PSC 1001 Introduction to Comparative Politics Week 4 of Notes and Readings
PSC 1001 Introduction to Comparative Politics Week 4 of Notes and Readings PSC 1001
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WEEK 4 NOTES Introduction to Comparative Politics Professor Jennifer Oetken PSC 1001 Caroline E. Jok The George Washington University Class 5 ~ How do Political -economic Models vary across states? Paper is due Next Friday (the 12th) Determinants/Conceptualizations of State Power Why do western European states have a stronger state system? • o Legacy/experience of War • State Capacity o Goods & services o Enact laws o Taxation etc. • Autonomy from International and Internal Actors o Military developments… o Not dependent on other states (globalization is changing this) • Legitimacy o Three different types of legitimacy • Traditional § That's how it's always been • Charismatic • Rational-Legal § Government sets laws and rules based on what people want/perceive as working. o Authorities o How do regimes gain Authority? • Centralization or Decentralization of Power State Power Indices: • Capacity and perhaps Legitimacies Not so much the structure • • Define State fragility as o The loss of physical control of its territory or a monopoly on the legitimate use of force o Erosion of legitimate authority to make collective decisions o Inability to provide reasonable public service o Inability to interact with other states as a full member of the international communit y • Considered measures of state weakness, but do they explain why some states have more power than others? o Does fragility affect power? o But U.S. is more "fragile" than Finland, but U.S. is more powerful o So what is the most important aspect of power? • International? Military? • Internal? States are tasked with maintaining and developing their economies • Regulating markets o Forces of supply and demand be it over goods/services • Construct and enforce property rights • Provide public goods and welfare through social expenditure • Generate revenue through taxation on income, property, business, investment etc. • Manage money through a central bank to control inflation and deflation • Regulate foreign trade Difference in political -Economic System • Liberalism: State plays limited role in regulating the economy to increase economic growth and freedom o Allows for competition • Social Democracy: liberty and equality can be balanced through economic policy determined by the state, labor and business collaboratio n o Goal: balance o Role of State: to distribute and monitor o Why have more public goods and more taxation? • Redistribute wealth • Even out the classes • Stability • Communism: State can create equality by eliminating market forces and private property o End Goal: transform economy and structures • Mercantilism: Domestic economy is viewed as an instrument that exists to serve the needs of the state o Doesn't look at balancing or favoring ideals o Main goal: develop the economy to support the state. o Restrict the state fro m infringing on individual freedoms • Liberalism Social Communism Mercantilism Democracy Market Laissez faire Regulated; some Market forces Regulated state ownership eliminated; state planned economy Property Strongly protected Protected Fully Nationalized Protected; key Rights industries - state owned Social Limited to critical Higher; wealth, Economy is a public Lower to Expenditure public goods re-distributed good; all needs increase public provided by the state savings Taxation Low rates Higher rates Indirect; Fixed wages Low and prices Foreign Trade Free trade Promoted; Restricted; only Trade regulated stimulates domestic imports deemed to protect competition and economy necessary domestic innovation preserved economy Indicators of Economic Development: • Gross Domestic Product (GDP) • Purchasing Power Parity (PPP) • Gini Index o Looks at the level of economic inequality • Poverty levels • Human Development Index • Happiness (used in Bhutan) Alternative argument for variations in development of States and regions of the world • Possibly because of their Colonial Legacies? • Political Legacies of Colonialism o Modern state exported through arbitrary political boundaries o State bureaucracy was unevenl y imposed by home country o State institutions were run and staffed by foreign bureaucrats • Social Legacies o New ethnic identities were created or reinforced by imperial authorities o Social classifications used by colonial powers to increase economic and politi cal control • Economic Legacies o Mercantilist economy set up to benefit the home country (colonizing power) • System of protection for their domestic industry at home o Traditional agricultural economies transformed into cash economies o Land rights, business ow nership and infrastructure was developed only to facilitate extraction o Employment limited to extractive sector State led development models to promote economic growth • Import substitution o State actively promotes domestic production to meet the needs of the domestic market o Tariffs/nontariff barriers use td to restrict imports. Large industries required state financing o Industries tend to be unsustainable because they are unprofitable - inefficient and can't compete in the international market . • Export-Oriented Industrialization o Economic production is focused on industries that can compete and be dominant in an international market o To promote export-oriented industrial growth, the state may need to protect domestic businesses from foreign competition and directly invest in key industries. Class 6 ~ What Factors Account for different economic Growth Models? According to O'Neil, How have coloni al legacies impacted the development of state institutions? • Connection between Colonialism and Authoritarianism • O'Neil: the relationship between colonialism and nondemocratic rule o Cleptocracy o Military rule • Trend or likelihood for colonial powers to play on the differences within societies and between groups o Makes it difficult to have common national identity • Weak state capacity due to lack of professional bureaucracy o Typically leads to corruption • Exploitation of state resources by high level corruption o Using your power to get other favors etc. • Tendency towards military rule • Political, economic and social tensions between different identity groups (see above) • Dependent development and underdeveloped domestic economies Atul Kohli's "Where do high growth Political economies come from…" • The experience of Japanese colonialism in Korea led to different outcomes of state development than most developing states. • Why are they newly industrializing economies? • Japanese colonialism is the underlying reason Import Substitution • State