PSC Introduction to International Politics Week 6 Note
PSC Introduction to International Politics Week 6 Note PSC 1003
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This 5 page Class Notes was uploaded by Caroline Jok on Thursday October 8, 2015. The Class Notes belongs to PSC 1003 at George Washington University taught by Farrell, H in Fall 2015. Since its upload, it has received 8 views. For similar materials see Introduction to International Politics in Political Science at George Washington University.
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Date Created: 10/08/15
Intro to International Politics 06102015 The Financial Crisis September 2008 Immediate cause the collapse of a speculative bubble in securitization of the US housing market 0 Had it just been a collapse in the housing market it could have been containable o The US housing market uncertainty spread Led to international contagion and collapse as nancial institutions which were immediately exposed found themselves in dif culties 0 Unemployment nancial instability etc Spread from nancial sector to other sectors too Contraction of credit etc Had different consequences in EU and US Different Approaches Realism o Might look to structurelack of hegemon as a likely cause of crisis Liberalism 0 Would point to weaknesses in institutions Ground up IPE 0 Point to Interest groups 0 People tend to listen to the nancial sector 0 The nancial sector is complicated and dif cult there is an asymmetrical balance between the regulators and those being regulated Constructivism 0 Point to ideas 0 Role that free market ideas have 0 Regulators are better off keeping out of it National Responses Differences between countries but important similarities 0 Key states adopted a limited Keynesian approach I Aimed at easing the crisis through higher spending temporarily 0 If in an economy where no one is spending the role of the government is to start spending and to create demand kick starting the economy Also some use of monetary policy Dif culties in continuing stimulus in both US and EU 0 Continued austerity and hard money policy in EU Who Paid the Costs Two key differences between this and the preVious crises Great Depression Costs were paid more by workers than by industry in crisis 0 Bank bailouts 0 higher unemployment 0 lower wages This is in part a result of interest politics 0 Weaker unions 0 Politically in uence of nance sector Egalitarian Critique o Sees the problems of financial crisis as problems of inequality I Focuses on claim that ban bail outs were fundamentally unfair to underprivileged et I Rooted in left wing arguments International Responses to the Crisis Central banks coordinated explicitly or implicitly to stop runs on weaker currencies 0 Limited support of each other G7 agreement not to allow systemically important nancial institutions to fail 0 Reduced panic IMF sought to stabilize various target countries in Asia and elsewhere EU provided very limited support to countries in Eastern Europe International Response preventing Future Crises Purported creation of new global nancial architecture through G20 0 No binding rules to the countries 0 Rules applied to banks Policy coordination and peer review Potentially stronger standards for bank capital ratios in Basel III 0 Basel rules are the key rules 0 Keep a certain amount of capitol in case of emergencies gt hard to do what is capitol and what is not Action to correct global imbalances Substantial expansion of IMF Puzzle 1 EU and US differences Why did Europe behave as it did Despite initial similarities US and EU diverged 0 Originally result of common set of ideas Keynesian interpretation 0 Important difference in both scal and monetary policy 0 EU has been less successful be they gave up on Keynesianism too quickly 0 Don t like freshwater economists Freshwater approach 0 EU weaknesses o Realism I Would point to differences in state interests highlight the role of Germany in EU 0 Germany most powerful state warrants tight money and not to support others Expected result Germany prospering but the rest of Europe lagging o Constructivism I Would highlight role of ideas Farrellquiggin also blyth I Commitment to economic austerity rooted in strongly held ideas among Germans but also in European Central Bank I Result a tight monetary policy that doesn t re ect German economic interests so much as shared ideas of German and EBC elite Puzzle 2 Financial Sector regulation 9 did this solve the problem Two clashing perspectives Drezner standard liberal story versus Helleiner and Kirshner bottom up IPE One suggests that system worked more or less as it was supposed to The other that it temporarily staved off disaster but did not address key probe Bottom Up IPE Would ask whether reforms affected power of key interested groups that participated Likely answer No 0 Financial interests still politically powerful Very different interpretation G20 s basel III