DREZNER - Notes from Reading 09/16/2009

On Nye:

On Krasner: Why is the US-Cuba television broadcasting payoff

matrix described as a deadlock? US wins out, IMO. By beaming signals to
the island, they are forcing Cuba to spend precious resources jamming the
signals, or face the cultural consequences

Emphasis on the importance of monitoring and info-gathering on

securing equilibrium situations. What are the global parameters addressing
spying? Everyone does it, no one admits it, no victim of spying wants it.
What gives?

Barnett and Duvall: Concern with power interpreted as a

disciplinary attachment to realism.
He argues that scholars of IR should employ multiple conceptions of
power and develop a framework that encourages rigorous attention to power
in its different forms.

Traditional (and erroneous) view of power is solely in relation to

coercing states to do something they would not normally do.

Power defined: “In general terms, power is the production, in and through
social relations, of effects that shape the capacities of actors to determine their circumstances and fate”
 1. Compulsory Power: Direct control by one actor over another;
 2. Institutional Power: Control actors exercise indirectly over
another through diffuse relations of interaction;
 3. Structural Power: Constitution of subjects’ capacities in direct
structural relation to one another;
4. Productive Power: Socially diffuse production of subjectivity in
systems of meaning and signification.

 analytic methods is to demonstrate how systems of knowledge and discursive prac-
tices produce subjects through social relations that are quite indirect, socially diffuse,
and temporally distant+28 For instance, students of gender, race, and nation rou-
tinely recognize how socially diffuse discourses, and not isolated, direct, and prox-
imate actions, produce the subjects of the modern world+29

FIGURE 1. Taxonomy of power


These two core dimensions—the kinds of social relations through which power
works, and the specificity of the social relations through which power’s effects are
produced—generate a fourfold taxonomy of power as illustrated in Figure 1+ Each
cell in Figure 1 represents a different conceptual type+ Compulsory power exists
in the direct control of one actor over the conditions of existence and0or the actions
of another+ Institutional power exists in actors’ indirect control over the conditions
of action of socially distant others+ Structural power operates as the constitutive
relations of a direct and specific—hence, mutually constituting—kind+ Productive
power works through diffuse constitutive relations to produce the situated social
capacities of actors+

27+ Pierson 2000+

28+ See Fairclough 1992; and Kendall and Wickham 1999+
29+ Kondo 1990+
DREZNER CLASS – Session 2
09/16/2009
Session # 2

Who has benefitted from the global meltdown?:

 FED?
 China?

POWER --- what is it? We use the term frequently, but it is an

ineffable construct. Money is concrete. Power is ineffable.
 Resources
 Influence
 Achieve Goals
 Information

AUTHORITY - - - - - - - - - - - -

Economists traditionally treat actors as atomistic and incapable

of moving markets… except when considering:
 Public Choice Models
 Oligopolies
 Optimal Tariff Theory: When you are a large market and you
impose a tariff, you are shifting the balance of trade in your favor.

Political Scientists have talked more about power.

 Robert Dahl defines power: A gets B to do what B wouldn’t
ordinarily do.
 But, how does A do this?
 o Logic of consequences: If you don’t do this, you are up shit
creek. Material incentives and disincentives for complying.
(MATERIAL)
o Logic of appropriateness: You can convince B that if not
complying is taboo. By instilling powerful norms in the
system b/c you disapprove or approve of certain actions, A
may be able to influence the actions of B. (NORMATIVE)
o

HARD POWER: A gets B to do what B normally wouldn’t do.

SOFT POWER: A gets B to think B wants to do what A wants them to
do.

HP and SP Usually correlate, but not always.

Operationalization
How do we measure power?
 Capabilities:
o GDP
o Income/capita
o Population
o Military Strength
o Natural Resource Reserves
o Foreign Investment / Aid / Debt
 Currency Reserves (China has over $2 trillion in
currency reserves)
o Human Resources: Education / Health
o Credit Rating (Express measure of how much it costs to
borrow money)
 BUT >>> Power is relational. Power is also zero-sum.

 DIRECT DIFFUSE

 SPECIFIC ACTORS Compulsory Institutional


 SOCIAL
 IDENTITIES Structural Productive

 1. Compulsory Power: Direct control by one actor over another;

 2. Institutional Power: Control actors exercise indirectly over
another through diffuse relations of interaction;
 3. Structural Power: Constitution of subjects’ capacities in direct
structural relation to one another;
4. Productive Power: Socially diffuse production of subjectivity in
systems of meaning and signification.
o WE ARE ALL REALLY IN THE MATRIX – Very subtle
o Private Property. We all accept the concept of private
property.
o There is a spoon.

MEixcanitas….
 09/16/2009
THEORIES

1) Actors --> Principally states

2) Incentives / Preferences: Fundamental disagreement between
realism and liberalism
3) Constraints: If all actors get what they want, it’s a boring theory.
YOU NEED PLOT TENSION! Something to get in the way of what one or
more actors want.
 Even in global economy, the system is anarchic.
4) Actions / Strategies: We know who are the actors, We know what
they want. We know constraints. How to they try to get it?
 GPE: A variety of actions: pass a domestic law; sign an intl
agreement; setup a foreign plant; hedge currency; sanction, etc.
5) Outcomes: Once you have a model of who actors are, what they
want, what are contstraints, what they do ---> OUTCOMES!
 OPENESS OR CLOSENESS

DREZNER’S CARDINAL PET THEORY BAR: A good theory has to be better
than: “Every major global political disaster is the fault of the FRENCH

QUALITIES OF GOOD THEORY:

1) Generalizability: How much can this theory explain? How
widely can you apply the theory?
2) Parsimony: Theories are like massive levers: Theories should
help you take a few inputs and give you a much broader prediction
of outcomes.
3) Plausibility: Do your assumptions jive with reality? How good
are the assumptions?
4) Falsifiability: If you can’t be proven wrong, you have an
ideology, not a theory.
i. EG: Marxism: original theory was falsifiable. But
the theory has evolved. Modern Marxism -
Dependency Theory – says developed countries keep
under developed countries underdeveloped to
maintain hegemony over them. This directly
contradicts…
 5) Accuracy

Debates on Political Economy can be described along four

axi:

1)  Realism/Liberalism
        
2)  Systemic/Domestic

3)  Interests/Ideas
    Where interests come from originally?  Material interests or
ideas?

4)  State/Non-State Actors
    

REALISM – (PRISIONERS DILLEMA, ONE GAME HORIZON)

ACTORS: States--> Unitary Actors.

PREFERENCES:
 SURVIVAL - States can disappear. States must take actions to
ensure that they keep existing. (really, all theories presume that
you want to survive). (Not as important on a GPE level)
 SECURITY – Not just survive, but keep control over security. (Not
as important on a GPE level)
 SOVEREIGNTY – Maintain control/autonomy over domestic affairs.
This is a concern on GPE.

CONSTRAINTS: Anarchy -- > No Supranational Government. No Supreme

International Authority. --> SELF HELP. Dog eat dog. The possibility exists
that we could potentially all throw down at any time. CONSTRAINTS ARE
IMPORTANT FOR REALISTS.
 STRATEGIES: Certain national strategies will be employed by all
nations:
 ACQUIRE POWER
 PRESERVE ECONOMIC AUTONOMY / AVOID INTERDEPENDENCE
(though asymmetric interdependence with you as beneficiary is
great!)
 STRENGTHEN STATE:
o Want a state that can effectively extract resources from the
rest of the economy if necessary.
o Want to strengthen state’s ability to negotiate with others
(including: acquiring intelligence).
o Maximize Relative Gains: Prevent other states from acquiring
power.
Atila the Hun: “Not just that I must win, but all others must lose”
OUTCOMES:
 DISTRIBUTION OF POWER:
o Hegemony (Unipolarity) – Dominant Global Leader
 Property Rights: In H System, you will have relative
openness, you maximize productivity and as Hegemon
you get the most out of it. And all other states are
dependent on you!
 Why then would other actors (non-Hegemonic) go along
with this? B/c other actors get to free ride on the
system.
 Who has the most open economy (besides Hong Kong).
United States. We’ve also written the rules of the
game to be able to force open other markets through
the WTO. Other states go along with us b/c they get
more out of the deal.
 HEGEMONY AS VALHALA – Will ultimately lose, but lets
try to grow as much possible and structure the system
to keep on as long as possible.
 Bipolarity – Two titans and many midgets.
o Bloc Management: Once it is clear that there are two pols
(like during Cold War), powers start creating blocs.
 US --> GATT
  USSR --> COMECON/CMEA
 Multipolarity – More than two dominant powers.
o Closed System: More autarchic
o
QUESTION: DIFFERENCE BETWEEN MULITPOLARITY AND
APOLARITY??

LIBERALISM: (PRISONERS DILEMMA ASSUMPTION: LONG

HORIZON)

 ACTORS: There are other actors, NGOs, UN, etc.

o PREFERENCES: Big difference between Liberals and Realists:
Liberals believe that states care about absolute, not relative
gains.
 Liberals are more into open economies
 Liberals tend to see the world as a non-zero come
system.
 CONSTRAINTS:
o Agreements are not always reliable
o Non-fungibility of power: Very difficult to exchange power in
one arena for power in another arena.
o But hey man, there are other possibilities out there.

