International Economic Policy: Globalization and Poverty

Department of Economics, UCSC

Economics 143, Fall 2009

Instructor: Professor Michael M. Hutchison

Department of Economcs, E2, Room 473

(831) 459-2600

Email: hutch@ucsc.edu

Office Hours: M, W 2-3pm

Class Meeting Times: MWF 9:30-10:40am

Room: Earth and Marine Sciences B214

Key Dates:

Sept 25 (Friday) First Class Session.

Nov 11 (Wed), Nov27 (Fri) Holidays. No classes held.

Nov 6 (Fri) Midterm Examination

Dec 4 (Friday) Last Class Session. Research Paper Due.

Dec 9 (Wed) Final Examination, 4-7pm

Overview:

This course investigates the origins of poverty in the developing world, especially the most fragile states in the world, and the linkages between economic globalization and poverty. The first part of the course addresses what is meant by globalization and poverty, looks at recent and longer-term trends, and identifies some of the key linkages between globalization and poverty in the developing world. The second part considers the origins of poverty and cases studies of sucessful development, as well as failures. The third part considers financial globalization, the recurring pattern of currency and financial crises, and the role of the International Monetary Fund. The fourth part considers possible solutions to poverty, contrasting alternative plans and presenting evidence on cases where forign aid and development assistance has both proven effective and counterproductive.

Reading:

Three texts are required reading for the course: (1) Globalization and the International Financial System: What's Wrong and What Can Be Done by Peter Isard (Cambridge University Press, 2005); (2) The End of Poverty: Economic Possibilities For Our Time by Jeffrey Sachs (The Penguin Press, 2005); and (3) The Elusive Quest for Growth: Economists’ Adentures and Misadventures in the Tropics by William Easterly (MIT Press, 2002).

The book by Isard is a comprehensive survey and evaluation of how globalization relates to the international financial system, international financial institutions, financial crises, economic growth and the agenda for reform. The book by Sachs, a world-wide bestseller, investigates the origins of poverty, possible links with globalization, and makes a passioinate plea for major funding from developed countries to poor nations for large and ambitious initiatives to end abject poverty. The book by Easterly, a senior economst with the World Bank for many years and now a professor, provides his perspective of the origins of povery, a critique of most aid progams in the developing world (and especially large-scale projects such as those advocating by Sachs), and an alternative view of how to implement a successful aid strategy to help alleviate abject poverty. Both the Sachs and Easterly books are rich in detail and personal observations about poverty in the developing world and why it has has proven so persisent and seemingly resistent to world-wide development efforts and foreign aid.

In addition, there will be a number of articles that will be available on the course website: http://people.ucsc.edu/~hutch. These are listed below under the readings for each topic.

Grading and Course Requirements:

Grades will be based on general class participation (10%), a research paper (25%), one midterm (25%) and one final examination (40%). Class discussion is encouraged.

Class Discussion

The course wil be divided between a lecture and seminar format. Class participation is encouraged and discussions of the readings and broader topics will be intensive.

Reseach Paper

The research paper will be on a topic chosen by the student and approved by the instructor. The general topics will be assigned and the student will work on a particular question within the topic area. The paper is between 10-15 pages (doubled spaced) and is expected to incorporate orgional research as well as reflect an understanding of the literature on the topic, including the class readings. The paper is due in class on the last day of class (Friday, December 4). No late papers are accepted.

Midterm and Final Examinations

One midterm and one final examination, both closed-book examiantions, will be required. The examinations will be based on the lectures and reading material. No makeup examinations. Do not schedule travel plans on or before the day of the final examination! (December 9^th).

Weekly Topics Wk1	F	S25	Introduction
Wk2			Globalization and poverty: overview and background
	M	S28
	W	S30
	F	O2
W3			Theory and Practice of Economic Development
	M	O5		Development Theory
	W	O7		East Asia
	F	O9		East Asia
W4			Theory and Practice of Economic Development
	M	O12		China
	W	O14		China
	F	O16		Africa
W5			Theory and Practice of Economic Development
	M	O19		Africa
	W	O21		India
	F	O23		India
Wk6			Theory and Practice of Economic Development
	M	O26		Latin America
	W	O28		Latin America
	F	O30		Lessons from Country Studies
Wk7			Aid and Development
	M	N2
	W	N4
	F	N6	Midterm Examination	Midterm
Wk8			Sovereign Debt
	M	N9
	W	N11	Holiday (No Class)	Holiday
	F	N13
Wk9			Financial Crises
	M	N16
	W	N18
	F	N20
Wk10			IMF, World Bank, UN
	M	N23
	W	N25
	F	N27	Holiday (No Class)	Holiday
Wk11			Reforming the International Financial System
	M	N30		IMF
	W	D2		WB
	F	D4	Research Paper Due in class. (No late papers accepted).	UN

Note: Final Examination: December 9^th, Wednesday, 4-7pm
Topics and Assigned Weekly:

Week 2 Globalization and Poverty: Overview and Historical Background

Fischer, Stanley, "Globalization and Its Challenges,"

Ely Lecture, American Economic Review, May 2003.

Bordo, Michael, "Globalization in Historical Perspective," Business Economics,

January 2002.

Sachs, chapters 1 (introduction) and 2 (spread of prosperity)

Isard, chapters 1 (introduction) and 6 (growth and poverty)

Easterly (2002), chapter 1.

Harrison and McMillan “On the links between globalization and poverty”

J. of Economic Inequality (2007)

Week 3 Theory and Practice of Economic Development

Sachs, chapters 3 (development failures) and 4 (“clinical” development theory)

Easterly (2002), chapters 2-5.

Nelson and Pack, “The Asian Miracle and Modern Growth Theory”

Case Study: East Asia

Week 4 Theory and Practice of Economic Development

Case Studies: China and Africa

Sachs, chapter 8 (China)

Caldaria et al. “Interprovincal Inequality in China” Federal Reserve Bank

of San Francisco Economic Letter (2009).

Sachs, chapter 10 (Africa)

Sachs, chapter 11-13 (UN and solutions to poverty)

Easterly (2002): chapters 8-10

Week 5 Theory and Practice of Economic Development

Sachs, chapter 9 (India)

Markets versus Planning (critique)

Reading:

Easterly (2002): chapters 11-14.

Week 6 Theory and Practice of Economic Development

Isard, chapters 7 (Country Policies)

Singh, Anoop and Charles Collyns, "Latin America 's Resurgence,"Finance and DevelopmentDecember 2005.

Lopez and Severn, “Too Poor to Grow”, World Bank Working Paper (2009).

Week 7 Aid and Development

Sachs, chapters 14-16 (solutions to poverty)

Easterly (2002): chapter 6.

Sachs, chapters 17-18 (Aid as a solution to poverty)

Week 8 Debt

Powell, Robert, "Debt Relief for Poor Countries",Finance and Development, December 2000.

Chauven and Kray,“Who Gets Debt Relief?” World Bank

Easterly (2002): Chapter 7.

Week 9 Financial Crises

Isard, chapter 4

Isard, chapter 5

Baldacci, Emanuele et al., "Financial Crises, Poverty and Income Distribution,"Finance and Development, June 2002.

Huang, Haizhou and S. Kal Wajid, "Financial Stability in the World of Global Finance," Finance and Development, March 2002

Week 10 IMF, World Bank and the UN

Isard, chapters 3 (IMF)

Week 11 Reforming International Financial System

Isard, chapter 8

Williamson, John, "A Short History of the Washington Consensus and Suggestions for What to do Next," Finance and Development, September 2003.

Clift, Jeremy, "Beyond the Washington Consensus," Finance and Development, September 2003.