Crises in capitalism, capitalism(s) in crisis

Central European University

Department of Political Science

MA Program, Fall Semester 2014/2015

4 CEU credits, 8 ECTS credits

Instructor: Dorothee Bohle

Time and Place: Mondays and Wednesdays, 15.30- 17.10, FT 809

Office hours: Tuesdays 13.00-17.00

The “Great Recession” of 2007 onwards is a powerful reminder that capitalism is a highly unstable

order, or, as argued by Wolfgang Streeck, an “institutionalized disorder”. Dominant approaches

especially in comparative political economy have in the last decades become too comfortable

with the idea that capitalism is successfully domesticated by institutions – be it the regulatory

institutions of liberal capitalism, or the more deeply engrained interlocking networks governing

coordinated market economies. Change, if it all, was to occur gradually. The aim of this course is

to revitalize concepts of capitalism as a highly dynamic system that is reproduced through cycles

of destruction and institutional reform. It seeks to provide analytical tools and a long-term

perspective on capitalist dynamics which foster an understanding of the destructive forces of

capitalism; and the historical conditions under which these forces could be tamed and turned

into sources of growth and social progress.

Course structure The course has three major parts. First, we will revisit some of the classic and more recent

theoretical perspectives on the political economy of capitalism and its crises. We will discuss

Marxist, perspectives, Schumpeter, Polanyi and Minsky. The second part of the course will

explore earlier crises and the lessons we can learn from them for the current crisis. We will take

a closer look at the Great Depression of the 1930s, and the crisis of the 1970s, and the financial

crises of the 1980s and 1990s. We will then move on to analyze in greater detail the international

and domestic origins of the most recent global financial crisis, and its unfolding in the US and

Europe.

Course requirements and evaluation: 1. Attendance and in-class participation demonstrating the familiarity with the key readings.

This is a discussion-based seminar, where attendance and participation are crucial. (20 % of the grade)

2. Two short presentations. The first presentation will tackle a recent development linked to the global financial crisis that students consider important. This can be a new turn in the eurocrisis, a country or bank being downgraded by a credit rating agency, the political fall-out of austerity, or any similar event that has recently unfolded. Students are expected to give a short overview over the event, justify why they find it important, and indicate what they would like to discuss. The second presentation consists of introducing the key readings to the class. The introduction consists of a short summary of the major arguments and findings of the key readings, and raises two to three questions to be discussed in class. Each presentation should not be longer than 10 minutes. Students are expected to upload the slides of their presentation at noon the day prior to the class. (30% of the grade).

3. Two position papers. This is a reading intensive seminar which will proceed almost entirely by discussions of the required readings supported by position papers. Position papers are small essays on the weekly readings. They should shortly summarize the readings, reflect on the major arguments, and include questions for further discussion. Position papers can compare the readings to other readings of the class, or apply the readings to an empirical case. The papers should be 700-900 words, and are to be distributed electronically to the whole class latest by noon the day prior to the class. Students cannot write a position paper on the class material they are presenting. Students might be asked to shortly present their papers in class (20 % of the grade).

4. Research paper of approximately 3000 words (excluding the bibliography). The final paper will be either a study of how the current crisis has affected a particular country or region, how specific actors have contributed to the crisis, or are trying to solve aspects of the crisis. You can also develop your first short presentation into a research paper. The topic of the final paper is to be agreed upon with the instructor. A short outline of the research paper has to be submitted by week 11 (30% of the grade).

Learning outcomes By the end of the class, students will have acquired basic knowledge of important classical

theories of political economy, their applications in different historical contexts, and will be able

to analyze contemporary events in broader social, economic and historical contexts. They will

also be familiar with major debates of the origins, the unfolding and the dimensions of the Great

Recession. The course enhances critical thinking and writing, multidisciplinary orientation,

contributes to the mastery of academic writing and oral skills. Learning outcomes are supported

by the course’s requirements and assessed accordingly.

Late submission According to the departmental policies, late submissions of written assignments will be downgraded in the following manner:

- 30 minute to 24 hours late:: 1 grading point - 24.5 hours to 48 hours: 2 grading points - etc.

Academic dishonesty

Students are expected to be familiar with the CEU policies on scholarly dishonesty. Plagiarism

and other acts of academic dishonesty will result in automatic failure of the course and

immediate referral to the appropriate committee for academic discipline.

Electronic Devices

The use of electronic devices (laptops, tablets, e-readers, phones, etc.) is not allowed.

Reading Material All the course material is available in electronic form through a pass word protected folder.

