POLI 150 Notes

Defining Actors in Politics

• Politics is a process through which societies decide how their resources are allocated.
• The problem of anarchy in international relations: there is no central authority, so states must decide outcomes for themselves.
• States are considered the primary actor in IR.
  • Definition: A central authority with the ability to make and enforce laws, rules, and decisions within a specified territory.
  • States are tied to physical geography.
  • Sovereignty varies.
  • Nations are groups of people with common lineage, culture, or customs.

Origin of States

• The idea of sovereign states originated in 17th-century Europe.
• The Thirty Years War was the catalyst for sovereignty.
  • People used to identify with their religion first, then their state.
  • It was a war between the Catholic Church and local princes, who wanted people to be loyal to them.
• The Treaty of Westphalia created modern states and modern international relations.
  • It established that the state had the primary loyalty of its people.

Key Features of International Relations Established by War

1. States are the key political actors.
2. States are sovereign and control affairs within their territories.
3. There is no supra-state authority, meaning that the states interact in anarchy.
4. Europe would later export these features to much of the rest of the world.

Power and Order in World Politics

• Power: The ability of X to get Y to do something Y would ordinarily not do.
• Sources of power:
  • Military resources, which come from:
    • Size of state’s economy
    • Territory
    • Population
    • Regime’s ability to harness both.
• Absolute power: How much power a state has.
• Relative power: How much power one state has compared to another.
• Positive Sum: An agreement that makes both parties better off than before. Optimal deals often split the difference.
• Ways to exert power:
  1. Persuasion
  2. Offer of Rewards
  3. Granting of Rewards
  4. Threats of Punishment
  5. Nonviolent Punishment
  6. Use of force.
• How to know if a state is powerful:
  1. Arable land
  2. Labor force
  3. Population
  4. Technological development
  5. Military forces
• It is very difficult to measure power.

Causes of War

• War: An event involving the organized use of military force by at least two parties that reaches a minimum threshold of severity.
• War can be a mechanism for policy change.
• Crisis Bargaining: A bargaining interaction in which at least one actor threatens to use force if its demands are not met.
• Coercive Diplomacy: The use of threats to advance specific demands in a bargaining interaction.
• Risk-return trade-off: In crisis bargaining, the trade-off between trying to get a better deal and trying to avoid a war.
• The Bargaining Model:
  • War is intended to accomplish something.
  • Causes of War
  • War as a product of information failure
    • Since both sides try to get a better deal by overstating their military capabilities and willingness to fight.
    • One side may conclude that a deal cannot be reached
    • And since that side may have an incentive to strike first to gain military advantage.
    • We see a war begin.

Fearon’s Bargaining Model

• What if War is an Outside Option?
  • Russia prefers war to any deal that allows Ukraine to keep more than 40% of the Donbas
  • Ukraine prefers war to any deal that does not allow it to keep at least 20% of the territory
  • So in theory, there is a possible settlement: Ukraine can keep 20%-40% of the territory.
• What if there is incomplete information?
  • What if Russia is unsure about Ukraine’s military capabilities?
  • What if, more likely, Russia is unsure about Ukraine's resolve to fight?
  • In either case, Russia may an offer that is less that 20% of the Donbas, which will reject, leading to war.
• What causes commitment Problems?
  • When a state has a strong incentive to renege on a commitment.
  • Power shifts