 STRATEGIES:
o Tit-for-Tat (Realists aren’t fans of Tit for Tat: If you care
about relative gains, there is no strategy that Tit-for-Tat will
out-perform one on one)
 Cooperative strategy
 Quick to punish defection
 Forgiving
 Thrive with like-minded states
o How to increase odds of successful Tit for Tat outcome:
1) Lengthen the shadow of the future.
2) Detection of Defection. In prisoner’s dilemma it is
easy to detect defection – not so in the real world.
 3) Alter payoffs so that: either the prisoner’s dilemma
looks less extreme or the game no longer looks like a
prisoner’s dilemma:

6,6 0,5

5,0 1,1
a) Increase the rewards for cooperation. Decrease the gap between
mutual cooperation and unilateral defection. Futhermore, you are
increasing the gap between MC and MD. Pipe dream: if you can increase
rewards for MC higher than rewards for Unilateral Defection, then you
create a very stable system.

OUTCOMES PREDICTED BY LIBERAL MODEL:

Three legs of Kantian Triad for achieving perpetual peace

1) Institutions Promote Greater Cooperation, Openness

i. Easier Detection of Defections
1. Intl Inst. Write rules and presumable it is
easier to detect defection with a rule regime
2. IMF and WTO have monitoring mechanisms
ii. Power to Punish
1. Sanctions
2) Promote an Open Economy
a. The more globalized the economy, the greater the mutual
dependence. You have increased the gap between mutual
cooperation and mutual defection;
b. Trade tames man’s passions: Individuals have a whole
variety of ways to enrich themselves
i. Destructive: Rape & Pillage
ii. Productive: Trade
iii. Unproductive: Graft/Corruption
THE GREATER THE OPPORTUNITY FOR PRODUCTIVE
BEHAVIOR, THE EASIER IT IS TO ENGAGE IN.
3) Stronger Cooperation Among Democracies
i. Democracies automatically lower cost of monitoring
and enforcement.
ii. Democracies more likely to cooperate b/c they are
(in theory) more bound by the rule of law
domestically. Global actors bound both at global and
domestic level. Democracies take intl treaties
seriously.
Wednesday, September 23rd 09/16/2009
THREE LEVELS OF ANALYSIS FOR INTERNATIONAL RELATIONS THEORY:
1) Individuals
2) Domestic
3) Systemic --> Realism and Liberalism are in essence both
systemic theories. Start from anarchy assumption and then derive
behavior from that.
Systemic is more parsimonious.

DOMESTIC v. SYSTEMIC

DOMESTIC
o Actors:
 Governments
 Regime type
 State Strength: Strong State / Weak State?
 Strong state is capable of making decisions
autonomously of societal forces. Even able
to influence societal forces. Easy to impose
tariffs and collect taxes.
 Political Parties: Power
 Interest Groups: Motivated principally by material and
ideological gains
 Central Bank
 Courts: Justice
 Legislatures: Stay in Power
 Sub-national governments
 States
 Emirates
 Provinces
o Incentives:
  STAY IN OFFICE
 PERCEPTION OF POWER

STOLPER SAMUELSON THEORM – When an economy opens, whatever

factor was scarce in the closed economy gets hurt. On the other hand,
relatively abundant factors benefit from opening economy.
 In US (capital rich): Capital intensive industries benefit from
openness.
 In US: Labor intensive industries oppose openness.
 In China (labor rich): Wants openness in labor sectors.
RICARDO-VINER MODEL:
 If you are mobile between sectors, you will be more open.
Wednesday, October 7, 2009 09/16/2009

Headline editors are the most important people in currency trade!

IDEAS v. INTERESTS

Actions -->
 Roadmaps
 Hooks (don’t believe the idea, but believe in the policy outcomes)
 Institutionalization: Crackpot --> legitimacy.
o IFIs (International Financial Institutions)
Milton Friedman and fellow monetarists started getting power
in the economic arena. At one point, IFIs stopped hiring
Keynesians and started to hire monetarist economists.
 Norm Cascade: if you can get enough people to believe your idea,
the idea becomes accepted wisdom.
Outcomes:
 An idea entrepreneur can create a epistemic community. This could
create hard policy constraint.
 TARP: When Paulsen proposed the plan, economists disagreed.
o Economists said to inject liquidity instead. Paulsen does a
180 and engages in the recommended strategy.
o Causal Complexity: Murphy’s Law of Ideas: if there isn’t a
consensus saying you’re wrong, you (as a policy maker) will
get away with it.
 Shifts in norms or principled ideas are rare.
 Consensus has to be politically palatable: during crisis, many
leading economists proposed nationalizing banks. Didn’t get
traction for two reasons: 1. Politically unpalatable; 2. No economic
consensus.
 Ideas as focal points.

NON STATE ACTORS –

 1) STATE WANNABES - Hezbollah, Hamas
 2) DOMESTIC INTERESTS –
 3) DIASPORAS –
 4) PRIVATE ORDERS –
o “Fuck it, We’ll just make our own rules.”
o MNCs—of 100 largest entities worldwide 51 are firms.
BUT using Sales Figures as a metric for comparision is
BULL SHIT! GDP is measure of value added. If you
look at revenues of MNS, the largest firm would be 81
among the top 100 actors, behind Lebanon.
o MOODY’s – STATES DON”T WANT TO MESS WITH
THESE FUCKERS.
o Wolfbergs principal
 5) IGOs
o Not singular actors. Writ large, IGOs are usually tools of
powerful states.
o EG: who does IMF lend money to? Who does IMF not led
money to? Who does IMF lend money to and then not enforce
repayment rules (CLOSE ALLIES OF US and FRANCE!)
o BRANDING
 Short term sacrifice in profit maximization
o PROFIT MAXIMIZATION
o Proprietary standards for industry.
o Maximize Sales
BAPTISTs & BOOTLEGGERs (bootleggers supported
prohibition b/c they didn’t want new competitors)
Domestic Lobbying:
Wednesday, October 14, 2009 09/16/2009
Tragedy of the Commons – NOBEL PRIZE FOR ECONOMICS

MNCs & NGOs

NGOs get power as MNCs get power.

NGOs

 Interests:
o Most are single issue interest groups.
o All NGOs have a few transitory interests:
 Funding
 Remaining Extant
 Attention – Be noticed
 Reputation
 Actions:
o Appeal to Emotive Norms
o Appeal to Executive Branch, Legislature Branch, Judicial
Branch
o Agenda Setting
o Have to decide whether to be ‘insiders’ or ‘outsiders’
 REFORMER – Play nice with powerful people.
 SYSTEM CHANGER – No compromise
 TRADE

A (Very) Brief History of Trade

Factors that affect the size of trade across borders:

o 1) Technology: Easier to trade, more of it.
 Containerization.
 Caravels
 Rail
 Refrigeration

o 2) Economic Organization
 Need some type of trust: credits, loans
o 3) Capital Markets
o 4) WAR – Bad for Trade. International Conflict dramatically
decreases trade:
 Actual Sabotage – enemies try to destroy commercial
trade
 Long term war – greater share of resources to state.
Producing goods with no useful goods beyond killing
people.
 Import competing sectors thrive. And want to stay in
business after war.
o 5) Trade Policy - Tariffs, Non-tariff barriers, trade
agreements, etc.

TRADE:
1) Pre 1860 --> Mercantilism: Fixed sum of global trade. Way to win:
have exports exceed imports, b/c you get gold. AND GOLD IS AWESOME!
Might have to go to war to protect your trade. Economists disdain
mercantilists. They were not completely insane at that time – economic
growth from the beginning of time and 1800.

TOTAL
GDP

BEGINNING OF TIME 1860

2) 1860-1890 -->
 Gold becomes consistent currency.
 Massive technological advancements:
o Transatlantic cable
o Railroad increases x5
 Companies become more sophisticated
 UK liberalizes trade barriers
 Cobden-Chevalier Treaty – Great Britain & France
o Most Favored Nation Status – If either country further
liberalized with another countries, that tariff reduction (or
whatever the policy was), also applied to the other partner.
 New Countries. Germany and Italy were re-unified.
 US was a big whopping protectionist. Russia had a 84% tariff on
manufactures.
3) 1890-1914 -->
 1870 – GB has more railtrack in GB, than LA, S.Af. India, Canada,
Australia combined. By 1914, the periphery has 5x more than GB.
 Vietnamese rice output quintuples.
 South Africa Chocolate exports expand.
 Economic recession --> Popular hostility towards globalization. Took
it out on the gold standard. B/C it was too expensive and caused
deflation. During recession, there was massive deflation.
 Massive waves of economic migration. People are shipping across
border.
o Between 1845-1900, Irish average income grows by .7%
per/year. Irish per capita GDP grew by 1.6% b/c of massive
migration.
 Waning British Hegemony. By 1890 the English trading state was
the largest Trader in the world. But no longer the largest economy.
o Their policy direction drifted back towards closure.
 Trade wars in Europe.
 Rising Agricultural protectionism in Europe (this starts a trend that
continues for the next 100 yrs).
 Rising Industrial Protectionism in rest of world

