea of quick war.
-Would Germany have declared war if it knew the real costs?
! -The German decision to continue fighting in 1916/1917 may show that they
! wouldʼve participated in the war knowing they wouldnʼt win quickly and it was
! expensive.
! -Necessity: some evidence that Germany wouldʼve fought anyway (because they
! wouldʼve lost their bargaining chip and lost out on being able to negotiate).
Was the idea of two opposing blocs bollocks?

-What were the two opposing blocs meant to do?

! -Ideally it wouldʼve been good to maintain the balance of power and deter war,
! but that isnʼt necessarily the bigger goal. The biggest goal was maintaining status
! quo.
! -ʻTwo vast opposing armies serving as deterrents.ʼ
-Why didnʼt it work? (Why didnʼt they prevent war?)
! -Did alliances break down?
! ! -NO - UK/France/Russia fought Germany/AH
! -All sides underestimated costs.
! -Germany had to fight or lose power. (it wouldnʼt lose power presently, but in the
! future).

Lessons of WWI

-In some instances, rising powers cannot be deterred (balancing may provoke them -
make them insecure).
! -I.e. even if Germany knew that war would be costly, it may have still declared
! war.
-BUT, misperception about costs of war can make war more likely.
-Hence, fighting wars can reveal important information that helps understand them.

If balancing doesnʼt work...

-In WWI, the alliance against Germany:

! -Either did not prevent war (was bollocks, in Blackadderʼs terms).
! -Or provoked Germany by making it insecure.
-Does this mean that balancing never works?
! -NO: balancing coalitions have forced other aggressors to back down.
! ! -E.g. US-led alliance in Europe prevented USSR from expanding.

When everyone buck-passes

-WWI settlement (Versailles) rough on Germany.

! -Disarmament.
! -Reparations.
-Germany suffers heavy economic depression and humiliation.
-Rise of Fascism:
! -Nazi Party promised return to national greatness.
! -Under the condition of militarism/authoritarian leadership.

Structural problem (shifting balance) - 1

-Germany increased power relative to France and UK.

-I.e. Germany > France/UK in the present/near future.
Structural problem (shifting balance) - 2

-USSR and Germany both got stronger.

-USSR had 3 times Germanyʼs population, 40 times its landmass (latent power greater).
-I.e. USSR > Germany in the future.

Strategic goals

-UK/France
! -Want to prevent rise of Germany (and maintain status quo).
! -Want to prevent war (WWI very costly).
-Germany
! -Want to expand power relative to UK/France.
! -Want to prevent rise of USSR.
-USSR
! -Want to prevent war with Germany until strong enough to fight.

What are the options (generally speaking)?

-Four options (remember Germany is rising power):

1. Balance (against Germany with UK/France/USSR)
2. Bandwagon (with Germany) - only open to weaker powers because they want want
UK/France have
3. Buck-pass (to UK/France/USSR)
4. Fight (Germany/UK/USSR/France)

Strategic options

-UK/France
! -Balance against Germany:
! ! -Preventive war in late 1930ʼs.
! -Buck-pass to someone else.
-Germany
! -Fight if no balancing coalition forms.
! -Donʼt fight everyone at once.
! ! -Ally with USSR while fighting UK/France.
-USSR
! -Bandwagon with Germany until stronger.
! -Balance with UK/France against Germany.

What happened?

-UK/France buck-passed until after Germanyʼs invasion of Poland (coordination

problem).
! -Germany had occupied Austria, Czech.
-Germany signed treaty with USSR.
! -Molotov-Ribbentrop Pact.
-Germany attacked USSR in 1941.
-This brought USSR, UK, France on one side. (1941)
! -Balancing coalition could not prevent war, but could end war.

Oct. 6/11

International Organizations

-Objects?
! -Why do they exist? (why states to continue to support them).
! -Problems of international organizations.

-Examples: UN, IMF, World Bank, WTO (and NATO as well as others)
! -World Bank provides aid for development projects
-International Organizations/Institutions/Regimes all mean the same things
! -International Regimes definitions is on pg. 325 of one of the readings
! ! -principles, norms, and decision-making procedures - institutionalized
! ! structures
! ! -around which expectations converge - the whole point of these is that
! ! they get the expectations of actors to more or less the same place

Why they exist?

-States function in anarchy and have incentives to work together but they fear the other
guy will cheat them. Their primary way, aside from war, of dealing with them is to create
alliances. They are ad hoc arrangements (you and I will fight so-and-so).
! -Alliances are temporary and can easily be broken.
! -Alliances create the ability to punish free-riders.
-International organizations are different because they donʼt normally break down
quickly. They are also institutionalized and have forums.

Outcomes states donʼt want in Prisonerʼs Dilemma

-DD (costly war) and CD (get invaded or lose relative advantage)

-DC (you gain the upper hand) and CC (you cooperate and avoid a costly war)
-International organizations help avoid the uncertainty and mistrust and create an
exchange of information.
! -Helps with the commitment problem.
! -There is credible 3rd party enforcement. This should stop states from getting
! invaded, although they may not have the means in important circumstances.
! -It may be able to impose external costs (such as trade sanctions).
-However it is hard to enforce disputes between larger states because the Blue Helmets
are made up of statesʼ formal armies and are authorized by them.
! -There are also not a whole lot of UN peacekeepers.
! -The UN is meant to enforce already existing peace treaties rather than using
! war to enforce new ones.

Most importantly

-Any exchange has 4 costs:

! -The actual price
! -Opportunity cost
! -Externality
! -The transaction cost (the cost to me of conducting the exchange which is not
! factored into the price)
! ! -International organizations reduce the transaction costs.

General pros and cons

-Having an organization like the WTO ensures some sort of expectations that reduces
uncertainty.
! -All states agree to certain standards reducing transaction costs by giving a set of
! agreed upon rules known prior to interactions making it cheaper to do business.
! -There is some sort of dispute resolution that is one less cost a state has to deal
! with.
-The logic is that there is a 3rd party tribune whose decision should be binding and
whose decisions should be enforceable able to impose fines or create free trade, etc.
However, it does not always work:
! -it may be able to lower costs but may not be able to provide the 3rd party
! enforcement such as situations in which the US flouted rulings.

International Organizations as forums

-International organizations provide 3rd party forums which can act as a buffer where
info is shared before bad things happen.
! -Socialization can occur between representatives of states.
! -Convergence of expectations (signaling)
! ! -When a deal is done in a 3rd party forum reneging on a deal leads to a
! ! higher cost of defection because you will lose the trust of everyone in a
! ! multilateral deal.
! -Self-binding: ways in which great powers signal to everyone else that they are
! not out to get the smaller states. They create ways to limit their own power.
! -International organizations have data collections and their information is
! generally seen as trustworthy.
! ! -World Bankʼs exhaustive information (infant mortality, education, etc.) that
! ! sometimes is sketchy when the government itself compiles it.

Problems associated with nuclear weapons

-Lying -> Monitoring to make sure things get dismantled

-Last mover so that you can preserve the relative advantage
! -Treaty through which expectations can converge.
-Trust
-Post-disarmament
Baruch plan??

Oct. 11/11

The Impact of Domestic Politics on International Politics

Lesson plan (for the week)

-Logistics: Midterm review sheet on Vista by Thursday.

! -Links to reading for next weekʼs Tutorial on Vista in folder for Week 7.
-Recap a few things.
-Understanding how domestic politics affects international politics.
! -The democratic/liberal peace.
! -Democracies and war.

How we got here

-States pursue survival in an anarchic world.

! -Uncertainty + offense = fear of CD.
-Why are we not all dead (Jervis)? Or why arenʼt we always at DD?
! -States have incentives to cooperate (CC > DD).
! -Alliances: aim is to deter challenger, but if not...
! ! -Defeat challenger (e.g. Germany).
! -IOʼs (why do they exist at all [Keohane]?):
! ! -Lower costs of CC (transaction costs).
! ! -Reduce uncertainty by sharing information.

Foreign policy and domestic politics (Uncle Henry discusses this)

-Two visions of foreign policy: Roosevelt (realist) vs. Wilson (liberal).

-Do domestic politics matter?
! -Roosevelt: No. Only balance of power matters
! -Wilson: Yes. Democracies are peaceful.
-Should foreign policy be moral?
! -Roosevelt: No. Foreign policy should maximize power
! -Wilson: Yes Foreign policy should promote moral values
-Wilson: domestic politics (institutions + morality/ideology) matters.

WWJS (what would John M. say)? (he is an offensive realist)

-Wilson is foolish - Roosevelt is right.

! -States should not care about domestic politics.
-But... in practice, states do consider domestic politics when designing foreign policy.
! -E.g. Communism vs. capitalism. (when it came to dispersing foreign aid)
-Does this make sense?
! -John says no.
! -But can states be doing this for good reason?

We were like John (and TR): we used to think domestic politics didnʼt matter

-We (IR folks) used to think of states as billiard balls.

-Domestic politics donʼt matter because:
! -Structure (balance of power) was what drove state behavior.
! -All leaders would behave the same way, given a similar balance of power.
! -States basing foreign policy on domestic politics were foolish (e.g. Cold War).
-But then we found a puzzling pattern.

How we found domestic politics mattered

-Democracies were relatively uncommon.

-The few democracies that existed did fight wars just like everyone else.
-But, as the number of democracies expanded...
-Scholars noticed that whiled democracies fought non-democracies, democracies
almost never fought each other.
-So we had to peel the onion, get to the second image - domestic politics.

Some definitions

-There are a range of regime-types.

-Democracy: ruler not selected by watery tart.
! -Free and competitive elections (i.e. govt. can lose).
! -Wide franchise. (range of people who can vote and their votes will count)
! -Leadership open beyond narrow elite.
-Liberal: ruler canʼt repress Dennis.
! -Govt. allows/protects individual liberty.
! -Rule of law makes life non-arbitrary.
! -Non-state liberal institutions (e.g. free press).

Liberal democracy

-Democracy (elections) + rule of law (individual rights, freedom of press/assembly).

! -E.g. Canada
-Most autocracies are illiberal (e.g. Nazi Germany). But
-You can have illiberal democracy.
! -Elections (and representative procedures) without adequate rule of law.
! -This happens in sates with weak institutions (e.g. Kenya where there were
! elections but not rule of law so people werenʼt protected).
-You can even have liberal autocracies (?).
! -No elections but protection of rule of law (e.g. South Korea until 1980ʼs).

What the democratic peace is

-Democracies donʼt fight other democracies.
! -More democratic two counties are, less likely they are to get into violent conflict.
! -All other things being equal, two democracies are 60% less likely to fight each
! other than two dictatorships.
-This finding is strong since 1900.
! -Few democracies prior to 1900 (limited franchise even in democracies, such as
! women not being able to vote).
! -Early democracies (e.g. ancient Greece) did fight other democracies.

What the democratic peace is not

-It does not mean that democracies are peaceful in general.

-It does not mean that democracies do not fight wars at all.
! -Democracies fight interstate wars.
! ! -E.g. WWII.
! -Democracies fight wars of conquest.
! ! -E.g. France in Algeria. (war of Algerian independence)
! -Democratizing states fight wars.
! ! -Ethiopia-Eritrea in 1998.

Early explanations for the democratic peace: Structure and/or Norms

-Structure: institutional constraints/audience costs. (leaders make promises to subjects

at the polls and if they fail to follow through with those promises they pay for it)
! -Leaders want to stay in office.
! -In wars, public suffers death AND taxes.
! -Leaders who fight wars, inflicting costs on public, run risk of being evicted from
! office (ʻaudience costsʼ).
! -So democratic leaders reluctant to fight wars.
-Norms: ideas held by democracies.
! -Non-violent conflict resolution.
! -Idea that democracy is morally good (Wilson).

But...

-There are problems looking at structure and norms within individual states:
-Structure:
! -Democratic publics and legislatures are often keen for war.
! -If leaders can win wars, they wonʼt lose elections.
-Norms: states sometimes donʼt consider one another democratic.
! -E.g. US did not consider Britain democratic in 1812 (Owenʼs point).

Problems when we look at individual states

-If a democratic leader can beat another democracy, why wouldnʼt she fight?
! -Audience costs donʼt count here.
-When does a democracy perceive another state as a democracy?
! -Perception: what state A thinks of state B is as important as what state Bʼs
! self-identity is.
! -We canʼt look at single states (monad), we have to look at both (diads).

For structure and norms to work...

-States have to see each other as liberal: this is John Owenʼs argument in the piece you
read.
! -Importance of perception.
-A two-stage process:
! 1) Two states understand each other as liberal
! 2) Foreign policy is affected by:
! ! 1. Liberal ideology: no wars against democracies.
! ! 2. Domestic democratic institutions: free debate.

Breaking down the 2-stage process

1) Liberal ideas: other state is liberal, hence can be trusted.

! 1. Why: stay tuned.
2) Influences on foreign policy:
! 1. Liberal ideology: donʼt fight other democracies because non-violent conflict
! resolution is possible.
! 2. Domestic institutions: legislature. Free press means that information is
! transmitted.

A simpler way to understand the DP: Democracy and Security Dilemma

-Recall the role of uncertainty (fear of D).

-Solution: send credible signals.
! -Credible: other side has to believe you.
! -Signal: information.
-How do liberal democracies do this?
! -Credibility: when a state sees other state as liberal, likely to believe signals
! because of audience costs.
! -Signal: information revealed through institutions like legislature, free press.

Liberal democracy and uncertainty

-Dealing with uncertainty.

-Liberal-democratic institutions produce information:
! -Leaders must tell public their policies.
! ! -Public can vote the leaders out (audience costs).
! -Free press/debate increases information.
-If state is perceived as liberal, information is likely to be believed (credible).
-Domestic politics (liberal democracy) can reduce uncertainty between states (fellow
democracies).

