Complementary seminar: Global Financial crises: Causes, consequences and political perspectives

Size: px

Start display at page:

Download "Complementary seminar: Global Financial crises: Causes, consequences and political perspectives"

Belinda Heath
5 years ago
Views:

1 Complementary seminar: Global Financial crises: Causes, consequences and political perspectives Om kurset Uddannelse Kursustype Undervisningssprog Tilmelding Eksamensform eu-studies / forvaltning / global studies / Politik og Administration / socialvidenskab Projektseminar / Afløsningsseminar / Stort seminar English Register for the course between September 1st and September 6th (please note: the first class takes place already on 6 September, so early registration would be appreciated!) 48-hours examination: written essay Synopsis examination: oral examination based on the synopsis Project examination: oral examination based on the project Project and Synopsis: Submission deadline: December 18th at noon. Please look for further information in the study handbook at Complementary seminar: The topic(s) will be sent out by on 28th November at 10AM. The deadline for submitting two printed copies is 30th November 2012 at 11.30AM. The essay should be of a maximum of 12,000 keystrokes/ characters including spaces. Eksamenstidspunkt 48-hours examination: 28th - 30 November 2012 (The result will be published before 21st December 2012) Synopsis examinations: January 2013 Project examinations: January 2013 Re-examination: Oral examinations: February hours examination: 6th - 8th February 2013 Evaluering 7-point grading scale The focus of this course is on financial and economic crises - we are now witnessing disruptive developments in (financial) markets across a global scale. The national, European and international financial system (broadly defined) has changed significantly throughout the last 20 years. This course has three main dimensions: it offers a historical perspective on financial crises, examines the relationship between states and markets (focusing on e.g. financial institutions, government debt, volatile exchange markets and proposals for global regulation á la Tobin Tax), and provides a critical appraisal of theoretical perspectives of finance and its function in society. The seminar will take a historical perspective: How can it be that international financial crises and banking crises were (nearly) absent for more than 25 years during the post-war period, and the first financial crises were mainly related to developing countries? This situation has changed dramatically; today the emerging economies experience relative financial stability (some of them have even introduced capital control to protect themselves against the international financial turmoil!). Problems are mainly concentrated on the fragile financial geometry in US and Europe: banks, public debt, housing and stock bubbles - how can we explain this? We will have a look at institutional and political changes during the last 20 years. How can it be that the conventional policy instruments: monetary and fiscal policies have become next to impotent with regard to reducing the financial and real economic crises? Which role does financial de-regulation play within the crisis, and how can we explain the broader process of financialisation? What is the role of the financial industry, e.g. in lobbying national governments and international financial institutions? We will examine which new forms and actors of financial governance have emerged in the crisis, what the obstacles are for regulatory responses to the systemic crisis of finance, and in how far there is a role for contestation from civil society. Also, which role have theories and ideas played in (causing) the crisis, and what are the implications for possible solutions? Here we look at the development in financial and macroeconomic theory, which until 2008 has been increasingly building on the methodological condition of modelling within a general equilibrium framework and the efficiency market hypothesis. These theoretical preconditions have been heavily criticised of being unrealistic, it has even been claimed that this lack of appropriate understanding has played an active role in aggravating the financial crisis (Soros, 2009). We provide an overview of heterodox perspectives, with reference to a number of disequilibrium economists, e.g. Hyman Minsky, Joseph Stiglitz and Ackerlof & Fisher. They all work within the (post) Keynesian tradition of emphasizing uncertainty and short-sightedness as important characteristics of the understanding of financial behaviour. This macroeconomic discussion is then set in the context of broader theories and approaches in International Political Economy. The course ends with an outlook and discussion on the crisis, to allow students to apply their knowledge on the question of whether 'this time is different', as some observers would have it, or whether we are actually already heading towards the next crisis. Some literature suggestions (see also the specific readings for the individual lectures)

