The Democratic Peace Democracy International OrganizationsInternational Trade Peace War

UK v. US Similar –Cultural –Foreign policy –Legal traditions –Car Culture??? Opposite ends of the spectrum on –gasoline tax policy –addressing climate change

Car culture: gasoline taxes and prices per liter in 31 countries (2004):

Who needs the most gasoline per capita? Urban v Rural

Does “need” translate into policy preference?

Policy outcome? We’ve got Interests & Incentives Now, to get the policy outcome,… We interact interests/incentives with a domestic political institution: Malapportionment!

Malapportionment tends to weigh RURAL preferences more than URBAN (i.e., Proportional representation tends to weigh URBAN preferences more than RURAL) Does this have an effect on NATIONAL policy?

Test: Does malapportionment affect: –Gasoline prices –Kyoto ratification

Kyoto Protocol to the UN Framework Convention on Climate Change Stabilize atmospheric “greenhouse” gas 1997 (enter into force: 2005) 2009: 187 states ratified Commitment to reduce greenhouse gases: –carbon dioxide –methane –nitrous oxide –sulphur hexafluoride

Ratifiers, signers, and non

Which came first? Car culture? Malapportionment? Once created, however, car-culture may reinforce malapportionment Car-culture may have other effects: –Crash: –It's the sense of touch.... Any real city, you walk, you know? You brush past people. People bump into you. In L.A., nobody touches you. We're always behind this metal and glass. I think we miss that touch so much that we crash into each other just so we can feel something. Hypothesis: car-culture exacerbates racial/ethnic tension Operationalized: automobiles/capita  inter-ethnic/racial violent crime

Main take-home from last time: What is it to explain? –to state the conditions under which it always or usually takes place (perhaps probabilistically) The BRIDGE –The BRIDGE between historical observations and general theory is the substitution of variables for proper names and dates

Religion vs. Science (Faith vs. Skepticism) RELIGION & SCIENCE both respond to mystery The key to religion is faith –in the religious hierarchy –in the Bible –in the Koran –Clear your mind of questions; there is no “why” The key to science is skepticism –theories must be tested, and tested, and tested –we never achieve “Truth” with a capital T –we never “prove”

COMPARATIVE INSTITUTIONAL ANALYSIS: The Politics of International Finance James Raymond Vreeland School of Foreign Service Georgetown University 17

2008 Financial Crisis & The rise of the G20 Unipolarism is over. We live in a multipolar world. 18

The future of the IMF?... 19

Changes to Global Governance Who has the power at the IMF? 20

The IMF Executive Board Directors, dominated by Western Europeans. Global governance is at a crossroads G20 = arrival of the emerging markets IMF governance is out of whack with reality 21

G20 Calls for a reevaluation of the BWI vote shares Why care about the G20? –Doesn’t do anything –Arbitrary membership (out of date) Represents the arrival of the emerging markets! More representative? Who is the G20? 22

Who is the G20? G7+ BRIC 11 down, 9 to go? NO! Only 8 to go. Only 19 countries in the G20. + EU+ MAKTISAS 23

Wrong guesses EU –Spain, Poland, Netherlands Europe –Switzerland, Norway The bad guy –Iran Large populations –Pakistan, Bangladesh, Nigeria Big economies –Thailand, Taiwan, Malaysia, Venzuela, Egypt, 24

Seats around the G20 table 25

Seats around the IMF table

WEOG Presence G20: 40% IMF Executive Board seats: 46% IMF Executive Board votes: 58% 27

How do they do it? Inflated vote shares? 28

IMF vote shares have been “out of whack” Top 5 members: –United States (16.8%) –Japan (6.0%) –Germany (5.9%) –France (4.9%) –UK (4.9%) Other important members: –China (3.7%) –Saudi Arabia (3.2%) –Russia (2.7%) –Italy? (3.2%) –Belgium? (2.1%) –Brazil? (1.4%) –India? (1.9%) –Turkey? (0.55%) 29

Who controls the IMF? (2010) Top 5 members: –United States (16.7%) –Japan (6.0%) –Germany (5.9%) –France (4.85%) –UK (4.85%) Other important members: –Italy? (3.19) –Saudi Arabia? (3.2%) –Canada? (2.9%) –Russia (2.7%) –Belgium? (2.1%) –China (3.65%) –India? (1.9%) –Spain? (1.4%) –Brazil? (1.4%) –Korea? (1.3%) 30

accessed 2 May

New vote-shares (for 2012)?? Has not happened yet! 1.United States: Japan: China: Germany: France: United Kingdom: Italy: India: Russia: Brazil: Canada: Saudi Arabia: Spain: Mexico: Netherlands: Korea: Australia: Belgium:

Who controls the IMF? (2010) Top 5 members: –United States (16.75%) –Japan (6.23%) –Germany (5.81%) –France (4.29%) –UK (4.29%) Other important members: –Italy? (3.16) –Saudi Arabia? (2.80%) –Canada? (2.56%) –Russia (2.39%) –Belgium? (1.86%) –China (3.81%) –India? (2.34%) –Spain? (1.63%) –Brazil? (1.72%) –Korea? (1.37%) 33