The liberal peace

-Bottom line: democracy (i.e. elections) is not enough because perception matters.
! -There must be institutions for transmitting information (e.g. free press), but...
! -Other states must find such institutions credible.
-Domestic politics can reduce uncertainty by
! -The prospect of audience costs through institutions.
! -Increased transparency increasing information.
! -Shared beliefs that signals are credible.

Why does this matter? - 1

-If democracies are seen as trustworthy/sending credible signals...

-Dictators are seen as the opposite.
-In 2003, US govt. said Saddam had WMD.
-Now we know that Saddam did not have WMD, but...
-Because of his opaque regime (dictatorship), he couldnʼt prove it. No one would believe
him.
-Problem is not that US govt. was wrong: problem was that Saddam couldnʼt send a
credible signal.

Broader lessons

-Uncertainty about capabilities/intentions.

! -US said Saddam had WMD.
! -Saddam did not have WMD.
-Saddam (dictator) couldnʼt credibly signal.
! -Foreign public distrusted him because he was an illiberal dictator.
! -No domestic institutions (free press, oversight) to reveal information about
! WMD.
-Problem of misperception high when one side (or both) is a non-democracy.

Why does this matter? - 2

-The number of democracies has risen in recent years.

-Policymakers in North America and Europe want to promote democracy.
! -NATO enlargement (hence Russia is left out).
! -EU: reform to join. (you have to pass certain conditions of reform such as freeing
! your press and increasing democratic institutions as an incentive to being a part
! of the EU enlargement)
! -War in Iraq.
-Popular movements in many part of the world demand democracy (e.g. Arab Spring).

Implications: Summing up

-Relations between pairs of states:

! -Liberal democracies vs. liberal democracies?
! ! -Zone of peace (e.g. EU).
! -Liberal democracies vs. illiberal democracies?
! ! -Suspicion, potential for misunderstanding/conflict.
! -Liberal democracies vs. non-democracies.
! ! -Suspicion, potential for misunderstanding/conflict.
! -Non-democracies vs. non-democracies.
! ! -Suspicion, potential for misunderstanding/conflict.

Oct. 13/11

-Two things on democracy:

! -Democracy + IOʼs + trade = ?
! -How good are democracies at war?
! ! -Use this to see who fights and why.
! -Discussion: World full of democracies?

Recall from last time

-Democracies are unlikely to fight other democracies.

! -This does not mean that they are “peaceful in general.”
-Democracies reduce uncertainty with each other (Dictatorship can have opposite
effects).
! -Shared perception of liberal democracy makes signals credible.
! ! -Have to “see the other guy” as democratic as well.
! -Foreign policy influences: 2 aspects
! ! -Institutions (free press, etc.) create information (credible because of
! ! audience costs).
! ! -Ideas (liberal ideology makes non-violence more likely).

Another way to look at IR

-Liberalism: theory that considers domestic politics as influencing international politics.

! -Contrast to realism, where states are like billiard balls.
-Take interaction between A and B:
Realism Liberalism

Do domestic politics in No. Only power of A Yes. Can influence foreign

state A affect Aʼs policy? influences foreign policy. policy of A.
 Realism Liberalism

Does A care about No. A only cares about Yes. Can influence
domestic politics in state B? power of B. perception of B for A.
-Democracy + other influences = peace - 1 (this is Russettʼs piece)
! -Two-step process:
! ! -Democracy -> trade/IO membership
! ! -Combination of democracy/ trade, IOs make peace more likely
! -Trade:
! ! -Democracies trade more with other democracies.
! ! ! -Rule of law/property rights.
! ! -Sectoral interests: trading groups can vote/lobby.
! -International Organizations:
! ! -IOʼs often require members to be democracies (e.g. EU)
! ! -Once two states are in an IO, they are 30% less likely to fight (recall
! reasons from last week).

Triangulating peace

-Lib. Democracies > Rule of law > trade

-Lib. Democracies > Membership > IOs

The credibility of democratic signals in a crisis

-So we know that democracy A is likely to believe democracy B if B sends peaceful

signals.
-But what about crisis situation, where A and B signal to each other that they want to
fight?
-What does A do? Options:
! -A knows that B, being a democracy, should be interested in non-violent
! resolution if...
! -The costs of war are high (B will be voted out).
! -The key question: are the costs of war high?

Are democracies better or worse at fighting war? - 1

-Democracies have higher success rate in war than dictatorships: they are good at war.
-From 1815-1990, democracies have won 75% of wars they have fought (Reiter and
Stam 2002).
-Wars by initiator:
! -Non-democracies win wars they start 59% of the time.
! -Democracies win wars they start 93% of the time.
! -Total (altogether) starters win 65% of the time.
-Democracies win the wars they start.
Are democracies better or worse at fighting war? - 2

-Democracies win the wars they start (93%)

-But they also win when the other side initiates war:
! -Democracies: 63%
! -Non-Democracies: 37%
! -Total: 41%
-Democracies win wars, whether they start them or not, at higher rates than non-
democracies.

Why are democracies better at war?

-Two reasons why:

! -Democratic leaders donʼt start wars unless there is a good chance of success
! (self-selection).
! ! -Audience costs explains 93% success when initiating.
! -Once wars start, democracies can draw on a more motivated and innovative
! public.
! ! -Citizens in democracies, on average, more motivated than in autocracies.
! ! -Greater levels of freedom drive innovation in technology.
-Lesson: wars involving democracies will have high costs; hence leaders will be
punished at polls.

Letʼs go back to A and B (both democracies)

-A and B know the following:

! -Signals that the other fight are credible.
! -Being democracies, the war will be costly.
! -The other side knows this as well.
-What do they believe about signing a deal?
! -They believe that the other, being a democracy, can commit to non-violent
! conflict resolution, so...
-They become more likely to go with non-violent conflict resolution.

If democracies are good at war...

-Why would a dictator fight a democracy?

! -Because he may stay in power even if he loses (e.g. Saddam lost in 1991, but
! stayed until 2003).
! -Because a democratic leader can lose office if she fights a costly war (e.g.
! Japan didnʼt think US would fight as hard as they did in WWII).
-A dictator may fight a democracy if:
! -He believes that he can lose and still stay in power OR
! -He can impose heavy costs and force a draw.

The decision to go to war - 1 (Democracies initiating)

-Should I fight and when?
-Democracy vs. Democracy
! -Calculation for me: War will be costly.
! -Decision: Negotiate, donʼt fight (e.g. US-UK 1895).
Democracy vs. Dictator
! -Calculation for me: I can probably win, and costs wonʼt be super-high.
! -Decision: Threaten him, and fight if he doesnʼt back down (e.g. US-Iraq 1991).

The decision to go to war - 2 (Dictators initiating)

-Should I fight and when?

-Dictator vs. Democracy
! -Calculation for me: Iʼll probably lose the war, and the costs will be “pretty damn
! high,” but I may stay in power anyway.
! -Decision: Fight, except when loss in war = loss of power
-Dictator vs. Dictator
! -Calculation for me: Costs are low (for me), and I donʼt trust the guy anyway.
! -Decision: If I think I can win, Iʼll fight (e.g. Iraq-Kuwait).

Discussion: A world full of democracies?

-Will there be war?

-If yes, what type of war?
-If no, will people have anything to argue about?
-If no, should governments promote democracy in currently non-democratic states?
! -If so, how, and at what cost?

Oct. 18/11

Transnational Movements and State Policy

Lesson plan (for the week)

-Logistics: extended office hours.

! -Today: 2-4pm, W 2-4pm, Friday by appt.
! -No tutorials next week.
-The puzzle of slavery ban (and other such events in world politics like anti-apartheid).
-Role of transnational movements.
! -Norms
! -Activist movements
-Putting together the onion of international politics.

Puzzle: Irrational states?

-Would you expect a state to ban an activity that had been extremely profitable for its
citizens and itself (through taxes)?
-E.g. the slave trade
! -In 1700ʼs, blacks seen as inferior.
! -Slave colonies in Caribbean very profitable: sugar consumption up 80%
! between 1785-1805.
! -Slavery banned in UK in 1807, colonies in 1833.
-Why would Britain ban slavery when the US, a rival, still allowed slavery?

What weʼve seen so far

-Realism: what does a realist care about?

! -Relative power: how many guns and bombs does the other guy have?
! -Economy: how many guns/bombs can I make? (latent power)
-Liberalism: what does a liberal care about?
! -Regime-type: is the other guy a democrat or a degenerate dictator?
! -Audience costs: can I stay in power (i.e. Can I avoid annoying powerful domestic
! interests?)?

-Using these logics, make some predictions....

-If UKʼs rivals (e.g. US) kept slavery, did banning it make the UK weaker or stronger,
relative to rivals?
! -Prediction of realism: UK should keep slavery.
-Did the slave trade benefit voting groups in the UK (e.g. businesses, consumers)?
! ! -YES: Planters launched campaigns calling slaves ʻassistant planters.ʼ
! -Prediction of liberalism: UK should keep slavery.
-So why did the UK ban slavery?

The ʻfirst human rights movementʼ

-Moral values over profit/power:

! -Race as equal.
! -Moral values over state goals.
-Coalition: combination of interests. (a whole bunch of people who want a similar
outcome and cannot do it on their own)
! -Ex-slaves.
! -Religious groups (e.g. Quakers).
! -Labor groups seeking to improve labor conditions.
-Transnational:
! -Civil society groups collaborated across borders (e.g. Frederick Douglass
! travelled to UK).

How do materially weaker actors change the policies of stronger entities like
states?
-ʻMore people signed anti-slavery petitions than were eligible to vote in the UK.ʼ
-We canʼt explain this by state interest or democratic politics.
-We have to look at two things we havenʼt examined this far:
! -Moral ideas, or norms.
! -Activists (also called activist networks or transnational movements/actors).

Norms - what they are

-Definition: a norm is a standard of appropriate behavior for actors within a specified

group. (social standard rather than inner moral compass)
-Somewhat tautological but this part is crucial: you follow a norm because you expect
others will follow it too.
-Two roots:
! -Normative: what you should do.
! -Normal: what you do regularly.

Functional vs. normative logics

-Two logics (Finnemore and Sikkink, pg. 912);

! -Logic of consequences: calculate the costs/benefits of your actions for yourself.
! ! -Individual cost/benefit (interest). (I act based on what the consequences
! ! will be rather than for the case of morality)
! ! -Morally neutral.
! -Logic of appropriateness: calculate whether your action is suitable/allowed
! within your society.
! ! -Social assessment/sanction (norm).
! ! -Moral value - good or bad.

Donʼt take the opposition too far

-This does not mean that norms are followed by mindless saps and do-gooders, and
smart people always break norms and benefit.
-Norms are functional as well as moral because they make life predictable (solve
coordination problem).
! -Norm: driving on one side of the road secure in the knowledge that others will
! drive similarly.
! -Uncertainty reduced: I know what others will do.
! -Transaction cost reduced: I donʼt have to drive a tank. (to protect myself)
! -Result: more people drive because itʼs cheaper (to drive a Toyota than a tank)
! and they are less likely to get killed.

Bottom line

-Norms are crucial aspects of life.

-They combine the normative (what is good), with the normal (what works on everyday
basis): they are functional as well as moral.
-Norms are socially accepted codes for appropriate behavior: they are ideas as to how
people should behave.
-They can change, as different ideas of behavior develop.
-How do norms change?

Activists - what and who they are

-Activists are ʻprincipled actorsʼ (also called ʻnorm entrepreneursʼ)
! -ʻPrincipledʼ: their actions are driven by moral values, rather than profit/power
! (they are also materially weak).
! -ʻActorsʼ: they engage in action (weʼll see what).
-They operate within groups (organizational platforms) and form coalitions.
-They use persuasion, not coercion.
! -Take what is appropriate and show it is wrong.

Activists - what theyʼre trying to do

-Campaign:
! -Publicity: get the message out.
! -Build coalitions: ally with other groups.
-Push states to adopt norms:
! -States are concerned about reputation. (you will be a pariah or outcast for
! disregarding certain norms or developing certain policies)
-Institutionalize norms:
! -Get norms written into everyday law.
! -Change way of thinking (internationalization).
! ! -E.g. people now see racism as bad.

Activists and their tactics - 1

-Legal: use domestic and international law.

! -Change laws.
! -Push govt. to follow international law/harmonize international and domestic laws.
! -Use different jurisdictions to prosecute offenders.
! ! -E.g. after Rwandan genocide, Hutu leaders were prosecuted in Belgian
! ! courts.
-E.g. in anti-slavery movement:
! -Challenge legality of slavery in court: slavery violates right to bodily integrity
! under law.

Tactics - 2

-Politics: appeals to state authority to rewrite laws/change policy.

! -Lobbying politicians/signing petitions.
! -Civil disobedience.
-E.g. in anti-slavery movement:
! -Lobby UK politicians to ban slavery/stop trade with states that allow slavery.
Tactics - 3

-Civil: change individual/group behavior.

! -Targets: companies, individuals as consumers/investors.
! -Goal: change understandings of right/wrong.
-E.g. in anti-slavery movement:
! -Boycott sugar-makers that use slave labor (first documented use of boycott, now
! common).
! -Consciousness raising/publicity (Equino travelled to the UK talking about bad
! conditions for slaves).

Norms + activists = ...

-Persuasion, not coercion:

! -Remember, activists are materially weak.
! -They canʼt coerce, so they must persuade...
-Change in ideas: activists change ideas of what is right.
! -E.g. slavery is bad because races are equal.
-Change in identities: when ideas change, individuals/groups/states behave differently
to maintain reputation in society/system.
! -E.g. slave-owning states are pariahs in (international) system.

What is identity?

-Definition: set of characteristics through which a being (thing, individual, group) is

known.
! -E.g. I am an Indian male.
-How individuals differentiate themselves from others.
! -ʻIʼ (Indian) as distinct from ʻyouʼ (French).
-How individuals become part of a group.
! -Recognition of others (my passport).
! -Reputation within community (do others see me as Indian?).

Ideas -> Identities -> Internalization

-Ideas: something previously seen as right/natural becomes seen as wrong/unnatural.