actively promotes domestic production to meet the needs of the domestic market • Tariffs/nontariff barriers use to restrict imports • Large industries require state financing • Industries tend to be unsustainable because they are unprofita ble - they are inefficient and can't compete in international market • Not a sustainable model • Done to get domestic industry restarted. Export-Oriented Industrialization • Economic production is focused on industries that can compete and be dominant in an in ternational market • To promote export-oriented industrial growth, the state may need to protect domestic businesses from foreign competition and directly invest in key industries • Protects domestic industry • Seen as the driver of South Korea's High Growth e conomy • Not as resource intensive South Korea • 8% avg. growth rate • Industrialization and export-oriented • Top exports: electronics, vehicles, machinery, ships, medical devices etc. • Why have South Korea and Japan been so exceptional in opposition to other countries that took the same approach Explanatory factors for South Korea's Developmental State • Highly autonomous state o Trade barriers o Local actors • High level of social Cohesion o Not a lot of economic dispa rity o Stronger sense of national identity o The people buy into and support the policies of the state • Strong ties between the state bureaucracy and large, family -owned corporations (Chaebol) o Why does there need to be such a strong relationship? o Corporations buying into the policies that rare selling • Well educated and hard working • Mercratic: highly professional How is it that South Korea has had the emergence of this A Weak Korean State under the Yi Dynasty • The monarchial state was unable to collect taxes from • The monarchy was factionally to the point that the state could not respond to challenges • The state was unable to respond to extern Discussion Question: What were some of the key ways that Japanese colonialism transformed Korea's state institutions under the Yi Dynasty? • Export led model of development • Highly authoritarian with control over internal organizations o In turn this makes corruption harder to get aw ay with o Increased ability to collect taxes • Product oriented alliances o Work with the companies that could use you for good • Control of the lower class o State-Class linkage allows for more control, order and predictability • Chronology of the state occurs Transformation of state bureaucracy • Replaced the monarchial state with a cabinet style government run by Japanese bureaucrats, which creates a strong centralized government • Created new professional and civil service that extended into the periphery • Developed a well-developed police • Japanese control! • Korean state utilized high levels of repression to eliminate uprisings Strengthen bureaucracy used to transform the economy • The colonial state created a revenue base by effectively collecting taxes for land ownership and use, as well as guaranteeing private property • The colonial state also invested in public goods, such as infrastructure, primary education, economic enterprises, and banking reforms • Agrarian sector reformed to export to japan • Japan invest capital in small industries and later encouraged the formation of large business enterprise. Transformation of state -society relations • Colonial state collaborated with propertied classes (land owners and b usiness owners) • Changes in land ownership and landlord -tenant relations sought to subdue the peasant classes o Make them more dependent on each other • Labor unions were prohibited and workers were closely monitored during work. Arthur Goldsmith's Predator y versus Developmental Rule in Africa: • Predatory = Extractive rule o Looking for short term gains as opposed to long -term development • This article looks at a more individual/leadership perspective, different approach for understanding state development • Understand why National executives are engaged in the draining of state resources for their own benefit o Uses rational choice approach to explain this choice of rule What drives state leaders to engage in "predatory " behavior • High levels of insecurity abut the future causes leaders to plunder state resources so they can pay off supporters and provide for themselves. o Demonstrates the frequency that leadership faces with insecurities • Rulers with great insecurity are less likely to engage in developmental behavior because it is unlikely that they will see the return on their investment o Long-term is unlikely • Leaders with long tenures accumulate political debts that they will need to pay off which encourages predatory over the long term • Recommendations: o Fast changing leadership o Promotion of democracy o Term limitations o Prosecutions under international law - having accountability from regional and international bodies Reading Notes ~ Essentials of Comparative Politi cs: Ch. 4 Political Economy How do people use politics to create and distribute wealth Venezuela: • President Hugo Chavez died in 2013 o Military officer o Embraced Marxist views o Bolivarian socialism: • Improve standard of living and increase political sovereig nty § Oil reserves - nationalization forced out a number of international firms § Nationalized agriculture, industry, telecommunications, finance § Expanded social welfare • Problems: § Financed by increase in the world price of oil § Calls for greater independence from global capitalism, it was too dependent on exports § Improvements of standards of living were in place but not to par with the rest of Latin America • Post Chavez o Unstable • Polarization between the poor and the middle and upper class • Protests • Shortages of basic goods • Rising crime Like Politics: Economies are made of many different institutions • Economy relies on an array of institutions that enable individuals to exchange goods and resources with one another • Not easy to replace or change once they have been constructed • Directly influence politics and vice versa Some view economy as central means by which people can achieve individual freedom • • Others: central means by which people can achieve collective equality Political economy: study of how politics and economics are related and how their relationship • shapes the balance between freedom and equality The Components of political Economy Markets and Property • The most fundamental components of political economy • Markets are closely connected to the rise of cities • Markets: interactions between the forces of supply and demand o Allocate resources through the processes of those interactions o Create values for goods and services by arriving at specific prices o Can be decentralized • Decisions made my th e individuals