4) 1914-1945
 WW1
o Blockades.
o Transport costs more than double as result of WW1
o Cost of capital increases as countries leave Gold Standard for
own printed currency.
o Before the war, trade as % of global economic output was
about 25%. After the war, it was about 16%.
o US was undisputed winner.
o US manufacturing output is tripled.
o Continental Europe is dealing with hyper inflation and other
domestic issues.
o US now undisputed hegemon, but US had ZERO interest in
taking on that leadership role. Rejects the league of Nations
and treaty of Versailles. US ABDICATED LEADERSHIP
o Outsources financial leadership role to JP Morgan and Lamont.
 Europe borrowed massive amounts of money from US
banks.
o CFR founded during this period as internationalization
advocate.
o Anti-dumping bills created.
o 2000 US tariffs raised on some good or product.
o With US abdicating leadership, Britain tries to take over. GB
goes back to Gold Standard, but at pre-war lb-Au rates.
Stupid!
Rise in MNCs.
Growth in Trade.
In US, it took until 1980 for levels of trade to exceed 1929
levels.
 From 1929 on, DEPRESSION. US Fed. Reserve thought there
was a stock market bubble, so they raised interest rates.
Stock market bubble popped. Massive deflation. Rubber –
1929 – 21 cents / lb; 1931 – 3 cents. / lb.
Massive fallen output. US economy shrinks by 30%.
o Policy Reactions: SMOOT-HAWLEY Average tariff – 52.5%.
Affects over 2000 goods. Canada, Mexico, France, Italy,
Turkey, China, Spain all react by raising tariffs. Egg war
between Britain and Canada. Within a year, 26 countries
levied tariffs against US. DIDN”T CAUSE GREAT
DEPRESSION, B/C it was enacted in 1930, but it SURE AS
HELL DEEPENED IT.’
o Austrian bank closes.
o All major currencies are non-convertible
o Massive drops in Exports.
o Currency blocks.
o Massive shift towards autarchy. Each country engages in a
self-help program to try to boost its domestic economy. In
US and GB, it is Keynesian. In USSR – Collectivization in
Agriculture. In authoritarian countries it is fascism.
o “Let goods be homespun”
o US in 1934 – Reciprocal Trade Agreement Act. Congress
outsources trade policy to President. Allows Pres. To
renegotiate trade deals to up to 50% less than Smoot-
Hawley.

5) 1945-1973
 1944 – Bretton Woods Conference – Chateau in NH
 1947 – Create General Agreement on Tariffs and Trade – little
agreement to reduce tariffs before big agreements.
 1948 – Havana Charter – Ambitious goal of creating International
Trade Organization - US negotiated this with US, LA, GB. US
wanted multilateral, open agreement. GB wanted commodity
protections and LA wanted economic development incentivizing
points. --> One problem: US Congress hated it. Republicans
thought it was too liberalizing. Didn’t want foreign imports coming
in. Liberal Democrats hated it b/c it wasn’t liberal enough. ITO
never comes into existence!
 Left with GATT. Intended to be interim treaty. But we had to build
on it. Didn’t include communist bloc. – Council of mutual economic
assistance. CMEA:> Inefficient economic union known to man. No
convertible currencies. No price system, so trading was difficult.
CMEA promoted mercantilist system if everyone adopted
mercantilism.
 GATT-->
o Most Favored Nation.
o National Treatment. Once a good is imported into country,
you have to treat it and regulate it just as you do
domestically made goods. Tax it with a tariff when it comes
in, but once in, same as all other goods.
o Quotas – made hidden trade barriers more visible and then
reduce them over time.
o Norm – Agriculture is not covered under GATT (US idea).
b/c Great D. started partially due to dust bowl hurting
ag. Commodities.
o GB could keep preferred trading status.
o Customs Unions: Reduces tariffs within custom unions (trade
promoting unions (EU, for example)). Simultaneously create
more trade, but also divert trade. NAFTA Creating a lot of
trade between US-CAN-MEX, but diverted it from other
places. EG: Mexico wanted NAFTA b/c it diverted trade with
US from China to Mexico.
o Dispute settlement – need consent of violating organization.
o GATTS winds up being very successful. Six rounds of GATT
negotiations before WTO is created.
 o From post-WWII to 1960s Global output triples, trade
increases by factor of six.
 Import Substitution Industrialization (ISI) - Raul Prebisch (ARG) –
observed that commodity markets function differently than
manufactured goods markets. If you liberalize commodity market,
prices inevitably go down. With manufacturing, the effect on prices
was more ambiguous. b/c mnf goods more heterogeneous.
 If all you are exporting is commodities then eventually you’ll be
screwed. Prebisch argued that there should be policies that protect
infant industries in LA. So in LA there were massive barriers to
Manufactured Goods imports (as in other developing countries).
 ISI by and large Succeeded. LA is mostly industrialized. Still, GDP
is low. Demand for imports didn’t decline. Saw luxury goods
demand increase, overvalued currencies and manufacturing sectors
that were ridiculously uncompetitive. Brazil exported less than 1%
of manufacturing output. As result, ISI countries suffered from
massive balance of trade deficits. They responded by devaluing
currencies, which lead to coups and dictatorships.
 Newly Industrialized Countries (NICs) Japan, SK, Sing, HK – no real
natural commodities to export anyway. ‘We will pursue policies
that protect our home markets’ Export Promotion. Purpose: We’ll
give you the domestic market, but you have to be able to export
and compete globally. ALTERNATE TO ISI
 ISI a lot of manufacturing, but none devoted to exports.
 Export Promotion – much of manufacturing devoted to exports.
 1973- US runs first trade deficit. GDP growth slows.
 As US GDP declines, Japan and Germany GDP increases. By end of
this era, Japan is second largest economy.
 1983 – Death of ISI – Export promotion strategy takes over. DEBT
CRISIS in LA. US (Volker) sets interest rates over 20% to curb
inflation. Developing countries can’t afford that.
 Prior to 1973, trade is between firms and countries. Post-1973,
trade grows between firms. Neo-classicist economist predict that
trade grows between LDCs and MDCs, but, that doesn’t happen.
US-->EU-->JAPAN
Strategic Trade Theory:
6) 1973-1990
7) 1990-2008

 Knowledge of
Wednesday, October 21, 2009 09/16/2009
Trade: Non-Strategic Trade Theory

How do you know what trading partners will say they have
increasing rerurns to scale

Non-tariff barriers:
 Anti-dumping.
 Countervailing Duties.
 ¼ of all traded goods covered under some sort of non-tariff barrier.
 For textiles, there is the Multi Fiber Agreement -->
Bangladesh benefitted most from this.
 Steel: Trigger price mechanism. Carter Admin. If foreign steel
drops below a certain ‘trigger’ price, we conduct automatic
investigation in anti-dumping.
 Voluntary Export Restrictions (VER): Japan, what if you voluntarily
restrict exports of autos to US? Do us this favor. By the way, we
protect you from the Soviet Union. Japan agrees.
o Consumer prices go up, not as many cheap jap autos in the
market.
o Government loses too, b/c no import taxes.
o US Auto makers win, but b/c of lack of competition, quality
declined.
o Japan got the bright idea of exporting Acuras and Lexuses,
luxury cars with higher profit marines
 In Japan 60% of imports from US were subject to some sort of non-
tariff barriers.
 After Kobe earthquake, Motorola offered to export cellphones for
free and Tylenol for free. Japanese Department of health argued
that the Japanese anatomy was different and Tylenol pills were too
big, so that US couldn’t export Tylenol.
 Uruguay round: more regional emphasis. Countries pursue this
strategy b/c of fear that GATT would break down. Triggered by the
fear that big countries were going at it alone (namely US).
1990-2008
 Massive productivity increases
 Internet
  GATT converts to WTO.
 WTO more significant:
o Actual mechanisms for enforcement.
o Most countries join, including developing counties like China.
o Unlike 70s, developing countries adopt Washington
consensus.
o Trade barriers drop.
o Blowback:
 Countries start engaging in multilateral agreements
outside of WTO.
 Populist reaction to trade epitomized by ‘Battle in
Seattle’
 Drivers of trade: absence of war and technology
Why FDI?
 Transaction Costs lower
 Product Cycle: Production moves to cheaper labor sources.
 Increasing Returns
 Comparative Advantage:
 Leapfrog protectionism.
 Multinationals are better at Politics that domestically-based firms
FPI: Foreign Portfolio Investment (Stock, Bonds, other interest bearing
assets).

FDI started out as extractive resource.

Pre-1900:
 Security not an issue, b/c investors had back-up of national forces.
1914-1950
 Mexico starts nationalizing production facilities.
 USSR starts nationalizing. They offer compensation, but then say
that the Allies will pay those compensation.
 Stages of grief: anger- invade; barter, accept.
 During WWII – out and out nationalization. US nationalized german
companies, English did the same, etc etc.
 Havana charter that proposed ITO, also discussed including
investment in ITO. Developing countries opposed it. One of
reasons that Democrats opposed ITO was that it didn’t allow for
liberal enough provisions on investments in developing nations.
Post-WWII:
 Coups – Chile, Guatemala – b/c of attempts to nationalize.
 Seven sisters (oil companies in Iran).
 Heights of nationalization.
 Major Oil producers start seizing private companies’ oil faciilites.
Seven sisters controlled 60% of oil production, but in 1973 – 25%
 Andean pact – Andean countries pledge that 25 years later no more
FDI.
 Rather than just compensation (what the nationalized asset was
worth), adequate compensation (we’ll pay whatever we want to pay
you, a ‘socially fair’ amount)
 New International Economic Order (NIEO)
o Mandated Tech transfer
o Limits on profit repatriation.
 UNCTAD: UN Committee on Trade and Dev.
o Mandates of NIEO
 G7 still has control over WB and IMF.
1990s
 Host country preferences recognize that they are profiting from FDI
 OED countries get together and form MAI – Multilateral Agreement
on Investment. – Common code of investment that all OED
Countries would follow.
 MAI:
o No more onerous conditions on FDI.
o Dispute settlement mechanism.
o Code to limit investment incentives. Race to bottom –
countries/municipalities offering ridiculous tax incentives to
attract foreign companies (think dollar game).
o Regulatory takings conditions: If you impose restrictions on
company, that amounts to a de-facto nationalism and that
company deserves just compensation.
o Doesn’t work very well.
 MAI ISSUES:
o Cultural issues – Euro Disney
o Helms Burton – Sanctions to back stop trade embargo with
Cuba. Executives of companies operating in Cuba would be
subject to arrest if they entered the US.
o 1998 –France pulls out of MAI and se fine!
 BIT: Bilateral Investment Treaty
o Germany-Pakistan – first BIT – 1989-1999 1742 BiTs signed
o Currently have 2181 BITs
o US has a form letter for writing BITs
o
 Renewed hostility to FDI – but now hostility coming from developed
countries – b/c developing countries now have MNC!