Additional material and information will be posted at the e-learning site at http://e-

learning.ceu.hu/. The password will be communicated to students who enroll for the course. All

students are required to register for the e-learning site.

General readings

Students are highly recommended to read the Financial Times on a regular basis.

As the crisis is unfolding, an increasing number of books are being published on its different

aspects. Students who are interested in learning more might consult

Raghuram G. Rajan. Fault-Lines. How Hidden Fractures Still Threaten the World Economy. Princeton, Pricenton University Press, 2010.

Michael Lewis: The Big Short. Inside the Doomsday Machine. London and New York: W.W. Norton and Company 2010.

Michael Lewis. Boomerang. Travels in the New Third World. London and New York: W.W. Norton and Company 2010.

Carmen M. Reinhart and Kenneth S. Rogoff. This Time is Different. Eight Centuries of Financial Folly. Oxford and Princeton, Princeton University Press.

Robert W. Kolb. The Financial Crisis of Our Time. Oxford: Oxford University Press, 2011.

Joseph Stiglitz. Freefall: America, free markets and the sinking of the world economy. New York: Norton and Company, 2010.

Jack Rasmus. Epic Recession: Prelude to Global Depression. London ; New York: Pluto Press, 2010.

Wolfgang Streeck. Buying Time: The Delayed Crisis of Democratic Capitalism. Brooklyn, NY: Verso, 2014.

Philip Mirowski. Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown. Reprint edition. Verso, 2014.

Mark Blyth. Austerity: The History of a Dangerous Idea. Oxford ; New York: Oxford University Press, 2013.

Eichengreen, Barry. Hall of Mirrors: The Great Depression, The Great Recession, and the

Uses-and Misuses-of History. 2015. 1 edition. New York, NY: Oxford University Press.

You can find a regularly updated bibliography on the crisis at

http://www.eui.eu/Documents/Research/Library/ResearchGuides/Economics/PDFs/GlobalCrisi

sBibliographyWebed.pdf

There are also a number of very useful and informative websites and blogs you might want to

take a look at. These include

Planet Money, especially the podcasts; at http://www.npr.org/rss/podcast/podcast_detail.php?siteId=94411890

Crooked Timber, at http://crookedtimber.org/

Eastern Europe Economy Watch at: http://easterneuropeeconomy.blogspot.com/

Bruegel: http://www.bruegel.org/bruegel-and-the-european-crisis/

Project syndicate at: http://www.project-syndicate.org/

Naked Capitalism at: http://www.nakedcapitalism.com/

Fistful of euros at: http://fistfulofeuros.net/.

Vox, at: http://www.voxeu.org/

Eurointelligence at: http://www.eurointelligence.com/eurointelligence-news/home.html

Topics and Readings

I. What is capitalism and why are there crises in capitalism?

Theoretical Foundations

Week 1: Introduction

Seminar 1

*Fulcher, James. Capitalism: A Very Short Introduction. OUP Oxford, 2004, Chapters 1, 3, pp. 1-

19, 38-57

Seminar 2

* Sewell, William H. 2012. “Economic Crises and the Shape of Modern History.” Public Culture

24 (2 67): 303–27.

Week 2: Marx

Seminar 1

* Crotty, James. “The Centrality of Money, Credit, and Financial Intermediation in Marx’s Crisis

Theory: An Interpretation of Marx’s Methodology.” Rethinking Marxism: Struggles in Marxist

Theory, 1985, 45–81.

Seminar 2

*Harvey, David. 1984. The Limits to Capital. Oxford: Blackwell. Pages tba

Recommended

Arrighi, Giovanni (1978) ‘Towards a theory of capitalist crisis, New Left Review, I/111, pp. 3-24

Kenway, Peter. “Marx, Keynes and the Possibility of Crisis.” Cambridge Journal of Economics,

1980, 23–36.

Harvey, David: Reading Marx’ Capital with David Harvey,

https://www.youtube.com/watch?v=gBazR59SZXk

Marx, Karl. Crisis Theory. From Theories of Surplus Value. In: The Marx-Engels Reader, edited by

Robert C. Tucker. New York/London: Princeton University Press, 1978, pp. 443-468

Norton, Bruce. 2013. “Economic Crises.” Rethinking Marxism 25 (1): 10–22.

Week 3 Schumpeter

Seminar 1 & 2

* Schumpeter, Joseph Alois. 1939. Business Cycles. Vol. 1. Cambridge University Press, Chapter

3: How the economic system generates evolution, pp. 65-131.

Recommended

Elliott, J. 'Marx and Schumpeter on Capitalism's Creative Destruction', The Quarterly Journal of

Economics (HB/1/.Q3), 95 (1980), pp. 45-68

Schumpeter Joseph, Capitalism, Socialism and Democracy Harper & Row Publishers, 1942.