Types of Commitment Problems

• Wars over sources of Power
  • The issue in dispute itself is a source of power
  • For example, the Golan Heights
    • Prior to the Six Day War
      • By virtue of the Golan Heights position, any peace deal between Israel and Syria was unstable.
      • Suppose Israel were to make a peace deal.
      • If so, Syria could use the position of the heights to attack Israel.
    • The Six Day War
      • The Golan Heights falls under Israeli control.
      • The war decreases Syria’s ability to wage war.
  • Dispute in the South China Sea
    • China claims the largest portion of the area based on a map it issued in 1947
    • The “Nine Dash Line” stretches for hundreds of miles off the coast.
    • Vietnam disputes the map, citing a map from the 17th century
    • Other countries in the area claim part control of over the South China Sea
    • China gains power in the region by building islands
    • This shift in power creates a commitment problem.
• The Cost of Peace
  • Maintaining peace can be expensive
  • It takes quite a bit of resources to invest in defense to deter your opponent
  • Therefore it might be preferable to bite the bullet and simple wipe out your adversary.
• Are these wars inevitable?
  • No!
  • States may decide to peacefully cede power to their competitors
  • US and USSR develop a hotline
• Conclusion
  • A key motivation for preemption is that shifts in the strategic situation

Domestic Politics and International Conflict

• People make decisions, not states.
• A state is a sum of its parts.
• Unequal distribution of gains versus costs:
  • People who gain from war are not necessarily those who pay for it.
• Institutional constraints
  • Fighting conflict is a bureaucratic process - the capabilities of bureaucracies limit the ability to do so.
• Political Survival
  • Leaders’ actions are intended to maximize their survival.

Bargaining with War as an Outside Option

• With the benefit of the domestic rally, Russia now prefers at least 80% of the Donbas to war.
• Same with Ukraine - it now prefers keeping 60% of the territory to war.
• Domestic rallying effects eliminate the possibility of bargaining and lead to war.

Political Survival

• Leaders should rationally make decisions to maximize their chances of survival.
• So, when it comes to war, leaders recognize that there will be an increased risk if they lose.
• If they win, however, they improve their chances of survival.

Interactive Effect

• Understanding these dynamics in isolation is easier, but they likely work together.
• Leaders seek to maximize their retention

The Democratic Peace

• Why don’t democracies fight each other?
• Rummel originally found that democracies fight other states, but do not fight each other.
• Finding held up despite numerous attempts to falsify it.
• What explains the absence of conflict between democratic status?
  1. Coincidence
  2. Endogeneity
  3. Cultural Explanations
  4. Institutional Explanations
  5. Institutions combined with survival

Arguments it doesn’t exist:

• Causes of Democratic Peace: It’s False
  • Democracies tend to be aligned in the postwar period, which means there is no reason to fight.
  • So alignments and power politics actually drive democratic peace.
  • Evidence holds up pre-Cold War, which casts doubt on this explanation.
• Causes of Democratic Peace: It’s Spurious
  • Democratic Peace Hypothesis: Democracy -> Peace
  • Alternative: Peace -> Democracy
  • Democracies don’t cause peace, peace causes democracy.

Arguments it does exist:

• Causes of Democratic Peace: It’s Culture
  • Democracies develop norms of non-violent conflict resolution.
  • These norms translate into relationships between democracies
  • Bapat’s Skepticism:
    • It doesn’t seem to be the case has respect for democratic values: human rights, self-determination, etc.
    • One study found that democratic peace does exist, but only between states that have predominantly white populations.
• Causes of Democratic Peace: Institutions
  • Democratic leaders have less capability to use force without getting cooperation from other parts of government.
  • Leaders must persuade others to engage in violence, which can be difficult.
  • If this is true, why do democracies fight other states? How do they overcome these barriers in those conflicts, but not others?
• Causes of Democratic Peace: Institutions and Survival
  • Ties work by Fearon and Bueno de Mesquita et al together
  • Fearon argues that because democracies suffer audience costs in bargaining, they can credibly signal to each other.
  • Since democracies know that crises may rapidly escalate, they de-escalate when it is clear that their opponents care about particular issues.

Bueno de Mesquita et al Explanation

• Assumption: Primary motivation of leaders is retention
• Retention can bring policy benefits
• Retention could also bring power benefits or legacy
• Regardless - all leaders need to stay in power to accomplish whatever their objectives are.
• Does Sinking Costs Work? Elaborate Staying in Power:
  • 51% of the voting public is a great deal of power.
  • Democratic leaders gave incentives to provide successful public policy.
  • This includes foreign policy, which democratic leaders can often take full credit for.