! -E.g. dueling was once common among ʻgentlemen.ʼ
-Identities: once ideas change, you change your identity.
! -In public opinion, duelers were seen as cold-blooded murderers, not
! ʻgentlemen.ʼ
-Internalization: once identity changes, you think in terms of the new ideas.
! -Now, we donʼt even think of dueling when our ʻhonorʼ is challenged - we go to
! court instead.

Social construction
-Norms are social.
! -Standard of appropriateness within a society.
-Identities are social.
! -Individuals defined as members of group.
-To change norms and identities is a process called ʻsocial construction.ʼ
! -By changing identities, you change behavior.
! -Strategic: actors are calculating how to change peopleʼs minds (Finnemore and
! Sikkink, pg. 910).

Development of new norms (Finnemore and Sikkink, pg. 896)

Stage 1! ! ->! Stage 2! ! ->! Stage 3

Emergence! ! ! Adoption/ratification!! Internalization
Actors: activists! ! Actors: states/IOs! ! Actors: law, bureaucracy
Motive: altruism! ! Motive: reputation! ! Motive: best practice

Oct. 20/11

Objectives:

-Working through the puzzle of apartheid in proper social-scientific fashion.

-Unpeel onion.

Recall from last time:

-Big changes in world politics often not explained by power/profit.

! -Importance of norms (right and wrong).
! -Norms donʼt change by themselves, activists change them.
! -Do so through “strategic social convention”

A third approach of IR

Realism Liberalism Constructivism

Whoʼs important? States (leaders all States, and States, and

act the same) domestic groups activists, who can
be transnational

Whatʼs important? Material power, and Material power + Material power (of
material power institutions states) + moral
alone (perceptions) + ideas of how states
domestic interests should act
 Realism Liberalism Constructivism

Can change Not really, system Yes, if you get Yes, if identities can
happen in world remains democracies + IOʼs change through
politics? competitive under = less competitions new ideas
anarchy

Activists can be transnational, so...

-If activists cross borders (think MSF) and states work within borders, what is
relationship between activists and states?
-Relationship is complicated.
! E.g. should human rights groups have supported the US invasion of Iraq in
! 2003?
-We need to look at two things.
! -Why activists need states.
! -Tensions between activists and states.

Why activists like/need states

material power, protection for various marginalized groups, money support

-Appeals made to states:
! -E.g. legalization: states must write laws like the ban on slavery.
! -E.g. humanitarian intervention: only states have resources to send troops
! somewhere.
! ! -Sometimes activists become state actors (become involved in
! ! government).
-States must ratify international law/support IOʼs:
! -E.g. states must sign Ottawa Treaty on land mines to stop trade in land mines.

Difference/tensions between activist networks and states - 1

1. Hierarchy vs. network forms.

! -States are centralized, and power flows from top.
! -Networks are decentralized, often without leaders. (people acting on more of a
! horizontal than vertical basis)
2. Territorial vs. transnational bases.
! -States are based in a territory. (sometimes they may have more in common with
! a group across the border than with your own government)
Case in point: Occupy Wall Street/Vancouver etc.

Differences/tensions between activist networks and states - 2

-Main difference: universal principles vs. state interests.

! States care about what goes on in their territory/to their people and threats to
! territory/people.
! -States work for their people, not humanity.
! -Activists care about people beyond borders.
! ! -E.g. climate change: states donʼt want to be exploited (CD), so donʼt sign
! ! Kyoto Accord.
! ! -Activists want Kyoto signed, even if it costs states.

How often do states follow norms?

-Isnʼt the ban on slavery one rare instance where states follow norms - most of the time
they donʼt?
-Short answer: NO.
-States sometimes, but not always, deviate from most efficient behavior because of
norms/activists.
! -States rarely use chemical/nuclear weapons, even when they have them and
! other guy does not (e.g. Vietnam).
! -This is important because you would expect states fighting war to follow
! efficient, not moral strategies.

Class assignment: The puzzle of apartheid South Africa

-South Africa was a racist regime until 1994.

-Why did US impose sanctions on South Africa in the 1980ʼs?
Using the concepts from the class, what would you expect to see (ignore IOʼs in this
case):
1. Balance of power/anarchy
2. Costs/benefits of cooperation
3. Democratic/liberal peace
4. Principled actors/norm emergence

US-South Africa relations in the 1980ʼs

1. Cold War: US opposed to USSR

! -South Africa was anti-communist
! -South Africa supported US intervention in Angola, Mozambique, etc.
2. US traded heavily with South Africa ($1.6 billion/year or $3.3 billion in 2011 dollars).
3. South Africa was democratic (if only white count)/undemocratic (blacks excluded)
4. Strong grassroots movement against apartheid: boycotts of goods/sports, pressure
on firms, lobbying.

Hypotheses: Sanction or not sanction?

1. Anarchy: US needs SA to balance USSR.

! -Hypothesis 1 (H1): US supports, not sanctions, SA.
2. Cooperation: US gains from trade with SA.
! -H2: US supports, not sanctions, SA.
3. Liberal dem. peace: US perception of SA
! -H3: US supports SA if SA perceived as lib. dem.
4. Norms: Activists change US view of SA.
! -H4: US sanctions SA if activists show US public/govt. that SA is racist/illiberal.

Verification/falsification: are the hypotheses right or wrong?

-H1: US supports, not sanctions SA.

! -Falsified: US sanctioned SA.
-H2: US supports, not sanctions SA.
! -Falsified: US sanctioned SA.
-H3: US supports SA if SA perceived as liberal, doesnʼt support if SA seen as illiberal.
! -Partially verified: why did US perception change?
-H4: US sanctions SA if activists show SA to be illiberal/racist.
! -Verified: activists changed US views of SA.

Lessons

-Just like in the anti-slavery instances, states donʼt always obey dictates of power.
! -US sanctioned SA.
-BUT, states have to be pushed by activists, often activists from several states.
! -Reagan wanted to support SA, but US Congress sanctioned SA after public
! pressure.
-Activists use range of tactics, including boycotts, lobbying, civil disobedience.

Are norm entrepreneurs always good guys?

-There are no ʻbadʼ norms* - norms are valid as long as members of a group accept
them as appropriate/obvious.
! -E.g. racism was a norm: people believed that some races were superior to
! others.
-Letʼs take a contemporary norm entrepreneur.
! -Al-Qaeda has ethical & political aims.
! -Transnational movement.
! -Criticism/attacks on existing Muslim states (e.g. Saudi Arabia), for betraying
! Islamic cause.

Important caveat

-Iʼm not saying that Al-Qaeda = Amnesty.

-However, transnational social movements can take several forms:
! -Goals vary: religious, political, legal.
! -Tactics vary: non-violence, violence.
-Important to recognize:
! -Ethical/normative element within a group.
! -Transnational mobilization.
! -Tension with states.

Back to my stupid onion

-Weʼve looked at several influences on state policy.

! -Weʼve peeled the onion.
-Key thing to emphasize here: we must look at a range of influences to understand
outcomes.
! -Anarchy/the balance of power.
! -IOʼs.
! -Regime-type/domestic politics.
! -Activist networks.
-These arenʼt the only influences, but they are major ones.

A hierarchy to help us understand international politics - 1

1. Begin with the balance of power.

! -States want to survive in anarchic world.
! -Given distribution of material power (e.g. Cold War), what should they do (recall
! CC/CD etc.)?
2. If balance of power doesnʼt explain evens, look at IOsʼ.
! -IOʼs reduce uncertainty/make cooperation cheaper.
! -Are states cooperating because theyʼre in IOʼs?

A hierarchy to help us understand international politics - 2

3. If international factors (BoP + IOʼs) donʼt explain events, look inside the state.
! -Regime-type: dictatorship/democracy.
! -Domestic groups: who wants what sorts of policies?
4. If international factors + interests of domestic groups doesnʼt explain events, look at:
! -Norms (ideas) rather than interests (material power).
! -Activists: who is trying to change the status quo?

Using the hierarchy

-Look at all possible factors.

! -Donʼt stop at balance of power.
-Youʼll probably find interactions between factors.
! -E.g. Sanctions on SA: activists changed US perception of SA to illiberal regime.
! ! -We could have falsely explained this with LP.
-World is a complex place: we donʼt use hammers for brain surgery.
! -Donʼt use one approach to understand the world. (Realism, Liberalism,
! Constructivism)

Tying things together

-International politics presents a series of puzzles.
! -E.g. why do IOʼs endure? Why did US sanction SA?
-No one approach can account for everything.
! -And states use range of tools (e.g. US-China)
-Best we can do is look at a range of possible explanations, without doing either.
! -Say that ʻeverything mattersʼ - this is LAME.
! -Infinitely adding variables - youʼll go CRAZY.
-The hierarchy-onion model is a start - nothing more.

Oct. 27/11

Lesson plan (for this week and next)

-Where I want to get to by the end of term:
! -We need to figure out what the hell is going on between Germans, Greek
! sovereign debt, deadbeats buying houses, Chinese surpluses, synthetic
! Collateralized Debt Obligation (?)... How did we get to $1.4 trillion?
-How weʼre going to get there:
! -The puzzle of globalization
! -Basics of political economy:
! ! -GDP (what it is, how it is measured)
! ! -Basics about economic policy
! ! -Basics about international trade

What is this globalization business?

-In 1800, most economics were similar.

! -Europe/North America diverged from rest in next 150-180 years.
-Big changes in last 20-30 years.
! -Huge grown in (some) developing economies. (China, India, Brazil, etc.)
! -These economies have become relatively stronger in world economy.
-Growth not smooth (e.g. Depression).
-What the hell happened, then and now?

Two main themes

-Economy involves political decisions.

! -Economic processes affect state power.
! -Economic process affect domestic interests.
! -Therefore, thereʼs no such thing as a ʻfree marketʼ - politics/state power is
! involved every step of the way.
-Globalization is neither new nor irreversible.
! -Globalization is subject to political decisions.
! -Frieden: ʻglobalization is a choice, not a fact.ʼ

WARNING: This material is...

-Boring.
-However, political decisions about the economy are crucial to everyoneʼs life.
-And many people donʼt know/understand enough about it.
! -Federal Government has set up Task Force on Financial Literacy
! (www.financialliteracyincanada.com)

This lack of knowledge happens for several reasons

-Economic processes are esoteric and seem like bizarre voodoo.

! -E.g. quantitative easing; synthetic Collateralized Debt Obligation (CDO).
-Economic decision-makers are not always in the public eye.
-Economic processes seem far removed from everyday life!
! -This is wrong. Thatʼs what weʼre going to explore.

Boring, yes. But you better learn it.

-Economic events, while esoteric, have great impacts.

! -Economic processes affect you.
-Economic events are profoundly political.
! -You can affect economic processes.
! ! -As worker.
! ! -As consumer.
! ! -As shareholder/business owner.
! ! -As voter (at ballot box and on the street).

Basic principles of international political economy

-What is ʻthe economyʼ?

-What do states care about in economic terms?
-How do states make economic policy?
-Why do people trade?

When we talk about ʻthe economyʼ, weʼre talking about GDP

-Gross Domestic Product.

-How is it calculated?
! GDP = C + I + G + NX* (know for final)
C = consumption (spending by households)
I = investment (company building factory)
G = government spending (on salaries, roads, etc.)
NX = net exports (exports - imports)
(This formula is called the expenditure approach)

Canadian GDP in 2008 (Source: OECD)

-All figures CDN $ million, current prices.
C = 891,197 (56%)
G = 313,669 (20%) including local, provincial, and federal
I = 371,242 (23%)
NX = 25,382 (1%)
! Exports - Imports = (562,174 - 536,792)
GDP = 1,601,490 (1.6 trillion)
-By comparison: C in US > 60% of GDP; in China is < 40% of GDP. (Imbalances that we
discuss later.)
-It indicates an imbalance which fuels that US has a huge trade deficit and China a
huge trade surplus. The lack of consumer spending in China reflects the USʼ large
consumer spending.

Distribution of wealth (Source: IMF)

-Average measures deceive.

-There is great inequality.
! -Between states.
! -Within states: we wonʼt talk about this much.
-Regional economies impact a lot because when your neighbor is wealthy and are
secure there are positive externalities to affect you as well as the opposite.

Be careful...

-When viewing statistics.

-Benjamin Disraeli (19th century British PM): “There are three types of lies: lies, damned
lies, and statistics.”
-You cannot avoid statistics just be cautious.

Important to remember when viewing economic statistics

-More statistics are nominal (i.e. current prices). this creates two problems for
comparison:
! -Temporal comparison: makes it difficult to measure change over time in one
! country.
! -Spatial comparison: makes it difficult to compare between countries at same
! time.
! ! -Weʼre not going to talk about this, but it is generally adjusted through a
! ! calculation called Purchasing Power Parity (PPP).

Temporal change: Inflation

-An increase in the supply of money.

-You are making US $10,000 in 1980, $20,000 in 2010. Are you twice as well off?
! -Your income has doubled BUT can you buy twice as many things?
! -No, because of inflation, everything has become more expensive.
! ! -$20,000 in 2010 is worth $7,559 in 1980 dollars.
! ! -You need $26,477 to have some purchasing power.
! -Nominal increase is deceptive, your wages can increase, but if they increase
! less than inflation, you are worse off.

Why does inflation happen?

-Inflation: rise in general level of prices.

! -NOT rise in individual prices.
-As amount of money in economy increase (i.e. more money is printed), prices increase.
-As prices increase, workers demand greater wages.
-As wages increase, people have more spending money, so demand increases, pushing
prices up.

Why inflation matters

-Policymakers try to keep inflation in a range (in Canada: 1% < target < 3%).
-When inflation is above this range:
! -Prices are rising, so people on fixed income (salary, pension) cannot pay for
! goods.
-When inflation is below this range:
! -Prices are falling, so producers will make losses, hence donʼt produce: deflation
! -> depression [DEADLY] (shrinking of GDP)

Tools of economic policy - 1

-Fiscal policy: spending money (generally borrowed money) + raising money (taxation).
! -Goal: boost aggregate demand.
! -Goal: control size of deficit (government borrowing - government revenue).
! ! -These two goals may be in tension.
! -Generally controlled by executive and legislature.