about what they will buy and sell o Communities of buyers and sellers who constantly interact through the economic choices they make • Typically require the state to enforce contracts/sanction activity/regulate supply/demand in some cases. o Focus: • Sellers seek to create products that will be in demand • Buyers seek to buy the best or most goods at the lowest price • Markets are the medium through which goods are exchanged • Markets emerge spontaneously and are not easily controlled by the state. o Undermined by black markets • Property: Ownership of goods and services o Lands, buildings, businesses, personal items o Must be regulated by the state or else property is insecure o Intellectual Property: ownership of a specific knowledge or content Public Goods • Privatization of transportation may limit economic development (ex: roads) • All state provide some level of public goods • Public goods: goods provided or secured by the state that are available for society and indivisible, no one private person or organizatio n can own them o Not linked to individual freedom o Can generate greater equality o Roads, national defense, health care, education o Cuba: most businesses are state owned Social Expenditures: Who benefits? • Social Expenditures: the state's provision of public benefits (education, healthcare, transportation, welfare) o Some claim the redistribution of wealth is controversial • High unemployment benefits may discourage people from seeking work. • May weaken the support of the community or churches o Social expenditures are provided by the state to those who find themselves in circumstances where they require greater care o Many countries, these benefit the middle class, not the poor Taxation • Societies expect the state to provide a number o f public goods and services • Most countries: taxation is the source of revenue o Other options: rentiers, ore borrowing money • Gross domestic Product: total market value of goods and services produced by one country in a year o Taxes consume a large portion of G DP o Some countries rely on high personal taxation, others rely on taxing businesses or goods and services. Money, Inflation, and Economic Growth • States must form a relationship with markets and property and determine the level of social expenditures needed to ensure a basic standard of living • Requires funds • Successful and productive tax = dynamic and growing economy • State must also foster economic growth o Management of Money • Money: medium of exchange • Money is losing intrinsic worth and people have come to base their faith in a state's currency on the ir trust in that state o States have influence over domestic economies • Central bank: institution that controls how much money is flowing through the economy and how much it costs to borrow money in that economy § Changing national interest rates • Lowers interest rates charged to banks, banks lower interest rates for businesses and individuals - loans are less expensive and saving is less lucrative --> People borrow more and spend more w hich increases the amount of money active in the economy and stimulates economic growth • Raise interest rates: people will borrow less and save more. • Inflation: Increase in the overall prices in the economy when demand outstrips supply § People press for higher wages/benefits to offset higher prices which further feeds inflation § States can be the cause of inflation if the government is forced to borrow money at higher interest rates to attract lenders • Hyperinflation Inflation that is higher than 50% for more than 2 months • When governments find themselves lacking in tax revenue and are unable to borrow, they may print more money to cover their debts, thus expanding their money supply which may affect the worth of their currency • Public belief that there is no l onger a strong state to support the currency • Deflation: too many goods are chasing too little money § Dropping prices lead to unemployment, less spending and more deflation Regulation • Regulations: rules/orders that set the boundaries of a given procedure o May be fundamentally economic in nature o May control what firms may operate in what markets • Monopoly: market is controlled by a single producer o Social in nature: managing risks Trade • Tools to influence trade: o Tariffs: taxes on imported goods o Quotas: limit the quantity of goods coming into the country o Nontariff regulatory barriers: may create health, packaging or tougher regulations • Purpose: protect citizens • Make it difficult or expensive for foreign goods to be sold in the local market • Support of trade barriers: o Way to government revenue o Stimulation and protection of local industries and firms • Opposition to trade barriers? o Gives competition, innovation and Comparative advantage: the ability to produce a particular good/service more efficiently • Leads to specialization • Why regulate? o Generate state revenue o Foster local industry o Protect local jobs o Keep wealth in the country • Not ? o Promote competition o Keep costs of goods low o Stimulate domestic innovation in areas of comparative advantage. Political-Economic Systems • Political economic system: the actual relationship between political and economic institutions in a particular country as well as the policies and outcomes they create • Often classified as liberalism, socialism, democracy, communi sm, mercantilism • Can be seen as the attempt to realize and abstract ideology in the form of real economic institutions ad policies Liberalism: • Adam Smith • Put faith in the market and in private property : if people are allowed to harness their own energies , sense of entrepreneurialism, greed • Best state is a weak one o Constrained in autonomy and capacity • State should have a limited involvement in the economy • Public goods: only in defense and education to prevent free riding • Unemployment should be accepted as inevitable • Taxes kept to a minimum keeping wealth in the hands of the public. • Light regulation • Trade encouraged • Laissez-fare: economy should be allowed to do what it wishes • Capitalism: System of private property and free markets • Liberals would maintain that democracy requires a free market • Emphasis on individual freedoms over collective equality • Power of markets over state • Low levels of government regulation, taxation and social expenditures. Social Democracy: • Functions on a foundation of capitalism • Rejects communists' call for revolution and the state appropriation of private property and wealth • Eduard Bernstein: Evolutionary Socialism • Unchecked economic development = great inequality by concentrated wealth in the hands of the few • This polarizes society • States are not a threat to the society or the economy but