Risk Aversion in Foreign Policy

• If they fail in crises, democratic leaders cannot minimize what occurs.
• Opposition will magnify any failure.
• Flip Hypothesis: Democratic leaders will avoid entering into major crises unless they have a high probability of winning.

Success in Foreign Policy

• Democracies know that they both are really compelled to win a war, so they back off. So if this is true:
  • If Democracy A knows Democracy B must prevail in a crisis
  • And Democracy B signals that it is serious about an issue.
  • Democracy A will break to B’s demands
  • On the other hand, if B is weaker than A, B will likely select out and avoid starting a crisis to begin with.
  • Hence, we have the democratic peace.
• But is it really true?
  • Spanish/American War?
  • WWII?
  • Coup of Mosaddegh

Three Forms of Maintaining Peace

• Immediate Deterrence: Short term efforts to stop crises from escalating.
• Extended Deterrence: Efforts to stop crises from materializing
• Collective Security: Build institutions to facilitate cooperation between members and prevent aggression, crises, and war, from occuring.

Immediate Deterrence

• Crises are characterized by incomplete info.
• Credibility: A threat is credibly if the price of not following through on it is costlier than the price of following through on it.
• Make it costly to fail to follow through on threats.

Two Strategies

1. Sinking costs: Idea is to expand enough resources to demonstrate you are serious
   • Example: Tripling your military budget
2. Tying Hands: Idea is to create a situation where if you are challenged, the response is out of your hands
   • If State A spends money on a show of force, these costs will be paid regardless of whether it follows through on its threat.

Alternative: Tying Hands

• Place your forces in harm;s way
• If an aggressor escalates, they may harm your military forces.
• And if they do, this puts your state at war.
• Ex. Berlin Crises
• Alliances can be seen as a catalyst for war (WWI)
• Alliances did not escalate due to NATO during the Cold War.
• Defensive Pacts Support Extended Deterrence
  • Alliances signal military capabilities
  • Alliances also signal resolve.
  • Signal commitment and grant more significant powers autonomy.
  • Tripwire presence U.S. presence in West Berlin.
• What is Gained from NATO?
  • Over a four-year period, NATO costs the US about $18.6$ billion.
  • US spent $5.74$ trillion during WWII.
• Tradeoffs in Alliances
  • NATO participation allows states to link foreign policies.
  • However, because each state benefits, there are incentives to free-ride
  • Tradeoffs exist

The United Nations

• Very weak

Human Rights

• Relatively new concept
• Difficult to define
• Hard to enforce and for states to look inward.

Darfur Conflict

• Government of Sudan supports Janjaweed militia in Darfur region
• In four years, from 2003-2007, 200k-400k civilian fatalities.
• Many label this as a genocide.
• Current civil war is a conflict between remnants of Janjaweed.
• Jan 2025, US accuses Janjaweed remnants of genocide.
  • Both state and non-state actors can commit genocide.

Rohingya

• One million muslims living in Myanmar in the Rakhine state.
• Faced historic discrimination - government refused to recognize them.
• Government blames attacks on Rohingya

Correlation versus Causation

• Think about what markets do.
• Markets destroy inefficiency
• Markets exacerbate the difference between those with privilege and those without.

Policy Recommendation

• One argument is that the liberal democratic welfare state provides best protection for individuals.
  • Ex. Norway, Sweden, Denmark, Netherlands.
• Does it?
• Or is this self congratulatory

Civil Wars

• Civil War: Violent conflict within a country, fought by organized groups that aim to take power at the center, or to change government policies.
• How do we know one when we see it?
• How do Civil Wars internationalize?
• Africa has a lot of civil war in the belt between Saharan and Sub-Saharan Africa.

