politíca e economia aula 12 ciencia politica cgae kurt von mettenheim
TRANSCRIPT
Politíca e Economia
Aula 12Ciencia Politica
CGAEKurt von Mettenheim
Topics
1) Review of “Political Economy” Sub-Discipline of Political Science
2) “Electoral Cycle” / “Fiscal Cycle”3) Downs´ Economic Theory of
Democracy Spatial Theories of Voting
4) Statecrafting Monetary Authority: Democracy & Financial Order in Brazil
Political Economy
2 Q’s • How do institutions evolve in
response to individual incentives, strategies, and choices?
• How do institutions affect the performance of political and economic systems?
Modern Classics Economics Politics
• Arrow (1951/1963) cycles in majority voting • Black's (1958) median voter theorem, • Downs (1957) party competition• Riker (1962) theory of coalition formation groundwork for contemporary models of
the role of distributive politics in government formation.
• Coase (1937; 1960) costly transactions• Schelling's (1960) co-ordination games, • Buchanan and Tullock's (1962) relationship
between supermajorities and externalities
Contested Views of Institutions
Models of institutions as
• (1) equilibria in some underlying social game or
• (2) rules, procedures, and choice mechanisms taken as product of political construction
Political-Electoral Cycles
Nordhaus (1975) Government stimulates economy before election
Hibbs (1977) "partisan" cycle :Left fights unemployment (not inflation)Right fights inflation (not unemployment)
(pre-rational expectations approach to macroeconomics).
Nordhaus (1975)
3 three assumptions: (i) economy = exploitable Phillips
curve with backward-looking expectations;
(ii) politicians = winning elections; and (iii)voters are retrospective and naïve
(reward incumbent if economy OK, growth high, before election).
Evidence from USA
1) Nordhaus's model is WRONG about unemployment and growth;
2) “rational" version of the opportunistic model (short-run manipulations of policy instruments (monetary and fiscal) around elections), but EFFECTS SMALL (No regular cycles in unemployment as predicted by the traditional model)
3) partisan effects on growth and unemployment YES (but not persistent; disappear two years after the election of a new government);
4) left-wing governments permanently higher inflation
Politics of Budget Deficits
Grilli, Masciandaro, and Tabellini (1991) OECD countries 2 Groups
1) Belgium, Ireland, Italy, Greece, Netherlands, and Spain, HI Govt Debt / GNP
2) Australia, France, Germany, the United Kingdom, Japan, and Denmark, LOW debt to GNP
= Good old Days…
…of Fiscal Illusion
"public choice" (Buchanan and Wagner 1977; Buchanan, Rowley and Tollison 1986)
voters overestimate the benefits of current expenditures and underestimate the burden of future taxation.
politicians take advantage of this illusion by raising spending more than taxes
End of Political Economic Consensus in EU
Buitl paper: Two Naked Emperors in EU
Veto of Corporate Shareholding Reform
Veto of Growth and Stability Pact
Plebiscite on EU Constitution
Anthony Downs, An Economic Theory of Democracy (1957)
Presuppositions:1) Voters = Consumers2) Parties = Firms3) Ideologies = Goods Model 1 =
Democrats RepublicansLeft ---------------------------------------Right1
10 Model 2 = “Polarized Pluralism”
International Political Economy
LiberalismImperialismWorld System, WallersteinDependent Development, Cardoso &
Falleto“Regimes” = Institutions Intl Policy
Sectors
Return to Classics
Marx…
Shonfield, Andrew. Modern CapitalismOxford University Press, 1965
Hall & Soskice: Varieties of CapitalismOxford University Press, 2001
Shonfield & Lindblom Muddling Through Statecraft
“Postwar French planning can be regarded as a device that mobilized a number of instruments of public enterprise and pressure, which had been laying around for some time, and pointed them all in the same direction.” Shonfield, Modern Capitalism, p. 85
“Through a series of accidents starting with a desperate piece of salvage by the Fascist Government, the Italians arrived at an alternative formula.” ibid. p. 189-90
“A body of nationalized undertakings as extensive and varied, and as haphazardly put together as the Italian, is Austria.” ibid. p. 192
Politics of Economic Reform
Economic ReformWhy Delay Reform?
S-Term / Long Term welfareBig Bang (Mussa)Building the Ship at Sea
(Offe & Elster)
Unsettling Statecraft
Statecraft = Politics of Sustaining Economic Policy
Malloy & Conaghan Neo-Liberalism in the Andes: Paz Estenssoro vs Decretismo
Temporal Transactions FrameworkIADB Research Team
Tomassi/Spiller/Santiso OECD
Politics & Economics:Inertial Inflation
Simonsen, Trinta anos de Indexacao
Larida (Lara Rezende/Persio Arida)
F. Lopes, Choque
FHC: UVR, gradual policy(Mettenheim, RAE paper)
New Political Economy
Mettenheim “From the Economics of Politics to the Politics of Monetary Policy.”
www.brazil.ox.ac.uk/Commanding Heights The Politics of Federal
Government BankingFinancial Statecraft The Politics of Monetary
Policy in BrazilStatecrafting Monetary Authority: Democracy
and Financial Order in Brazil (Sola & Whitehead, eds)
New Political Theory & Political Economy
Stakeholding:Ackerman & AlstottUS$ 80.000,00 @ 18 Years
Basic Income:Van Parijs (2004)
Pateman: Citizenship & Sustainable Growth
Comparative Political Economy of Finance
Washington Consensus?