How fiscal policy works

-Spend money/lower taxes to increase aggregate demand.

! -GDP = C + I + G + NX
-When C and I fall (e.g. financial crisis reduces credit reduces consumer spending/
investment):
! -Government spends more/lowers taxes.
! ! -This is ʻstimulus.ʼ What happens to deficit?
-When deficit is high (e.g. Greece):
! -Cut spending/raise taxes.

Tools of economic policy - 2

-Monetary policy: control supply of money by setting interest rates.

-What is the ʻinterest rateʼ?
! -Rate at which banks borrow from one another (ʻovernight rateʼ). Currently target
! is 1%. (this sets the basic interest rate for the entire economy)
! -Goal of monetary policy: control inflation (in Canada: usually target 2%, range
! 1% - 3%.
! -Generally controlled by central bank (Bank of Canada).

Nov. 1/11

-Greek bailout offer by EU: help debt so they only have to pay 50% in exchange for
austerity (a cut in government spending) and a rise in Greek taxes (to help with deficit -
difference between revenues (taxes) and spending)
! -if they submit to austerity they are lowering their overall GDP, affecting the ability
! to grow in the future and will affect the tax revenues in the future, but it was their
! only option of being able to borrow (otherwise the interest rate would be crazy)
-Greek GDP is shrinking (shrank by 4% in last year)
! -need to increase government spending (G) to make up for shorts in C and I
! -this is borrowed (debt)
-short of money problem is somewhat caused by a lack of savings (money is often
invested or used to lower taxes in good times)
-debt is 142% (debt/GDP) and is the 4th highest and may get higher as GDP shrinks
! -this causes obtaining a loan to become harder (interest rate increases)
! ! -BROKE
-the EU means Germany because it is the most secure at the moment and providing the
backing money for the bailout package
-Greek president called a referendum, should we accept the deal or not? (see next
point)
-people are worried because a vote no means default (bankruptcy)
-president wants to bargain for a better deal
! -His leverage: if the Greek economy collapses there would be effects on the rest
! of Europe as well (negative externalities).
! ! -people are worried because there have been riots and demonstrations
! ! (unhappy Greeks) at this austerity
! -He can get cash (without strings) to stimulate Greek economy
! -He also may want a writedown (have to pay only a portion of the debt)
-His gamble is that he might lose his job, but it is the same thing as a vote no because
the opposition has said they wonʼt sign either
-all this guy has is the threat of the vote, but after it happens he has no control
! -if they vote no itʼs a default
! -if they vote yes the Germans will deal with the people directly and not care about
! the president (TM)
! -this is like the game CHICKEN
-US isnʼt in this position (although has 100%)
-assets
! -risk
! ! -riskier assets give you a higher rate of return - investing in Greek debt
! ! gives higher interest rates than US debt)
! -return
! ! -risk adjusted - the probability to get the money back, for example
! ! the risk of Greeks not paying back despite higher interest rates)
! -allocated between stocks, bonds, etc.
-institutional investors (mutual funds, hedge funds, etc.) have rules requiring a certain
rating (triple/double A) to lend to them or else they wonʼt and it will also dissuade people
(risk averse investors) wanting to bid and higher interest rates.
-the German president (AM) cares about German banks who have bought a lot of
sovereign debt (which is why they want Greek austerity)
-cars driven went from Yugos to Audis and so the government borrowed money to
spend a whole lot more on the change of cars
! -this created debt loaned by the German banks
-BMW (AM, German president) is asking VW (German citizens) to bailout MB (German
banks) who bailed out Audi (Greece)
-SQ - export market (?)
-exchange rate problem which is solved by the Euro which keeps it set
! -the Eurozone lowers cost of borrowing allowing more export (for Germany who
! are one of the biggest exporters besides China) which is why they want to remain
! a part of it
-banks provide lending long term (ex: 10 year mortgage) but are funding it on short term
(ex: deposits, or overnight from other banks)
! -debt is somewhat protected by debt insurance provided by the government in
! prevention of a bank run
-if banks donʼt lend money long productive processes stop because consumers need
lines of credit (for TVs, etc.)
! -Germans donʼt want what happened to Lehman Brothers (folded in a weekend
! because no one would lend to them) to happen to German banks
! -if Greek, Italian and/or debt downgrades and looks like it will not be paid off
! people will not want to lend to the banks holding their debt
-the way to try and guarantee a payment back is to keep the Eurozone as well as the
reason of maintaining a good export market
! -they will show they want to support their financial systems by the European
! Central Bank buying Greek sovereign debt
! ! -this also provides capital to their banks to provide a short term fiasco
! ! -theyʼre getting the Greeks to agree to a deal and keeping them in the
! ! Eurozone
! -the problem is the number, $1.4 trillion, may not be enough
-the Chinese reserves may be the only solution
! -they have two incentives of wanting to avoid negative externalities (a meltdown
! in the financial system would hurt them because they export a lot)
! -Europeans offering positive things such as loosening trade restrictions

Nov. 3/11
Recall from last week

-When we talk about ʻthe economyʼ weʼre talking about”:

! -GDP
-GDP = C + I + G + NX
-Governments have three tools to influence GDP:
! -Fiscal policy: discussed last time.
! -Monetary policy.
! -Trade policy.

Tools of economic policy - 2

-Monetary policy: control supply of money by setting interest rates.

-What is the ʻinterest rateʼ?
! -Rate at which banks borrow from one another (ʻovernight rateʼ). Current target is
! 1%.
! -Goal of monetary policy: control inflation (in Canada: usually target 2%, range
! 1%-3%).
! -Generally controlled by central bank (Bank of Canada).

How monetary policy works

-Interest rate (rate at which banks borrow) affects how much money banks lend.
! -Lower rates = more lending = higher inflation.
! -Higher rates = less lending = lower inflation.
-Central bank policy:
! -When inflation is high, reduce lending.
! ! -Raise interest rates.
! -When inflation is very low or negative (risk of deflation - VERY BAD), increase
! lending.
! ! -Cut interest rates: this is what ECB boss (European Central Bank) did
! ! today.

Tools of economic policy - 3

-Exchange rate: (The rate at which two currencies are exchanged.)

! -Affected by demand for a stateʼs exports.
! ! -E.g. if Canada is a net exporter to US, CDN$ will increase in value
! ! compared to US$.
! ! ! -Canadaʼs dollar is getting stronger and USʼ weaker because
! ! ! Canada is exporting more to the US than vice versa and Canadian
! ! ! currency is more in demand.
! -Exchange rates can be fixed or floating.
! ! -Fixed: central bank sells US$ when own currency goes down; buts US$
! ! when own currency goes up.
! ! ! -China keeps buying US$ to maintain renminbi.
! ! -Floating: exchange rate set by demand and supply.

Summary: Tools of economic policy

1. Fiscal policy: done by executive/legislature.

! -Goal: increase aggregate demand/control deficit.
! -Mechanism: spending (generally borrowed money) and/or taxation.
2. Monetary policy: done by central bank.
! -Goal: control inflation within a range.
! -Mechanism: raising/lowering interest rates.
3. Trade/exchange rate policy.
! -Weʼll worry about this later.

Understanding international trade

-Why do states trade with each other?

! -Absolute and comparative advantage.
-What effects does this have?
! -The puzzle of the international division of labor/specialization across borders.
-How do states trade in ways that benefits them?
! -Winners and losers.

Trade in a 2 produce economy: Essentials of a balanced diet

Why do people trade with each other?

-If Canada is the only country in the world, it has to produce malt liquor (ML) and buffalo
wings (BW).
! -If you donʼt have both = deficient diet.
-Canada is efficient at producing ML, inefficient at producing BW.
-If Canada produces BW, it draws resources away from production of ML.
! -This is an opportunity cost.

Representing this numerically

-Canada has 100 units of input.

-For each unit input, it can produce ML output of 1, BW output of 0.5.
-If canada splits production, it produces 50 units ML, 25 units BW (75 total).
! -This is an unbalanced diet [ML > BW = headache].
-If all ML, 100 units total.
! -Very unbalanced [all ML/no BW = severe headache].
-The opportunity cost of producing BW is 25 units of total output (100-75).

The US shows up

-Now assume Canada has a neighbor, the US, that is in the opposite situation.
-I.e. the US produces BW more efficiently than ML.
-For 100 units input, US produces 50 units BW, and 25 units ML.
Trade is the solution.

The shape of trade

-Canada is more efficient at producing ML (this is called absolute advantage).

! -When it can sell its surplus ML to buy BW, Canada will only make ML.
-US does opposite.
Opportunity costs disappear

-Before trade, the states were producing less than their potential output (25 units each/
total 50).
-With trade:
! -Canada produces 100 units ML, sells 50 to US for 50 units BW.
! -US produces 100 units BW, sells 50 to Canada for 50 units ML.
-Both wind up with a balanced meal, and more of it.
! -Balanced meal = no headache.

But what if you are more efficient at producing everything?

-An example:
! -If Canada makes two products: computers and wheat. For each unit of input,
! Canada produces 1.5 output of computers, 1.2 of wheat.
! -US makes two products: computers and wheat. For each unit in input, US
! produces 1 output of computers, 1 output of wheat.
Both have 100 units of input. How do we maximize output?

Question: what is Canada most efficient at producing?

-Canada produces 1.5 units computers to US 1.

! -Ratio is 1.5
-Canada produces 1.2 units wheat to US 1.
! -Ratio is 1.2
! ! 1.5 > 1.2

Comparative advantage

1. Scenario 1: Both countries divide resources.

! -Output = 235
2. Scenario 2: Canada makes only computers, US makes only wheat
! -Output = 250
! -Total output increases by 15
Canada gains by producing only computers, selling surplus to US and buying wheat.

Comparative advantage defined

-Comparative advantage is the maximization of production in goods a country is most
efficient at producing relative to other goods it produces (Frieden describes this on pg.
31).
-CA is not producing what you are better at relative to others - you may be better at
producing everything relative to others BUT
-You will only produce what you produce the most efficiently.

What comparative advantage leads to

-Division of labor.
! -Allows specialization.
-Increases productivity.
! -People are doing what they are best at.
-Increases total output.
! -Size of pie increases with trade.

Impact 1: Move away from primary products

-Industrialized economies may move away from primary products even though they are
more efficient at producing these products than poorer economies.
! -Fewer people farm in North American, even though farming is efficient
! compared to Europe/Asia.
-This is because they gain relatively more by focusing on industrial goods/services they
have a comparative advantage in.

Impact 2: Increased specialization in supply chains

-Firms indifferent countries make parts for a final product.

! -Production process is disaggregated.
! -Many links on supply chain.
-Final assembly may happen far from where components are made.
! -Cost of transportation has fallen 3/4 since 1900.
-This is called ʻglobalization of production.ʼ

Important aspect of ʻglobalizationʼ

-Globalization is not just a quantitative phenomenon.

! -I.e. More trade = globalization.
-Globalization is also qualitative change:
! -Division of labor between states.
! -Increasing specialization within states.
! -Interconnection and interdependence.
! ! -E.g. Tsunami in Japan disrupted supply chains in 2011.
This creates VULNERABILITY

This is a big dilemma for states

-What do states want?
! -Security.
-What happens if you specialize?
! -You become vulnerable.
-What should a state do?
! -Be self-sufficient (i.e. Produce most things).
! -Trade-off between efficiency and security.

How do you get a comparative advantage?

-CA involves making and trading what youʼre best at making. What are you best at?
-Factors of production (FOP):
! -Land - your farming, resources, things like mining
! -Labor - your workers (number as well as what they can do; lower/higher skilled),
! agriculture, low end manufacturing of things like clothes
! -Capital
-Your CA comes from the FOP you have most of, relative to others.

Example

-India has a lot of labor.

! -Should trade labor-intensive goods (e.g. call-center services, textile workers).
-Canada has a lot of land.
! -Should trade land-intensive goods (e.g. grain).
-Germany has a lot of capital.
! -Should trade capital-intensive goods (e.g. high-end machines).
-This is what these countries actually trade.

Winners of comparative advantage

-Factors of production: land, labor, capital.

-Winners: owners of abundant FOP.
! -Where FOP is abundant, trade increases size of market, number of buyers,
! hence prices rises.
! -E.g. logging in BC: wood more plentiful in BC than in Europe.
! ! -European paper-makers pay higher price than Canadian paper-makers,
! ! because itʼs still lower than buying European wood.

Losers of comparative advantage

-Losers: owners of scarce FOP.

! -Where FOP is scarce, trade exposes owners to competition from places where
! FOP is abundant.
! -E.g. oil in Texas: thereʼs more oil in Saudi Arabia.
! ! -US consumers pay less for oil from Saudi Arabia than for oil form Texas.
CA and FOP

-Trade equalizes prices.

! -Somewhat: there are still differences.
-This does not mean everyone makes more or less money:
! -Loggers in BC (owner of abundant FOP) make more money from trade than
! they would if they only sold to Canadian firms.
! -Oil producers in Texas (owner of scarce FOP) make less money from trade than
! they would if oil wasnʼt imported from Saudi Arabia.

Political economy

-States have three goals in the world economy:

! -Maximizing output (more GDP is better):
! ! -Increasing trade and investment is important.
! -Maintaining state sovereignty.
! ! -Trade and investment can make you dependent on others, and
! ! vulnerable to external shocks.
! -Keeping domestic groups happy:
! ! -Trade has winners and losers, and losers often vote/wield other influence.