Consensus on Factors Associated with Civil War

• Poverty
• Africa
• Weak Central Governments
• Large Populations
• Civil Wars Last Relatively Longer
  • Mean duration of civil war is $8.8$ years, median is $5.5$ years.

Why do Civil Wars Persist?

• An obvious way to resolve these disputes is to share power based on each sides’ military strength.
• If each rebel group controls 20% of the territory, guarantee them 20% of the seats in the parliament.
• Same for each rebel group.

The Paradoxical Danger of Peace

• Peace is efficient, but it creates a commitment problem.
• A side that gains in power cannot credibly prevent itself from exploiting its opponent.
• So any deal that is struck today may be unstable.

Syria

• $500$k dead
• Half of Syria’s 2010 population displaced
• Loss of resources equivalent to four times Syria’s 2010 GDP
• Use commitment problems to understand this complex conflict.

Beginning of War

• March-July 2011. Protests erupt in Syria against Assad.
• Assad’s security forces engage in violence, with the army attacking protestors at the start of the summer.
• Oct-Nov 2011. New Syrian National Council organizes from rebel groups; Arab League suspends Syria.
• Violence increased in 2012 with Syria turning to air attacks.
• Every time a government turns to air power against civilians, it’s weak.
• Free Syrian Army seizes Aleppo.

US Intervention, and Non-Intervention

• In Early 2012, US officials believe Assad would fall, and recommended arming rebels.
• Obama provided limited US arms to rebels but would not get involved unless if Assad uses chemical weapons.
• March-September 2013. Reports indicates that Assad does use chemical weapons.
• August 2013. Obama gets Russians to dismantle weapons.

Saudi Escalation

• Inaction fueled Saudi intervention into the conflict, who are concerned that Iran was encircling them.
• March 2015. The Amry of Conquest drives Syrian Arab Army out of Idlib.
• Looks like Assad is going to fall.

Global Refugee Crisis

• Refugee (UN Definition) - Someone who has been forced to flee his or her country because of persecution, war, or violence. A refugee has a well-founded fear of persecution for reasons of race, religion, nationality, political opinion or membership in a particular social group.
• Est 2013: 1 in 113 people in the world are refugees ($0.8$)
• Internal Displacement: Someone who is a refugee but remains in his or her country’s borders.
• External Displacement: Someone who is a refugee and leaves his or her country’s territory.

Why Do Refugees Leave?

• The typical assumption is that refugees do have agency.
• They choose to leave to stay.
• So why make the strategic choice to leave?
• Especially because there are no guarantees with leaving… Correct?
• No robust correlation between migrants and crime rates

Simple correlation: Terrorism

• What is terrorism?
• Is it effective?
• How do governments respond?
• Definition: A politically motivated attack by a non-state actor against non-combatant targets to influence a group larger than the immediate victims.
• These incidents are intended to shock and cause fear
• They do this through graphic violence
• And by their random nature
• They create a heightened and visceral emotional response
• But that’s exactly why we need science to understand them.

How does terrorism work?

• Shock and randomness
• You don’t see fatalities from military strikes all that much, and you probably don’t think about them.
• Terrorists often mix with civilians, leading to attacks on terrorists inadvertently killing civilians.

Wars on Terror

• US govt wanted to turn weak states like Afghanistan into strong states because they figured that terrorists thrive in weak states.
• US gave aid to Pakistan and Afghanistan to prevent future terror threats from emerging in the countries.
  • Because the Afghan government only gets aid from the US because of terrorism, there is no incentive for Afghanistan can eliminate terrorists.
• Pakistan supported Taliban militants to destabilize afghanistan.

The Nakba/War of Independence in 1947

• Militias organize into the IDF and clear 750,000 Palestinians from their homes.
• Arab States attack Israel, but are not coordinated.
• War ends in 1949 with an armistice, creating the state of Israel.
• $688,000$ Jewish immigrants arrive in Israel.

