International Political Economy

1. International Political Economy Lecture One: Understanding the Global Political Economy March 27, 2008 Professor Timothy C. LimCal State Los Angelestclim@calstatela.edu

2. Understanding the Global Political Economy: Introduction Making Sense of the Global Economy: The Asian “Financial” Crisis Let’s begin with a few broad questions … • What was the Asian Financial Crisis? • Why or how was it important? More specifically … • Why did the authors begin their book with a discussion of this particular event?

3. Understanding the Global Political Economy: Introduction The Asian Financial Crisis: Background The Asian financial crisis, according to the UN, was “perhaps the most serious financial crisis since the breakdown of the Bretton Woods system in the early 1970s, in terms of both its scope and its effects” The effects of the crisis were far reaching, as this image (produced by BBC news) shows. The crisis started in Thailand, but spread to much of Asia, and indirectly hit Europe, Latin America, and North America. Ultimately, the damage was limited, but, for a time, there was fear that the crisis would cause a global depression.

4. Understanding the Global Political Economy: Introduction The Asian Financial Crisis: Background “East Asian Financial Crisis was a period of economic unrest that started in July 1997 in Thailand and South Korea with the financial collapse of Kia, and affected currencies, stock markets, and other asset prices in several Asian countries, [which] many considered [the] Four Asian Tigers. It is also commonly referred to as the East Asian currency crisis or locally as the IMF crisis although the latter is somewhat controversial. There is general consensus on the existence of a crisis and its consequences, but what is less clear are the causes of the crisis, its scope and resolution”Source

5. Understanding the Global Political Economy: Introduction The Asian Financial Crisis: Background The series Commanding Heights provides a useful overview of the Asian financial crisis and its global effects. We will watch a short 20+ minute excerpt from this three-part, six hour documentary. The entire series is available for viewing (click here)

6. Understanding the Global Political Economy: Introduction The Asian Financial Crisis: More Questions • What were the main causes of the Asian Crisis? • Who or what was to blame? InCommanding Heights where wasblame located? • What are the main lessons from the Crisis?

7. Understanding the Global Political Economy: Introduction Asian Financial Crisis: Different Stories What are the three dominant “stories” told about the Crisis? The authors identify three … • The ______________ story • The ______________ story • The ______________ story liberal state power critical What do each of these stories tell us about the Crisis?

8. Understanding the Global Political Economy: Introduction Asian Financial Crisis: The Liberal Story The Liberal Story begins with the begins with the premise that economic problems are caused by states or other non-market actors who mess the market up with their bad policies, corruption, and incompetence Thus, the root cause of the crisis were inappropriate financial policies followed by Asian states The key lesson? don’t mess with markets, for markets will eventually punish economic activity that violates or ignores liberal economic principles Indonesia’s Suharto supposedly epitomized economic corruption in Asia: in the liberal story leaders such as Suharto were the problem

9. Understanding the Global Political Economy: Introduction Asian Financial Crisis: State Power This story begins with the premise that too little state intervention, rather than too much state intervention was the problem More importantly, this story tells us that liberalization was essentially forced upon weaker Asian states by the richest, most powerful capitalist states, especially by the United States The lesson? states need to be careful about protecting their own interests first and foremost The United States as global “bully”

10. Understanding the Global Political Economy: Introduction Asian Financial Crisis: Critical Story Shares surface similarities with state power story, but assumes that power is not in the hands of states per se, but in the hands of those who control the economy, namely … The critical story also tells us that the world economy is structured in such a way to make such crises inevitable The upshot? The entire system needs to be reformed or restructured; for the time being, however, individual states--especially in the developing world--must not surrender to market forces Transnational corporations, larger firms, speculators, the capitalist class, in general United Corporations of America?