Nov. 8/11

- Golden Age (the gold standard) of Globalization—

why it happened, why it ended (the Depression).
- Globalization is a choice not a fact!
o It is not constant: happened around 1900 and
now, but can diminish, like between the
1930s to 1980s.
- The laws of economics involve lots of politics.
1. Use of military and police force
2. Domestic Political competition
3. Dealing with the losers of free trade markets
- Frieden 83, Why is the Congo exporting rubber and
ivory, importing weapons for Belgian troops?
- Because weapons were being sent to Belgian troops
to coerce Africans to tap rubber.
o They did this by taxes
o Also by taking women and children hostage.
- Lessons of the Congo: Free trade doesn’t happen
due purely economic forces like comparative
advantage, self-interest
- Free trade is often created through coercion. E.g.
Opium war in 19th Century China, where the British
forced opium on China.
- Free trade is often the product of state intervention
to open economics/ roles of IOs like IMF.
- Domestic political competition over trade:
o Winners: consumers everywhere (price of
goods fall); workers in low-wage economies
(demand for cheaper goods overseas create
jobs); Exporters (get access to markets with
higher demands; producers of good with
abundant tradable factors of production
(Frieden 109-111) because the cost of FOP is
lower than competitors. E.g. loggers in
Europe vs. BC.
o Losers: Low-skill workers in high-wage
economies (foreign competition depresses
wages/ reduces jobs); Producers for domestic
market (competition from overseas cuts
prices); producers of goods with scarce
factors of production (cost of FOP relatively
higher than competitors, reducing profits),
e.g. oil producers in Texas. To reduce these
they may demand trade barriers.
- What do losers from trade want? Less trade. How?
Higher cost of trade.
- What do winners from trade want? More trade. How?
Lower cost of trade.
- Protection helps owners of nationally scarce
resources FOP; trade helps owners of nationally
abundant resources.
- Winners want more trade (lower cost of trade);
o Open markets
o Trade deals—Most Favored Nation (MFN)
status
o Enforcement against uncompetitive practices
elsewhere.
- Losers want less trade (raise cost of trade):
o ‘Infant industry’ protection (e.g. tax breaks)
o Tariffs (tax on imports) or ban on imports.
o Uniform labor and environmental standards.
- Trade policy depends on who wins this political
contest.
- Effect of political competition:
- Those who lose from trade will fight it.
- Trade policies come about not because of elegant
theoretical models, or because trade is morally
good.
- Trade policies are outcome of political competition
between competing interests.
- That’s why trade policies can de to detriment of
majority: we call this “suboptimal”
- Domestic interest groups, on either side:
o Owners of scarce FOP: want restrictions on
trade.
 Labor groups: reduce number of sellers
of labor.
 Producers for domestic market: reduce
number of sellers.
o Owners of abundant FOP: want trade
extended.
 Exporters: increase size of market for
product.
- Trade policies can be detrimental to interests of
majority because of interest groups (lobbies).
- E.g. Canadian rice growers call for tariff on rice.
Price of rice rises.
- Consumers are a majority—but they are
disorganized. They do not speak with one voice to
politicians.
- Interest groups are better organized. They can
lobby politicians more effectively.
- Also, trade policies can be detrimental to interests
of majority because of state ideology.
- E.g. North Korea bans South Korean (ROK)
medicines because ROK are capitalist swine.
- Fewer medicines available, so price rises.
- Quality of medicine drops.
- North Koreans have less medicine, at higher price,
lower quality.
- Thirdly, trade policies can be detrimental to
interests of majority because of state alliances.
- E.g., Cuba makes better. Cheaper cigars than
Dominican Republic, but DR are ally and Cuba is
enemy. So US bans trade with Cuba, buys cigars
only from DR.
- US consumers spend more for a lower quality cigar.
- Lesson: there are often organized interests that lose
from open economic policies that benefit the
majority. Recall: comparative advantage increases
output by letting people specialize.
- These groups will oppose such economic policies
(e.g. free trade).
- Therefore, in many instances open economic
policies are the effect of political struggles, not
economic logic.
- The first phrase of globalization: (1870-1914)—
Golden Age.
- Transition from mercantilism (good of individual
state you are in) to free trade
o Mercantilism: states use markets for their
own interests (military advantage)
- Why this change? UK businesses wanted free trade
to export. Role of UK: opened markets through
trade deals (e.g. with France) and coercion (e.g.
China/ Opium War).
- “Imperialism was a political solution to an economic
problem.”
- What can we learn from 1870-1914.How did people
have the confidence to trade?
o Gold Standard reduced uncertainty
o Role of one great power in managing
global economy (Britain).
- Rise of previously underdeveloped states.
o Then: Germany/ Japan outpaced UK.
o Fast forward to present: rise of exporters in
Asia.
- Lots of dislocation/ inequality
- The level of trade around 1900 was higher than
until the 1990s.
o Trade between 1900-2000 looks like and ‘M’
curve
o Early 20th Century called Golden Age.
o 3 Pillars of the Golden Age
 Gold Standard
 International finance (loans across
borders: common now)
 Free trade
- The gold standard:
- Currencies ‘pegged’ to gold.
o Full convertibility: exchanged for value in
gold.
o Stable exchange rates: dollar-gold rate fixed.
- If you were in Vancouver and you had a bond for US
$10000 you could get that in Gold from US
treasury.
- Gold was the reserve currency, like US $ is now.
o Governments held their reserves in gold, as
collateral they could borrow against.
- States had to maintain gold reserves for their
outstanding obligations (i.e. debts).
o Borrowing was restricted by level of reserves.
- Price levels were connected, by gold, to other
states.
o If prices rose, exports would fall because…
- Exchange rate was relatively fixed.
o States couldn’t devalue to make exports
cheaper (although states could, and did, leave
gold).
- Understanding the gold standard.
- Malt Liquor costs $10 in US.
- US $10= 1 unit gold= $20 CDN.
- If US prices rise 20%:
o ML costs US $12. How much is it now in CDN?
$24 (1.2 units gold) for ML.
 Exchange rates have not changed (fixed
to gold).
 My income in Canada has not change.
- Inflation in US is major problem.
- US$ is fixed to gold: must maintain gold reserves.
- If inflation happens in US, prices or US goods
increase in Canada, but income in Canada stays
same. Therefore you stop buying ML in Canada, big
problem for US.
- Why is this a problem for the US?
o If inflation rises, exports will fall (I don’t buy
ML)
o Id exports fall, US imports more than it
exports.
o It pays for negative NX with gold.
o If gold reserves drop, borrowing becomes
harder.
 - US must control inflation to avoid:
o Fall in exports  fall in gold reserves.
- How does US do this? Raise interest rates. Why? This
is how you lower wages and prices. To force down
prices of products and labor.
- Who does this hurt? US workers and producers.
- What is the US hoping for? Reduce prices so
exporting restarts (rebalance economy).
- Why the gold standard mattered?
- Recall that the world is anarchic.
o Commitment problem.
- But states need to borrow money from
international sources (individual investors [bonds],
banks [loans]).
- Problem: states can always default.
o No enforcement mechanism.
o Uncertainty—lack of information.
- How can states send a ‘credible signal’ that they are
to be trusted?
- Foreign lender hate:
o Default: don’t get paid back.
o Inflation: real value of debt decreases.
o Falling currency: value of debt decreases.
- Being on gold showed a commitment o economic
openness and discipline.
o Can’t let wages rise (inflation control).
o Can’t devalue to reduce debt (exchange rate
pegged to gold).
- Foreign lenders would make loans to countries on
gold:
o Gold standard was credible signal.

Nov. 10/11

Because of gold standard...

-States and entrepreneurs could access loans from international markets.

! -Then: cost of credit (i.e. interest rates) dropped due to bigger markets, more
competition.

It wasnʼt all good, however...

-Many did not benefit (Frieden, 80-123).

! -Workers (wages didnʼt rise); farmers (prices falling).
! -People in colonies (e.g. Congo).
! ! -Next week: weʼll see why this mattered A LOT.
-Economic dislocation increased.
! -Farmers were pushed off land and moved to cities.
-Real problem was still to come:
! -When governments had to pay off debts.
! -Fast forward to present: similar situation (indebted governments in West facing
! low growth).

End of classical gold standard and the future problem

-Classical gold standard folded after 1913:

! -Europeans sent all their gold to US to buy stuff to kill other Europeans with (i.e.
! Reserves depleted).
! -Remember: gold standard involves convertibility.
! ! -I.e. No gold = nothing to convert claims into.
! -So European states had to go off gold.
-But to fight war, Europeans owed money:
! -Debt: borrowed money from US and others.
! -Reparations: penalties (mostly on Germany) for costs of war.

Hyperinflation - 1923

-Governments (e.g. Germany) had debts + reparations for war.

-Revenues were low.
-So they printed money to pay their bills (Frieden, 134).
-Result: hyperinflation.
-Middle classesʼ savings vanished.
-Unemployment increased.
! -Recession in Europe

Solving the problem

-Reduce hyperinflation: how?

! -Cut spending.
! -Foreign aid with debt/reparations (Dawes Plan 1924).
-Once this is done, how do we get back on good terms with creditors?
! -Go back to gold standard.
-Return to interwar Gold Standard uneven:
! -States returned to gold at their own pace:
! ! -US: 1922 but most between 1922-1928.
! -Date of return of core countries: 1928.

How did the Depression start?

-In 1928, a recession began in Europe and Asia, and stock prices rose in US (Frieden,
174).
-Money from all over flowed to US, and away from states in recession.
! -Investors sold European currencies.
! -European governments raised rates (lower wages) and cut spending.
! (Consumer and Government spending decreases, lower GDP)
-Mild recession became worse in Europe.
-Then US stock market crashed in October 1929. As investment fell...

The Golden Age and the Depression (Frieden, 174-194)

-Main problem: gold standard (Frieden, 188)*read

-Recall: states on gold raise interest rates when prices rise, to push down wages.
! -Key: when wages fall, economy would rebound.
-But in 1920ʼs wages rose AND became more rigid because of bigger firms growth of
labor.
! -I.e. even though prices fell, wages did not.
-So policymakers raised interest rates after 1929. What happened?

The Depression - 1

-What policymakers were thinking when they raised interest rates (the theory):
! -Prices were falling BUT wages had not fallen.
! -So no one was producing new goods.
! ! -Supply of goods not increasing. (creating a dead loss by making goods
! ! that will be sold for less)
! -Low production = low demand for labor = unemployment.
! -Policymakers wanted to lower prices until everything was sold (ʻpurge
! rottenness out of system,ʼ Frieden, 176).
! -This would bring down wages, and then producers would start hiring again.

The Depression - 2

-What actually happened: DEFLATION.

! -Prices kept falling but wages didnʼt fall as much (Frieden, 180). (cost of labor is
! increasing in relative terms)
! -Because wages fell less than prices, producers hired fewer people, produced
! less goods.
! -Household debt because more expensive, so people spent even less (debt
! deflation).
! ! -Debt amount remained constant, incomes fell.
! -High interest rates + deflation meant people couldnʼt borrow to start businesses.

The vicious cycle: what happens when you think prices will fall in the future?
-Falling prices meant people stopped buying things now, because they could buy later
for less.
-Because people stopped buying things, producers stopped making things.
-Because producers stopped making things, unemployment increased.
-Because unemployment increased, people couldnʼt buy things.
-Because people couldnʼt buy things, demand fell, and prices fell further.

This led to: banking crises

-Then: gold standard was problem.

! -Obvious solution: go off gold.
! -Whatʼs the risk of doing this?
! ! -Bank run (Frieden, 186).
-Now: Euro is problem (e.g. Greece).
! -Solution: Greece leaves Euro.
! -Risk: bank run in Greece. (if people find out and then withdraw everything they
! can in Euros.
! -If bank run happens: no credit for businesses/consumer spending (I and C will
! fall further).

The DEFLATIONARY spiral - no way out

1. Falling prices (or expectation of falling prices)

2. People delay buying
3. Businesses stop making
4. Jobs are lost.
5. People canʼt buy.

How GDP fell in Depression

-Recall formula for GDP:

! GDP = C + I + G + NX
-Depression meant all were lower.
! -C: consumers stopped buying.
! -I: Interest rates were high, so no one invested.
! -G: Governments didnʼt spend + tax collections dropped (incomes down, sales
! down)
! -NX: Currencies were high (still at gold standard, not yet devalued so the value is
! artificially high), so exports went down.
! -Canada in 1933: GDP 56% of 1929 levels/Unemployment rate was 27%.

What could be done?

-Gold standard had to be dropped to devalue currencies AND loosen monetary policy.
! -States went off gold (e.g. US in 1934).
! -Currencies became cheaper.
! -Governments could now increase money supply.
! ! -NOW: how would Greece do this?
-Demand had to be stimulated.
! -Interest rates were lowered (in real terms).
! -Governments promised to spend money (and spent) money.
! ! -E.g. In US money supply increased 50% between 1933-1937.
! -Governments set up trade barriers to help domestic industry. (not as important
! as other 2)

How GDP increased (Keynesian model)

GDP = C + I + G + NX
! -Step 1: Governments spend money, so G increases.
! -Step 2: Governments employ people, who spend, so C increases.
! -Step 3: Interest rates are lowered, and government is buying goods (aggregate
! -demand increases), so people start investing in factories, so I increases.
! -Step 4: Going off gold devalues currencies, so exports increase (NX increases).

A rational expectations model of this process

-Puzzle: recovery started in 1934, but govt. spending started in 1938 (Frieden, 190).
! -This is why some economists say fiscal policy has no role in ending recessions,
! and what matters is monetary policy.
-Explanation: FDR in 1933 promised to spend money, and folks expected prices to rise.
! -I.e. Consumers, expecting inflation, bought stuff now.
! -I.e. Businesses expecting govt. to build roads in future, hired workers now in
! order to bid for contracts.

Fast forward: US, 2008

-Big fear: DEFLATION (falling prices/demand).

-Govt. policy can affect following elements:
! -Falling demand (or fear of it): increase G.
! -Supply of credit: stop banks going bust, so they lend.
! borrow!

What did the US government do in 2008?