The Suez War (1956)

• Israel and British seize Suez Canal (told to abandon it later by US)

Six Day War

• Israel takes Gaza.
• War started because Israel attacked its neighbors as they felt threatened.
• Palestinians in West Bank and Gaza began an insurgency to resist.

Oslo

• Oslo Peace Process concludes in 1993
• Israel agrees to withdraw to 1967 borders and allow for a Palestinian state in several years.
• Does not solve issues of Israeli settlers in Palestinian territories, the status of Jerusalem, or the right of return.

Responsibility to Protect?

• Is there an obligation to protect people from atrocities?
• If so, whose responsibility? And who determines when atrocities are occuring?

Can international institutions work effectively as peacekeepers? If so, under what conditions?

• Can the UN serve as a Neutral Peacekeeping Force?
• Force typically consists of less wealthy, population-heavy states.
• Deployments are less likely to states with primary commodity exports.
• Deployments are less likely to be made in states with large armies.
• More likely when there is no clear winner in the conflict.
• UN Peacekeepers are sent to the most difficult areas, but they do reduce the probability of conflict recurrence by $84$

Define Success

• Empirically conceptualized as the duration of peace following war.
• But doesn’t identify whether conditions that led to war are resolved.
• Clinton originally argued that US forces would be there for one year.
• They stayed for ten years, now replaced by European peacekeepers.
• Is this conflict done? Safe to remove peacekeepers?
• Peacekeeping is a long-term, iterative process.

Long Term Instability

• Multiple studies indicate that mediation can stop violence in the short run
• But, it is less predictable what mediation can do in the long run

Consequences

• Intervention may not allow conflicts to resolve, and may instead freeze them in place.
• If they can go on for long enough, attitudes may change and people may lose the desire to fight.
• If they don’t, they may open the door to instability later.

Civil War in Yemen

• Proxy war between Saudi-led coalition and Iran
• Deposition of Abdullah Saleh following Arab Spring in 2011.
• Followed by significant Houthi gains in the north.
• Saudi intervention begins in 2015 with airstrikes, joined by several others.
• Creates one of the worst current humanitarian crises in the world.

Alternative form of Intervention: Mediation

• Mediation does not involve intervention with force.
• Instead, mediators try to promote peace by passing information from one side to another.
• Ex. Northern Ireland
  • Peace-Enforcement: UN brokers peace
  • Peace-Keeping: UN trying to enforce peace

Trade! International Trade

• What is the economic motivation for trade?
• Are states better or worse off for doing so?
• What are the domestic and international political implications?

Mechanisms

• Absolute Advantage: The ability of the state to produce a greater quantity of goods using the same resources as a competitor. Making something the quickest.
• Comparative Advantage: Ability of to produce more efficiently than another.
• Factor Endowments: Resources such as land, labor, and capital. Giving up the least by making it, even if it takes longer to make it.

How Does Trade Affect Global Markets?

• Suppose a society produces and consumes grapes, but does not trade.
• The equilibrium price is $6$, where the supply curve meets the demand curve.
• Now suppose it does – and the world price for grapes is $3$
• Protectionist arguments would suggest that this would undercut domestic producers.
• It undercuts domestic production but increases domestic consumption.
• Embedded Liberalism Says that those who benefit from trade should compensate those who lose.

States have different levels of production factors

• Capital Abundant: Lots of capital and little labor.
• Labor Abundant: Lots of labor and little capital.
• Hecksher-Ohlin Model: Who wants protection and who wants open markets depends on who is the abundant factor and who is the scarce factor.
• Stopler-Samuelson Extension: Overtime, with no restrictions, prices of resources will equalize across states if there is perfect competition and technology is equal.

So if Trade is Beneficial?

• Remember the core assumptions – if they don’t hold, the predictions may be incorrect – things may not work out as perfectly as they do in theory.
• Even if the theory is correct, dynamics can produce conflict between those with factors that are abundant and those with abundant factors.
• Abundant sectors benefit from free trade, whereas scarce factors may demand protection.
• Smoot-Hawley went bad.

