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The Democratic Peace. Democracy. War. Peace. International Trade. International Organizations. UK v. US. Similar Cultural Foreign policy Legal traditions Car Culture??? Opposite ends of the spectrum on gasoline tax policy addressing climate change. - PowerPoint PPT Presentation
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The Democratic Peace
Democracy
International OrganizationsInternational Trade
PeaceWar
UK v. US
• Similar – Cultural– Foreign policy– Legal traditions – Car Culture???
• Opposite ends of the spectrum on– gasoline tax policy – addressing climate change
Car culture: gasoline taxes and prices per liter in 31 countries (2004):
Who needs the most gasoline per capita?Urban v Rural
Does “need” translate into policy preference?
Policy outcome?
• We’ve got Interests & Incentives
• Now, to get the policy outcome,…
• We interact interests/incentives with a domestic political institution:
Malapportionment!
Malapportionment tends to weigh RURAL preferences more than URBAN
(i.e., Proportional representation tends to weigh URBAN preferences more than RURAL)
Does this have an effect on NATIONAL policy?
Test:
• Does malapportionment affect:–Gasoline prices–Kyoto ratification
Kyoto Protocolto the UN Framework Convention on Climate Change
• Stabilize atmospheric “greenhouse” gas• 1997 (enter into force: 2005)• 2009: 187 states ratified
• Commitment to reduce greenhouse gases:– carbon dioxide– methane– nitrous oxide– sulphur hexafluoride
Ratifiers, signers, and non
Which came first?• Car culture?
• Malapportionment?
• Once created, however, car-culture may reinforce malapportionment
• Car-culture may have other effects:– Crash:– It's the sense of touch.... Any real city, you walk, you know? You brush
past people. People bump into you. In L.A., nobody touches you. We're always behind this metal and glass. I think we miss that touch so much that we crash into each other just so we can feel something.
• Hypothesis: car-culture exacerbates racial/ethnic tension• Operationalized: automobiles/capita inter-ethnic/racial violent crime
Main take-home from last time:
• What is it to explain?– to state the conditions under which it always
or usually takes place (perhaps probabilistically)
• The BRIDGE– The BRIDGE between historical observations
and general theory is the substitution of variables for proper names and dates
Religion vs. Science(Faith vs. Skepticism)
• RELIGION & SCIENCE both respond to mystery• The key to religion is faith
– in the religious hierarchy– in the Bible– in the Koran– Clear your mind of questions; there is no “why”
• The key to science is skepticism– theories must be tested, and tested, and tested– we never achieve “Truth” with a capital T– we never “prove”
COMPARATIVE INSTITUTIONAL ANALYSIS:The Politics of International Finance
James Raymond VreelandSchool of Foreign Service
Georgetown University
17
2008 Financial Crisis &
The rise of the G20
Unipolarism is over.We live in a multipolar world.
18
The future of the IMF?...
19
Changes to Global Governance
Who has the power at the IMF?
20
The IMF Executive Board Directors, dominated by Western Europeans.
• Global governance is at a crossroads
• G20 = arrival of the emerging markets
• IMF governance is out of whack with reality
21
G20• Calls for a reevaluation of the BWI vote shares
• Why care about the G20?– Doesn’t do anything– Arbitrary membership (out of date)
• Represents the arrival of the emerging markets!
• More representative?
• Who is the G20?22
Who is the G20?
G7 + BRIC
11 down, 9 to go?
NO! Only 8 to go.
Only 19 countries in the G20.
+ EU + MAKTISAS
23
Wrong guesses• EU
– Spain, Poland, Netherlands
• Europe– Switzerland, Norway
• The bad guy– Iran
• Large populations– Pakistan, Bangladesh, Nigeria
• Big economies– Thailand, Taiwan, Malaysia, Venzuela, Egypt, 24
Seats around the G20 table
25
Seats around the IMF table 2012
26
WEOG Presence
• G20: 40%
• IMF Executive Board seats: 46%
• IMF Executive Board votes: 58%
27
How do they do it?
• Inflated vote shares?
28
IMF vote shares have been “out of whack”
• Top 5 members:
– United States (16.8%)
– Japan (6.0%)
– Germany (5.9%)
– France (4.9%)
– UK (4.9%)
• Other important members:– China (3.7%)– Saudi Arabia (3.2%)– Russia (2.7%)– Italy? (3.2%)– Belgium? (2.1%)– Brazil? (1.4%)– India? (1.9%)– Turkey? (0.55%)
29
Who controls the IMF? (2010)
• Top 5 members:
– United States (16.7%)
– Japan (6.0%)
– Germany (5.9%)
– France (4.85%)
– UK (4.85%)
• Other important members:– Italy? (3.19)– Saudi Arabia? (3.2%)– Canada? (2.9%)– Russia (2.7%)– Belgium? (2.1%)– China (3.65%)– India? (1.9%)– Spain? (1.4%)– Brazil? (1.4%)– Korea? (1.3%) 30
http://www.imf.org/external/np/sec/memdir/members.aspx accessed 2 May 2012
31
New vote-shares (for 2012)??Has not happened yet!