-Stimulus (i.e. government spending): $787 billion

! -Bailed out banks TARP: > $700 billion
-What did this achieve?
! -Positive: avoided deflation/depression.
! -Negative: did not increase employment significantly.

Why did the Golden Age end?

-Economic crisis (economic reasons)
! -Hyperinflation means middle class saving wiped out.
! -Recession and gold standard meant depression.
-States ended free trade (political reasons).
! -All states imposed trade restrictions.
! -Rise of right...**

Lessons: individual governments can lose commitments to free trade when:

-There is an economic crisis.
-Domestic interest groups pressure for restrictions on trade.

What Harry Truman knew in 1945: these economic crises can ruin my day

Economic crises can lead to tensions between states

-Problem 1: Germans (like fighting). Angry Germans fight.

-Problem 2: French, canʼt be trusted. Want to keep the Germans poor.
-Problem 3: Soviets (deadly). Can take over Europe.
-Goal: to prevent all this.

After WWII, US took proactive role in managing global economy

-IOʼs for crises (IMF), and development (now WB/then IBRD - World Bank)
! -Marshall Plan in Europe (make Europe, including Germany, richer, so they stop
! fighting.
-Support for free trade: avoid protectionism.
-Finally they pegged the dollar to gold.
-With US money and influence economic crises would be managed better.

Nov. 15/11

Lesson plan (for this week and next)

-Logistics: TA office hours this week, check Vista.

! -Turnitin details also later this week on Vista.
-Understand economic policies in the developing world from the 1950ʼs onward.
! -Inward turn: why did developing countries (DCʼs) reject trade/open economies
! from 1950ʼs on? What policies did they use?
! -Return to global economy: why did DCʼs open their economies from 1980ʼs on?

Prior to decolonization (1945-1965)

-Non-Western economies were part of global trade networks.

! -Exported commodities (e.g. Tea from China).
! -Exported labor (e.g. South Asians in Caribbean).
-But economic growth/standard of living was low: Africa/Asia fell behind, and badly.
! -Unequal terms of trade: imperial preferences/coercion.
! -Colonial extraction: primary commodities exported, manufactured good
! imported.

Situation developing countries were in (logic of comparative advantage)

-What they had (abundant factors of production).

! -Land - to make primary goods.
! -Labor - for labor-intensive products.
-What they didnʼt (scarce factors of production).
! -Capital - technology/machine tools, etc.
! -What should they do (according to comparative advantage)?
-Solution: to export primary goods/labor-intensive goods, import capital-intensive goods.
How?
! -Expand free trade/specialize in agriculture/labor intensive goods.
-They didnʼt do this: why?

Why DCʼs didnʼt follow the leader

-Bretton Woods: Great Depression showed Western economies needed... (summary in

Frieden, 300) (world economic order in 3 organizations with US serving as foundation)
! -Role of hegemon (US) in global economy: IOʼs to manage crises/avoid another
! Depression.
! -Free trade.
! -Importance of state spending (G in Depression).
-DCʼs took somewhat different lessons.
! -Not so hot on free trade.
! -Suspicion of hegemon.
! -But faith in state spending.

Two reasons for suspicion about free trade

-Colonialism:
! -Exposure to global economy had negative impact on growth.
! -Adverse terms of trade (remember Leopold/Congo).
! ! -Leopold forced those of the Congo to work on rubber by kidnapping their
! ! children and wives.
-Socialism (Frieden, 321-338):
! -China/USSR seemed to offer good model of growth.
! -Many decolonized countries were socialist (e.g. Vietnam), or had socialist
! sympathies (e.g. India).
! -An example of theses tensions Lumumba.

The problems for developing countries

-Logic of structural inequality/dependency:

! -Idea that primary goods prices fell, while manufactured goods prices rose
! (Frieden, 311): not really true. (but if believed to be so: see below)
-Problem 1: if you donʼt have industry?
! -If trade was allowed, industries in Ghana (e.g.) could not compete with US
! firms.
! -If manufactured goods prices rise, trade balance will worsen over time.
-Problem 2: if you export few primary goods?
! -If you export only one goods, fall in price is deadly.
Lesson

-Developing countries decided they had to build industry to:

! -Diversify economies.
! -Become self-sufficient.
! -Reduce vulnerability to economic shocks/external politics (e.g. sanctions).
-Policy: how to do this?

Class exercise: the DC puzzle

-What combination of trade and industrial policy will help developing countries to get
what they want (i.e. self-sufficient industry)?

Have free trade - Yes Have free trade - No

Build industry - Yes 1 2

Build industry - No 3 4

Options: will they have industry or not? You predict...

-Scenario 1: have trade, build industry.

! -Result: no industry, as foreign competition will win.
-Scenario 2: limit trade, build industry.
! -Result: some industry. (the option taken, only condition allowing some industry
! to be build, but likely inefficient)
-Scenario 3: have trade, donʼt build industry.
! -Result: no industry (this would be pure comparative advantage option).
-limit trade, donʼt build industry (an option never taken seriously)
! -Result: no industry.

Bottom line

-DCʼs couldnʼt build industry with open markets.

! -Competition would swamp domestic producers.
-They had to close markets somewhat to enable industry.
! -Trade had to be restricted.
-As there were low levels of industry, state had to build industry.
! -Private sector didnʼt have necessary capital.

What did DCʼs do?

-ISI: Import Substitution Industrialization (Frieden, 301-320)*.

-Two goals:
! -Produce domestically:
! ! -Build industry.
! -Reduce imports:
! ! -Tax imports heavily.
! ! -Become net exporter.
! ! -Become self-sufficient.

In terms of GDP equation

-GDP = C + I + G + NX
-What is the role of C? (in Western countries it is made up primarily of the people and
businesses)
! -People poor, so C is low.
-What is the role of I?
! -People poor, so low private investment. So...
-What is the role of G? (Frieden, 314)
! -G should be high to compensate: government responsible for I.
-What is the role of NX?
! -Imports limited (high duties), so NX should be positive (in theory). Weʼll come
! back to this later.

How to do ISI: the theory

-Central planning:
! -E.g. India had five-year plans with budgets and growth targets (Frieden, 314).
! (trains, roads, etc. but not consumer goods)
-Heavy restrictions on imports:
! -E.g. trade in Turkey went from 25% of GDP in 1920ʼs to < 9% in 1970ʼs
! (Frieden, 318).
-State sector very important (Frieden, 318):
! -EITHER entire economy was state-controlled (e.g. Cuba).
! -OR state sector was big relative to private sector - this was called mixed
! economy (e.g. India). (combination of government industry and private sector).

Actual development programs: the practice

-Move production from agriculture to industry.

! -E.g. The Great Leap Forward.
-Promote more efficient agriculture.
! -E.g. Green Revolution.
! ! -things like fertilizer and tractors were subsidized to make agriculture more
! ! efficient (plots were getting smaller with generations splitting them up
! ! between kids making investment in such things as a lone farmer
! ! inefficient)
-Build big infrastructure projects.
! -E.g. Aswan in Egypt.
! ! -Cost: $1.3 billion - $500 mill egypt $400 investors $400 western countries

What these examples teach us

-Obviously, there are unintended consequences:

! -Famines in China.
! ! -Estimated deaths between 1958-1962: 45 million (Ditkoetter, 2011).
! -Spread of disease (flatworms) in Egypt.
-Broader problems:
! -How did the Chinese government manage the Great Leap Forward?
! ! -They used coercion on their people.
! -How did the Egyptian government finance the Aswan Dam?

Coercion in development programs

-DCʼs used coercion.

! -Appropriation. (landownersʼ land was redistributed).
! -Resettlement (e.g. dams). (they needed to be moved forcibly if uncooperative).
-This had two costs:
! -Economic (e.g. famines create poverty).
! -Legitimacy (e.g. people opposed dam projects). (people distrust the government
! if they see the govt. as beating up on them)

How were these financed?

-Keep in mind that DC leadership felt that their public were too poor to be taxed.
-Tax collections were low.
-Taxes are low not just because of poverty, they are low as proportion of economy:
! -Low rates of collection.
! -Tax evasion.

If you donʼt tax...

-Where do you get the money? (Think of Aswan Dam).

-Debt:
! -Private loans/bond issues (generally from overseas as domestic savings are
! low).
! ! -Particularly big in Latin America (Frieden, 374-375)
! -Institutional loans (also from overseas: World Bank, Asian Development Bank).
-Aid: direct transfers from Western states.
! -Development aid.
! -Alliance aid.

What was the role of foreign aid?

-Why do rich countries give foreign aid?

! -Strategic reasons (e.g. alliances).
! -Altruistic reasons (e.g. development).
-How much? Hereʼs a comparison:
! -During Marshall Plan, aid to Germany/France was 2.5% of GDP.
! -In 1996, average African country (excluding Nigeria and South Africa) received
! aid worth:
! ! -12.3% of GDP.

Benefits of ISI

-Some industry developed because of protection.

! -E.g. in 1965, DPRKʼs per capita GDP was $292, while ROKʼs was $88.
! -India grew 50% between 1950-1975, after growing 10% between 1850-1950
! (Frieden, 315-316).
! ! -Caveat: this was short-lived.
-Green Revolution increased agricultural productivity.
! -DCʼs became less reliant on overseas food aid.
-Infrastructure/educational institutions built.
! -E.g. Indiaʼs engineering colleges rained future software experts.

Success stories

-East Asian ʻTigersʼ.

! -South Korea, Singapore, Hong Kong, Taiwan (to a lesser extent, Malaysia)
-What they did right (EOI; Frieden, 319-320): (export oriented industrialization)
! -Export-oriented growth: produced for foreign markets.
! -Used comparative advantage:
! ! -E.g. Singapore in financial services.
! -State-led growth strategies.
! ! -Focus on industrialization.
! ! -High levels of trade protection.

Nov. 17/11

Lessons from successes

-Domestic markets are inadequate:

! -Domestic markets did not create enough demand.
! ! -Remember, these are poor countries.
! -Domestic sources of capital (state, domestic savings) inadequate.
-Benefits from (controlled ) external trade:
! Foreign investment: increased access to capital.
! -Foreign markets higher demand for goods, pushes price up.

Downsides of ISI

-Low rates of economic growth:

! -Inefficient use of resources
-High levels of government debt:
! -Low levels of taxation.
! -High levels of foreign borrowing.
-Government bloat:
! -Crowded out private investment.
! -Big projects, low payoff.
! -Excess bureaucracy.

Failures

-Many African states

! -Problematic historical legacies
-What happened to them/what they did wrong.
! -These economies were not diversified.
! -Economic shocks.
! ! -Oil prices rose in late 1970ʼs.
! ! -Demand for African imports fell.
! ! -Trade went down, government revenues went down.
! -Bad governments.
! ! -Few incentives for private industry.
! ! -Lots of corruption/kleptocracy (government that steals).

Continuation on example from last class (video)

-Post Lumumba -> 1965-1997

-Renamed Congo “Zaire”
-renamed himself Mobutu Sese Seko Nkuku Ngbendu Wa Za Banga = “the all-powerful
warrior who, because of his endurance and inflexible will to win, goes from conquest to
conquest, leaving fire in his wake”
-By late 1980s: > US $5 billion in Swiss Banks
-Good relations with US -> Cold War dynamic

Mixed lessons

-Many states that did ISI are neither huge successes nor massive failures:
! -E.g. India.
-Mixed legacy:
! -Without government programs from ISI days, India would not have comparative
! advantage in current trade.
! -ISI helped industry develop in India.
! -But without exposure to foreign markets, Indian businesses would stagnate.

Fundamental problem

-DCʼs were correct to fear:

! -Unrestricted free trade: Most countries with successful industry had high levels
! of protection (e.g. South Korea). - see book Kicking the Ladder
! -Lack of industry: Agricultural prices volatile.
-But incorrect to fix everything through state-led development:
! -Created disincentives for local businesses.
! -Ignored economic activity of poor.
! ! -Weʼll go into this later.

Evaluating economic choices in DCʼs: The outcome

-Clear that mistakes were made.

! -Well-intentioned errors. (pouring money into higher education institutions and a
! lack of funding of basic educations, ex: India)
! -Criminal behavior/negligence.
-But situation at independence was pretty bad: look at decline in share of world GDP
(%).

Therefore...

-DC growth not as high as hoped/ideal.

-But DCʼs have grown, unlike in the colonial period - shares of GDP after 1970.

Why did ISI end after the 1980ʼs?

-Internal problems:
! Low and unequal growth in many places.
! -PCI Per Capital growth between 1950-1973 (Frieden, 354):
! ! -Chile: 1%; Argentina: 2%; India: 1.6%
! -Small domestic market.
-External pressure:
! -Debt burden: interest rates wen up in 1980ʼs and economies began to default,
! which led to...
! -IMF Structural Adjustment Programs (SAP).
-Ex: Brazil:
! -GDP growth >10%/year (late 60s - early 70s)
! -But...by 1980s: richest 5% population = poorest 80%
! -Internal migration swelling urban centers of developed areas -> favelas
Understanding internal problems (Frieden, 351-356)

-DCʼs wanted industry, but this needed imports.

-For imports, you need foreign currency.
! -But no one wants to buy your exports.
-So what happens?
! -Balance of payments problem (negative NX).
-What do you do?
! -Devalue currency: make exports competitive. (making exports cheaper and
easier to sell, but imports became less competitive and more expensive, making it hard
to imports (for things like oil), so youʼre screwed either way).
! -Raise interest ratesL to attract foreign investment.
! -THESE LEAD TO RECESSIONS (inflation + high rates).

Understanding external problems

-Problem of debt burden.

! -Cheap loans in 1970ʼs.
! -Debt servicing (i.e. interest) large portion o budgets: more than health +
! education.
! -In 1980ʼs, interest rates wen up (8% in 1982; Frieden, 374).
-DCʼs had to fix the debt problem: dump ISI.
-Change in lending institution priorities.
! -In 1960ʼs WB, in particular, had focused on state-led development projects. Why
! did they change policy?