as a creator of social inequality • State should make a wide array of public goods available. • Goal of equality requires high levels of social expenditures to ensure basic b enefits for all • Taxes tend to be higher and capitalism more constrained • Neocorporatism: system of policy making involving the state, labor and businesses. o Relies on a limited number of associations that represent a large segment of business and labor • Trade unions • Business groups o System less prone to conflict that provides a greater role for both business and labor in state economic policies. Communism • View private property and markets as a form of power that inevitably leads to one person or group gaining control over others • Creates exploitation and the development of social classes • Small group of wealthy dominants • Inevitably leads to a revolution • Use the state to transform markets and property • Private property is fully nationalized • Market forces eliminated • All private transactions take place illegally on the black market • Economic decisions making is entrusted entirely to the state • Requires a large bureaucracy to determine what needs to be made and how it should be distributed. • Taxation takes an indirect for m through fixed prices and wages • trade is highly restricted • Capacity and autonomy are extremely high • Offer equality for all and emphasizes equality over individual freedom and liberalism does the opposite Mercantilism: • Focuses on the needs of the state • National economic power is paramount • Focus on their position in the international system • Oldest of the systems • Building of empires • Used in Asia • Uses active industrial policy • Parastatals: partial or full state ownership of specific industries • Use s tariffs, nontariff barriers and other trade regulations o Foreign goods drain away wealth and increase dependence on foreign economies • Welfare tends to be lower o Low level of benefits encourages higher public savings o Lower taxes o State capacity and autonomy are higher Political-Economic Systems and the State: Comparing Outcomes: Measuring Wealth • Most common tool to measure wealth is GDP o Can be misleading o Not the same as personal income o Includes government expenditures o Does not assign value to leisure or innovation o Does not account for wealth distribution o Fails to capture quality of life • Crime • Mortality • Health of environment o Government welfare is hard to measure. o How we compare the wealth across space and time • A salary of 40000 would go a lot further in Idaho than in new york • Purchasing power parity: attempts to estimate the buying power of income in each country by comparing similar costs such as food and housing by using prices in the United States as a benchmark Measuring Inequality and Poverty • Gini index: measure the amount of economic equality o The greater the number the greater the inequality • Political economic systems do matter o Social democratic countries tend to have lower inequality • Inequality does not equal poverty • Poverty is measured in terms of absolute wealth • Inequality; is relative wealth • Trends for poverty and inequality o People have grown wealthier overall o The world has seen the emergence of a new global middle class • Associated with increased inequality Human Development Index • Assess health, education and wealth of population • Countries with the highest national income also show the highest levels of education and life expectancy • Does not include gender equality Happiness Result of the interaction between freedom and equality • • Richer countries generally are happier than poorer countries • Happiness is neither sustained nor absolute • After a certain level of GDP happiness may stagnate • People's relative income is a stronger predictor of happiness than overall standard of living • Variations o Wealth is not necessary to happiness o Trends with culture and geography o Post communist countries have lower happiness indexes o Corruption o Social support o Individual freedom • Imperfect fit between wealth, inequality and happiness • Easterlin paradox • Extreme poverty = misery and rich countries are happy, however the levels of wealth, inequality and development do not correlate with happiness as neatly as expected. The Rise and Fall of liberalism? • At the dawn of modern capitalism, mercantilism was the dominant force and central to the establishment of empires and industries • Liberalism emerged as a challenge to mercantilism • Twentieth century o Threatened by fascist and communist regimes • For the past two decades, social democracy and liberalism have appear ed to be the only viable political-economic systems o Economic liberalization : cutting taxes, reducing regulation, privatizing state -owned businesses and public goods and expanding property rights • Qualifications: o Despite the increasing liberalization of m any economic systems, most industrialized democracies still largely adhere to social democratic ideology • The U.S. is an outlier o Despite increased liberalization, many countries that have traditionally relied on the social democratic model have continued to maintain both social expenditures and good economic growth o Over the past decade, global economy has seen one of the worst downturns since the Great depression • Direct result of growing and excessive global liberalization • Led states to relinquish regulato ry responsibilities and contributed to frenzied economic growth that eventually collapsed as housing prices and stock markets fell • Steep economic decline undermines many arguments of liberalism • As long as economic difficulties continue and inequality increases, liberalism will be under stress Reading Notes ~ Essentials of Comparative Politics: Ch. 10 Developing Countries: What are the causes of poverty and wealth? • How do we promote development • Where do changes begin? Fair trade • Certifies that goods met certain standards in several areas o Laborers guaranteed basic working conditions o Farmers are organized and cooperatives pool resources and distribute the premium earned o Environmental standards met o Long term contracts and financing agrees to a fixed higher price • As Fair trade has grown so has scrutiny o Premiums paid keep inefficient farmers in operation o Premiums do not trickle down to the producers but are eaten up by the overhead costs of administering a cooperative • African and Latina American cases suggest that profits and other benefits are more equitably distributed when fair trade production takes place at a larger scale o May go against belief that large business are by nature, unjust • Larger firms have greater reso urces at their disposal and can provide a wider array of benefits and can be held accountable via unionization