Monday, October 26, 2009 09/16/2009
4 Recent Trends

1) Growing Hostility to FDI

 EADS
 Racism – ARCELOR – biggest European steel company (in
Netherlands) was going to be bought out by an Indian firm,
but the EU was opposed to a ‘brown takeover’ and instead
sought a Russian company as a buyer.
2) Growing LDC MNCs –
 Infosys, Tatta, Lenovo
3) SOE – MNCs
4) FDI based not in extractive industries, but in services.
Outsourcing, Intellectual Property Rights Strengthen

Money & Finance

 Monetary Relations: Currency Convertibility and Exchange
Rate Regimes
o Current Debate on Dollar/Won exchange rate.
o How do these regimes retard or promote trade?
 Capital Market Regulation
o Coordination of rules and standards designed to assist
global capital markets.
o Not concerned with trade accounts, but rather capital
accounts.
o FDI,
o Foreign Portfolio Investment
o ‘Hot Flows’ (hot capital – money moves very quickly
across borders – speculatory arbitrage. )
o Carry Trade: Borrow money in low interest context and
invest in country with higher interest rate.
 Macroeconomic Policy Coordination
o Coordinated Fiscal and Monetary policy.
TERMS
Money – Commonly accepted good or token used by a society
that fulfills three functions:
 Unit of Account – Functions as a metric to measure value.
 Medium of Trade – People actually use it for trade.
 Store of Value – Money is considered intrinsically valuable.
SDR: Special Drawing Right. IMF created this in 1968.
 Basket of currency: Dollar, Yen, Euro, Pound
Fiat Money: a money that has no intrinsic value.

Nominal Exchange Rate:

e = Local Currency / Foreign Currency
Real Exchange Rate: Price Level of Non-Tradables.
 Real Exchange Rate = (e*P^n) / P
 In theory nominal exchange rate should converge at real
exchange rate.
o But in reality, it moves awkwardly towards RER, but
never gets there. Capital markets are one retarding
factor.
Balance of Payments: What money is leaving your country and
what money is coming in:
 Consists of two components:
o Capital Account: Balance flows of capital going to and
from.
o Current Account: Primarily consists of balance of trade
o Capital Account = Current Account
 If you run trade deficit, you have to run an equal
capital surplus.

Fixed Exchange Rate: Government pledges to act in the market

to buy or sell currency to make sure that our currency is pegged to
some mark. High Gov’t intervention.
 Floating Exchange Rate: Gov’t allows private market forces to
determine value of currency.

Dirty Float : Some Gov’t

IN THE BEGINNING:
 Money made of precious metals
 Gresham’s Law: Bad money drives out good money.
o Let’s say the gov’t says 1 gold coin is worth 18 silver
coins.
o But the market says 1 gold is worth 16 silver coins.
 So the arbitrager sells gold to gov’t for 18 silver
and buys gold on market for 16 silver. Eventually
gold leaves market (b/c the gov’t buys it) and the
market value goes up.
 UK was on a gold standard
 “As Master of the Mint in 1717 in the "Law of Queen Anne"
Newton unintentionally moved the Pound Sterling from the
silver standard to the gold standard by setting the bimetallic
relationship between gold coins and the silver penny in
favour of gold. This caused silver sterling coin to be melted
and shipped out of Britain.”
 Bimetallic Standards: GOLD AND SILVER: WHY?
o Both were useful
o Even though there were occasional supply shocks,
surprisingly little volatility.
o Brissage: Cost of shipping of gold and silver (VERY
HEAVY)
o Some level of Int’l cooperation. Latin Monetary Union
was an arrangement in EU in late 19th c that regulated
common standard of purity for silver coins.
o
 1879 Classical Gold Standard
o Gold Standard had bouts of serious deflation, b/c there
wasn’t bimetal standards in US.
 Pound is Medium of exchange, Sterling is Unit of account.
 Countries were willing to deal with inflation or recession to
ensure that gold standard was preserved.

 Only 6 adjustments in exchange rates between 1890 – 1914
WWI:
 Countries go off Au Standard and start printing money willy-
nilly.
 Interwar Gold Exchange. Significant Economic Shocks:
Germany has to agree to indemnity of ~$40 Billion (in
today’s dollars). At same time UK and France owed US
massive sums of $$$ from loans to finance war.
 Political Shocks: Expansion of voting franchise (Most men,
and some women)
o Expansion of Voting Franchise ratchets up expectations
of Govt (welfare state)
o Social Democratic Party arises.
o Communism rises.
o Dramatic shrinking of cabinet security (duration of
governments) to about 18 months in office.
 In 1922 – International Monetary Conference in Genoa: Let’s
get back to gold standard.
o Agreement: peripheral countries would take whatever
gold they had and deposit it in London’s major financial
firms. In return, they’d get convertible currencies.
o Continued UK colonized policy
o Also minimized gold coinage. Allow for gold standard
without having to have all that gold. GB, FR, and US
would all make gold available and convertible.
o League of Nations (that era’s UN and IMF) – could loan
money to nations.
o US doesn’t send political representatives to Genoa,
rather bankers like Edward Kemeror:
 Jeff Sachs of his era.
 Was prostheletizing Gold Standard.
 Wherever Ed
Monday, November 2nd
09/16/2009
MONETARY POLICY

Y: C+I+G+X-M-T
(GDP = Consumption + Investment + Government Spending+ Exports
– Imports – Taxes)
Y = C+S
(GDP=Consumption + Savings)
C+S = C + I + G – T + X - M
S-I = (G-T)+(X-M)

Although US runs huge trade deficit against china, No depreciation of

Yuan, b/c China is buying massive amounts of dollar-denominated debt.

Macroeconomic Policy Coordination: What circumstances

encourage this?
 1) Global Crisis: It is likely that global crises are triggered
by lack of MPC.
 2) Rising Macroeconomic Imbalances: For Eg: A country
runs a huge budget deficit (or surplus) or tight monetary
policy (with double digit real interest rates) or massive
Trade surplus/deficit.
o Some market mechanisms usually push imbalances
back toward equilibrium. IF they don’t, something
might be screwy.
o Negative Trade Externalities.
o Large budget deficits push up interest rates
o Larger the imbalances , the more jittery markets get –
on the look out for policy signals.


LOW SUPPLY
 A)THE GOLD STANDARD:
o Deflation was tolerated (despite crippling effects)
o Willing to tolerate recession to have coordinate
 o Minimal political pressures for govt to diverge from
thses polcies
 Limited understanding of connection between intl
pol. Coordi. And domestic effects.

o Fair amount of cooperation, but the world doesn’t look
like this now.
 B) 1920’s Isolated episodes of
 C) Bank runs, loss of faith in ability of major western
countries to coordinate.
 D) Bretton Woods –
o Significant capital controls so link between exchange
rate and macroeconomic policy gets severed.
o Unholy trinity
 Fixed exchange rates
 Capital mobility (bretton woods gave this up and
could pursue ‘embedded liberalism’)

Attempts to coordinate Macroeconomic Policy:

A) G-7: Only works as coordination mechanism when things get
really out of whack, like during 80s when US dollar was severly
overvalued.
- Low incentive to adjust.
- Easier for surplus countries to maneuver with monetary + fiscal
policies.
B) Structural Impediments Initiative:
o Japan – US
o US: Japan needs to allow large retailers to set up shops
and provide a stronger social safety net so that people
can consume more.
o Japan: US needs to consume less and save more.
o Somewhat successful. GHWB raises taxes in 1990,
Clinton in 1993 – reduces budget deficit.
o Unclear if these steps were related to structural
impediments initiative.
C) EU
  Maastricht criteria would allow countries to stay out of
reckless fiscal spending and get the benefits of being part of
the euro --> Growth and Stability Pact (GSP)
 FR + GE liked this b/c it made Euro comptetitive to the
dollar. IT liked it b/c it helps knock off zeros from lire.
 By 2005 – the three largest economies, FR, GR, IT are not
compliant with the growth and stability pact. EU took the
countries to court. So GSP was rewritten. (IT WAS STUPID,
ANYWAY).
D) G-20: Proposed mechanism to address persistent
macroeconomic embalances. Did this in Fall 2009 in Pittsburg
Summit.
 Countries engage in peer-to-peer evaluation of
macroeconomic policy.
 Will this work? Quien Sabe…
 Peer-to-peer surveillance allows countries to monitor
without being overly saction-monius!
 More like Pacific Rim. Could work well…. But
 But, we are seeing it as ineffective already. China is not
listening to global whining about the RMB.

US Politicians need a better cover to reduce budget deficits

than saying: China wants us to!