Why do DCʼs change policies? (I.e. how did ISI end?)

-When DCʼs have debt problems, they go to the IMF - why?

-Government has to pay things like:
! -Pensions
! -Civil servants
! -Infrastructure
! -Health
! -Education
! -Military
-This is done through:
! -Taxes & fees
-If that isnʼt enough governments can:
! -Printing money (creating money, but lessening its value)
! -Borrow $
! ! -Domestic market - problem is there is little/zero $
! ! -International market
! ! ! -Private investors (ex: banks)
! ! ! -Countries
! ! ! -International institutions (ex: IMF)
Latin American Debt Crisis

-1960s - early 1970s:

! -$ easily available in international market; low and stable interest rates
-1973: 1st oil shock
! -More $ available (petrodollars) in international market.
-1979: 2nd oil shock
! -Interest rates rise
! -Oil prices quadruple
! -US and European economies in trouble
! -ISI continues but becomes all the less efficient and more expensive
-1982: Mexican Default
! -Also other countries like Brazil faced dire circumstances.

Changes in lending practices

-Emerging view in 1980ʼs: state programs are inefficient/do not lead to growth.
-SOlution: private enterprise in free markets.
! -Better incentives.
! -Better information.
! -Less waste/corruption.
-DCʼs had to open their markets, cut their state sector.

Why do DCʼs change policies (I.e. how did ISI end?)

-IMF -> only options

-What happens?
! -Case of Jamaica.
-In 1980ʼs, lending organizations moved form supporting state-led projects to demand
open markets.
! This is sometimes called ʻneoliberalismʼ or following the ʻWashington
! Consensus.ʼ

How IMF debt restructuring works (or, what happened to Jamaica?)

-Jamaica goes to IMF for ʻbridge loanʼ.

-IMF says OK, if following conditions are met:
! -Cut government spending.
! ! -Rationale: reduce deficit/control inflation.
! -Privatize government services.
! ! -Rationale: raise money for government coffers
! -Open markets
! ! -Rationale: attract foreign investment

Goal of SAP
-Convince foreign-debt holders to continue lending to Jamaica.
! -Thatʼs why theyʼre called ʻbridgeʼ loans.
-How do you do this?
! -Control inflation.
! -Control deficit.
! -MOST IMPORTANT: PAY BACK THE LOANS.
! ! -SAPʼs prioritize paying over other issues.

Problems of SAP

-Cut in government spending means people in Jamaica are poorer.

-Open markets mean foreign competitions, creating problems for domestic industry.
-Open markets mean capital can flow out of country, creating volatility.
! -Capital flight (think of airport runway).

Remember what I said about economists...

-Economists would tell you that DCʼs changed policies because opening markets made
simple economic sense.
! -This is wrong.
-As always, politics was involved:
! -Direct coercion: coups until...

Debt and the ʻeconomic hitmanʼ

-Confessions of an Economic Hitman Part 1

-Confessions of an Economic Hitman Part 2

Whatʼs behind the ʻreturn to globalizationʼ?

-Different strokes for different folks.

! -I.e. states changed trade policies for different reasons.
-External influences:
! -Fall of USSR: Revenue dropped.
! ! -Ex-communist states (e.g. Vietnam).
! -Pressure by lending agencies, like IMF.
! ! -Debtor states (e.g. Jamaica).
! -Incentives to engage in open trading system.
! ! -Bigger states (e.g. China).

Internal reasons

-Problems of ISI.
! -Lack of economic growth.
! -Inefficient use of resources.
-Public desire for better standard of living.
! -Consumer goods were of poor quality.
! -Too many restrictions on business/consumption.
! -Increased exposure to world (media).
! ! -I.e. globalization is cultural as well as economic.

ʻCulturalʼ: what does this mean?

-Trade includes ʻculturalʼ goods.

! -Media: ʻFriendsʼ in India.
! -Sports: Manchester United in Asia.
-We used to think this meant ʻAmericanizationʼ/ʻMcWorldʼ/cultural imperialism.
-Not true (for the most part). Instead:
! -Adaptation by Western firms (e.g.?).
! -Lots of hybrid cultural forms (e.g.?).
! -Culture exported from non-West as well (e.g.?).

Nov. 22/11

- What is globalization?
o Interaction: e.g. trade/ travel
o Interconnection: e.g. food products contain
ingredients from different places (remember
tutorial).
o Interdependence: e.g. Chinese economy
grows because of US consumption.
- On this score, globalization is not new.
o Golden Age
- When did the return start? Two things, different
dates.
- End of Cold War (for Soviet Bloc):
o Date: after 1989/1991
o Fall of USSR meant socialist model was
unviable.
o USSR could no longer help DC’s, who had to
reform.
- End of ISI (for developing countries):
o Date: after 1986
o Debt problems/ lack of growth meant the
DC’s moved away from ISI and towards trade.
- How IMF debt restructuring works (Jamaica)
o Jamaica goes to IMF for ‘bridge loan.’
o (Greece has a solvency problem—long term;
Italy is a liquidity problem—short term).
 o IMF says OK to Jamaica, if following
conditions are met (these conditions are
contended):
 Cut government spending
• Rationale: reduce deficit/ control
inflation.
 Privatize government services.
• Rationale: raise money for
government coffers.
 Open markets.
• Rationale: attract foreign
investment.
- Goal of SAP:
- Convince foreign-debt holders to continue lending
to Jamaica.
o That’s why they’re called ‘bridge’ loans.
- How do you do this?
o Control inflation.
o Control deficit
o Most Important: Pay Back the Loans!!
- Problems of Structural Adjustment Programs (SAP)
o Cut in government spending means people in
Jamaica are poorer—it hits the standard of
living for many.
o Open markets means foreign competition,
creating problems for domestic industry.
o Open markets mean capital can flow out of
country, creating volatility.
 Capital flight.
- Is there an alternative to SAP?
- Theoretically, yes. Idea from Joseph Stieglitz.
- Alternative to SAP:
o Government spends money to raise growth
(remember the Depression).
o Limit capital outflow (prevent money leaving
country).
o Don’t privatize (so you don’t sell assets on
cheap).
- Rationale: raise growth, risking inflation and risk of
default, to fix economy.
- In an SAP inflation is controlled, govt spending goes
down, deficit hopefully goes down, markets are
opened, the winners are holders of DC debt
 (inflation down) and the losers are people in DC
unemployment rises). The alternative is the exact
opposite. In the alternative inflation increases and
markets are controlled.
- The great irony/ hypocrisy of 2008
- What’s good for goose is NOT good for gander.
- DC debt problems: strong medicine
o Cut G: reduce benefit programs/ deficit.
o Privatize government firms like utilities.
- Financial crisis in US: opposite solution.
o Big stimulus ($787 billion).
o Big bailouts, NOT privatization (e.g. GM/ Citi
bank).
- This is seen as hypocritical.
- Lessons: why this matters.
o If reaction to crisis varies—some get
austerity, while others don’t—there is loss of
confidence in global economic order.
o Commitment to open economic order may
fade… just like it did in 1920’ s-1930.
- These are political choices:
o Remember: globalization is a choice, not a
fact
o There is no guarantee that states will trade
o Thee are winners and loser from every policy.
- The Golden Age vs. today
- Is current globalization the same as in 190?
- Why does this matter?
o Same problems may happen
 Can states stop globalizations by
become protectionist like in the 1930s?
 Can major war result?
o Same policies may apply/ or not.
 Use of gold standard?
 Fiscal policy to fix recession?
- Oversimplified answer. No—current globalization
different now from 1900
- Good:
o Broader economic base: non- Western
economies also growing.
o More actual interdependence: war becomes
harder.
- Bad:
 o Broader economic base: non-Western
economies run surpluses, but US economy
runs deficits. **Non-western is a very large
umbrella—Like 90% of the world.
o More actual interdependence: economic crises
more common, and reverberate.
- Globalization without gold standard
- Recall what gold standard did:
o Reduced state control over monetary policy/
exchange rate.
o Creditors happy—so they made loans
- How do we have Globalization with Gold Standard?
o States commit to restraining economic policy.
 Independent central banks: inflation
control.
 Deficit control: lower risk of default.
 Open economic policies: creditors get
money back.
 These were the credible signals stated
sent with economic policy.
- What’s behind the ‘return to globalization?’
o Different strokes for different folks.
 I.e. states changed trade policies for
different reasons.
o External influences:
 Fall of USSR; revenue dropped. Ex
communist states (e.g. Vietnam).
o Pressure by lending agencies, like IMF.
 Debtor states (e.g. Jamaica).
o Incentives to engage in open trading system.
 Bigger states (e.g. China).
- Internal Reasons
- Problems of ISI.
o Lack of economic growth.
o Inefficient use of resources.
- Public desire for better standard of living.
o Consumer goods were of poor quality.
o Too many restrictions on business/
consumption.
o Increased exposure to world (media).
 I.e. globalization is cultural as well as
economic.
- ‘Cultural’: What does this mean?
 - Trade includes ‘cultural’ goods.
o Media: ‘Friends’ in India.
o Sports: Manchester United in Asia.
- We used to think this meant ‘Americanization’/
‘McWorld’/ cultural imperialism.
- Adaptation by Western firms.
- Lots of hybrid cultural forms. For example sushi is
popular in the “West.”
- Culture exported from non-West as well.

Nov. 24/11

Objectives

-Implications of globalization
! -Back to the onion,
! -States: war/peace, economic policy, domestic policy.
! -IOʼs.

1. Prospects for war

-Great powers integrated to unprecedented degree.

! -Production: China makes PCʼs.
! -Consumption: Americans buy PCʼs (on credit).
! -Debt: China buys US debt.
! ! -Risk of war should be low (if trade trends continue).
-Isolated cases: some states are not integrated.
! -E.g. North Korea (DPRK).
! ! -Will DPRK fight or not?
YES NO

Nothing to lose No allies [China?], weak

No audience costs High costs

Ideology/Military sector (more Disconfirm the cult (Kim Jong

militarized relative to others) Ilʼs superpowers)

2. Prospects for economic policy (at the state level)

-Most states are committed to open markets:

! -Free(r) trade.
! -Attract investment (FDI vs. FII?). Direct Institutional
 Foreign Direct Investment Foreign Institutional Investment
(more wanted)

Ex: Build a factory Ex: Canadian mutual fund buys

shares on Bombay stock exchange
(financial assets: stocks bonds)

Directly provides jobs Provides investment and credit

Not very mobile Can take flight easily

! -Paying back creditors.
! ! -How do you raise money/attract investors?
-You give up some decision-making autonomy:
! -Trade policies have to conform to international guidelines (WTO rules).
! -Central banks must be independent (no control over monetary policy). (This way
! you send a signal that inflation will be kept within a certain rate and you will not
! let it go crazy.)
! -Deficits to be controlled (limits on fiscal policy).

Loss of autonomy, a case study: Ireland last year

-Problem: deficit 32% of GDP/debt 64% GDP.

-Revenues low/spending high.
-Ireland wanted: US$114 billion bailout.
! -Irelandʼs 2009 GDP: US$227 billion. (only double what they were asking for!)
-Solution:
! -Cut public spending by $20 billion over 4 years.
! ! -Cut social welfare by 15%.
! ! -Eliminate 24,750 public jobs (pop. 4 million)
! ! -Cut minimum wage by 9%.
! -Keep corporate tax rate at 12.5%.

Why is Ireland doing this?

-Convince foreign-debt holders to continue lending to Ireland (and lower interest rates).
-How do you do this?
! -Cut spending: control inflation.
! ! -Maintain value of loans.
! -Cut spending: control deficit.
! ! -Reduce risk of default.
! -Keep taxes low: encourage investment (FDI).
-GDP = C↓ + I↑ + G↓ + NX
Did it work?

-Yes and no.

-YES: exports still strong ($110 billion in 2010).
! -Compare with Greece $22 billion.
-NO: bad economic indicators.
! -Unemployment: 13%.
! -GDP growth: -1% in 2010 (-8% in 2009).
! -Debt: 112% of GDP (increased from 64% in 2009).

This brings us to: problem of imbalances

-Current account = savings - investment.

! -Current account surplus means state contributes savings to global pool.
! -Current account deficit means state is borrowing from other statesʼ savings.
-What happens when you run persistent deficits?
! -You finance with debt (recall DCʼs in 1980ʼs).
! -This problem in US/Europe: too much borrowing.
! -US debt: $15 trillion.

What do these imbalances mean for US? (as the biggest economy in the world)

-Problem: creditors freak out (like with Greece).

! -Effect: interest rate on US debt (now 2% on 10 yr T-bill) rises.
! -US option 1: raise taxes/cut spending (behave).
! -US option 2: cause problems:
-Risk 1: US causes inflation: unlikely. (print a lot of money, and increase spending)
-Risk 2: US puts up trade barriers. (NAFTA, free trade, tariffs on imports)
! -Reduce trade imbalances. (reduce imports in relation to exports)

How to avoid these risks?

-US can take its medicine.

! -Reduce debt (government and household).
! -But this means US economy grows very slowly.
! ! -Drop in consumption and government spending, they would experience a
! ! slow down (not quite recession though).
! ! -After average financial crisis: unemployment rises 4 years, housing
! ! values fall 6 years (Reinhardt and Rogoff).
-But problem of imbalances remain until...
! -DCʼs increase C (less than 40% of GDP in China).
! -World economic growth must come from CDCʼs in medium term, because of
! debt problems in West.

3. Prospects for domestic policy (to be discussed in tutorial)

-States have two audiences:
! -Foreign interests:
! ! -Creditors/investors/markets (individual/businesses)
! ! -Trade partners (states).
-Domestic interests:
! -Winners from trade: want more trade.
! -Losers from trade: want less trade/more help.
-Sometimes these two audiences want different stuff.
! -E.g. creditors want less spending, losers from trade want more spending.

