Political Economy Kwon Yoon Bok(Politics) Seo Soo Min(Economics) Choi Hyun Jeong(Korean) Lee Se Hoon(English)

INDEX Political Economy Foundation of Political Economy Varieties of Capitalism Convergence The Political Economy of Authoritarian States The Political Economy of Illiberal Democracies 07 Case Study : Cuba & North Korea’s Economic Reform 08 Discussion

텍스트를 입력하세요 Political Economy? 1 Politic Political Economy Econom y

Political Economy? 1 Adam Smith John Maynard Keynes Milton Friedman

Foundation of Political Economy 2 -emphasizes the role of market -explains the political phenomena in terms of invisible hand of the market which is based on mercantilist philosophy -consumers are best served when the ‘butcher, the brewer and the baker’ also act in their own interests. -Insists free market which requests minimized regulation of government Adam Smith

Foundation of Political Economy 2 -Insists the strong intervention of government rather than free market. -Background of Keynesian theory: rise of unemployment in the 1930’s and of inflation in the 1970’s. -Said government should control the market system by reducing wages, priming the pump of employment recovery John Maynard Keynes

Foundation of Political Economy 2 - Background : inflation phenomenon in 1970’s =Stagnation - Pointed the limitation of Keynes’s formula and offered a past-returning strategy as Adam Smith had said before - Thought that inflation is a kind of monetary phenomenon - By restricting growth in the money supply and paying the short-term price of increased unemployment, the inflation will be solved. = monetarism Milton Friedman

Varieties of Capitalism 3 ＊ Contractual relationships based on price ＊ Private sector is free from the government Ex) Free economic activity(business management selection of job, pursuing private property etc) ＊ Flexible labor market [1.Liberal market economies]

Shareholder Capitalism In shareholder capitalism, those who own the company seek to maximize the financial return on their investment and are willing to replace managers who fail to achieve this goal. This form is found in liberal market economies such as the USA Varieties of Capitalism 3 United States of America

Varieties of Capitalism 3 ＊ Collaborative relationships based on discussion ＊ Private sector is dependent on the government Ex) Minimum wage system, State-led economic activity ＊ Inflexible labor market [2. Coordinated market economies]

Stakeholder Capitalism In stakeholder capitalism, companies acknowledge-and often incorporate into their deliberations- a wide range of interests, including employees, trade unions, the local community and the government. This form is found in coordinated market economies such as Germany. Varieties of Capitalism 3

3 ＊ Rapid industrialization ＊ Close relationship between government officials and senior managers in private firm. * Legitimacy deriving from economic success [3. The Developmental State]

KoreaJapan Varieties of Capitalism 3

Convergence 4 The convergence thesis All developed economies are adopting a common format, liberal economy Coordinated economies might be evolving Refutation The financial crisis was originated from the liberal model. Developmental state focus on managing economic openness.

The Political Economy of Authoritarian States 5 Theoretical Claim : Growth first, Democracy later Empirical Reality : Developing countries must convince lenders that their economy is market-friendly and that their politics are tolerably democratic. Communist state - Command economy ex) USSR - China and Vietnam Other authoritarian state - Resource curse - A rentier state - Rent-seeking

The Political Economy of Authoritarian States 5 ChinaVietnamUSSR

The Political Economy of Illiberal Democracies 6 The operation of the economy is usually market-based but remains subject to political override The operation of the market becomes more arbitrary and less efficient than in liberal democracies. At the same time, economic intervention by the rulers of illiberal democracies is more limited than in authoritarian states.

The Political Economy of Illiberal Democracies 6 Malaysia Singapore

Case Study : Cuba & North Korea’s Economic Reform 7 1 The time of economic reform : After the collapse of the Soviet Union 2 One party or one leader has dominated for the country 3 Lots of natural resources, similar size of population and territory Similarities

Case Study : Cuba & North Korea’s Economic Reform 7 Under the similar condition such as political system and size of Population, two countries have made different outcomes

Case Study : Cuba & North Korea’s Economic Reform 7 12 Tourist industry made a big role in Cuba’s economy The level of open economy inflow rate of foreign assets >> North Korea ↓ Cuba ↑ Why have these similar countries made different outcomes?

Discussion 8 Convergence theory insists that if the country developed its economy, it tends to transit into a democratic society. According to this theory, political development is related to economic growth. In case of China and Russia, however, the convergence theory can’t be applied. That’s because both countries have authoritarian system even though they have developed an economy. Economic development doesn’t always guarantee political development to democracy. What do you think of it? Discussion Question 1. Convergence (Economy & Politics)

Discussion 8 North Korea had pursued closed economy for a long time to maintain their ideological legitimacy of labor party. However, recently North Korea tried to adapt open economy. Many specialists say this economic strategy means that North Korea tried to stabilize their livelihood of public even taking risks for their authority. Is the strategy of open economy really for the Trickle Down Effect of the public interest? Can it be another tactic only for their labor party maintenance? Discussion Question 2. Political Economy of North Korea