Streeck, Wolfgang:Re-Forming Capitalism Institutional Change in the German Political Economy

Oxford: Oxford University Press, 2009, especially chapter 17.

Mathews, J.A. (2002) “An evolutionary theory of the economy as a whole: reflections on

Schumpeter's ‘lost’ seventh chapter to The Theory of Economic Development”, MGSM Working

Paper, at http://hdl.handle.net/1959.14/99596

Schumpeter, J.A. (1939) Business Cycles: A Theoretical, Historical and Statistical Analysis of the

Capitalist Process (abridged) downloadable at

http://classiques.uqac.ca/classiques/Schumpeter_joseph/business_cycles/schumpeter_busines

s_cycles.pdf

Week 4 Minsky and Polanyi

Seminar 1

* Minsky, Hyman P. 1964. “Longer Waves in Financial Relations: Financial Factors in the More

Severe Depressions.” The American Economic Review, 324–35.

Seminar 2

* Polanyi, Karl The Great Transformation, Beacon Press 1957, chapters 6, 11, 12, pp. 71-81, 136-

156

Recommended:

Fred Block, “Karl Polanyi and the Writing of the Great Transformation”, Theory and Society, Vol.

32, No. 3, 2003

Fred Block and Margaret Somers, “Beyond the Economistic Fallacy: The Holistic Science of Karl

Polanyi”, in Vision and Method in Historical Sociology, edited by Theda Skocpol, Cambridge

University Press, 1984, pp. 47-84

Silver, Beverly J., and Giovanni Arrighi. “Polanyi’s ‘double Movement’: The Belle Époques of

British and US Hegemony Compared.” Politics & Society 31, no. 2 (2003): 325–55.

II. Historical Precedents

Week 5 Gold Standard and the Great Depression

Seminar 1 &2

*Eichengreen, Barry. Golden Fetters. The Gold Standard and the Great Depression. 1929-1939.

New York, Oxford: Oxford University Press, 1992. Chapters 7- 9, pp. 187- 286

Recommended

Eichengreen, Barry. Hall of Mirrors: The Great Depression, The Great Recession, and the Uses-

and Misuses-of History. 2015. 1 edition. New York, NY: Oxford University Press.

Kindleberger, Charles P. The World in Depression, 1929-1939, Harmondsworth: Penguin Books.

Frieden, Jeffry A. “Globalization and Exchange Rate Policy” (http://scholar.harvard.edu/jfrieden/files/Globalization_and_exchange_rate_policy.pdf).

Frieden, Jeffry A. 2006. Global Capitalism: Its Fall and Rise in the Twentieth Century. New York:

W. W. Norton & Company, chapters 8 (The Established Order Collapses) and 9 (The Turn to

Autarchy), p. 173-228.

Gourevitch., Peter. Politics in Hard Times. Compartive Responses to International Economic

Crises. Cornell University Press 1986. Chapter 4: Breaking with Orthodoxy: The Formation of a

Mixed Economy, pp. 124-180

Hall, Thomas E and Ferguson, J. David: The Great Depression: an international disaster of

perverse economic policies, Ann Arbor, The University of Michigan Press, 1998, pp. 63-131.

Katznelson, Ira. 2014. Fear Itself: The New Deal and the Origins of Our Time. New York:

Liveright.

Week 6 The Postwar Order and the Crisis of the 1970s

Seminar 1:

* Frieden, Jeffry A. 2006. Global Capitalism: Its Fall and Rise in the Twentieth Century. New

York: W. W. Norton & Company, chapter 12: The Bretton Woods System in Action, p. 278-300

Seminar 2:

* Frieden, Jeffry A. 2006. Global Capitalism: Its Fall and Rise in the Twentieth Century. New

York: W. W. Norton & Company, chapter 15: The end of Bretton Woods, pp. 339-360.

Recommended

Ruggie, John Gerard. 1982. “International Regimes, Transactions, and Change: Embedded

Liberalism in the Postwar Economic Order.” International Organization 36 (02): 379–415.

Block, Fred: The Origins of International Economic Disorder : a Study of United States

International Monetary Policy from World War II to the present , Berkeley : University of

California Press, 1978.

Strange, Susan: Mad Money. When Markets outgrow Governments, Ann Arbor, The University

of Michigan Press, 1998.