and regulation • 2 types of countries o First world = developed democracies o Second world = communist and post communist • Third category o Neither liberal democratic nor communist regimes o Vast majority have levels of economic industrialization far below the other countries o Third world grouped together a diverse range of people/political systems o More recent: global South • Hybrid forms of econom ic, societal and political institutions Freedom and Equality in the Developing world • Middle income countries o Newly industrializing countries o Undergone rapid development with sharp tendency toward democratization and political and social stability • Lower income countries o Economic and political structures are weak o Slid into poverty • Lower income and middle income countries = developing countries o Have grown increasingly similar • History matters but it is only one factor in explaining the problems of the post -imperial world Imperialism and Colonialism • The growing power of modern societies was soon projected outward to conquered and incorporate new lands and peoples that could contribute to their rapid development • Empires: single political authorities that have under their sovereignty a large number of external regions or territories and different peoples • Imperialism: system where a state extends its power directly to control territory, resources and people beyond its borders • Colonialism: indicates the physical occupation of a foreign territory through military force. o Means for consolidating an empire. • Europe: states saw imperialism as a means to expand their resources, markets, subjects, territory and gain the upper hand • People who were subject to modern imperialism had their own institutions in place but lacked the centralized military power to resist • Imperial powers typically possessed a well -organized political system, military structure, technology , economic resources Also had a belief that imperial control was necessary, just and willed by God. Institutions of Imperialism Exporting the State • One of the first major effects: transfer of the state to the rest of the world. • States eventually succeeded in consolidating power over other forms of political organization o Delineated their borders and establishing sovereignty • Establishing power and authority: Westernize and create bureaucratic structures • Some empires relied on local leaders to enforce their wi ll, others favored their own centralized forms of authority • Difference started to reflect the degree of state capacity and autonomy found in the imperial country • Individuals under colonial rule were subject and had few political rights • Imperial territories remained economically and politically underdeveloped Social Identities • Imposition of organization forms from the outside included various new identities that often displaced existing social institution • People often identified themselves by tribe or religion, economic position, job • Rather than ethnic or national identities • Empires introduced the concepts of ethnicity and nations • People who had not specifically defined themselves by ethnicity found their basic rights being tied to how they were ethnically defined by the empires • Foreign presences further sharpened ethnic and racial divisions that already existed in some places • Inequality was tightly interconnected to ethnicity • Imperial powers also introduce national identity • If nationalism meant the right for people to live under their own sovereign state, did this not mean that subject peoples had a right to rule themselves? • Empires provided ideological ammunition to overturn imperialism • Unclear whether imperialism freed or rest ricted women. o Women were marginalized by the economic system • Imperial rule created new economic opportunities that challenged traditional roles of women within patriarchal family and tribal orders • Women could get education, be freed from traditional codes and hold a job Dependent development • First important change: replacement of traditional agricultural economy with one driven by needs of the industrializing capitalist home country • Cash based economy o Free trade did not exist • Colonial production was organi zed to provide goods that were not easily available in the home company • Infrastructure was frequently developed only to facilitate the extraction and export of goods rather than to improve communication or movement • Jobs were created in the extractive sect or • Local industrialization and entrepreneurship were limited • Development of agriculture for export vs. subsistence damaged the ability of the people to feed themselves • Creation of large-scale agricultural production drove many small farmers off the land The Challenges of Post -Imperialism: • Elimination of imperialism did not bring a sudden end to the problems of the developing world • Problems are often a legacy of imperial rule • In other cases, may be from domestic and international factors Building State Capacity and Autonomy • Capacity: states ability to fulfill basic policy tasks o Developing countries are frequently unable to perform basic tasks expected by the public • Infrastructure • Education • Health care • Delivering other public goods o Absence of professional bureaucracy o Exacerbated by the politicization of the state o Civil servants become part of a system of clientelism and rent seeking • Autonomy: ability to act independently of the public and foreign actors o The prevalence of nondemocratic regimes reinforces the misconception of high autonomy o State is not a highly independent actor, but is penetrated by groups that use it as a resource to be exploited rather than a tool for achieving national policy o Kelptocracy: government by theft o Most corrupt countries in the w orld are developing and post communist countries o International factors may limit autonomy • Pressure from more powerful states • International actors (UN, World Bank, multinational corporations, NGOs) • A state with weak capacity and autonomy is unlikely to be able to establish the rule of law. • Will not be respected by the public if the state is unwilling/unable to enforce and abide by them • Freedom is threatened by conflict and unpredictability • Economic development slowed • Dissuades long term investment • Wealth goes to those in control • High inequality • No regime • No rules • No norms • Instability is so high, the only institution that has the capacity and autonomy to handle it is the military • Issues that came when colonies gained independ ence: o Group divisions often have economic implications • Ethnic or religious groups favored under colonialism continue to monopolize wealth in the post independence society • Civil conflicts o Ethnic and