1. United States: 16.482. Japan: 6.143. China: 6.074. Germany: 5.315. France: 4.026. United Kingdom: 4.02
7. Italy: 3.028. India: 2.639. Russia: 2.5910. Brazil: 2.2211. Canada: 2.2112. Saudi Arabia: 2.0113. Spain: 1.9214. Mexico: 1.8015. Netherlands: 1.7616. Korea: 1.7317. Australia: 1.3318. Belgium: 1.30
32
Who controls the IMF? (2010)
• Top 5 members:
– United States (16.75%)
– Japan (6.23%)
– Germany (5.81%)
– France (4.29%)
– UK (4.29%)
• Other important members:– Italy? (3.16)– Saudi Arabia? (2.80%)– Canada? (2.56%)– Russia (2.39%)– Belgium? (1.86%)– China (3.81%)– India? (2.34%)– Spain? (1.63%)– Brazil? (1.72%)– Korea? (1.37%) 33
But real distortions also occur in the elections for the Executive Board
34
Appointed & Elected Directors• Appointed:
– US, Japan, Germany, France, UK
• Elected:– China, Saudi Arabia, Russia
• Regionally elected (ad-hoc)– Australia
• South Pacific, New Zealand, Korea, Uzbekistan
– Brazil• Latin American countries
– Togo• African countries
– Iran• Afghanistan, Algeria, Ghana, Morocco, Pakistan, Tunisia
35
Really ad-hoc elected Directors:• Italy
– Greece, Malta, Portugal, San Marino, Albania, & Timor-Leste
• Belgium– Austria, Luxembourg, Belarus, Czech Republic,
Hungary, Kosovo, Slovak Republic, Slovenia, & Turkey
• Netherlands– Armenia, Bosnia and Herzegovina, Bulgaria, Croatia,
Cyprus, Georgia, Israel, Macedonia, Moldova, Montenegro, Romania, & Ukraine
• Switzerland– Azerbaijan, Kazakhstan, Kyrgyz Republic, Poland,
Serbia, Tajikistan, & Turkmenistan
36
How do they do it?
• Foreign aid?
37
Buying Bretton Woods
James Raymond VreelandGeorgetown [email protected]
Paper prepared for presentation at the AidData Conference, University College, Oxford, March
22-25, 2010 38
Switzerland?
• New IMF member (1992)– Bloc does not have deep historical ties other
than joining around the same time– Data for the entire period are available
• Switzerland has added incentives– Out of the EU, out of the G20
39
40
Figure 2: Comparison between country-years receiving any Swiss aid versus those that did not
0.46
0.77
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
n=3,515 n=83
Std dev=0.50 Std dev=0.42
Non-IMF block Swiss IMF block
t=-5.65Pr(|T| > |t|)=0.00
Per
cent
of c
ount
ry-y
ears
rece
ivin
g S
wis
s ai
d
41
Figure 7: Azerbaijanbefore & after joining the Swiss block
0.00
0.88
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
n=2 n=16
Std dev=0.00 Std dev=0.34
Non-IMF block Swiss IMF block
t=-3.53Pr(|T| > |t|)=0.00
Per
cent
of c
ount
ry-y
ears
rece
ivin
g S
wis
s ai
d
42
Figure 8: Kyrgyzstanbefore & after joining the Swiss block
0.00
0.94
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
n=2 n=16
Std dev=0.00 Std dev=0.25
Non-IMF block Swiss IMF block
t=-5.16Pr(|T| > |t|)=0.00
Per
cent
of c
ount
ry-y
ears
rece
ivin
g S
wis
s ai
d
43
Figure 9: Turkmenistanbefore & after joining the Swiss block
0.00
0.25
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
n=2 n=16
Std dev=0.00 Std dev=0.45
Non-IMF block Swiss IMF block
t=-0.77Pr(|T| > |t|)=0.45
Per
cent
of c
ount
ry-y
ears
rece
ivin
g S
wis
s ai
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44
Figure 10: Uzbekistanbefore & after joining the Swiss block
0.00
0.81
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
n=2 n=16
Std dev=0.00 Std dev=0.40
Non-IMF block Swiss IMF block
t=-2.78Pr(|T| > |t|)=0.01
Per
cent
of c
ount
ry-y
ears
rece
ivin
g S
wis
s ai
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45
Figure 11: Tajikistanbefore & after joining the Swiss block
0.50
0.93
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
n=4 n=14
Std dev=0.58 Std dev=0.27
Non-IMF block Swiss IMF block
t=-2.18Pr(|T| > |t|)=0.04
Per
cent
of c
ount
ry-y
ears
rece
ivin
g S
wis
s ai
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46
Figure 12: Serbiabefore & after joining the Swiss block
0.67
1.00
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
n=12 n=5
Std dev=0.49 Std dev=0.00
Non-IMF block Swiss IMF block
t=-1.49Pr(|T| > |t|)=0.16
Per
cent
of c
ount
ry-y
ears
rece
ivin
g S
wis
s ai
d
47
The risk:Irrelevance of the IMF in a Multi-Polar world!