Rodrik, Danni: How Far Will International Economic Integration Go?” The Journal of Economic

Perspectives, Vol. 14, No. 1 (Winter, 2000), pp. 177-186 John Gerard Ruggie “International

Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order”

International Organization, Vol. 36, No. 2, pp. 379-415

Week 7: After the Golden Age: a Sequence of Crises

Seminar 1

*Wade, Robert. “The Asian Debt-and-Development Crisis of 1997-?: Causes and

Consequences.” World Development 26, no. 8 (August 1998): 1535–53. doi:10.1016/S0305-

750X(98)00070-9.

*Walton, John, and Charles Ragin. 1990. “Global and National Sources of Political Protest: Third

World Responses to the Debt Crisis.” American Sociological Review, 876–90.

Seminar 2

*Streeck, Wolfgang. “The Crises of Democratic Capitalism.” New Left Review, no. 71 (2011): 5–

29.

Recommended

Devlin, Robert, and Ricardo Ffrench-Davis. 1995. “The Great Latin American Debt Crisis: A

Decade of Asymmetric Adjustment.” Revista de Economia Política 15 (3): 117–42.

Frieden, Jeffrey. 1989. “Winners and Losers in the Latin American Debt Crisis: The Political

Implications.” Debt and Democracy in Latin America, 23–38.

Pempel, T.J. (ed.). The Politics of the Asian Crisis. Ithaca, New York: Cornell University Press

1999

Krugman, Paul: The Return of Depression Economics, 2008, pp. 3-30; 139-191

Wade, Robert “Wheels within wheels: Rethinking the Asian Crisis and the Asian Model”, Annual

Review of Political Science, 2000, (3), pp. 85–115

Stallings, Barbara 1992, “International Influence on Economic Policy: Debt, Stabilization and

Structural Reform”, in Haggard Stephen and Kaufmann Robert R. (eds): The Politics of Economic

Adjustment, New Jersey: Princeton University Press.

Neely, Christopher 1999. “An Introduction to Capital Controls,”Federal Reserve Bank of St. Louis

Review 81(6):13--‐30.

Roberto Chang.1999.“Understanding Recent Crises in Emerging Markets,” Federal Reserve Bank

of Atlanta Economic Review, Second Quarter, pp.6--‐16.

Remmer, Karen L. 1991. “The Political Impact of Economic Crisis in Latin America in the 1980s.”

American Political Science Review 85 (03): 777–800.

Rodrik, Dani ‘Who needs Capital account convertibility’, Harvard University February 1998

III. The Great Recession

Week 8: From Subprime Mortgages to the Global Financial Crisis

Seminar 1:

*Schwartz, Herman. “Housing, Global Finance and American Hegemony: Building Conservative

Politics One Brick at a Time.” In The Politics of Housing Booms and Busts, edited by Herman M.

Schwartz and Leonard Seabrooke, 28–52. Basingstoke ; New York: Palgrave Macmillan, 2009.

Seminar 2

Film Screening: Inside Job

Recommended

Gowan, Peter “Crisis in the Heartland. Consequences of the New Wall Street System”. New Left

Review, January/February 2009, pp. 5-29

Crotty, James “Structural causes of the global financial crisis: a critical assessment of the ‘new

financial architecture’,” Cambridge Journal of Economics, 2009, (33): 563–580

Panitch, Leo and Konings, Martijn: Myths of Neoliberal Deregulation. New Left Review 57,

May/June 2009, pp. 67-83

Brenner, Robert: The economics of global turbulence: the advanced capitalist economies from

long boom to long downturn, 1945-2005, London; New York : Verso, 2006

Stiglitz, Joseph: The Roaring Nineties: A New History of the World's Most Prosperous Decade,

2004

Wade, Robert “From global imbalances to global reorganizations” Cambridge Journal of

Economics, 2009, (33) 539-562

Week 9: Credit and the Debtfare State

Seminar 1 &2:

*Soederberg, Susanne. 2014. Debtfare States and the Poverty Industry: Money, Discipline and

the Surplus Population. 1 edition. London ; New York, NY: Routledge, chapters 2-4, pp. 27-104

Recommended

Ansell, Ben W. 'Crisis as Political Opportunity? The Role of Partisan Politics in the Response to

the Global Credit Crisis', in Bermeo, Nancy and Jonas Pontusson (eds.) Coping with Crisis,

Russell Sage Foundation. 2012, pp. 327-360.

Bohle, Dorothee. “Post-Socialist Housing Meets Transnational Finance: Foreign Banks,

Mortgage Lending, and the Privatization of Welfare in Hungary and Estonia.” Review of

International Political Economy 21, no. 4 (2014): 913–48. doi:10.1080/09692290.2013.801022.