2 Paul Davidson (2011) Post Keynesian Macroeconomic Theory, 2nd edition, Edward Elgar (Chapter 9 hand-out) *Charles Kindleberger and Aliber, R.Z (2011) Manias, Panics and Crashes. A History of Financial Crisis (5th edition). Basingstoke: Palgrave Macmillan Carmen Reinhart and Kenneth S. Rogoff (2009) This time is different Eight centuries of Financial Folly, Princeton University Press, p. ixl-xlv og p (hand-out) *Jesper Jespersen (2005), Introduction to Macroeconomic Theory, Copenhagen: Djøfs Forlag (Danish edition Introduktion til makroøkonomi, 2009 is an equivalent text). *George Soros (2009) The Crash of 2008 and What it means The new Paradigm for Financial Markets, New York: Public Affairs David Harvey (2010) The Enigma of Capital, Oxford University Press Herman Schwartz (2009) Subprime Nation: American Power, Global Capital and the Housing Bubble, Cornell University Press Colin Crouch (2011) The Strange Non-Death of Neoliberalism, London: Polity Geoffrey Underhill, Jasper Blom and Daniel Muegge (eds) (2011) Global Financial Integration Thirty Years On: From Reform to Crisis, Cambridge University Press Eric Helleiner, Stefano Pagliari and Hubert Zimmermann (2010) Global Finance in Crisis: The Politics of International Regulatory Change (Routledge) Books marked with * will be used intensively. If you're not familiar with political economy, good introductory texts to read would be Jim Stanford (2008) Economics for Everyone (London and New York: Pluto) Ha-Joon Chang (2010) 23 things they don't tell you about Capitalism (London: Allen Lane) Mål Målgruppe Course objectives: - to familiarise students with historical developments, causes and consequences of financial crises in the 20th and 21st century - to introduce students to a variety of theoretical and conceptual perspectives on how to study and understand financial crises - to discuss policy responses, and their consequences, to financial crises, and to draw parallel and highlight differences between previous crises and the ongoing global financial and economic crisis Master students of ISG Course requirements: A background in political economy/economics is not required for this seminar. An open mind and willingness to engage with developments in and perspectives on Global Finance are a good start! Global Studies students are advised to take this course in conjunction with the Global Political Economy Module. Undervisningsansvarlig Laura Horn ( lhorn@ruc.dk ) Kursussekretær Connie Jakobsen ( conja@ruc.dk ) Peter Nielsen ( petern@ruc.dk ) Laura Horn ( lhorn@ruc.dk ) kursusgange 1. Introduction Tidspunkt 06/ kl. 08:15-10:00 What is a financial crisis, and how should we study it? In the introduction to this course, we discuss some of the guiding questions that will be discussed in the lectures. On the basis of a few examples from financial crises we will examine causes, consequences and political responses to crises. As preparation for the first meeting, have a look at these articles from the early days of the current financial and economic crisis - what, if anything, has changed since then?

3 Paul Krugman (2009) How Did Economists Get It So Wrong? New York Times, 2 September 2009, available at The Economist (2007) The turning point - The global economy, 22 Sept 2007 Martin Wolf (2007) Questions and answers on a sadly predictable debt crisis, Financial Times, 5 September 2007 Martin Wolf (2008) The Lessons to be learnt from today's financial crisis, Financial Times 2 July 2008 The Economist (2002) Crisis? What Crisis? The financial system has coped remarkably well with a horrendous couple of years, 16 May 2002 Leo Panitch and Sam Gindin (2008) The Current Crisis: A Socialist Perspective The Bullet - E Bulletin 142, 30 September 2008 (all these articles are available online or via RUB - use the 'newspaper' search function and then find your way through the database... this is also a great way to check up on recent issues of the Economist/the Financial Times if you don't have a subscription) 2. Financial crises in perspective I The Great Depression and the postwar period Tidspunkt 13/ kl. 08:15-10:00 In this lecture, we will trace the developments in international and domestic (mainly focusing on the US) finance to examine the trajectory of the Great Depression in the 1930s. We will be considering whether we can draw parallels to current developments, and will discuss the reactions, policy responses and consequences to the depression, up until the post-war establishment of the Bretton Woods system. In conjunction with this lecture, we will be watching and discussing the documentary 'The Great Depression' in the afternoon of this day. Required readings: Kindleberger - chapter 1 (pp. 1-25), chapter 8 ( ) Recommended readings: John Kenneth Galbraith (1954) The Great Crash 1929 (London: Penguin Books) (this is still one of the best books on the Great Depression, and easy to read - see file on moodle ) Alan Blinder and Mark Zandi (2010) How the Great Depression was brought to an end (working paper by two economists, see this articles in the New York Times on political implications Christina Romer (2009) The Lessons of 1937, Christina Romer 18 June 2009 More readings on historical perspectives on (financial) crises: Reinhart and Rogoff chapter 6 (pp ) Peter Garber (1989) Tulipmania Journal of Political Economy 97(3), pp Peter Garber (1990) First Bubbles Journal of Economic Perspectives 4(2), pp Larry Neal and Marc Weidemier (2002) Crises in the Global Economy to today - Contagion and Consequences NBER working paper 9147 Joseph French Johnson (1908) The Crisis and Panic of 1907 Political Science Quarterly 23(3), pp, (on the 1907 crisis in the US) Film screening and discussion: The Great Depression Tidspunkt 13/ kl. 13:00-16:00 In this session, we will watch and discuss the documentary 'The Great Depression' (Arte). More information at the beginning of the semester! The screening/discussion takes place in See the trailer here