48
Regional Monetary Funds? Lipscy, Phillip Y. 2003. Japan's Asian Monetary Fund Proposal. Stanford Journal of East Asian Affairs 3 (1):93-104.
http://www.youtube.com/watch?v=HyrTypTRDbk
49
Asian Monetary Fund Proposal?• Going back to the aftermath of the US/IMF
bailout of Mexico in 1995: TEQUILA CRISIS• Japanese policy-thinkers/makers begin thinking
about an “Asian Monetary Organization” ($20 billion)
• Why? – Believed that the US would not act as vigorously in
the event of a crisis in Asia
• Then: East Asian Financial Crisis• http://www.xtimeline.com/timeline/Asian-
Financial-Crisis 50
51
Why did Japan (not US or EU)lean towards liquidity provision in the East Asian Crisis?
25% of Japanese lending to all developing countries went to Thailand! 52
Japan’s position at the IMF re: Indonesia
• Japan opposed major structural reforms (eliminate national projects, reduce subsidies, restructure financial structure)
• Japan supported a loan package to stabilize the exchange rate
• IMF ignored Japan
53
54
“Asian sense of solidarity” AMF vision
• $100 billion• 10 members:
– Australia, China, Hong Kong, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Thailand
– NOT the United States– Secretary of State Summers to MOF official
Sakakibara:– “I thought you were my friend!”
55
Flash-forward: March 2010Chiang Mai Initiative
• A multilateral currency swap arrangement
• Members: Association of Southeast Asian Nations (ASEAN), China (including Hong Kong), Japan, and South Korea
• ASEAN members: http://www.aseansec.org/74.htm
• Foreign exchange reserves pool of US$120 billion
• Launched: March 2010 The ASEAN flag
56
Power:
• Matters in international institutions
• But emerging markets have outside options
• Can we keep China at the table?
• Or does China go for outside options?
57
Aside
• How do you “see” China?• What does China “look” like?
58
Rise of the Rooster
59
Will China play this game?
• Increasingly using foreign aid & access to Chinese markets for political goals
• Recognition of Taiwan
• Dalai Lama
• Liu Xiaobo
• Chiang Mai alternative
60
One more triangle…
Is this a “Bretton Woods” Moment?
Treaty of Versailles (1919–20): League of Nations
Keynes begins discussions on an “international loan”
1918
Stock Market Crash!
World War II (1939-45)
United Nations (1945)
Bretton Woods: IMF/World Bank (1944)
GATT: 1947
Smoot-Hawley (1930) Beggar-thy-neighbor
1944
15 years from crash to institutional solutions…
1929
Latin American Debt Crisis (1982)
1980
Tequila Crisis (1995)
2008 Financial Crisis
“Bretton Woods” moment… 2023?...
Or beyond?
East Asian Financial Crisis (1997-1999)
2023?
Lay out architecture now, so we’re ready when it comes…
20081990 2000
Think Big aboutGlobal Governance!
Regionalism before globalism?
Wrap up
68
Why should you care?• Globalization of capital flows
• Financial crises plagued the 20th century
• Bailouts will continue
• Tension between – Providing liquidity– Preventing MORAL HAZARD
• Solution: conditionality– 1944-1970s conditionality light– 1980s & 1990s conditionality heavy– 2008… conditionality light?
• What will it be like when the shoe is on the other foot?69
The course take-away:
• Institutions matter…
• How do international institutions matter?– Solve collective action problems?– Informational role?– Facilitate foreign policy goals?– Obfuscate the pursuit of political goals?
• How do domestic political institutions matter?– Shape the survival strategies of political leaders
70
Analytical toolkit• TRILEMMA
• Time-inconsistent preference problems– “Commitment” problems– Remember Ulysses and the sirens– USING INTERNATIONAL ORGANIZATIONS TO “LOCK-IN” OR
INFLUENCE POLICY
• Veto players (stability of policy)
• Stability of democracy in rich democracies
• Objectives of leaders: stay in power!– The optimal strategy to fulfill this goal depends on
incentives/constraints shaped by institutional context
• “Controlling” for variables (holding conditions constant)71
Winners & Losers
• Greater economic integration greater power of “Winners”
• Economic integration greatest at the Regional Level
• So look for regional cooperation
• You are winners from globalization!72
Thank youWE ARE GLOBAL GEORGETOWN!
73
Figure 1: Seats around the IMF Executive Board (by Director's total vote share, 2010)
United States, 16.7%
Japan, 6.0%
Germany, 5.9%
France, 4.9%
United Kingdom, 4.9%
Belgium, 5.1%
Netherlands, 4.8%Spain, 4.4%Italy, 4.1%
China, 3.7%
Canada, 3.6%
Thailand, 3.5%
Korea, 3.4%
Denmark, 3.4%
Egypt, 3.2%
Saudi Arabia, 3.2%
Sierra Leone, 3.0%
Switzerland, 2.8%
Russia, 2.7%
Iran, 2.4%
Brazil, 2.4%
India, 2.4%
Argentina, 2.0%
Rwanda, 1.3%
74
Seats around the IMF table (2012)
75