1) Distributional Costs
 Adjustments carry relative sacrifices. Difficult to gain
political capital for these adj. better to influence other actor
to change instead.
2) Prisoner’s Dilemma: In response to 2008/2009 Crisis
(FISCAL STIMULUS)
 Most big economies agree that governments need to engage
in aggressive spending.
 Most govts like this (+jobs +investment + services), except
those that have been burned but hyper inflation in the past.
  Germans for example, don’t have to worry about domestic
stimulus, b/c if China, US, UK boost spending, Germany’s
export-driven economy benefits without having to increase
fiscal spending!
Reduces incentives for all countries to cooperate.
Could help reduce this by enforcement… but…..
3) No Enforcement Mechanism – so incentives to coordinate
dissipate.

DREZNER NOT OPTIMISTIC THAT G-20 WILL WORK. PERHAPS

SOME POLICY EDUCATION…

INTERNET: What are the Internet’s Effects in the GPE?

 Completely New:
o Most topics so far have very long histories.
o Reduction in time and cost of information exchange is
unprecedented.
o Good symbol of globalization
 Paradox of ‘Globalization Studies’
o Friedman: World is flat. States look clunky and
obsolete.
o Awesome means for communication
 Creation of Internet: (Previously known as: ARPANET) – for
gov’t purposes. Means of communication post-nuclear
attack.
o Decentralized network. Couldn’t cut out 1 node and
destroy network.
 No Centralized Regime that governs the internet.
1) WHY NO SINGLE REGIME?
2) WHY NO DISAPPEARNCE OF STATES?
 Stringent regulation of internet that varies from country to
country. Why are they able to do this?
3) EXPLAINING VARIATION IN REGIMES
 1) US Department of Commerce: Controls Root Server
2)MNC’s
 Intellectual Property
 Free Reign
o Sales
o Marketing
3) GEEKS
 Left-libertarian Outlook:
o Internet should be free (OPEN SOURCE)
4) Developed Economies:
5) LDCs
 Want to control political externalities while enjoying the
positive commercial opportunities
6) IGOs: See Internet as a great big opportunity for regulating.
7) NGOs: Want info to be free. Exploit all possibilities of
internet and allow unfettered access to it without Govt or MNC
involvement.
November 4, 2009 09/16/2009
Divergent restrictions

NORTH/SOUTH
DIVERGENCE
CONVERGENCE
Content
Data Privacy
DIVERGENC Regulation
E

US/EU

IPR Technical
Protocols
CONVERGE
NCE

Regulation is never fool-proof : You could buy Nazi propaganda in

France if you really wanted to, but the barriers and risks are high.

Illegal to own a laptop in Myanmar.

In US, paranoia that the gov’t will have too much info.
In EU, paranoia about MNCs getting too much info.

In developing world: Not too concerned

Data Protection Directive: A EU law that protects user info

online
 In US, Americans wanted private standards, not gov’t
controlled directive.

US and EU Agree to SAFE HARBOUR:

 Rival standards outcome (US and EU have different
standards)
 Outcome: hypocritical regime
 US compliance not so great
 EU doesn’t really enforce safe harbor accord.
 Situation of benign neglect: like don’t ask don’t tell.
 US wants into EU market
Convergence in Technical Protocols:
 Everyone agrees, but there are still politics:
o EG: Domain names: DNS
 Internet used to be run by geeks.
 As internet commercialized, increased desire for
top-level domains: .com, .edu, .org, .biz
 ITU has meeting on ad-hoc in Geneva, but no
consult with EU or US gov’t.
 EU doesn’t like ad-hoc agreement b/c the US has
too much control.
 US doesn’t like it b/c it wasn’t consulted.
 US writes white paper on internet. Big town hall
meeting with a lot of geeks. The geeks hailed this
as the internet’s constitutional convention.
 But there was also a separate track: the US was
also negotiating with the Internet Task Force,
Japan, Australia and the EU to create ICANN:
Internet Corporation for Assigned Names and
Numbers (Non-profit registered in California).
 Great for Governments. Gov’ts have privilege, but
relatively opaque access. B/C it is not an
international corporation, no need to publish
public records.
 Furthermore the core of the internet remains with
US govt.
 EU likes this b/c they get somewhat more access
than under ITU.
 Some gov’ts upset, and there were efforts to
create alternative sources of authority.
 WSIS: Equivalent to UN of internet – utterly
ineffective.
 INTELLECTUAL PROPERTY: Incentives R&D and creativity
o 1) Patents
 Tech know-how or invention
 Process or product
o 2) Copyrights
 Creative works: books, films, art, music
o 3) Trademarks
 Logos, brands

 For intellectual property producers we want protection.

 For intellectual property net consumers (dev. World) we
want dissemination.

1883 Paris Convention:

 Covers patents, trademarks and industrial design.
 Foreign patent holders and domestic patent holders treated
equally.
 Right of priority (to sell or disseminate) belongs to patent
holder.
1886 Berne Convention:
 Extends norms of Paris Convention to Copyrights.
 If you publish a book (for example) in any signatory country,
you effectively have a global patent.
 US doesn’t sign until 1986!!
1893 WIPO
 Enforcement agreement.

US is the biggest problem country during this period.

Three most important patent-dependent industries:

  Pharmaceuticals
 Entertainment
 Software
 IN THESE THREE INDUSTRIES, MANUFACTURE OF PRODUCT
IS LOW COST. DEVELOPMENT IS HIGH COST.

GSP: Generalized system and preferences: lowered tariffs for
technology.

By late 80s. US creates ‘ Super 301’ where US determines

which countries were not compliant with patent law and therefore
vulnerable to trade sanctions.

Pfizer and IBM lobby to have intellectual property rights on GATT

agenda in Uruguay round.
 Pfizer and IBM lobby to get EU and Japanese companies to
lobby their gov’ts to get Int.Prop. on Uruguay Agenda.
 MDCs out-gun LDCs on IP.
Geographical Indicators:
 Darjeeling Tea, Basmati Rice, Scotch, Tequila, Bourbon
US MAJORILY EXPLOITED THIS:
 US Gov’t has to make complaints on behalf of companies.
 AIDS is different than most pandemics:
o Most pandemics hit old and very young: not a big deal
for economy.
o AIDS affects working population the most – major hit
to economy.
 So US says it is a security issue (Dec. 1999).
o
Monday, November 9, 2009 09/16/2009
2008 Financial Crisis

HTF did this happen?

A) Bretton Woods II
 No more loans from IMF with embarrassing strings attached.
 Wanted Fuck You money – allowing them to go to IMF during
economic crisis with out hat in hand.
o 1) Asian accumulation of dollars.
 Currency reserves as percentage of GDP at
unprecedented levels.
 What are opportunity costs?
 Use $$ to buy:
 a) Cash
 b) T-bills
 c) GSE: Government Sponsored Enterprises
(Fannie Mae and Freddie Mac) – buying
mortgage backed securities from FM^2
 d) Equity (stocks)
 e) Buy real estate
o 2) Pegged, Undervalued exchange rates –
o 3) US – Led Consumption Growth
 US consumption rises to 72% of GDP
 China’s, by contrast, is 35% of GDP
 US Current Account Deficit is $800B – 7% of GDP,
1.7% of Global Output!
 Currency speculators eyeing this. Major risk of
run on $$
 o CHINA – Net exports 25-35% of China’s GDP growth.
Chinese implicit compact: we provide better than

8% growth, you don’t protest or mass in the
streets.
 China’s only development option is to create a
viable export sector.
 Chinese government can’t mess with this, b/c it
would also mess with their only reliable engine of
growth.
o OPEC:
 also doesn’t want to screw with this. Their
financial markets can’t handle the surplus
revenues they are generating from sale of oil, so
they invest in US financial markets.
 OPEC- US consumption is fueling their success
o US: Could have mitigated risk, but the political costs
were too high
FOR EACH MAJOR PLAYER, ADJUSTMENT COSTS TOO HIGH TO
SHIFT FROM STATUS QUO.
 Massive Capital Flows going into the US:
o (Opposite of Classic position: capital should be flowing
to the places with least capital)
 Greenspan Put: the guarantee that if there is a crisis, Alan
Greenspan will cut interest rates. This causes asset prices to
go way up. A lot of capital sloshing around, limited amount
of assets, so prices go up.
 Economists were worried, but about a run on the dollar.
What really happened was a crisis pertaining to where the
dollars were being invested.

B) FINANCIAL DEREGULATION, INNOVATION

 Elimination of limitations on Stock Trading.
 Causes stock brokers to lower brokerage fees
 Market forces also influenced firms to engage in riskier
behavior to generate profits.
o 1) Use of Derivatives
 o 2) Greater use of Leverage
 Higher rates of borrowing, lower capital
requirements.
o 3) Glass /Steagall
o 4) Basel II
 Mark-to-Model
 INNOVATION:
o 1) Hedge Funds + Private Equity
 Designed to secure investments from undue risk
o 2) Subprime Mortgages:
 Adjustable rate mortgages
 Interest-only mortgages
 2008 – $2 Trillion tied up in subprime mortgages.
o 3) Securitized Mortgages
 The bank that gets the mortgage sells it.
 Mortgage is a bond – if we can sell the mortgage
as a bond, we can get our money upfront.
 But, if the original issuer could sell off mortgage
bond, the buyer would have little information
about mortgage.
 In theory the bond agencies would rate the
mortgages through counter party
surveillance.
 But these get securitized and packaged and
no one party has enough of these ‘bonds’ to
worry about enforcing strict counter party
surveillance.
 Credit Default Swaps created to hedge
against downside risk. It is a bet on the
performance of the underlying bond. This
allowed investment banks to set up a
‘Fantasy Football version’ of the housing
markets. You create secondary markets that
reacted to the ‘real’ real estate market.
o 4) Prime Brokerage Firms: ‘RE-HYPOTHECATION”
  Investment banks start to function as banks for
hedge funds and private equity. The prime
brokerage firms took this money and invested it
somewhere else. Like:
 The Carry Trade: Borrow money from low
interest places and invest it in places with
high interest rates (Iceland, for example).