4 3. Crisis: Theories and Concepts I Tidspunkt 20/ kl. 08:15-10:00 The outbreak of the financial crises in US (2007/08) and EU (2008/09) came as a shock for the politicians. They had not been warned by the academic world or by financial institutions about the vulnerability and fragility which had built up within the deregulated financial sector and the derived consequences for the housing and stock markets. Crisis-policies had to be invented and undertaken nearly from scratch and the dominating financial theory (efficient market hypothesis and rational expectations) was severely challenged. Kindleberger & Aliber (2011), p Soros (2009), chapter 1-5, p (Danish edition) 4. Crisis: Theories and Concepts II Tidspunkt 04/ kl. 08:15-10:00 The financial crisis quickly developed into an economic and employment crisis. Growth rates were negative and unemployment reached a post-war height. Why had we not been warned asked the politicians. Where had the stability and robustness of the real economy gone? Once again the dominant economic theory was challenged (even by the British queen, when she asked the Dean of Economic Faculty at the London School of Economics: Why did you not see the crises come? ). Monetarism and NewClassical economics had come to a problem of explanation: the real world behaved very differently from their highly mathematical models. This has created an open macroeconomic agenda with a possible comeback for Keynes and his theory of Uncertain, but Realistic Macroeconomics. Jespersen(2005) Chapter 2-3 og Carmen & Rogoff (2009), p. ixl-xlv og p Davidson (2011), chap. 9 (the Reinhart/Rogoff and Davidson texts are available on moodle) 5. Financial crises in perspective II Neoliberalism and debt crises: From Bretton Woods to Argentina Tidspunkt 11/ kl. 08:15-10:00 What does neoliberalism have to do with the debt crises in Latim America, South-East Asia and even Russia? In this lecture, we're looking at the break-up of the Bretton Woods system, the rise of neoliberal financial governance, and the consequences of debt and currency crises in the 1970s-1990s. Required readings: Kindleberger chapter 9 (pp ) and chapter 12 ( ) Miles Kahler (1985) Politics and international debt: explaining the crisis International Organization 39(3), pp Adam Harmes (2001) Institutional investors and Polanyi's double movement: a model of contemporary currency crises Review of International Political Economy 8(3), pp Recommended readings on the rise of international finance Susan Strange (1998) Mad Money (Manchester University Press) Martijn Konings (2007) The institutional foundations of US structural power in international finance: from the re-emergence of global finance to the monetarist turn RIPE 15(1), pp Recommended readings on various crises:

5 Andrew Cooper and Bessma Momani (2005) Negotiating out of Argentina's financial crisis: Segmenting the international creditors New Political Economy 10(3), pp Giselle Datz (2009) What life after default? Time horizons and the outcome of the Argentine debt restructuring deal _Review of International Political Economy _ 16(3), pp Jason Furman and Joseph Stiglitz (1998) Economic Crises: Evidence and Insights from East Asia Brookings Papers on Economic Activity 2/1998 Aseem Prakash (2001) The East Asian crisis and the globalisation discourse RIPE 8(1), pp Giancarlo Corsetti (1998) Interpreting the Asian Financial Crisis: Open Issues in Theory and Practice Asian Development Review 16(2) pp1-47 Stephan Haggard and Andrew Macintyre (1998) Theme section: Models and Crisis: turbulence in Asian economies RIPE 5(3), pp (see also other articles in this special issue) Marieke de Goede (2003) Discourses of Scientific Finance and the failure of Long-Term Capital Management New Political Economy 6(2), pp Peter Englund (1999) The Swedish Banking Crisis: Roots and Consequences Oxford Review of Economic Policy 15(3), pp Ziya Oenis (2009) Beyond the 2001 financial crisis: the political economy of the new phase of neo-liberal restructuring in Turkey RIPE 16(3), Neil Robinson (1999) The global economy, reform and crisis in Russia RIPE 6(4), pp Michael D. Bordo and Anna J. Schwartz (1999) Under What Circumstances, Past and Present, Have International Rescues of Countries in Financial Distress Been Successful? Journal of International Money and Finance 18, pp Financial crises in perspective III From the subprime and Financial Crisis 2007 onwards Tidspunkt 18/ kl. 08:15-10:00 How could a crisis in the subprime mortgage market in the US trigger a global financial and economic crisis? Or are there more fundamental/structural causes for the current crisis? In this lecture, we will cover the developments in the financial crisis emerging in 2007 up until the sovereign debt crisis in the Eurozone. We will look at how the crisis has affected the OECD countries and emerging markets/developing countries rather differently; we will compare policy responses to the crisis, and we will discuss why, some five years later, it doesn't look like very much has changed in financial governance. In conjunction with this lecture, we will be watching the documentary 'Inside Job' in the afternoon of this day. Required readings: Barry Eichengreen and Kevin O'Rourke (2010) A tale of two depressions: what do the new data tell us? Vox, available at Eric Helleiner (2011) Understanding the Global Financial Crisis: Lessons for Scholars of International Political Economy American Review of Political Science 14, pp Aaron Major (2012) Neoliberalism and the new international financial architecture RIPE 2012 Recommended readings: Bank of International Settlements (2012) 82nd annual report, available at on the current state of the global financial crisis Brassett et al (2010) The Political Economy of the Subprime Crisis New Political Economy 15(1), see also the other contributions to this special issue John Peters (2011) The rise of finance and the decline of organised labour in the advanced capitalist countries New Political Economy 16(1), pp Phil Cerny (2009) Introduction: Financial Crisis and renewal? Diversity and convergence in emerging markets RIPE 16(3), pp (see also articles in this special issue) Michel Aglietta (2012) The European Vortex New Left Review 75, June 2012 pp