4. Prospects for IOʼs

-Why would IOʼs become more important?

! -Problems/issues at global levels, not just state-level. (ex: climate change)
-More:
! -UN does peacekeeping at higher levels.
! -WTO sets trade policies for states.
! -More regional organizations (e.g. EU).
-Important change/realignment: IOʼs no longer dominated by Western powers.
! -E.g. BRICʼs now in top 10 of IMF shareholders. (Brazil, Russia, India, China)
-In general, IOʼs have become more important.

Governance vs. government

-Government: functions performed by states.

! -E.g. taxation/national defense.
-Increasingly, functions of government are delinked from states.
! -Performed by IOʼs: e.g. trade rules.
! -Performed by private firms: e.g. security provision.
-This is ʻgovernanceʼ:
! -Governance can be private/foreign, as opposed to government, which is
! public/domestic.

Bottom line

-On aggregate (therefore on average), standard of living improves with globalization.

! -More consumer goods.
! -More efficient investment/use of resources.
-Why isnʼt everything awesome?
-Problem 1: disparities/inequality.
-Problem 2: greater volatility/interconnection.
-Problem 3: limited state power.

Nov. 29/11
Julia Nov 10/24
Lesson plan (for the week...)

-Logistics:
! -Exam review in tutorials (exam is on 12/10).
! -Evaluations open until 12/5.
-Recap the problems associated with globalization.
-How are the majority of folks, who are poor and in developing countries, dealing with
their world?
! -Political society: ʻdemocracy from below.ʼ
! -Insights from Appadurai (slum-dwellers in Mumbai) and Maathai (womenʼs
! activism in Kenya).

Bottom line (from last time)

-On aggregate (therefore on average), standard of living improves with globalization.

! -More consumer goods.
! -More efficient investment/use of resources.
-Why isnʼt everything awesome?
-Problem 1: disparities/inequality.
-Problem 2: greater volatility/interconnection.
-Problem 3: limited state power.

Problem 1: Disparities/inequality

-Low-skill vs. high skill:

! -Low-skill folks exposed to global competition.
-Rural vs. urban:
! -Rural producers also face global competition.
! -Rural folks face commodity price volatility.

What are the causes of inequality in West?

-Some more numbers.

! -1975 in US: folks at 90th percentile earned 3 times as much as folks at 10th
! percentile.
! -2005 in US: folks at 90th percentile earned 5 times as much as folks at 10th
! percentile.
(the folks at the top are earning more relative to the poorest)
-Why is this happening?
! -Trade.
! -Mechanization.
! -BUT MOST OF ALL is premium to education: trade and mechanization hurts
! those with lower skills.
-People should be moving from farming to industry, but arenʼt, people who havenʼt
increased skills or been more educated suffer more over time and have higher
unemployment rates.
Caveat: this is not all because of globalization

-Deindustrialization/lack of jobs for low-skilled workers in West began prior to 1980ʼs.

-BUT globalization has accelerated the process.
-Key: comparative advantage.
! -Low-skill workers in high-wage economies exposed to greater levels of
! competition: effect of globalization.
! -Technology requires higher skills/education than many workers have: effect of
! education premium. (smaller number of people who can do those jobs)
! -Bottom line: inequality up, despite overall economic growth/increase in jobs on
! global level.

Problem 2: Volatility/interconnection

-Global economy means shocks in one place are felt in others.

! -E.g. US recession means US buys less oil.
-When shock is in another state, less control over outcomes.
! -Oil prices fall, and income of Nigeria falls. (affects policy like fiscal that the
! government of Nigeria uses)
-Caveat: increase in demand elsewhere can mitigate problem (diversification).
! -China and India have money and want oil.

Problem 3: Limited state power

-Two problems:
! -Challenges like financial crises exceed borders.
! -Home populations affected by folks overseas.
! ! -US SUVʼs -> climate change -> raise sea levels in Bangladesh. (one way
! ! effect, Bangladesh government is powerless to effect circumstances)
-States limited in two important ways:
! -Economic policies constrained (with exceptions). (if you are big enough, like US,
! can flout some of these things, and have few constraints on their economy)
! ! -Canʼt spend money/canʼt close economies.
! -Canʼt influence government/consumer decisions overseas.
! ! -Bangladesh government canʼt stop Americans buying SUVʼs.

Implications

-Greater divergence:
! -Between states: integrated vs. isolated states.
! -Within states: winners vs. losers.
-Environmental degradation (next time):
! -Rich folks create problems because they donʼt pay the costs.
! ! -E.g. US SUVʼs -> sea levels in Bangladesh.
! -Poor folks create problems trying to survive.
! ! -E.g. deforestation for pasture in Costa Rica.

Globalization + democracy

-The world sees a whole lot more:

! -Interaction
! -Interconnection
! -Interdependence.
-But democracy has also been expanding.

More democracies but...

-Global: influence of IOʼs has expanded/many problems are now ʻglobalized.ʼ

Democracy?
! -Democratic deficit 1: policies made by unelected bureaucrats.
! -Democratic deficit 2: people affected by decisions in other states (Appadurai,
! 24-25).
-National: there are more democracies...
! -Recall that to participate in globalization, states must restrict their economic
! policy (e.g. central bank independence).

What happens to democracy?

-Three things:
! -Globalization changes how people are government (governance vs.
! government).
! -Restrictions on state policy.
! -New actors proliferate (e.g. NGOʼs).
-Where to look for democracy?
! -Stakes of this question: who matters? How do they matter?
! ! -Is it only leaders and experts who count?

A world of poor people

-1.4 billion worldwide live below poverty line (US$1.25/day).

! -Situation has improved: 52% below poverty line to 25% between 1981-2005.
-Great regional variation:
! -East Asia: 17% (from 78% in 1981).
! -India: 40%.
! -Sub-Saharan Africa: 51%.
-Many of these people are moving to cities in the developing world.
! -Bottom line: almost 1 billion people live in slums.

Living in a slum

-First of all - youʼre poor.

-Legal problems:
! -Most are migrants - fewer rights.
! -Businesses mostly informal.
! -Donʼt own property. (undocumented, unrecognized)
-Logistical problems:
! -Lack of sanitation/plumbing.
! -Environmental hazards.

Half the worldʼs people...

-Are women.
-Indeed, 66% of worldʼs workforce are women. BUT
-Women account for 10% of income.
-Women own only 1% of property.
-500 million women are illiterate.
! -E.g. India: Male 73%; Female 48%.
-70% of people in poverty are women.
! -I.e. most poor people are women.

Situation facing poor folks (majority of whom are women)

-Poor people canʼt always, or generally, count on government protection and help.
! -Some governments actively oppress them.
! -Some governments donʼt have the resources to help them.
! ! -Governments trying to appease foreign creditors.
! ! -Governments incapable of dealing with global problems.
-Poor people are often unarmed and often not capable of armed....

Are you totally screwed if youʼre poor and weak?

Letʼs start with the toilet

-Mumbai (formerly Bombay) is massive.

! -Population between 14-20m (Canada 33m).
-Asiaʼs largest slum: Dharavi.
-Real problem of public services:
! -People living in Dharavi: 600,000 to 1 million.
! -Population density: 336,643 people/sq.km.
! ! -Toronto: 3,972 people/sq.km.
! -People without access to toilers: 60% across Mumbai, far more in Dharavi.

Structural problems

-These problems are true for majority of poor people:

! -Government inadequacy/hassles.
! -Market failure: people canʼt afford housing, so market solutions donʼt work.
-If neither the state nor the market can help you, what happens?

1. Collective action

-ʻAlone we are uselessʼ: no property rights for the poor.

! -Governments hassles people (Shelter Strategy)
-Partnerships/consensus (NSDF/SPARC/MM).
-Enumeration (Community Ritual): spread from India to...
! -Not done by state - claiming governance.
! -Using numbers/size to claim resources.
-Saving as collective effort (Appadurai, 33). (economic activity has to proceed as a
collective effort)
! -Not private property.
-Issue linkages. (from a single issue to a broader and enduring movement)
! -Transport, housing, toilets.

Enumeration:
-sort of informal census
-they have to count themselves
-general distrust of the government
-they get a sense of a collective/community (not divided)
! -structural exclusion, not just failure at an individual level
-recognition (linked to collective because there is strength in numbers, to be recognized)

-Itʼs important to gain knowledge to get control about policy.

2. Local knowledge (Appadurai, 38-39)

-What does ʻhuman waste managementʼ do?

! -It deals with shitting.
-But if itʼs called HWM, who ʻmanagesʼ it?
! -Bureaucrats/experts, not the people shitting.
-Poor people do not trust outside actors or ʻprojectʼ approach.
! -Avoid dealings with bureaucrats.
! -Local conditions require local solutions.

Dec. 1/11

Last time

-Globalization = more growth AND more disparities:

! -States are more constrained.
-There are lots of poor people:
! -1.4 billion under $1.25/day; 1 billion in slums.
! -Women disproportionately poor despite working.
-Their activism is different from the Amnesty-types weʼve discussed.
! 1. They focus on collective action (enumeration/savings). *Pg. 36 Appadurai
! 2. They prioritize their own local knowledge over expert knowledge.

3. Public action/partnership (Appadurai, pg. 40)

-Spectacular action: make a statement. (the only way to claim ownership and to avoid
being left out of the process)
! -ʻToilet festivalsʼ: show competence/claim ownership.
! -Taking it to the UN (A, 40).
-Articulation across borders.
! -Slum-dwellers live everywhere.
! -Appadurai, pg. 43: internal critical debate.
! -Politics of partnership is a gamble (A, pg. 44).

Beyond the state? What have the slum-dwellers achieved?

-SDI: transnational mobilization beginning with toilers.

! -1.1 million savers in 388 cities worldwide.
-Paradox of democracy in 2011: democracy mostly seen in a particular state. BUT...
! -Governance vs. government. (democratic deficit)
-Poor people have responded with...
! -Direct collaboration/learning between poor communities.
! -Once you mobilize, you appeal to others:
! ! -Governments.
! ! -IOʼs/Lending agencies.
! ! -Businesses.

Is this type of thing democracy?

-Not procedural:
! -Elections not the main thing.
-Not liberal:
! -Rule of law/individual property rights not main focus.
-But remember: demos + kratos.
-This may be a new form of democracy, which takes us back to old understandings of
ʻpopular sovereignty.ʼ
! -ʼDeep democracyʼ or ʻdemocracy from below.ʼ

How do we understand this activism? - 1

-What itʼs not:

! -This is not Amnesty International.
! -Theyʼre not suing. (not involved in litigations and the standard of civil political
! things that these human rights movements have done)
! -They arenʼt asking the World Bank or Indian government experts to come in and
! tell them what to do.
-This is not ʻcivil society.ʼ
! -Civil society is based on individual rights (more specifically property).
! -Using your individual rights, you lobby or litigate.

How do we understand this activism? - 2

-What it is:
! -Itʼs about taking control over oneʼs own environment. (not charity and begging)
! -Transforming the value of surroundings. (not just move out of slum, make it a
! better place)
! -Keeping experts at armʼs length. (they donʼt listen to them or set them back)
-This is ʻpolitical society.ʼ
! -Political society is based on collective mobilization, not individual rights.
! -Collective mobilization allows them to make claims.
! -These claims make them participants in ʻgovernance.ʼ

Another problem: the environment

-Environmental impacts are also unequal.

-Two types of environmental damage:
! -Affluence.
! -Poverty.
-Problems:
! -Rich arenʼt changing behavior fast enough.
! -Newly rich (e.g. India) make situation worse.
! -Poor have to survive.

Fixing environmental problems

-International level: are states agreeing to control emissions?

! -Not really.
-National level: are states implementing policies that would reduce environmental stress
(e.g. gas tax)?
! -Not really.
-Does this mean that no one can act? Should we focus exclusively at state level/
Western consumers?

Letʼs take an example

-Kenya was a dictatorship.

! -Daniel Arap Moi.
-Moi and associates sold off forest resources to get rich.
! -Resources from abroad made him stronger.
-Forest-dwellers suffered loss of livelihood.
-Pro-democracy activists were college males.
! -Moi locked them up.
! -No help here.

Now the tree (ʻTaking Rootʼ documentary)

Understanding the Green Belt movement

-Women mobilized to plant trees.

! -Police thought they were harmless (ʻjust womenʼ).
! -Subverted gender discrimination.
-This enabled:
! -Consciousness raising.
! -Sharing of knowledge.
-They became a political movement.
! -Evicted Moi in 2002.
! -Note: Wangari Maathai passed in September 2011.

The effectiveness of the weak

-Remember that the pro-democracy protestors (young dudes) had been locked up.
-This is what happened.
! -Funding from IO was cut and project died.
-What did the women do?
! -Lobbied foreign governments.
! -Transnationalized local issue.
-Essentially, the protestorsʼ mothers got them freed.

Is this international politics?

-YES, in three ways:

-Problems are international (climate change).
! -National solutions not adequate.
-Alliances are international.
! -Variety of movements worldwide.
-New channels for political expression.
-Lesson: positive change can come from unexpected places.

Limitations to ʻpolitical societyʼ

-No substitute for state action in certain situations:

! -Build industry/infrastructure.
! -Provide broader safety net.
-ʻPolitical societyʼ has numbers, but few resources and often little political power,
compared to:
! -States (some of which are actively repressive).
! -IOʼs/MNCʼs.
-Peopleʼs movements face uphill battle.
! -ʻPolitics of patienceʼ is difficult and requires constant work/engagement/
! partnerships.

Why does this matter? I.e. why have I finished on this note?

-Am I asking you to go live in a slum?

-What I am telling is:
! -Poor people arenʼt saps.
! ! -Their activism reveals creativity and real innovation.
! ! -There is a lot of capital/value in their work.
! -Many mistakes have been made when people think theyʼre saps.
! ! -Development programs that donʼt work (e.g. dams).
! ! -Government oppression (e.g. Great Leap Forward).
-Letʼs not think we always know better.