 C) PREVAILING IDEOLOGICAL CONSENSUS:

o Efficient Market Hypothesis
o Great Moderation: Until 2008, every recession since
1929 was shorter and less-damaging than the previous
recession. This rests on the belief that Monetary Policy
was simplier than we realized:
 Focus on keeping interest rates low
 Cut interest rates when it looks like a recession is
starting to brew
 Don’t worry about asset bubbles
o A Generation without a recession (since 1987).
“Financial crises happen in other countries”
Risk management is a science.
o Asset valuation models: Very little probability placed
on extreme out of bounds events.
o Private Graders: Moody’s trusted.

 D) POLITICAL ECONOMY OF BUBBLES

Wednesday, November 11, 2009 09/16/2009
2008 Crisis – Cont…

 4) Political Economy of Bubbles

o As an investor, if you think that everyone else will
invest in a particular asset, it is rational to invest in
that asset, even if you don’t believe it is the strongest
asset. Even if you think an asset is overvalued, if
everyone is investing in it, you should too.
o People were pointing out overvaluation of some of
these assets (Cassandras), but they were often
assholes. Not often socialized (you have to have an off-
kilter perspective to go against the flow). Often raving
egomaniacs.
o A few characters shorted all mortgage companies
around. Started going to all stockholder meetings and
telling CEOs that the default rate was going to be 50%
in one year. But these people were disregarded as
cranks.
o Futhermore, the longer it takes for these Cassandra
predictions to come true, the more disregarded is the
Cassandra.
o CHEAP CREDIT:
 Whole new class of homeowners, which in US is
generally seen as a positive thing.
 Asset prices go up up up. (in interest of new class
of homeowners)
 Savings decrease. If capital gains are shooting
up, no reason to save.
 Because asset prices rose in unimpeded manner
for almost 20 years, you started to see strange
behavior.
 Flippers + Chartists
 Politics of Counterfactuals:
 Easy to say we are living in an asset bubble
and that something needs to be down.
  If someone had regulated this growth, they
would have caused a recession. But they
would have averted financial crisis. BUT,,, it
is impossible to prove that this crisis would
have actually happened and the regulator
would have been blamed for causing the
recession.
 BERNAKE: Capital rushing into the United States
--> b/c US was looking good. A dynamic market.
Thriving market, deep capital markets, no where
else looked good.
EICHENGREEN: Dark Matter Hypothesis – US
investors outperform foreign investors. US FDI
outperforms foreign FDI.
 So bubble bursts and subprime mortgages
become ‘toxic assets’ . Banks holding massive
amounts of these assets, but no one wants to buy
them. Not usually on books.
 General belief is that sumprime mortgage brokers
will go under, but that this won’t affect wider
housing market.
 We are in a recession. Fed and other Central
banks trying to provide cheap credit to financial
sector.
 March 2008 – Bear Stearns goes under.
o LIBOR: London Inter-bank Offer Rate
 Starts shooting up in March 2008. This means
that banks lose trust in other banks.
 FED responds by lowering interest rates, increase
credit facilities and they start arranging for failing
firms to be taken over.
 Balance Sheets for Fannie/Freddie look awful.
 September 2008 LIBOR Shoots up.
 9/7/08 – Treasury Dept. steps in to say that they
will start a gov’t conservancy of FM/FM but…
9/15 --> Lehman Bros goes under.
  When LB went under, no one understood the role
LB had in credit default swaps.
 9/16 Treasury buys 85% of AIG – the primary
holder of credit default swaps. Bad news, as all
companies want to cash in on Credit Default
Swap.
 As Lehman goes under, any firm that held assets
with LB is in deep trouble. The first firm that is
affected by this is the Reserve Primary Fund (a
friggin Money Market account!) ---> RPF broke a
buck. $1 share of RPF = less than $1. ALL HELL
BREAKS LOOSE. Every financial investor says that
if RPF goes under, nothing is safe anymore. So
there is a run on the financial sector.
 LIBOR goes from 50 basis points to 350 basis
points.
 TED SPREAD: Dif between LIBOR and US Treasury
Bonds shoots up.
 GWB is at best a lame duck. And he never really
opens his mouth about the financial crisis.
 During crisis, GWB defers to three people: Hank
Paulsen, Tim Geitner, and Ben Bernake.
 Congress is asked to pass TARP: Temporary Asset
Relief Program.
 Congress doesn’t pass it. Stock market falls 8%.
 Politicians saw the counterfactual. When public
saw TARP wouldn’t pass, the stock market tanks.
o Sovereign Wealth funds invested at the very peak of
the bubble.
o Iceland’s debt: 850% of GDP
o Switzerland: UBS alone had outstanding debts
equivalent to 600% of Switzerland’s GDP.
o Once LB and RPF goes under you see flight to quality.
o Chinese government let’s US know that they are
thinking of selling FM/FM assets (one reason the US
gov’t bought FM/FM).
o QUALITY = US T-Bills. Determined to be the safest
investment.
Monday, November 16, 2009 09/16/2009
2008 Crisis

Financial Sector loses $4Trillion

Totl Asset Decline 50 Trillion Globaly

Debt to GDP prior to crisis: 40%,

Debt/GDP post-crisis = 80%

In the fall of 2008 some argued it was just financial crisis

Estimate that 2009 World Trade will decline by 9%

1) Efforts at Policy Coordination

 G-7 Leaders on the phone daily
 BRIC
 Sarkozy suggests we have a global crisis meeting. Bush
suggests convening the G-20.
 G-20 developed out of Asian Crisis as an action by the G-7 to
be more inclusive.
o {G-8 + O-5 (China at Kiddie table for Thanksgiving)}
(Didn’t convene)
o Pledge to refrain from trade protection
o Pledge to launch fiscal stimuli
o Pittsburg – pledge to pursue more balanced marco-
economic policy.
o Request by G-20 to have IMF, WB, WTO to conduct
surveillance of G-20 actions to make sure they actually
follow through on pledges.
 o Central Banks also meet.
 G-10 + China agree to joint interest rate cuts
 G-7 Agree to unlimited currency swaps.
o Primary concern that there might be a run on a
currency (forget run on bank, a run on a country). But
by pledging unlimited currency swaps, they protect
against this.
 This made currency speculators think about un-
secured currencies like SK, Sing, Netherlands. So
G-7 countries start agreeing to unlimited currency
swaps in key economies.
2) RESCUES:
 US:
o Banks: Merrill Lynch, Wachovia, WashMu,
o TARP: Direct Equity Injection into Bank
o Fed agrees to act as insurer to whole array of
industries that its never meddled with before through
actions like commercial paper funding facility. Money
Markets insured by Fed.
o Bailouts of Auto Sector: GM + Chrysler.
 EU
o Germany, GB, bail out banks,
o Swiss pledge 60 B to pay off UBS’ bad debts
o Iceland:
 Start seeing capital surplus countries
 Russia and GCC buy stock to keep prices
escalated.
 China allows massive credit bender.
STIMULUS:
 Obama: $750 Billion Fiscal Stimulus
 China: $580 Billion Fiscal Stimulus
o Only 25% came from Beijing. But the rest came from
local regional govt and national development banks.
o So, not really as strong as they had pledged.
o Also, targeted at investment, not consumption, which
could potentially exacerbate the problem.
  BRIC:
o India: $4 Billion Dollars
 EU: Squabbles amongst self.
o Germany deplores crass Keynesianism the rest of the
world is obsessed with.
o Rest of EU have automatic stablizers.
 QUANTITATIVE EASING: Print Money.
o Chinese lending institutions lend $855 Billion dollars.

TRADE/FISCAL
 If everyone engages in fiscal expansion, trade doesn’t change.
 But, if you are Germany and you know that other countries are
engaging in fiscal expansion and that your economy is dependent
on exports, you can do nothing and ride free.
o It this happens, USA introduces Buy-American and China
passes Buy China.
TRUST: Little trust in financial markets. Not a lot of lending
either.


Authoritarian Capitalist Countries become more authoritarian:
 Sovereign Wealth Funds turned inward
 Russia seizes assets
 China

LONG-TERM: L, U,W
 L–
o Look at how countries have recovered from financial crises in
the past
o 8/2007 – 8/2008 – Central banks were working hard to stave
off crisis, but it didn’t work
 o Housing Crisis fell by 35% over the next six years (relative to
start of crisis)(Reinhart and Rokoff)
o Equity Market fall by 55% over the next 6 years.
o Unemployment should spike by 7% (US is almost here)
o Flat Growth for a while.
 U–
o Interest Rates at historic lows.
o Massive Fiscal stimulus packages
o IMF’s target was fiscal stimulus equivalent to 2% of Global
GDP: They hit 1.8%
o Zarnowitz Rule: As hard as we fell, so fast will we rise again.
 W– WE ARE IN NO-MAN’S LAND
o HUGE CRISIS + HUGE RESPONSE = VOLATILITY
o Recovery caused bubble?
o Uncertainty about value of toxic assets
 Might be worth less, might be worth more
o Monetary Policy usually takes 14-18 months to cycle through
economy.
o Threat to Central Bank independence. Central Bankers were
too lax in their policies towards credit. Simultaneous
legislation trying to curb their powers, right when they have
to raise interest rates.
o MASSIVE POLITICAL UNCERTAINTY!!!
o Financial Regulation is a big WILDCARD. WHO KNOWS?
o BUBBLE CRASH BUBBLE CRASH BUBBLE CRASH --> $$$
Wednesday, November 18, 2009 09/16/2009
BRIC
 1) Why Them?
 2) How Powerful?
 3) Preferences?
 4) How Cohesive?