Colin Crouch, “Privatised Keynesianism – An unacknowledged policy paradigm” The British

Journal of Politics and International Relations, Vol. 11, No. 4, 2009, pp. 382-399.

Manning, Robert D. Credit Card Nation. The Consequences of America’s Addiction to Credit,

Basic Books 2000, Chapter 2, pp. 31-67

Schelkle, Waltraud (ed.), “In the Spotlight of Crisis: How Social Policies Create, Correct, and

Compensate Financial Markets.” Special issue of Politics and Society, 40 (1), 2012.

Week 10 The Crisis of the Eurozone

Seminar 1: cancelled (public holiday) Seminar 2 Fritz W. Scharpf (2011): “Monetary Union: Fiscal Crisis and the Pre-emption of Democracy.” LSE

Europe in Question Discussion Paper Series, LEQS Paper 36/2011

Recommended Bulmer, Simon. 2014. “Germany and the Eurozone Crisis: Between Hegemony and Domestic

Politics.” West European Politics 37 (6): 1244–63.

Paul de Grauwe. Check his recently published papers at

http://www.econ.kuleuven.be/ew/academic/intecon/degrauwe/

Eric Jones. Check his papers on the issue at

http://www.jhubc.it/facultypages/ejones/EMU_and_the_Financial_Crisis.pdf

http://www.jhubc.it/facultypages/ejones/sovereign_debt_crisis.pdf

Nikolaus Wolf, “Crises and Policy Responses within the Political Trilemma: Europe, 1929-1936

and 2008-2011”, EHES Working Paper in Economic History No 16 (European Historical

Economics Society, 2012)

Kevin H. O’Rourke, A Tale of Two Trilemmas, (Dublin: Department of Economics and IIIS, Trinity

College, 2011), available at

http://ineteconomics.org/sites/inet.civicactions.net/files/BWpaper_OROURKE_040811.pdf

Chinn, Menzie and Jeffry Frieden, “The Eurozone in Crisis: Origins and Prospects,” La Follette

Policy Report, Spring 2012

http://scholar.harvard.edu/jfrieden/files/euro_crisis_for_lafollette_report.pdf

Soros, George. “The Tragedy of the European Union and How to Resolve It.” The New York Review of Books, September 27, 2012. http://www.nybooks.com/articles/archives/2012/sep/27/tragedy-european-union-and-how-resolve-it/.

Week 11 When Small Countries Crash

Seminar 1

*Brazys, Samuel, and Niamh Hardiman. 2015. “From ‘Tiger’to ‘PIIGS’: Ireland and the Use of

Heuristics in Comparative Political Economy.” European Journal of Political Research 54 (1): 23–

42.

*Dellepiane, Sebastian, Niamh Hardiman, and Jon Las Heras. 2013. “Building on Easy Money:

The Political Economy of Housing Bubbles in Ireland and Spain.” UCD Geary Institute Discussion

Paper 2013/18. http://irserver.ucd.ie/handle/10197/4929

Seminar 2

*Symposium: ‘All that Glitners is not Gold’: The Political Economy of the Icelandic Financial

Crisis, EPS Volume 10, issue 3, September 2011. Read the Contributions by Schwartz and

Thorhallson

*Kattel, Rainer, and Ringa Raudla. “The Baltic Republics and the Crisis of 2008–2011.” Europe-

Asia Studies 65, no. 3 (2013): 426–49. doi:10.1080/09668136.2013.779456.

Recommended Armingeon, Klaus, and Lucio Baccaro. “The Sorrows of Young Euro: The Souvereign Debt Crises

of Ireland and Southern Europe.” In Coping with Crisis: Government Reactions to the Great

Recession, edited by Nancy Gina Bermeo and Jonas Pontusson, 162–97. New York: Russell Sage

Foundation, 2012.

Michael Lewis. Boomerang. Travels in the New Third World. London and New York: W.W.

Norton and Company 2010.

Mark Blyth. Austerity: The History of a Dangerous Idea. Oxford ; New York: Oxford University

Press, 2013

Walter, Stefanie. “Financial Crises and Politics Macroeconomic Adjustments”. Cambridge

University Press.

MacDonald, Scott B., and Andrew Novo. 2011. When Small Countries Crash. Transaction

Publishers.

Niamh Hardiman (ed.). Irish Governance in Crisis. Manchester: Manchester University Press.

2012.

Week 12 Conclusions: The Power of Finance

Seminar 1

Nesvetailova, Anastasia. “Innovations, Fragility and Complexity: Understanding the Power of

Finance.” Government and Opposition 49, Special Issue 03 (2014): 542–68.

doi:10.1017/gov.2014.12.

Seminar 2

Concluding Discussion