religious divisions complicate politics • Struggle may foster authoritarian rule • Patrimonialism: one group dominates the state while effectively freezing other groups out of the political process • Make the creation of a single national identity difficult • Gender and family is another important area shaped by leg acies of imperialism § How are women viewed? § Security of women may be a variable to predict the security of states Generating Economic Growth • Because of imperialism, instead of undergoing economic modernization on their own terms, countries experienced rapid changes directed by the imperial powers to serve their own needs • After gaining independence, many of these countries found themselves in a continued state of economic dependence on their former empire. • Neocolonialism: indirect form of im perialism • 2 mercantilist policies that need to be broken o Import substitution: countries can restrict imports, raising tariff or nontariff barriers to spur demand for local alternatives • Resulted in economies with large industries reliant on the state for ec onomic support and unable to compete in the international markets o Export oriented industrialization • As a product spreads, other countries find ways to make the same good more cheaply or efficiently and eventually export their own version back to the countr y that originated the product. • Washington Consensus: o Neoliberalism o Structural adjustment programs o Reflect the wishes of institutions based in D.C. (World bank/IMF) o Reduce tariffs, reduce the size of the state, welcome foreign investment. Puzzles and prospects for democracy an development • The developing world is seeing dramatic improvements • Measuring development in many different ways • Asia: rapid growth, trend toward effective states and democratization • What explains variations in developments? o Ethnic divisions and borders o Resources • Resource trap theory of development : countries with natural resources are hindered from political and economic development because the state or political actors can rely on these resources and ignore public demands • Further polarizes politics o Governance • Need to have an effective state: able to establish sovereignty and develop public goods and property rights while resisting corruption and allowing for the transfer of power between governments over time. Forging states: • View of the state as an aid or obstacle has shifted • Immediate post war: modernization theory, focused on the importance of state in economic and political development • Aid agencies developed • Large but inefficient states were created • Washington Consensu s is different: encouraging many developing countries to roll back state power, promote private industry and limit regulation in the belief that market forces could succeed where states have failed • There has been a return to focusing on the state • Reduction corruption, improving health care, increasing economic growth • Build a better relationship between freedom and equality • How states can be made more effective and accountable is dependent on the existing institutions that we have to work with • Developing countries with a reasonable degree of capacity and autonomy: o Focus on the rule of law o Eective government can improve accountability, but in the absence of the rule of law democratic practices are less likely to become institutionalized as norms o Illberal system may result: individuals in power not held accountable o Goal: state that is more predictable and fairer in how it treats its citizens o Fostering social movemnets and NGOs that may embody and advance ieas such as impartiality and universal application of rights may help • Lower levels of autonomy and capacity or regimes (patrimonial ones) o Domestic options more limited o Greater role for international community o Conditionality: other countries provide support if particular conditions have been met. o International institutions can step in to provide the core element of sovereignty in the monopoly of violence, intervening in domestic conflicts and temporarily serving as the central coercive power o Expansion of the international court of justice o Backfire if seen as a threat to those in power o International community may lack resources, attention, and skills to effect change across a wide range of cases Building Society • In the absence of civil society, states can become enmeshed in clientelist relationships that prevent formation of policies that serve society as a whole. • The state is no longer the sole instrument for democracy and development • Public activity is now viewed as vital • Education is the first step • Organizational skills must be strengthen • State reform UN's Millennium Development Goals: resolved that by 2015: • Halve the population that lives on less than a dollar a day, suffers from hunger, lacks safe drinking water • Reducing maternal mortality by three quarters • Reducing under five child mortality by two thirds • Improved education • Greater gender equality • Creation of millennium villages o 14 small communities that are given target intervention to improve residents lives • Not a significant difference. Promoting Economic prosperity • Informal sector: segment of the economy that is not regulated, protected or taxed by the state o Dominated by self employed or small enterprises such as individual street vendor or a family that makes repairs or goods out its home o Associated with weak states that are unable to effectively regulate economy or prevent corruption o State may be highly bureaucratic but unable to provide oversight of property or markets that would be found where the rule of law is strong o Because of state weakness in managing markets and property, it is harder for businesses to grow • Microcredit: system of small loans are made to small scale businesses that lack access to capital o No evidence that they are means for firms to grow and take on employees • Middle income trap: situation wher e countries experience economic growth but are unable to develop at speed necessary to catch up with developed countries • States are necessary to support and protect economic development o Developing countries: lack capacity o Bypass the state o Grassroots micro funding o doesn't fully address how to capitalize on success that might be achieved. Reading Notes ~ Predatory vs. Developmental Rule in Africa • National leaders have to choose how to govern - "Faced with the prospect of losing power, those who make political decisions may engage in pillage, rather than pursue developmental policies that would enhance the welfare of their successors. But they may also react differently, trying to increase the welfare of their constituents so as to enhance their chanc es of surviving