OPEC – Never really made it

NIC - Now Middle Income Countries.

Usually with developing countries, 3-5 year bursts in static economic

growth are common.

Key to IDing rising powers is to make sure they continue to rise.

In 1997, Jeffery Garten referred to ‘Big 10’

 Brazil, Mex, Arg, Poland, South Africa, South Korea, India,
China, Indonesia, Turkey
Then the IBSA
Then O5 – Brazil, China, India, South Africa, Mexico
 China and India paranoid – they were in the minority. Mexico was
in OEDC, Brazil and South Africa were pro-West.

In 2003, Goldman Sachs comes out with BRIC idea: a lot of common
strengths:
 Sizeable Land mass
 GDP over $1T
 Population over 140 Million
 Foreign Exchange reserves over $200 Billion – none are truest
vulnerable to international crisis.
 Attracting significant Inward FDI / and have MNCs engaging in
outward FDI

BRAZIL
 Richest of BRIC economies, but smaller pop-wise
 Abundant natural resources
 Energy Independent –
 Water and Food independent
 Best security situation within the BRICs, hegemonic power in Latin
America. Pretty good friends with US.
RUSSIA
 Demographics
 Heartland
o McKinder – whoever can control heartland can control
rimland.
HOW POWERFUL ARE THEY?
 Reversion to Historical Trend
o India + China biggest economies in year 1
o India + China biggest economies in year 1500
o Stronger tech, military, navy, etc.
o THE ANOMALY HAS BEEN THE LAST 200 YEARS!
 Technological Diffusion Long Waves:
o Tech origins in hegemony. They burst ahead / break away!
o Than stasis kicks in, diffusion of tech from core to periphery.
o Now BRICs can leapfrog tech. Don’t have to invest in
landlines, and can invest directly in wireless capabilities.
o
 Russia is a big version of Kuwait – 80% of economy falls under:
energy, metals, or timber
 India is most vulnerable strategically. The most politically insecure.
o New Economic Order was never imposed
o India still sees itself as a wretchedly poor, predominantly
agricultural economy.
“GHANDI WAS FUCKING INSANE – I can not stress this
enough.”
 Total Luddite -
 The only power that could expand without making people nervous is
the EU.

Preferences:
 Poor
 Anti-American
 Resisted Washington Consensus
 Varieties of Capitalism that are inefficient

 Public opinions about free trade in each of these countries are more
simpatico with US populations that US public!
Cohesion?
 Cleavages:
o Per capita income: Brazil and Russia well ahead India and
China
o History: China and Russia have always been perceived as
great powers and have many of the perquisites of the great
powers (IMF). India and Brazil have always been at the
kiddie table.
o Regime Type: Brazil and India: Democracies; Russia and
China not so much.
o Consumer v. Producer
 China and India will be consumer states
 Brazil and Russia will be raw material producers
o Security Tensions: Russia, China, India have a few security
tensions to deal with. Russia:China; and China:India. Brazil
is OK here.
  Disputed China-India border. Russia-Chinese have
border dispute. China-India-Pakistan – wonderful
mess.

o
o dsdf
Monday, November 23, 2009 09/16/2009

STATE POWER IN THE ECONOMY

 State has played an important role

o Creation of bond markets
o Property rights protection
o Some concern that if US were to retire all debt, it would
destroy the bond market.
o Direct State ownership
o Government actors assume risk during crisis.
 Not a new phenomenon: 5 big state actors:
o 1) State Owned Enterprises
Oil, pipelines, utilities, etc. – Goals are still profi-

oriented and act like other firms on the global stage.
o 2) Central Banks
Hold large amounts of security reserves to preserve,

protect and intervene in currency markets.
 Hold onto this money by depositing it into private
intermediaries.
 CBs primarily are concerned with liquidity.
 As sums get larger, Central Banks start taking risks with
a portion of their reserves.
o 3) Public Pension Funds
Social Security Trust Fund – Obligated to buy

government debt.
 Calpers (CA pension fund) – Major player in
international bond markets.
 Source of wealth: Working Contributions
o 4) Direct Government Purchases Across Border
 State buying farmlands in Africa.
  (Look at export bans – and reaction of food
importers)
 Military base leases.
 Official aid flows.
o 5) Sovereign Wealth Funds
 Government Investment Vehicles that acquire
international financial assets to earn a higher than risk-
free rate of return.
 In some cases, SWF are funds for future generations.
Save now for lean years ahead. Joseph set up first
SWG (7 fat years, 7 lean years). Rainy day fund to
break glass in case of emergency.
 Central Banks sometimes set up and invest in SWF.
 Why are they such Assets of Interest now??
 1) Size matters: 2-4 Trillion Dollars (larger that
private equity and hedge funds combined.
1-2% of total global financial markets.
 We don’t have a great estimate of what
SWFs own – they are not very forthcoming.
 We are not exactly sure what classifies as a
SWF – pension funds: Saudi Arabia, China,
Hong Kong. SAMA, HKSE, SAFE
 2) Rate of Growth: Grew by 25% a year.
Includes rates of return and increases in size of
principal. Funds come from energy (and other
commodity) exports, and manufacturing exporters
in the Pacific Rim.
 Project annual growth rates: 20% per
annum.
 $7-16 Trillion by 2016
 3) Countries of Origin:
 Commodity producers responsible fore
2/3rds of all SWF assets.
 Come from countries w/o a robust history of
international investments.
  16 of 20 SWFs based in authoritarian
countries.
 2/3rds of SWF investment is going into
democratic countries.
 4) Investment Trends: SWFs starting to invest in
more risky assets.
 Bonds --> Equities ---> ‘Alternatives’
 Starting to turn inward post-crisis. Acting as
domestic investment banks. Pressure from
government to sure up domestic
investments.
POLICY CONCERNS – Conclusion: OVERBLOWN!
 1) Lack of Transparency / Regime Type of Home Country
o The more authoritarian the home country, the less
transparent the SWF.
o CONCLUSION: The Jury is Still Out: Will SWF adopt
GAPP?
 2) Sovereignty: By definition, servants of the state.
o They might say ‘they are profit-oriented’, but there are
always suspicions of other motives: access to sensitive tech,
for example.
o Can Sovereign investors be treated like normal investors?
o CONCLUSION: Exaggerates Unitarian intent of foreign
governments. Likely that SWFs cause internal
squabbling. CIC lost a lot and thus the managers are
unpopular in China. As citizens learn more about how
bad SWF are at investing, they want there money back.
 3) Market Integrity:
o Concerns that these incredibly opaque organizations are
sitting on trillions of dollars.
o Corporate governance: if they buy up a lot of Citibank shares,
they might take an active role (and get accused of
manipulation). But if they keep silent, they sit back and let
the management do their thing, SWFs are accused of being
corporate partners.
o No info on foreign exchange positions for countries.
 o CONCLUSION: Yes. But there is no evidence today that
they have exacerbated market volatility.
 4) Political Leverage:
o Possible that they could buy an asset and run it into the
ground.
o Could threaten investment withdraw:
 EG: Libyan investment authority threatened to pull out
of African investments if Sub-Saharan Africa didn’t give
Libya a larger leadership role.
o Soft power – Goldman Sachs wanted SWF as client, so
colored their perception of SWFs as good.
o CONCLUSION: Two-way Street. If investments are
made in the US or advanced industrialized states, those
states have a big desire to see those investments
succeed.
o CONCLUSION: Companies with SWF investment may
get preferential access to the SWF markets.
 5) Foreign Policy Risks
o China offered a $900M deal to Costa Rica in exchange for not
recognizing Taiwan.
o Non-SWF Countries overreact to SWF by levying high tariffs
and engaging in protectionism.
o CONCLUSION: SWF countries in Democratic countries
are much more likely to engage in policy setting than
SWFs from authoritarian regimes.
 6) Existential Risk
o From Western Advanced Industrial Nation POV:
SWF represent a contradiction to free-market

capitalism. Perhaps SWF are an alternative
development model that does not require
democratization.
 If you are not a member of the OECD, this is unnerving.
o CONCLUSION: Bunch of Crap. SWF have bad luck.
‘Govts have a long tradition of losing a lot of money,
this is not going to change any time soon.’ – Ken Rogoff
  Case in point: SWF got into financial markets at
the height of the crisis.

 In 2007 the G7 started to push for a new GAPP mechanism to
regulate SWFs. This pissed off the Middle-Eastern SWFs who have
been working for 40 years, while noveau-riche Chinese and Russian
SWFs began tossing money around.
o China and Russia were last holdouts to GAPP. Entirely
voluntary, no obligations for SWG to adhere to it.
o GAPP is all about transparency.
o But if SWF don’t comply with GAPP, may see adverse
investment reaction.
Wednesday, December 2, 2009 09/16/2009
Reserve Currency:
 Currency against which all others are measured. De facto
numerare.

Bretton Woods II  Dollar Overhang

Foreign demands has switched to the short term end, not long
term (T-bills)

US isn’t going to stop issuing debt any time soon. They will
continue to borrow and roll over debt.

