The 2007 9 financial crisis and the future of international relations
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The 2007-9 Financial Crisis and the Future of International Relations. Leslie Elliott Armijo [email protected] .berkeley.edu March 2011. FIVE THESES. 1. Not much contagion for emerging markets (EMCs) 2. Due to a combination of virtue—and luck

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The 2007-9 Financial Crisis and the Future of International Relations

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The 2007 9 financial crisis and the future of international relations

The 2007-9 Financial Crisis and the Future of International Relations

Leslie Elliott Armijo

[email protected]

March 2011


Five theses

FIVE THESES

1. Not much contagion for emerging markets (EMCs)

2. Due to a combination of virtue—and luck

3. Significance for international relations is that the wealthy democracies (finally) notice convergence

4. Emerging powers (EPs) is a more useful concept for IR than is emerging markets

5. Political regime type will influence the IR profile of EPs


Advanced industrial countries flu

Advanced Industrial countries’ flu

and

Emerging Market Countries’ hiccups


Cumulative annual growth rates percent weighted average

Cumulative Annual Growth Ratespercent, weighted average


Cumulative annual growth rates

Cumulative Annual Growth Rates

* All AIC aggregates shrank, 2007-9

  • All developing country aggregates had positive growth, 2007-9

    * The only developing country aggregates that dropped as much or more as the AICs were those closely tied: CCE and Mesoamerica and Caribbean


Emerging market countries virtue

Emerging market countries’ virtue

And their luck


Sources of emcs virtue and luck

Sources of EMCs’ Virtue--and Luck

  • High commodity prices (esp LAC & SSA)

    * EMC financial crises in 1990s  banking reforms (esp Brazil, Mexico, Korea, Thailand, Indonesia?)

    * Capital controls (China, India, Brazil, Chile)

    * Less sophisticated home financial markets  no involvement in CDSs, securitized mortgages, etc (esp Andean countries, SE Asia, SSA)


The immediate political consequence of the crisis

The Immediate political consequence of the crisis

Advanced countries wake up to convergence


The advanced countries take notice

The advanced countries take notice

  • In 1980s developing Asia grew faster than the G7

  • In 1990s developing Asia, LAC, and MENA grew faster than the G7

  • In 2000s every developing region grew faster than the G7

  • BUT THESE TRENDS ESCAPED NOTICE in the G7 foreign policy community

  • In Fall 2008, G.W. Bush administration realized a coordinated global stimulus required a G20 summit, not the G7


Cumulative annual growth rates weighted averages

Cumulative Annual Growth Rates(%, weighted averages)


Emerging powers

Emerging powers

Not just emerging markets


Emerging markets v emerging powers

“Emerging Markets” v. “Emerging Powers”

  • For analysis of development trajectories, “one country, one case” research works

  • For analysis of IPE and IR, it may help to focus on larger, more capable countries

  • There is growing self-consciousness within the set of “emerging powers”


Correlates of war power index

“Correlates of War” Power Index

  • Composite index of global capabilities by J. David Singer, Stuart Bremer, and John Stuckey

  • Most used in International Relations scholarship

  • Calculated continuously 1820-2001

  • National shares in world totals in six hard power capabilities:

    • Population

    • Urban population

    • Iron & steel production

    • Energy consumption

    • Military personnel

    • Military expenditure


Correlates of war power index1

“Correlates of War” Power Index


Armijo power index

Armijo Power Index

  • COW index has these problems:

    • No GDP

    • Positive valence for energy consumption, not production

    • No indicators of high technology

  • Armijo index is global shares in 6 components:

    • GDP

    • Population

    • No. of telephone subscriptions (fixed & mobile)

    • Industrial value-added

    • Foreign exchange reserves

    • Total military spending


Armijo power index1

Armijo Power Index


Political regime types

Political regime types

And emerging powers’ behavior in the international system


Political regime types1

Political Regime Types

  • Variations along two somewhat independent dimensions allows categorization of most political regime types.

  • Similar to dimensions Robt Dahl labeled “polyarchy” (~ democracy)

  • Democratic contestation implies open competition for political offices, secret ballots, and executive constraints (variation from authoritarian to democratic)

  • Democratic participation or inclusion refers to the scope of suffrage and political demand-making (variation from elite to mass-based regimes)


V ariations in political contestation

Variations in Political Contestation

  • Authoritarian regimes bifurcate into growth miracles and disasters

  • Increases in democratic contestation:

    • Have a U-shaped relationship with inward foreign investment (Bayulgen)

    • Predict lower growth volatility (Mobarak; Chandra and Rudra; Armijo and Gervasoni)

    • Predict fewer growth crises (Armijo and Gervasoni)

    • Predict steady, positive growth, though not miracles


Variations in political inclusion

Variations in Political Inclusion

  • Transition from low to moderate inclusion regime leads incumbents to prioritize economic growth

  • Transition from moderate to high inclusion leads incumbents to prioritize both growth and stability (avoid crises)

  • See Dreze and Sen; Armijo & Gervasoni


Democratic peace theory revisited

Democratic Peace Theory Revisited?

  • Democratic partners in global negotiations may find it easier to resolve problems of collective action than will partnerships containing one or more authoritarian states (Armijo and Gustafson; Armijo forthcoming)

    • Transparency of deliberations

    • Trust

    • Need to convince domestic populations  difficult to reverse or cheat

    • Multiple veto players


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