in power" o Opt 1. : pillage o Opt 2. : increase welfare • Sub-Saharan Africa leaders typically chose the first option • Why? • Typically called predatory rule • Political economy theory o Assumes that the leaders try to do what they think is best for themselves personally and politically w/ their time horizon o Leaders seen as entrepreneurs - objective: retain and exercise power • Optimize public capital formation (increase output that can be drawn on in the future) o Africa's problem: The break even point is too low • Leaders favor excessive current consumption and neglect public's capital stock • Perceive political risk o Hat happens after losing office o Misperception: political stability gives leaders the ability to favoopmentl • Decision theory: implies the opposite Examples of Predatory Rule: • Excess of selective incentives --> Fiscal deficits, inflation, stagnation • Poor economic performance threatens the leader's hold on power. • Politician's dilemma: o Distribute sufficie nt resources to keep loyalist happy o Avoid economic hardship that may alienate the rest of society and destabilize government • Kenya o President Daniel arap Moi: 2 decades Denounced aid donors (IMF) for dictating terms to his country • • Agreed in their policy prescriptions/drug feet on implementation § IMF suspended loan program o Multiparty elections (Moi re -elected…) o Constitutional review excluding public consultation o Selected a political heir to run in his place o 2002 new party came to power: President Mwai Ki baki & National Rainbow Coalition: anti - corruption platform o Donors ended freeze • Nigeria o Patrimonial system fed by oil revenues o Refused loans from the IMF o Good start: • Producer marketing boards abolished • Agriculture soared o Protests & rioting o General Abacha died, Obasanjo succeeded him • Ghana o President Jerry Rawlings o 2 coups o Sought electoral legitimacy (flawed presidential election) o At first: vaguely populist program o Moved to a structural adjustment plan • Harsh austerity budgets • National currency devalued • Public workers laid off • Taxes increased • Government restrictions were lifted to allow for free competition and encourage production and exports o International donors intent on making Ghana a showpiece of economic liberalization • Unemployment remained high • Manufacturing and agriculture are in decline • Rawling's Handpicked successor lost the election, Rawling lost influence § Will eventually face human rights abuse charges • Uganda o Yoweri Musevini: earned a reputation in the West as a reformer o Embraced structural adjustment o Recovered ground lost post civil war o Leaders inner circle grew more corrupt • What's in common with all of them: Corruption Exceptions to the Rule: Developmental Leadership • Botswana o Highest rate of per capita growth o One of the largest publi c sectors o 26 state owned corporations o Invested heavily in social services and infrastructure with expansion of schools, health facilities, housing and roads o Single party dominant system o President is chosen by the parliament (closer to that of a prime minister) Mauritius • o 3 main political parties are socialist o Significant welfare state o Large and active trade unions o Centralized wage bargaining o Price controls o Generous public pensions o Protected home markets o Took advantage of trade preferences for sugar and textiles o Controls imports of rice, flour, petroleum, cement, potatoes, onions, corn o Full fledged multi-party parliamentary democracy o Ministerial form of government and figure head president • Both: o Internally coherent public bureaucracies o Rule-bound democratic political systems o Protection of civil liberty • Developmental leadership is hard to see directly • Best evidence is indirect: Consistent pattern of economic advancement Political Economy of Leadership • Deductive theory to explain why most African leaders seemed trapped in the politician's dilemma • Politicians are non-ideological, pragmatic and self-interested. • Leaders' first concern is to maximize their hold on power o Allows them to pursue all other goals o Try to extract as much revenue as possible from the population • Insights o Politicians have perception of excessive risk (the return is low) • Risk: measurable uncertainty o Time: • People have greater confidence in predictions made over the short term • Longer vistas are more willing to bear risk (longer stretch of time to make up losses) § Despite lack of certainty, long -term perspective makes people more willing to take risks • The longer someone is in power, the more likely they are to lose interest in issues of larger social welfare • What determines political discount rates? o Security of office • Insecure rulers are believed to be unconcerned with lasting economic growth or improving the social welfare, very interested in retaining the loyalty of followers • National prosperity and regime stability = long term collective good • Political survival = immediate problem § Induces leaders to engage in opportunistic behavior: maximize short term gains, regardless of long term damage o Leaders need a minimal degree of protection in office to undertake development Understanding Political Risk Influenced by job security (how long a leader can stay in office) • • The more time passes, the more likely one is to lose power • Does Africa need a fresh generation of leaders? • Risk taking tends to be higher when knowledge and experience of the decision makers are lower o New leaders owe political debts • Predatory rulers are often predatory from the start o Volatility of office in holding: encourage rulers to set high political disco unt rates • Behavioral economics: risk is subjective • African leaders are tolerant of risk • By predicting that certain events will come about, they choose to act in ways that cause the predicted events to come about • They will alter their initial behavior onl y when the outlook for catastrophic loss changes • Leaders are apt to se risk differently at different stages in their career Job Security and Volatility • Transition: shift from an existing national leader to a new one • Manner in which these shifts transpire is hypothesized to affect leaders' risk assessments • Leaders in Africa take cues about political risks from transitions in neighboring countries o Death in office o Lost election o Retirement o Coup o Civil war o Invasion Dangers after leaving Office: • Killed • Imprisonment • Banishment • Namibia: shorter track record, but didn't suffer a coup Political Risk in the Historical Context: • Historical Parallels • Compare the experience of late medieval and early modern England o 25 leadership transitions o Coup/warfare o Eventually broke the pattern Changing Political Incentives