IR 404: International Policy Task Force

IR 404: International Policy Task Force

How Emerging Economies Survived the Global Financial Crisis:

Prelude, Policy Responses, and Future Prospects

Prof. Carol Wise

Spring Semester 2016

Tuesday 5-7:50 pm, SOSB40

Office Hours: Thurs. 3:30-5:30 pm

Office: VKC 328

E-mail:

Course Description & Objectives

One of the more surprising features of the 2008-9 global financial crisis (GFC) was the comparative ease with which emerging market countries in parts of Africa, East Asia and Latin America rebounded.This was a radical departure from the effects of previous crises on these countries, be it the decade-long recession that the 1982 debt shocks wreaked on Africa and Latin America or the string of Asian financial crises that dramatically slowed those economies in the late 1990s. The remarkable resilience of emerging economies (EEs) in the wake of the GFC is also striking when we consider the substantial differences that exist among countries, both within and across these respective regions. Countries diverge in terms of size, endowment factors, and the domestic institutional backdrop that frames economic policymaking. Taking this diversity into account, this course explores the phenomenon of EE recovery in the aftermath of the GFC. We will focus, first, on the reform period that preceded the GFC, as the ability of these countries as a group to resist the initial financial contagion is at least in part a tribute to the substantial macroeconomic, financial sector, and trade reforms that EE governments undertook over the past two decades. Second, we will analyze the economic policies and political strategies that were employed when the GFC hit in 2008-09. Third, we will explore the performance of these EE political economies six years after the GFC and as the prospects for sustained growth have slowed and deeper reforms still await many of these countries.

Grading and Assignments

Grades will be assigned on the basis of class participation and preparation; an in-class final exam; and 3 6-8 page background papers to be submitted over the course of the semester.

(1) Preparation and Participation in Class Discussions (10% of your grade)

All students are expected to have completed the readings before each class, and to be prepared to answer questions on the material when called upon. Students are also expected to participate in ongoing weekly seminar discussions.Each student is expected to make apresentation based on the country that they have been assigned to track and write about over the course of the semester.

(2) Three 10-page Background Papers (45% of your grade, or 15% each)

Each of you has been assigned an Emerging Economy to concentrate on for the semester (See final page of syllabus for country assignments). On January 26 you arerequired to submit a short bibliography based on your assigned country consisting of a minimum of five research references. Three background papers will then be written on your assigned country along the following lines:

Paper 1 -6-8 pages (due February 2): A description of the reform period that preceded the GFC, including macroeconomic, trade, and financial reforms.

Paper 2 - 6-8 pages (due March 8): An analysis of the policy responses that were employed when the GFC hit your country in 2008-09.

Paper 3 - 6-8 pages (due April 12): The aftermath of the crisis and the political economic performance of your assigned country six years later. Here, you will offer reform insights and policy recommendations for your assigned country.

(3)Final Policy Memorandum, 15-18 pagesthat weaves together the three papers listed above (15% of your grade). Due May3, 2016 at noon. Please submit through turn-it-in on Black Board.

(4) In-class Final Exam (30% of your grade). Tuesday, May 10, 4:30-6:30 pm, SOSB40.

Disability Disclaimer

Students requesting academic accommodations based on disability are required to register with Disability Services and Programs (DSP) each semester. A letter of verification for approved accommodations can be obtained from DSP when adequate documentation is filed. Please be sure the letter is delivered to me (or to TA) as early in the semester as possible. DSP is open Monday-Friday, 8:30-5:00. The office is in Student Union 301 and their phone number is (213) 740-0776.

Readings

All of the assigned readings have been posted on USC Blackboard under the name and number of this course. The following book is required reading for the course and can be purchased at the USC Bookstore or on Amazon.com: C. Wise, L. Armijo, and S. Katada, eds., How Emerging Economies Survived the 2008-09 Global Financial Crisis (Washington, DC: Brookings Institution, 2015).

WEEK 1:Introduction and Overview

January 12: Structural Shifts in the International Political Economy (IPE)

M. Guillen and E. Ontiveros, Global Turning Points (New York, NY: Cambridge University Press, 2012), chapters 1, 2, 4, 6, 8, 9. PDF posted on Blackboard

A. Hardy, The World Turned Upside Down (Singapore: World Scientific Press, 2013), chapters 1 & 2. PDF posted on Blackboard

R. Sharma, Breakout Nations (New York: W.W. Norton & Co., 2012), chapters 1 & 14. PDF posted on Blackboard

WEEK 2:Pathways from the Periphery

January 19: The Elusive Quest for Growth

Amsden, “The Wild Ones: Industrial Policies in the Developing World,” in Narcís Serra and Joseph E. Stiglitz, eds., The Washington Consensus Reconsidered.PDF posted on Blackboard

W. Easterly, The Elusive Quest for Growth (Cambridge, MA: MIT Press, 2002), pp. 5-85. PDF posted on Blackboard

R. Hausman, D. Rodrik, and A. Velasco, “Growth Diagnostics,” in Narcís Serra and Joseph E. Stiglitz, eds., The Washington Consensus Reconsidered (New York, NY: Oxford University Press, 2008). PDF posted on Blackboard.