6 Lena Rethel (2011) Whose legitimacy? Islamic finance and the global financial order RIPE 18(1), pp Film screening and discussion: Inside Job Tidspunkt 18/ kl. 13:00-16:00 In this session, we will watch and discuss the documentary 'Inside Job'. More information at the beginning of the semester! The screening/discussion takes place in Watch the trailer here 7. Financial Crises in Cognitive Capitalism Tidspunkt 01/ kl. 08:15-10:00 Underviser Peter Nielsen ( petern@ruc.dk ) Since the crises in the 1970 s we have witnessed a transformation of capitalism it has increasingly become cognitive and financial. This lecture will be about this transformation in the light of the current global crises, based on Neo-Marxist perspectives. Major issues will be financial bubbles and finance as a two-headed feature of the current crises. Texts: Michael Hardt and Antonio Negri: Commonwealth The Belknap Press of Harvard University Press. Pages: André Gorz: the immaterial knowledge, value and capital Seagull Books. Pages: Financial and Economic Crises of the US and Europe. Tidspunkt 15/ kl. 08:15-10:00 Using our theoretical concepts we shall analyze how the financial and economic crises have developed in the US and in Europe. Public debt seems, today, to be the overwhelming macroeconomic problem, but underneath there are mounting social and political tensions as a consequence of unemployment and growing differences in cost levels and international competitiveness causing severe balance of payments imbalances between US and China and within the euro-zone. On top of that we are witnessing a negative rate of interest on government bond in US and Germany even though inflation is running at 2-3 percent p.a. How can that be? Kindleberger & Aliber (2011), p Soros (2009), chapter 8-13, p (Danish edition) 9. Governing finance regulators, lobbies and alternatives Tidspunkt 22/ kl. 08:15-10:00 Ekstern underviser How can/should finance be governed, at which level and in whose interest? What is the role of rating agencies, institutional investors such as private equity and hedge funds, and banks in the crisis? And can the Occupy movement make a difference for the way finance is governed? In this lecture, we're looking at the relationship between finance and the state, we examine the role of regulation/legislation, and investigate which impact lobbying can have. Moreover, we ask which possibilities civil society organisations like Attac and movements such as Occupy have to advocate alternative perspectives. Required literature: Wolfgang Streeck (2011) The Crises of Democratic Capitalism New Left Review 71, October 2011, pp. 5-29

7 Daniel Muegge (2011) Limits of legitimacy and the primacy of politics in financial governance RIPE 18(1), pp Kevin Young (2012) Transnational regulatory capture? An empirical examination of the transnational lobbying of the Basel Committee of Banking Supervision RIPE 2012 Recommended readings: ' Euromemorandum Group (2012) European integration at the crossroads: Democratic deepening for stability, solidarity and social justice, available at STADS stamdata Afløsningsseminar Belastning : 7.5 / 15 / 7.5 ECTS Aktivitetskode : U24660 Prøveform : Intern Bedømmelse : 7-trinsskala Censur : Intern censur STADS stamdata Projektseminar Belastning : 7.5 / 15 / 7.5 ECTS Aktivitetskode : UP24660 Prøveform : Bedømmelse : Censur : STADS stamdata Stort seminar Belastning : 7.5 / 15 / 7.5 ECTS Aktivitetskode : U24661 Prøveform : mundtlig Bedømmelse : 7-trinsskala Censur : Intern censur

eu-studies / forvaltning / global studies / Politik og Administration / socialvidenskab

Complementary seminar: The European Union as a Global Actor Om kurset Uddannelse Kursustype Undervisningssprog Tilmelding Eksamensform eu-studies / forvaltning / global studies / Politik og Administration