in the 1990s • Exogenous change can occur in the political system that alters political calculations o Alter the rules and impose them on the leaders o May lead them to rethink predatory behavior • Such institutional rearrangements may be endogenous o Initiated by the new power holder who sees advantages in a more calculable system • Main question: will the leaders submit or subvert • How do they expect other political actors to react • 3 promising institutional c hanges are largely responsible for increases in electoral transitions o Elections • All but four countries in the region held elections, not all were fair and free • Many leaders remained in their positions o Term limitations • Countries with formally established finite terms in office for their presidents • Also place constitutional restraints on terms • How do you enforce the rules? § Sometimes you don't but they increase the retirements • Possibly responsible to fall the number of leaders dying in office o International law and diplomacy • Punishing predation • Belgian courts have indicted at least six African rulers • Ad hoc tribunals § But does this overstep sovereignty? • International Criminal Court • African leaders can no longer count on sovereignty to immunize the m against human rights abuse or corruption charges • Adds to the risk of losing power but only for leaders who have followed a predatory strategy • International community makes leaders pay after they engage in criminal or violent acts but also puts pressure on them to make matters right before they go too far with predatory rule Institutionalizing Change • Need time to tell • Political economy : rational expectations problem: o Leaders expectations of other political actors affect their current decisions o Fear rivals will turn to opportunistic behavior o Leaders get trapped in self -fulfilling equilibria o If all political actors mimic one another the equilibria is stable o To create a new equilibria, participants must adjust what they expect of each other o Aka: institutionalization • International court is a way to help institutionalize • Simple check of an electoral system = two turnover test o Turnover = opposition party candidate bet the ruling party • Cape Verde • Benin • Madagascar o Fragility of democratic instit utions Reading Notes ~ North Korea 3 decades of sustained high economic growth makes South Korea a model of development Developmentalism: • Colonial and postcolonial Korea are linked • However: changes in South Korean economy began only after the adoption o f an "export led model of development" Nationalist impulse: deny any link between colonial and post colonial Argument: Japan had decisive influence in shaping a political economy that later evolved into high - growth South Korean path to development How does Japanese colonialism differ in the important respects from the colonialism of European powers • Japan was a late developer • Used state power for their own economic development • Colonial impact was more intense, brutal and deeply architectonic Trace colonial origins of three patterns that we now readily associate as elements of the South Korean "model" 1. Korean state under the Japanese influence was transformed from a relatively corrupt and ineffective social institution into a highly authoritaria n, penetrating organization 2. New state's production -oriented alliances with the dominant classes, an alliance that buttressed the state's capacity to both control and transform, as well as the structural changes in the economy 3. Brutal repression and systemat ic control of the lower classes in both the cities and the countryside General ideas 1. How much choice does a developing country really have when adopting a specific development strategy 2. At a higher level of generality, there are theoretical issues revolvi ng around the concept of "developmental states" 3. Implication that some of the variations we notice today among the more or less dynamic third world political economies may have some of their roots in a variable colonial past Construction of a Colonial Stat e (a) the old Predatory state • The clearest manifestation of the powerlessness of a centralized monarchial state was the continued inability to collect taxes owed to the state on agrarian incomes, especially from the powerful Yangban elite (landowning -official class of Korea) o The state resorted to squeezing the peasantry via taxation o The state's limited resources exacerbated the competition and tensions in what was already a personalized and factionalized elite at the apex of the political pyramid o Financial limitations made it difficult to mobilize any serious military response to growing external pressures • Yangban class o Power rested in part on access to hereditary land wealth o Close identification with centralized bureaucracy o Created a balance of power o Yangban support was necessary to be king o Source of stability o Limiting balance of power • Not merely the presence of a powerful land -controlling strata in society that limited the states capacity • Key factor o Direct control that landed groups exercised on state offices o Korean monarchy remained to the end a highly personalist, patrimonial institution • Korean monarchs were incapable of acting along the modern distinction between public and private realms and thus incapable of designing stat e-led national goals of economic development o The ruling strata below the monarch was highly factionalized o Important to note that the reach of the state from center to the periphery was limited • The ineffectiveness of the Yi State was rooted in part in the pattern of state-class linkages and in part in the design of the state itself • When faced with growing security challenges related to fiscal crises, the Yi state turned on its own society - became predatory • Corrupt and ineffective states are a common feat ure in parts of the contemporary third world countries (b) Toward a "developmental" state • Japanese motive in Korea: o Sought to control it politically and transform it economically • Japanese economy is mercantilist in nature • Unique aspects of Japanese imp erialism are essential to note for a full understanding of the colonial impact on Korea o Japan colonized neighboring states with whom they shared racial and cultural traits o Proximity o Larger role of military and police o Near geographical contiguity and share d cultural and racial traits also implied that the Japanese could realistically consider their rule to be permanent o Deeply informed by their own successful domestic reform efforts following the Meiji restoration • Essential elements of this political econo my o Creation of an effective centralized state capab
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