International Political Economy1

International Political EconomyComparative Economic Systems: 

International Political Economy Comparative Economic Systems How do we compare Economies? The Affinity Discourse Comparative organization and Efficiency

Slide2: 

Rosser & Rosser: Comparative Economics in a Transforming World Economy Janos Kornai: The Affinity Between Ownership Forms and Social Coordinations Mechanisms. Branko Horvat: The Political Economy of Socialism

The End of History and the last Man: 

The End of History and the last Man As mankind approaches the end of millenium, the twin crises of authoritarianism and socialist central planning have left only one competitor standing in the ring as an ideology of potentially universal validity: Liberal democracy, the doctrine of individual freedom and popular sovereignty…In its economic manifestation, liberalism is the recognition of the right of free economic activity and economic exchange based on Private property and markets (Francis Fukuyama, 1992).

Has this prophecy come true?: 

Has this prophecy come true? - Financial crises, stagnating economies, continued poverty and inequality (East Asia, 1997, Russia 1998, Argentina 2001). - The new traditional economy (Islamic economies) Structural Differences within market capitalist economies (From Laissez Faire to Economic Policies and Planning) Central Command economies still there Remnants of Central Command still present in the former USSR (Etatism, State capitalism or classical socialism?) Hybrid of Etatism and Capitalism (China, Vietnam) From Workers Self-management to Worker Ownership (Slovenia) The Share Economy (Martin Weitzman), Classic Co-operatives (The Mondragon Experience, Thomas and logan), Employee Stock Ownership Plans ( Blasi and Kruse) Understanding transformation involves inclusion of the socio-cultural context

In Search for an Alternative?: 

In Search for an Alternative? No Value Judgements (Not strategic or Normative research). On going debate. Knowledge Creation on Economic Systems Globally Speaking. Pure models vs. Real Existing Societies (often a mix of systems). (Students Seminars (New traditional Systems, Country Studies)

Growth and Development: 

Growth and Development Technical-economic (resources): Inputs: Labor, real capital, human capital (social-), technical inputs. Innovations - Socio-economic Systems (cultural, political)

Economic Systemspage 18-19: 

Economic Systems page 18-19 Market Capitalist Planned market Capitalist Social market Capitalist Market Socialist Former Market Socialist Command Socialist (Etatism) Former Command Socialist New Traditional

How do we approach a Comparative study?: 

How do we approach a Comparative study? Conceptualization (Differences and Similarities) Economic Efficiency The Systems Economic Viability (Stability, Sustainability) Evaluation of Feasibility and Desirability (The danger of normativism and value judgements).

Classifying Economies: 

Classifying Economies A group of agents (decisionmakers) A political entity with particular geographical charactheristis Structure and functioning of the economy according to basic rules, customs and laws constituting the institutional framework Real world economy and main stream economics?

Allocative SystemsThe ideal Market: 

Allocative Systems The ideal Market What, How and for Whom? Production and distribution of commodities and services Allocating factors of production (the production function) Alocating goods and services to the households (the utility function) Utilitharian ethics

Classical and Neo-classical Economics: 

Classical and Neo-classical Economics Adam Smith: the Wealth of nations 1776. The Marginal Revolution 1871 (Walras, Menger and Jevons).

Central Command Planning: 

Central Command Planning Central Decisionmaker (GOSPLAN, Sector ministries, Regional Planning Authorities, Enterprise Conglomorates, Enterprises and Work Brigades) Five Year Plans and Operational Plans Technical-economic Decisions imposed by Law or by Force.

Slide15: 

HERE THEY MAKE EXCAVATORS. HERE THEY MAKE TURBINES. PLANS, THEMES, SUGGESTIONS AND HERE THEY ONLY MAKE NOISE. Artist: K. Yeliseyev Krokodil [Crocodile] satirical magazine, 1952.

Forms of Ownership: 

Forms of Ownership Private Ownership (Stock Ownership Companies, in the US Publicly Traded or Closely Held Companies) State Stock Ownership Companies. State ownership (Etatism, State Capitalism, Soft Budget Constraint) Local State Ownership (village enterprises) Co-operative Ownership Worker Ownership (When mr. Smith meets Mr. Marx?) Joint Ventures Social Ownership

The Role of Planning: 

The Role of Planning Planners’ Preferences vs. Consumer Sovereignty? (The role of advertizing) – Central Command. ’War Communism’ or ’Warfare Economy’ Indicative Planning Physical and Economic Planning in a Social Market Economy (Cost-benefit analysis) Corporate Planning (Williamson’s Hierarchies and markets, Galbraith’s technostructure)

Economic incentives - Profits: 

Economic incentives - Profits The Profit Incentive (Marginal Productivity Theorem, Earnings of ’Self-used Factors’)? Return to innovators and Entrepreneurs (Schumpeter)? Premium for Risc Bearing (Knight: All True profits are linked to Uncertainty) Monopoly Return? Marxian Surplus value?