B/C of all of this, there has been a lot of speculation that the
dollar should no longer be the reserve currency.
Relatively Plausible replacement for the dollar = €
o Governs large economic area
o Holds value relatively well
 China
o Blames much of global economic ills on overdependence on
US dollar as reserve currency
o Proposed a ‘Super-Sovereign’ currency
 IMF staff thought it would be good
 Many countries bought the idea
 ‘Gold Bug’
o Over $1275 / ounce
o Indicates loss of faith in world economy.
o China has increased holdings in gold 5x in the last five years
o India purchased $100 billion of IMF gold
 WILL WE SWITCH AWAY FROM DOLLAR ANYTIME SOON??
 o No real history of this.
o In the last 300 years, only one switch of international reserve
currency. Pound Sterling --> Dollar
 MONEY:
o Unit of account – to what extent are international
commodities valued in $$$
 Dollar is still pretty robust.
 Most commodity markets are invoiced in dollars.
 Switching away from that would be costly.
 Most currencies are pegged to the dollar.
 66 countries are pegged to dollar
 27 countries pegged to €
o Store of value –
Even during crisis, dollar maintained value
Flight to quality paradox:
 Dollar rose in value during crisis.
 Int’l community wanted an asset that was not
risky and relatively liquid = US Gov’t debt.
 Fear of crisis leads to plunging dollar, which leads
to concerns which leads to flight to quality, which
leads to buying the dollar, which brings the dollar
back up.
o Medium of exchange
 86% of all cross border transactions involve the dollar
 38% of “ “ “ “ “ Euro

OPTIONS
 1) Stop Capital Mobility - Do away with international currency
reserve:
o Capital Mobility has lead to huge instability
o Getting rid of Capital Mobility eliminates the Unholy Trinity
problem.
 o Brazil tried to implement capital control --> insignificant 2%
tax. Easy to evade.
BUT … Capital markets are TOO SOPHISTICATED
o Even though the RMB is non-convertible, international
investors find way to invest in China.
o Emerging markets don’t want to limit capital inflow
o FINANCIAL MARKETS DON’T WANT THIS.
 2) Continue with the dollar
o If you took a snapshot of the world economy right now you
would conclude that global reserve should be the dollar
 Significant financial strength
 HUGE Private wealth --> part of reason that dollar
increased in value during the crisis is that Americans
investing abroad decided to bring dollars home.
 Debt to GDP load is much lower than Japan and EU writ
large.
 US has security relationships that cement the dollars
role. Key capital exporters (Japan and Gulf Council)
have important security relationships with US. Japan
and Gulf Council agree to support the dollar in exchange
for military support.
 In 1973 Bretton Woods ‘Spelled the end of the dollar’ -
the opposite happened.
o If you stick with the dollar you get to avoid the switching
costs.
 Dollar value plummets, countries lose a lot of money,
very publically.
 China, for example, got very upset when CIC’s
investment in Blackstone went belly up.
 Private sector loses also huge.
But…
 Flight to quality paradox continues
 Concerns about huge increases in debt issues in the
next 10 years.
 3) Gold – Good old fashioned commodity based currency
o As store of value, Gold has held up well
o Other countries show interest in gold
o Domestically, US conservatives love gold
 Ron Paul- head of house financial services committee:
Into Gold
 Drawbacks:
 Not portable
 Not enough
 Not an interest bearing asset. Doesn’t do anything for
you when you hold it besides gleaming.
 China has quintupled gold reserves, but aggregate
reserves have increased by 15x, so as a percentage,
China’s holding of gold fell in value by 50%.
 4) EURO: €
o Second in all measurements to dollar
o Germans are fanatical about inflation. Germans run currency.
Strong Euro policy.
o Complications b/c of make up of EU.
Not clear what the precise relationship between all of
the EU actors.
 Euro was created as a pact between France and
Germany.
 Political Uncertainties
 Weak countries. Ireland, Greece.
 Financial Depth
o 10 years old
o ASIA: Euro-zone is not the most dynamic economic zone in
the world. Is the future of the European economy a robust
one?
 Heavily regulated markets
 Bad demographic picture
 Pacific Rim Actors have a good relationship with US.
 Pac Rim actors have little to no influence over European
actors.
o European Central Bank doesn’t want the Euro to be the
reserve currency.
 Performance during Financial crisis didn’t help out
much.
 For a country to have a foreign reserve currency.
 5) ¥£ CHF
 o Not huge economies,
o Not a lot of trade in these currencies
 6) Yuan, RMB:
o RMB --> Not convertible
 Many people want it to be convertible
 Fastest growing economy
 China promoted use of RMB in GoangDong Province and
other examples. China taking steps to making RMB
convertible.
 BUT… China’s Financial Sector is much more repressed.
 China took the ‘wrong lesson’ from the financial crisis.
 Short term switching costs for China would be the
greatest of all countries we’ve talked about. Reliant on
exports, exposing it to major economic shocks.
 Political Stability
 Authoritarian, Opaque as best. Private + State
actors are not comfortable about this.
 India, Japan, Australia, Russia, ASEAN countries,
not thrilled over this.

 7) Special Drawing Right: Basket of World Currencies.
o Created in 1969 as a way to create liquidity
 11% £
 11% ¥
 44% $
 34% €
o Some countries clearly are interested in this.
o How often do SDR weights get adjusted?
o IMF have begun to issue SDR denominated bonds. (Only $500
Bn – compared with global assets of 100Trillion Dollars)
o Political issues huge!
 o No way the EU or the US will agree to this.
Surrender of monetary sovereignty that no one will be
willing to do.
o SDR is not money. Functions as a unit of account, doesn’t
serve as a medium of exchange. Doesn’t serve as store of
value.
UPSHOT:
 Maybe Soft regionalization of Euro.
 LUO PING: Chinese Banking Regulator “We hate you guys. Once
you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we
know the dollar is going to depreciate, so we hate you guys but
there is nothing much we can do.”

Luo Ping, a director-general at the China Banking Regulatory

Commission, said after a speech in New York that China would
continue to buy Treasuries in spite of its misgivings about US
finances.

Mr Luo, speaking at the Global Association of Risk Management’s

10th Annual Risk Management Convention, said: “Except for US
Treasuries, what can you hold?” he asked. “Gold?"”
Monday, December 6, 2009 09/16/2009
CLIMATE CHANGE

 Science – It’s getting hotter.

o 1999 => Sunspots
o Hockey Stick:
o Clouds --> Biggest evil in global warming.
 Water vapor responsible for 98% of Global Warming
 1) CO2 – Human Activity
 2) Methane
 8x more powerful in effects than CO2 in terms of
greenhouse gas
 3) Nitrous Oxide
 4) Fluoridated Gases
 Montreal Protocol for Stratospheric Ozone
Regulated
o Human Activity is
o CHINA is biggest contributor to greenhouse gas.
o US biggest per capita
o WATER VAPOR is ‘biggest’ greenhouse gas.
 BY SECTOR:
o Energy (POWER) => 30%
o Industry => 16%
o Transportation => 14%
o Agriculture => 12%
o Residential => 10%
 NONE OF THESE CONTRIBUTING FACTORS ARE TARIFF
– SENSITIVE.
  Anything over 2C increase in post-industrial time is really bad.
 Status quo predicts 3C rise by 2050.

Going forward, it is impossible to make these types of long term

predictions.

BAD THINGS TO HAPPEN

1) SEA LEVELS RISE
 2/3rds of global populations within 10 miles of ocean.
2) DROUGHT & DESERTIFICATION
3) INTENSIFICATION OF WEATHER PATTERNS
4) MIGRATION --> ISLAND STATES
5) LESS FOOD, DISEASE VECTORS INCREASE

GLOBAL ORGANIZATIONS DEALING WITH CC

1) UNEP
2) IPCC
3) G-8
4) APP
5) MEF
6) GCS

RULES
1) UNFCCC –
 Investigate the problem.
 Everyone signs on (not surprisingly)
2) 1997 Kyoto Protocol ‘Annex 1’

1) REALISM:
 No real political changes have taken place b/c of Climate Change
 Only the EU has really done anything and that was for energy
security.
 Most powerful country didn’t sign on.
 NOTHING WILL HAPPEN.
 COAL.COAL.COAL.
2) LIBERALISM:
 If you look at the pattern, you are seeing a slow accretion of
agreements.
 Cooperation is building.
 At a minimum the int’l orgs set up to deal with Global Warming has
gotten the world on-board in agreeing there is a problem, and
talking about potential solutions. That alone is a success.
 Classic Tragedy of the Commons. N player prisoner’s dilemma.
Wednesday, December 9 09/16/2009
Bank of International Settlements – 1933
IMF: 1944/45
IBRD: 1945
WTO/GATT: 1947
OECD: 1948

NETHERLANDS – 2.37%
SWITZERLAND – 1.59%
FRANCE – 4.9%
ITALY - 3.24%
GERMANY – 5.98%
SPAIN – 1.4%
UNITED KINGDOM – 4.94%
24.42%

JAPAN – 6.12%
CHINA – 3.72% voting rights in IMF
INDIA – 1.9% voting rights
RUSSIA – 2.73%
SAUDI ARABIA – 3.21%
UNITED STATES – 17.09%
CANADA – 2.93%
AUSTRALIA – 1.49%
 LAT AM:
BRAZIL: 1.4%
MEXICO: 1.45%
ARGENTINA: .97%
CHILE: .39%
VENEZUELA: 1.22%
COSTA RICA: .08%
COLOMBIA: .36%
PANAMA: .1%
PERU: .29%
BOLIVIA: .08%
URUGUAY: .14%
6.48%

EMPOWER THE G-20

Governance Bloc)
What has the G-20 accomplished to date?
People keep crashing.
Spain, Netherlands both got seats at table.
G-2