M. Kose and E. Prasad, Emerging Markets: Resilience and Growth amid Global Turmoil (Washington, DC: Brookings Institution Press, 2010), pp. 1-66. PDF posted on Blackboard

D. Rodrik, One Economics, Many Recipes: Globalization, Institutions, and Economic Growth (Princeton, NJ: Princeton University Press, 2007), pp. 1-55. PDF posted on Blackboard

EMERGING ECONOMIES: THE CONCEPTUAL & EMPIRICAL TERRAINS

WEEK 3:Neoclassical Assumptions & Modern Political Economy

January 26: Micro versus Macro Views

Assignment due in class: a short bibliography based on your assigned country consisting of a minimum of five research references

M. Blyth, Austerity: The History of a Dangerous Idea (Oxford, UK: Oxford University Press, 2013), pp.

178-226.PDF posted on Blackboard

A. Kreuger, “Government Failure in Development,” in J. Frieden, M. Pastor, and M. Tomz, eds., Modern Political Economy and Latin America (Boulder, CO: Westview Press, 2000), pp. 10-17.PDF posted on Blackboard

R. Holcombe, “Entrepreneurship and Economic Growth,” in B. Powell, ed. Making Poor Nations Rich (Stanford, CA: Stanford University Press, 2008). PDF posted on Blackboard

J. Williamson, “A Short History of the Washington Consensus,” in Narcís Serra and Joseph E. Stiglitz, eds., The Washington Consensus Reconsidered. PDF posted on Blackboard

M. Wolf, Why Globalization Works (New Haven, CT: YaleUniversity Press, 2004), pp. 3-76. PDF posted on Blackboard

WEEK 4: Statist Approaches

February 2:Theory & Practice

T.J. Pempel, “The Developmental State in a Changing World Economy,” in M. Woo-Cumings, ed. The Developmental State (Cornell University Press, 1999), pp. 137-181. PDF posted on Blackboard

J.C. Ramo, The Beijing Consensus (Washington, DC: The Foreign Policy Center, 2004).PDF posted on Blackboard

P. Evans, “Predatory, Developmental, and other Apparatuses: A Comparative Political Economy Perspective on the Third World State,” Sociological Forum 4 (1989): 561-587.PDF posted on Blackboard

A. Kohli, State-Directed Development (New York: Cambridge University Press, 2004), pp. 1-26.PDF posted on Blackboard

WEEK 5: Institutions versus Geography

February 9: Nature or Nurture?

D. Acemoglu and J. Robinson, Why Nations Fail: The Origins of Power, Prosperity, and Poverty (New York, NY: Crown Business, 2012), pp. 7-123. PDF posted on Blackboard

S. Ahlfeld, H. Hemmer, and A. Lorenz, “The Economic Growth Debate: Geography vs Institutions,” ZBW – Leibniz-Informationszentrum Wirtschaft, Working Paper no. 34, 2005. PDF posted on Blackboard

P. Collier, The Bottom Billion, pp. 53-98.PDF posted on Blackboard

D. Rodrik, One Economics, Many Recipes: Globalization, Institutions, and Economic Growth, pp. 153-183. PDF posted on Blackboard

THE 2008-09 GLOBAL FINANCIAL CRISIS (GFC)

WEEK 6: Emerging Economies and the GFC

February 16: The Great Recession---Prelude

Bernanke, The Federal Reserve and the Financial Crisis (Princeton: Princeton University Press, 2013), pp. 64-97. PDF posted on Blackboard

Blinder, After the Music Stopped, pp. 3-99. PDF posted on Blackboard

N. Roubini and S. Mihm, Crisis Economics (London: Allen Lane, 2010), pp. 86-157. PDF posted on Blackboard

FILM---“Too Big to Fail”

WEEK 7:Emerging Economies and the GFC

February 23: Policy Responses

C. Wise, L. Armijo, and S. Katada, eds. Unexpected Outcomes: How Emerging Economies Survived the 2008-09 Global Financial Crisis (Washington, DC: Brookings Institution Press, 2015), skim all.

WEEK 8:Country Cases

March 1: Mexico, BrazilArgentina

G. Esquivel, “Mexico’s Recovery from the Global Financial Crisis,” in Wise, Armijo, and Katada, eds. Unexpected Outcomes: How Emerging Economies Survived the 2008-09 Global Financial Crisis.

A. Fishlow, Starting Over: Brazil Since 1985 (Washington, DC: Brookings Institution Press, 2011), pp. 33-86. PDF posted on Blackboard

A. Kohli, State-Directed Development, chapter on Brazil. PDF posted on Blackboard

C. Wise and Maria Antonieta Lins, “Macro-prudence versus Macro-profligacy: Brazil, Argentina and the Global Financial Crisis,” in Wise, Armijo, and Katada, eds. Unexpected Outcomes: How Emerging Economies Survived the 2008-09 Global Financial Crisis.

