International Political Economy

International Political Economy

Lecture One: Understanding the Global Political

Economy

March 27, 2008Professor Timothy C. Lim

Cal State Los Angelestclim@calstatela.edu

Understanding the Global Political Economy: Introduction

Understanding the Global Political Economy: IntroductionMaking Sense of the Global Economy: The Asian “Financial” Crisis

Let’s begin with a few broad questions … What was the Asian Financial Crisis?

Why or how was it important?

More specifically …

Why did the authors begin their book with a discussion of this particular event?

Understanding the Global Political Economy: Introduction

Understanding the Global Political Economy: IntroductionThe Asian Financial Crisis: BackgroundThe Asian financial crisis, according to the UN, was “perhaps the most serious financial crisis since the breakdown of the Bretton Woods system in the early 1970s, in terms of both its scope and its effects”The effects of the crisis were far

reaching, as this image (produced by BBC news) shows. The crisis started in Thailand, but spread to much of Asia,

and indirectly hit Europe, Latin America, and North America.

Ultimately, the damage was limited, but, for a time, there was fear that the

crisis would cause a global depression.

The effects of the crisis were far reaching, as this image (produced by

BBC news) shows. The crisis started in Thailand, but spread to much of Asia,

and indirectly hit Europe, Latin America, and North America.

Ultimately, the damage was limited, but, for a time, there was fear that the

crisis would cause a global depression.

Understanding the Global Political Economy: Introduction

Understanding the Global Political Economy: IntroductionThe Asian Financial Crisis: Background

“East Asian Financial Crisis was a period of economic unrest that started in July 1997 in Thailand and South Korea with the financial collapse of Kia, and affected currencies, stock markets, and other asset prices in several Asian countries, [which] many considered [the] Four Asian Tigers. It is also commonly referred to as the East Asian currency crisis or locally as the IMF crisis although the latter is somewhat controversial. There is general consensus on the existence of a crisis and its consequences, but what is less clear are the causes of the crisis, its scope and resolution” Source

Understanding the Global Political Economy: Introduction

Understanding the Global Political Economy: Introduction

The Asian Financial Crisis: Background

The series Commanding Heights provides a useful overview of the Asian financial crisis and its global effects. We will watch a short 20+ minute excerpt from this three-part, six hour documentary. The entire series is available for viewing (click here)

Understanding the Global Political Economy: Introduction

Understanding the Global Political Economy: IntroductionThe Asian Financial Crisis: More Questions What were the main causes of the Asian Crisis?

Who or what was to blame? InCommanding Heights where wasblame located?

What are the main lessons from the Crisis?

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

Understanding the Global Political Economy: Introduction

Understanding the Global Political Economy: Introduction

Asian Financial Crisis: Different StoriesWhat are the three dominant “stories” told about the Crisis?

The authors identify three …

1.The ______________ story

2.The ______________ story

3.The ______________ storyWhat do each of these stories

tell us about the Crisis?What do each of these stories

tell us about the Crisis?

liberal

state power

critical

Understanding the Global Political Economy: Introduction

Understanding the Global Political Economy: IntroductionAsian Financial Crisis: The Liberal StoryThe Liberal Story begins with the begins with the premise that economic problems are caused by states or other non-market actors who mess the market up with their bad policies, corruption, and incompetence

Thus, the root cause of the crisis were inappropriate financial policies followed by Asian states

The key lesson? don’t mess with markets, for markets will eventually punish economic activity that violates or ignores liberal economic principles

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

Indonesia’s Suharto supposedly epitomized economic corruption in Asia: in the liberal story leaders such as Suharto were the problemIndonesia’s Suharto supposedly epitomized economic corruption in Asia: in the liberal story leaders such as Suharto were the problem

Understanding the Global Political Economy: Introduction

Understanding the Global Political Economy: IntroductionAsian Financial Crisis: State PowerThis story begins with the premise that too little state intervention, rather than too much state intervention was the problem

More importantly, this story tells us that liberalization was essentially forced upon weaker Asian states by the richest, most powerful capitalist states, especially by the United States

The lesson? states need to be careful about protecting their own interests first and

foremost The United States as global “bully”The United States as global “bully”

Understanding the Global Political Economy: Introduction

Understanding the Global Political Economy: IntroductionAsian Financial Crisis: Critical StoryShares surface similarities with state power story, but assumes that power is not in the hands of states per se, but in the hands of those who control the economy, namely …

The critical story also tells us that the world economy is structured in such a way to make such crises inevitable

The upshot? The entire system needs to be reformed or restructured; for the time being, however, individual states--especially in the developing world--must not surrender to market forces

Transnational corporations, larger firms, speculators, the

capitalist class, in general

Transnational corporations, larger firms, speculators, the

capitalist class, in general

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

United Corporations of America?United Corporations of America?