Globalization and Finance

• Review Trade
• What is Globalization

Is Autarky Preferable?

• Think about what it would mean…
• Assuming there is no disruption in production, items would all need to be created in state, meaning loss of efficiency from comparative advantage.
• Also, what occurs if there are shortages?
• And what occurs when markets saturate?
• Conclusion after WWII was that closed trade was one of the causes of the Great Depression, so it was something to be avoided.

Globalization

• Economic integration of markets
• Creation of global supply chain
• Driven by technology and integration into global free market system.

Capital Account

• Trade in assets: reflects investment, loans, banking capital
• Physical capital overseas
• Portfolio investment: stocks and bonds
• Real Estate
• This balances out balance of payments surplluses and deficits in the long term.

Exchange Rates

• How are currencies exchanged globally?
• What explains the value of currency?
• Currency
  • A form of money.
  • Govts make currency valuable by demanding tax payments in them.
  • Most states use US dollars as the base currency.

How to Determine Exchange Rates?

• Fixed: Tie value to a base currency or commodity
• Fixed but adjustable: tie value to a base currency or commodity, but allow for some appreciation or depreciation.
• Managed float: allow currency to rise and fall, bugt keep in a band
• Float: Allow currency to rise and fall based on international demand.
• Advantage of Fixed Exchange Rates
  • Effort to keep currency values stable by “pegging” to a commodity or reference currency.
  • Bretton Woods System pegged currencies to US dollar, which was pegged to gold at $35$ per ounce.
  • Theoretically, this allows currencies to retain value.
  • Also keeps low inflation, provides certainty for exporters and importers, and should keep inflation down.
• Downside
  • Limits ability of central banks to stimulate growth and respond to recessions.
  • Requires large pools of reserves when under pressure.

Floating Exchange Rate

• Currency price set by supply and demand.
• Allows for central bank flexibility but exposes individuals to risks and volatility.

Pax Britannica and the Gold Standard

• By 1880s, currencies pegged to value of gold.
• At the start of the 20th century, Britain is at the forefront of industrial and military power
• British guaranteed that all currency can convert into real gold.
• Other countries, therefore peg their currency to the pound, creating a stable system of exchange rates.

Crisis of WWI

• Britain and other states abandon gold standard in 1914 – need more resources to finance the war.
• British could not link the value between pound and gold credibly.

Bretton Woods System

• Stabilization of global interest rates by pegging all currencies to the US dollar
• US dollar remains convertible into gold at $35$ per ounce
• Fixed exchange rates decrease investor uncertainty – allow for financial capital to flow across borders.
• States maintain their currencies at plus or minus 1% of that fixed rate.
• States could buy and sell their own currencies.

Establishment o the IMF

• Encourages fixed exchange rates
• Provides loans to help members with temporary balance of payment deficits.

Establishment of the World Ban

• Provides low interest loans to developing states
• This allows states to recover from war and engage in development

End of the Bretton Woods System

• By the late 1960s, growing social spending and escalating Vietnam War create structural deficits in the US
• US does not have enough gold in Ft. Knox to redeem all dollars it issues
• States begin demanding that their dollars be redeemed into gold.
• US becomes effectively defaults: it cannot redeem all the dollars into gold
• Nixon closes gold window in 1971.

Jamaica Agreement of 1976

• Floating rates are accepted.
• Gold is abandoned as a reserve asset.
• IMF returns gold reserves to states at currency prices.
• IMF and World Bank continue with their functions.
• Case for Floating Exchange Rates
  • Monetary policy autonomy
• Trade balance adjustments helped
• Case for Fixed Exchange Rates
  • Monetary discipline
  • Speculation limited
  • Uncertainty reduced
  • Trade balance adjustment effects on inflation controlled.

Global Poverty

• 45% of the world’s wealth is owned by 1% of the population

Domestic Explanations

• A common explanation revolves around democracy.
• Democratic governments must satify large constituencies - so their incentive is to eliminate poverty.
• Autocratic ones, on the other hand, satisfy a narrower and typically urban elite.
• So autocracy may be associated with increase poverty.

