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After Hegemony I

After Hegemony I. Robert O. Keohane. Overview. I. The concept of hegemony II. Repeated prisoner’s dilemma, regimes, and international cooperation III. Assessment. International cooperation as a public good. NC. C. Payoff i. K group. n. Equilibrium?. All free ride.

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After Hegemony I

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  1. After Hegemony I Robert O. Keohane

  2. Overview I. The concept of hegemony II. Repeated prisoner’s dilemma, regimes, and international cooperation III. Assessment

  3. International cooperation as a public good NC C Payoffi K group n Equilibrium? All free ride

  4. The case of hegemony NC C Payoffi n Equilibrium? • Hegemon contributes • All others free ride

  5. After hegemonic decline NC C Payoffi n Equilibrium? Everyone free rides

  6. Implications • International hegemony is beneficial • Property rights • Security • Transaction costs • The “weak” exploit the “strong” • Burden sharing in NATO • MFN in GATT • Hegemonic decline threatens the system

  7. Cases: Britain 19th Century • Repeal of the 1815 Corn Law in 1846 • Market opening strategies • Bilateral MFN negotiations with Scandinavia, France & U.S. • Imperialism • Market creation • Protection for property • Reduction of risk for investors

  8. Cases: Britain 19th Century • Financial system • Gold standard, international reserve currency • Free capital market • Lender of last resort

  9. Cases: Britain 20th Century • Decline after WWI • Abandon the gold standard • Protectionism • Imperial preferences as a discriminatory trade bloc

  10. Cases: United States during the depression • Smoot-Hawley Act of 1930 • Reluctant lender of last resort • J.P. Morgan and the New York Fed • Abandon the gold standard (1934)

  11. Cases: United States after WWII • 1944 Bretton Woods • International Monetary Fund (IMF) • World Bank (IBRD) • Trade: ITO  GATT • Marshall Plan (ERP)  OECD • Oil producers’ regime • Low prices • Price stability

  12. U.S. decline? • Rise of OPEC • Departure from the gold standard 1971 • Triffin’s paradox • Vietnam War • Protectionism, NTBs, VERs Just two cases?

  13. Theoretical problems • How do you motivate the hegemon? • The U.S. was a potential hegemon before WWII • Wrong or tautological? • Only the crude theory makes predictions’ • The nuanced theory is tautological • Hegemonic temptations • Impose optimal tariffs • Unilateral macroeconomic policy • Exploit reserve status of the currency

  14. Public goods • Non-rival • Non-excludable

  15. Public goods • GATT/WTO • Members only • MFN status is a public good by design • IMF • Members only • But, benefits to net contributors are public: • Systemic stability, free trade, capital flows • Oil • Suez crisis of 1954

  16. Public goods • In any regime, enforcement is a public good • Temptations to cut a deal • Need a threat to punish the punishers • Exclusion itself may be the public good

  17. Collective action in repeated games • Small groups substitute for hegemons • There is more “cooperation,” in Keohane’s terms—mutual adjustment • Cooperation may improve because hegemons can more credibly threaten to defect after decline • U.S.-Japanese trade in the ‘80s • U.S.-EC on NTBs  Uruguay Round

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