But real distortions also occur in the elections for the Executive Board 34

Appointed & Elected Directors Appointed: –US, Japan, Germany, France, UK Elected: –China, Saudi Arabia, Russia Regionally elected (ad-hoc) –Australia South Pacific, New Zealand, Korea, Uzbekistan –Brazil Latin American countries –Togo African countries –Iran Afghanistan, Algeria, Ghana, Morocco, Pakistan, Tunisia 35

Really ad-hoc elected Directors: Italy –Greece, Malta, Portugal, San Marino, Albania, & Timor- Leste Belgium –Austria, Luxembourg, Belarus, Czech Republic, Hungary, Kosovo, Slovak Republic, Slovenia, & Turkey Netherlands –Armenia, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Georgia, Israel, Macedonia, Moldova, Montenegro, Romania, & Ukraine Switzerland –Azerbaijan, Kazakhstan, Kyrgyz Republic, Poland, Serbia, Tajikistan, & Turkmenistan 36

How do they do it? Foreign aid? 37

Buying Bretton Woods James Raymond Vreeland Georgetown University Paper prepared for presentation at the AidData Conference, University College, Oxford, March 22-25,

Switzerland? New IMF member (1992) –Bloc does not have deep historical ties other than joining around the same time –Data for the entire period are available Switzerland has added incentives –Out of the EU, out of the G20 39

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The risk: Irrelevance of the IMF in a Multi-Polar world! 48

Regional Monetary Funds? Lipscy, Phillip Y Japan's Asian Monetary Fund Proposal. Stanford Journal of East Asian Affairs 3 (1):

Asian Monetary Fund Proposal? Going back to the aftermath of the US/IMF bailout of Mexico in 1995: TEQUILA CRISIS Japanese policy-thinkers/makers begin thinking about an “Asian Monetary Organization” ($20 billion) Why? –Believed that the US would not act as vigorously in the event of a crisis in Asia Then: East Asian Financial Crisis Financial-Crisishttp:// Financial-Crisis 50

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Why did Japan (not US or EU) lean towards liquidity provision in the East Asian Crisis? 25% of Japanese lending to all developing countries went to Thailand! 52

Japan’s position at the IMF re: Indonesia Japan opposed major structural reforms (eliminate national projects, reduce subsidies, restructure financial structure) Japan supported a loan package to stabilize the exchange rate IMF ignored Japan 53

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“Asian sense of solidarity”  AMF vision $100 billion 10 members: –Australia, China, Hong Kong, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Thailand –NOT the United States –Secretary of State Summers to MOF official Sakakibara: –“I thought you were my friend!” 55

Flash-forward: March 2010 Chiang Mai Initiative A multilateral currency swap arrangement Members: Association of Southeast Asian Nations (ASEAN), China (including Hong Kong), Japan, and South Korea ASEAN members: Foreign exchange reserves pool of US$120 billion Launched: March 2010 The ASEAN flag 56

Power: Matters in international institutions But emerging markets have outside options Can we keep China at the table? Or does China go for outside options? 57

Aside How do you “see” China? What does China “look” like? 58

Rise of the Rooster 59

Will China play this game? Increasingly using foreign aid & access to Chinese markets for political goals Recognition of Taiwan Dalai Lama Liu Xiaobo Chiang Mai alternative 60

One more triangle…

Is this a “Bretton Woods” Moment?

Treaty of Versailles (1919–20): League of Nations Keynes begins discussions on an “international loan” 1918 Stock Market Crash! World War II ( ) United Nations (1945) Bretton Woods: IMF/World Bank (1944) GATT: 1947 Smoot-Hawley (1930)  Beggar-thy-neighbor years from crash to institutional solutions… 1929

Latin American Debt Crisis (1982) 1980 Tequila Crisis (1995) 2008 Financial Crisis “Bretton Woods” moment… 2023?... Or beyond? East Asian Financial Crisis ( ) 2023? Lay out architecture now, so we’re ready when it comes…

Think Big about Global Governance!

Regionalism before globalism?

Wrap up 68

Why should you care? Globalization of capital flows  Financial crises plagued the 20 th century Bailouts will continue Tension between –Providing liquidity –Preventing MORAL HAZARD Solution: conditionality – s conditionality light –1980s & 1990s conditionality heavy –2008… conditionality light? What will it be like when the shoe is on the other foot? 69

The course take-away: Institutions matter… How do international institutions matter? –Solve collective action problems? –Informational role? –Facilitate foreign policy goals? –Obfuscate the pursuit of political goals? How do domestic political institutions matter? –Shape the survival strategies of political leaders 70

Analytical toolkit TRILEMMA Time-inconsistent preference problems –“Commitment” problems –Remember Ulysses and the sirens –USING INTERNATIONAL ORGANIZATIONS TO “LOCK-IN” OR INFLUENCE POLICY Veto players (stability of policy) Stability of democracy in rich democracies Objectives of leaders: stay in power! –The optimal strategy to fulfill this goal depends on incentives/constraints shaped by institutional context “Controlling” for variables (holding conditions constant) 71

Winners & Losers Greater economic integration  greater power of “Winners” Economic integration greatest at the Regional Level So look for regional cooperation You are winners from globalization! 72

Thank you WE ARE GLOBAL GEORGETOWN! 73

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Seats around the IMF table (2012) 75