The Resource Curse

• Resources allow states to build wealth, but reliance on one resource can lead to states being dangerously reliant.
• Natural resources can distort markets for other goods
• For example, the nature of oil would make trading it on the world market very valuable.
• So valuable that it wouldn’t make sense to invest in anything else.

Process of Dutch Disease

• A state finds a resource. Demand for that resource increases, typically increasing value of currency.
• Increased currency value makes other exports more expensive, as well as foreign investments, need to keep selling resource to support imports.
• Economy shifts toward this valuable resource – other sectors lose skilled labor. Other industries must offer higher wages to keep workers from resource industry.

Venezuela

• Venezuela was very reliant on oil, goes through a boom in the 2000s as the price of oil goes up. Chavez imposes price controls which prevents the rise of any other industries.
• Chavez antagonizes US after attempted coup, announces he will give discounted oil to US adversaries.
• Venezuela was very wealthy in the 2000s.
• In 2014, the Saudis open their oil pumps and the price of oil drops, Venezuela becomes poor. Both Venezuela and Iran’s crashes directly tied to international factors.
• Both effected by Saudi increases in oil production.

International Causes of Poverty

• Europeans co-opt old empires, but change them based on their objectives of settler colonialism or extraction
• The concept of the state was also foreign – and new states lacked the apparatus needed to maintain them.
• Resource dependence and autocracy are endogenous to historic development and international relations

Acemoglu and Robingson

• Colonial Insittuions shape modern states
• Predicted by European settle mortality rates: less likely to settle in areas where mortality rate was high.
• In low mortality areas, Euopreans create inclusive institutions, whereas they create extractive institutions in high mortality rates
• Can create ‘reversal of fortune’

Development

• Last time we talked about poverty, a nd how internal and external factors may cause it.
• Today we will talk more about development.
• Assumption is that states transition from agrarian to large industrial state
• Not all states follow this similar pattern, but…

Development Theory

• Initial Stage - Societies are agrarian, economies will be based on barter and will be small
• But, over time – financial systems develop and industrialization takes place, so growth occurs rapidly
• After the industrialized period, service sector takes over, growth slows down.
• Problems
  • For developing countries — it seemingly should be easier.
  • Major technological innovations should accelerate industrialization
  • But it doesn’t, many growth rates are flat.

One Explanation: Marxist Theory

• Neo-Marxists extend theory extended his work to core/periphery issues.
• The core gains the maximum benefit from the system at the expense of the periphery
• Workers in the core are “bought off” with social services to prevent social unrest.
• However, workers in the periphery continue to be exploited, while elites in the core form alliances with elites in the periphery.

Two Strategies

• Keynesianism is a seen as a tool after WWII
• Transitions in the 1970s to neoliberal prescriptions for development.
• Keynesisam: Government driven; neoliberal: private sector driven

The Fall of Keynesianism: The Oil Crisis

• In 1973, OPEC imposes an oil embargo to protest US support
• Prices rise from $3$ per barrel to $12$
• Tight Money Policies and the Loss of Loans
• Govt spending will not help: it will exacerbates inflations
• Vlocker Shock: Interest rates peak at 20%, capital flows back into US and away from Global South.

Neoliberal Model:

• Use the private sector for investment becasue gov’t intervention crowds out private investment.
• The goal is to expand the market’s power and weaken the state’s control.
• Think about this from the developing country perspective: asking you to weaken your own power, which is already tenuous.
• Criticism is that the power vacuum will be filled by multinational from the core.

The Washington Consensus

1. Global south needs to adopt fiscal discipline and balance budgets.
2. Decreasing taxes, competitive exchange rates.
3. Trade liberalization
4. Privatization
   • Perception:
     • From first glance, all of these prescriptions appear to benefit the poor
       *