Moral incentives: 

Moral incentives Ideological or Religious Prescriptions Moral Incentives (Stachanovism) The Cultural Revolution (’Serve the people’)

Income Distribution and Social Safety Nets: 

Income Distribution and Social Safety Nets A Just Distribution Reflects a Free Market Outcome in terms of Well Defined property Rights and Equal Opportunity for All (Ludvig Von Mises). No Government Intervention beyond a minimum Standard of Living (Fiederich Von Hayek). The Justness of a Society can only be judged by how well off its poorest are (John Rawl: Rational Individuals Realize the Uncertainty of their Future). From Each According to His Ability to Each According to his Work (Socialism) (Marx/Engels) From Each According to His Ability to Each According to his Needs (Communism) (Marx/Engels).

The Market-socialist Arguments: 

The Market-socialist Arguments Freedom and Equality Require an Equalized Distribution Higher Incomes Increase Labor Productivity Consumer Sovereignty Is Possible with an Equalization. Private Property Decreases Democratic Control (Internally and Externally) Responsibility, Inovations and Entrepreneurship Based on an Elitist Approach

’Trickle Down Economics’ (Supply Siders): 

’Trickle Down Economics’ (Supply Siders) The Distributional Aspects (Equity) ’When it Rains on the Clergyman, it Drips on the Parish Clerk’ (Incentives are What Draw Forth Entrepreneurial Efforts and productivity) Equity-Efficiency Synergy?

Social Market Economies & NIC’s: 

Social Market Economies & NIC’s Social market Economies (Scandinavia/Northern Europe) Social Safety Net Redistribution Tax Codes Equal distribution og Wealth and Income and Strong Economies. NICs (East Asia) Some of the fastest Growing Economies in the World have reasonable equal distribtions Latin American Countries the Other Way Around.

Politics and ideology: 

Politics and ideology Political Democracy is incompatible with Socialism (Von Hayek: The Road to Serfdom). Libertarianism & Laissez Faire (Milton Friedman) Reformism in Europe (Democratic Socialism) Dictatorship of The Proletariat (Democratic Centralism) Delegative Democracy?

Quantification: 

Quantification Real GDP pr. Capita Growth Rate Inflation Rate Investment Share (I/Y) Quintile Ratio Life Expectancy at Birth

Real GDP per Capita?Purchasing Power Parity Index: 

Real GDP per Capita? Purchasing Power Parity Index Common ’numeraire’ (US $) Human Development Index (Real per. Capita Income, Life Expectancy, Adult Literacy rates and Measures of Educational Enrollment) Differences in General Price Level from Country to Country Purchase Power If GDP Grows at the Same Rate as the Price Level? International Differences in Price Level? A Basket of Goods and Services (an International Deflator)

The Frontiers of the State: 

The Frontiers of the State Government Expenditures (Percentage of Collectivism: G/Y). Taxes Spending Military Spending Education Spending Health Spending Economic Freedom Index (The Heritage Foundation and the Wall Street Journal: 10 Subindexes not defined)

Measures of ’equitarianism’: 

Measures of ’equitarianism’ Quintile Ratio: The ratio of nationalincome of the top fith of the population to the bottom fifth (the higher the ratio, the more unequal the distribution). Gini Coefficients:

Janos Kornai: The Affinity Discourse: 

Janos Kornai: The Affinity Discourse Common Experience of reform in former Etatist Countries Affinity Refers to Ownership Forms and Social Co-ordination Mechanisms ability to Create strong or weak Linkages (Natural Sciences). Stable Connections In Social Sciences Viable Socio-economic Systems

The Evolution of a Private Sector in a Reforming Etatist Economy: 

The Evolution of a Private Sector in a Reforming Etatist Economy Private farming (Private farming or smaller plots of land attached to the household). Private companies in Services, transportation and construction (Hungary, Yugoslavia). ’Moonligting’ and ’do it yourself’ approaches. State owned Property Sold or leased to private entrepreneurs. High Income activities (sellers market) Bureaucratic Constraints (credits, foreign currency, employees etc.) Abscensce of Legal institutions, fear of Confiscation an Nationalization Economies of scale never obtained (no incentive to invest) Bribery often the case

The Persistance of Bureaucracy: 

The Persistance of Bureaucracy Centralization vs. Decentralization Cycles (from direct to indirect tools of bureaucratic coordination) Control through Formal State Orders, Informal Requests, Administrative Price Setting) Self-production of Bureaucracy (Nomenclatura) Autonomy to superiors but Loss of Power to subordinates. Soft Budget Constraint as Power Tool

Branko Horvat: Comparative organization and Efficiency: 

Branko Horvat: Comparative organization and Efficiency Social Formations (Mode of productions) Capitalism, Etatism and Worker Managed Socialism.