WEEK 9:Country Cases

March 8: Indonesia, Nigeria,South Africa

P. O. Alege, T.V Ojapinwa, and H.T Bello. "Global Shocks and Their Impact on

Nigeria: Lessons from Global Financial Crisis,"European Scientific Journal, no. 17 (2012).PDF posted on Blackboard

Aswicahyono, H. Hill, and D. Narjoko. “Indonesian Industrialization: A Latecomer in Adjusting to Crises,” in A. Szirmai, et al eds., Pathways to Industrialization in the Twenty-First Century (Oxford, UK: Oxford University Press, 2013), pp. 193-222. PDF posted on Blackboard

A. Kohli, State-Directed Development, chapter on Nigeria. PDF posted on Blackboard

M. Nowak and L. Antonio Ricci, eds. Post-Apartheid South Africa: The First Ten Years (Washington, D.C.: International Monetary Fund, 2005).PDF posted on Blackboard

M. Beeson, “Southeast Asia’s Post-crisis Recovery: So Far, So Good,”in Wise, Armijo, and Katada, eds. Unexpected Outcomes: How Emerging Economies Survived the 2008-09 Global Financial Crisis.

WEEK 10: SPRING BREAK

WEEK 11: Country Cases

March 22: China, India & Korea

S. Breslin, “Chinese Financial Statecraft and the Response to the Global Financial Crisis,” in Wise, Armijo and Katada, eds. Unexpected Outcomes: How Emerging Economies Survived the 2008-09 Global Financial Crisis.

J. Echeverri-Gent, “India’s Response to the Global Financial Crisis:From Quick Rebound to Protracted Slowdown?in Wise, Armijo, and Katada, eds. Unexpected Outcomes: How Emerging Economies Survived the 2008-09 Global Financial Crisis.

Kohli, State-Directed Development, chapter on India. PDF posted on Blackboard

A. Kohli, State-Directed Development, chapter on Korea. PDF posted on Blackboard

B. Naughton, “The Political Economy of China’s Economic Transition,” in L. Brandt and T.G. Rawski, eds., China’s Great Economic Transformation (New York, NY: Cambridge University Press, 2008), pp. 91-135. PDF posted on blackboard

Y. Qian, “How Reform Worked in China,” in Dani Rodrik, ed., In Search of Prosperity (Princeton: Princeton University Press, 2003), pp. 297-333. PDF posted on blackboard

P. Shankar Jha,Crouching Dragon, Hidden Tiger: Can China and India Dominate the West?(Berkeley: Soft Skull Press, 2010), pp. 188-251. PDF posted on Blackboard.

B. Stallings, “Korea’s Victory over the Global Financial Crisis of 2008-09:

Good Fundamentals, Strong Policy Response,” in Wise, Armijo, and Katada, eds. Unexpected Outcomes: How Emerging Economies Survived the 2008-09 Global Financial Crisis.

CHALLENGES FOR THE 21st CENTURY

WEEK 12:Structural Adjustment Programs & Foreign Aid

March 29: 20th Century Relics?

P. Collier and J. Gunning, “The IMF’s Role in Structural Adjustment,” The Economic Journal, vol. 109 (November 2001), pp. 634-651. PDF posted on Blackboard

W. Easterly, White Man’s Burden (New York, NY: Penguin Books, 2007), pp. 3-59, 165-209. PDF posted on Blackboard

Gilbert, A. Powell, and D. Vines, “Positioning the World Bank,” The Economic Journal, vol. 109 (November 2001), pp. 598-633. PDF posted on Blackboard

B. Moyo, Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa (New York, NY: Farrar, Strauss, and Giroux, 2010), pp. 29-97. PDF posted on Blackboard

WEEK 13: The Tenacity of Poverty and Inequality

April 5:

P. Bardhan, “The Global Economy and the Poor,” in D. Mookerjee, A. Banerjee, and R. Benabou, eds., Understanding Poverty (Oxford, UK: Oxford University Press, 2006), pp. 99-109. PDF posted on Blackboard

A. Case, “The Primacy of Education,” in D. Mookerjee, A. Banerjee, and R. Benabou, eds., Understanding Poverty, pp. 269-284. PDF posted on Blackboard

E. Duflo and A. Banerjee, Poor Economics (New York: Public Affairs, 2011), pp. 235-273. PDF posted on Blackboard

M. Ravallion, “Transfers and Safety Nets in Poor Countries,” in D. Mookerjee, A. Banerjee, and R. Benabou, eds., Understanding Poverty, pp. 203-229. PDF posted on Blackboard

WEEK 14:(student input on designated topic)

April 12:

WEEK 15: (student input on designated topic)

April 19:

WEEK 16: Class Dinner

April 26: El Cholo Restaurant

Country Assignments

ARGENTINA

BRAZIL

CHILE

CHINA

CZECH REPUBLIC

GREECE

HUNGARY

INDIA

INDONESIA

IRELAND

KOREA

MEXICO

NIGERIA

PERU

POLAND

SOUTH AFRICA

SPAIN

TURKEY

VIETNAM