Policies of:Privatization & Liberalization
Would Cause:
Convergence Toward Financial Market-Centered Political Economies?
Bank Credit, Stock and Bond Market Capitalization, Large Advanced Economies,
1980-2001 (% GDP annual average)
0,00
25,00
50,00
75,00
100,00
125,00
1980 1983 1986 1989 1992 1995 1998 2001
Year
% o
f GD
P Bank credit
Stock mkt
Cor. Bonds
Gov. Bonds
Bank Credit and Equity Market Capitalization
(1995-2000 Averages)
ARG
ARM
AUS
AUT
BEL
BGD
BGR
BOL
BRA
BRB
BWA
CAN
CHL
CHN
CIVCOLCRI
CYP
CZE
DEU
DNK
ECU
EGY
ESP
FIN
FJ I
FRA
GBR
GHA
GRC
GTM
HND
HRV
HUN
IDN
IND
IRL
IRN
ISL
ISR
ITA
J AM
J OR
J PN
KEN
KGZ
KOR
KWT
LKA
LTU
LUX
LVA
MAR
MEX
MNG
MUS
MYS
NAM
NGA
NLD
NOR
NPL
NZL
OMN
PAK
PAN
PER
PHL
POL
PRT
PRY
ROM
SAU
SGP
SLV
SVKSVN
SWE
SWZ
THA
TTO
TUN
TUR
URY
USA
VEN
ZAF
ZMB
ZWE
0%
25%
50%
75%
100%
125%
150%
0% 50% 100% 150% 200%
Stock Market Capitalization (% GDP)
Ban
k C
redi
t Cap
italiz
atio
n (%
GD
P)
Bank-Centered World Finance Centers
Equity-CenteredUnderdeveloped
Change by Type of Financial System, 1995-2000
2000
1995
2000
1995
2000
1995
20001995
0%
25%
50%
75%
100%
125%
150%
0% 50% 100% 150% 200%
Stock Market Capitalization (% GDP)
Ban
k C
red
it C
apit
aliz
atio
n (
% G
DP
)
Bank-Centered
World Finance Centers
Equity-Centered
Underdeveloped
Bank Credit, Stock and Bond Market Capitalization, Large Latin American
Economies, 1980-2001 (% GDP annual average)
0,00
5,00
10,00
15,00
20,00
25,00
30,00
35,00
40,00
1980 1983 1986 1989 1992 1995 1998 2001
Year
% o
f G
DP
Bank Credit
Stock Mkt
Cor. Bonds
Gov. Bonds
Bank Credit, Stock and Bond Market Capitalization, Large Asian
Economies, 1980-2001 (% GDP annual average)
0,00
10,00
20,00
30,00
40,00
50,00
60,00
70,00
1980 1983 1986 1989 1992 1995 1998 2001
Year
% o
f GD
P Bank credit
Stock mkt
Cor. Bonds
Gov. Bonds
Bank Credit and Stock Market Capitalization, Large African
Economies 1980-2001 (% GDP annual average)
0,00
2,00
4,00
6,00
8,00
10,00
12,00
14,00
16,00
1980 1983 1986 1989 1992 1995 1998 2001
Year
% o
f G
DP
Bank Credit
Stock Mkt
Income Distribution Market-Centred vs Bank-Centred
Political Economies
Market-Centred Economies Gini Coefficient Australia 1994 0.311
Ireland 1995 0.336UK 1995 0.344US 1994 0.355
Bank-Centred Economies Austria 1995 0.277Denmark 1995 0.263
Finland 1995 0.217Germany 1994 0.261Netherlands 1994 0.253Sweden 1995 0.221
Source: Vigols, 2004, from Luxembourg Income Study Key Figures (www.lisproject.org/keyfigures/)
Income Distribution1970s – 1990s
Germany US UK
--------------------------------------------------------------------------------------
Mid 1970s 2.64 3.18 2.68
Mid 1980s 2.49 3.35 3.03
Mid 1990s 2.61 3.55 3.44
Ca. 2000 2.52 3.68 3.45
-----------------------------------------------------------------------------------------
Source: Luxembourg Income Study Key Figures (www.lisproject.org/keyfigures/)
Income DistributionGini Indexes
1970 1980 1990 1990s
---------------------------------------------------------------
Brazil 57.6 58.4 63.7 58.1
Chile 46.0 54.5 55.4 56.4
Mexico 45.6 42.9 47.5 52.8
---------------------------------------------------------------Source: Luxembourg Income Study Key Figures
(www.lisproject.org/keyfigures/)
Explore Political Economy
www.lacea.org Latin American & Caribbean Economics Association
www.nber.org National Bureau of Economic Research
Bibliographies “political economy” intranet