Transcript March 5, 2012 - Indiana University Bloomington

Y376 International Political
Economy
March 5, 2012
Comparative Economic Sizes, in
Current Billions of Dollars, 1995
Albania
Slovenia
Slovakia
Bulgaria
Hungary
Czech Rep.
Poland
Russia
$0
$200
$400
$600
$800
$1,000
Key Issues
• Why did the Cold War end?
• What were the different political and
economic strategies being pursued by the
transition economies?
• How successful were these strategies?
• What general lessons can be learned from
the above?
The End of the Cold War
• The desire to end Stalinist oppression
• Inability to keep up with the United States
and Western Europe economically and
technologically
• Errors of judgment on the part of Soviet
leaders, e.g.,
– Chernobyl
– Afghanistan
Dissidents
• Andrei Sakharov
• Nuclear Physicist
• Father of Soviet
hydrogen bomb
• Human Rights
advocate
Main Problems of Centrally
Planned Economies in the 1980s
•
•
•
•
•
•
Low growth rates
Low productivity growth rates
Slow diffusion of new technologies
Consumer shortages
Foreign currency shortages
Declining purchasing power of exports
Figure 10-2. Average Annual Growth in Real GNP
in the Soviet Union and Eastern Europe, 1961-1985
6
5
4
3
2
1
0
1966-70
1971-75
1976-80
1980-85
Source: Central Intelligence Agency, Handbook of Economic Statistics 1988
(Washington, D.C.: U.S. Government Printing Office, 1988), p. 33.
Slow Technology Diffusion
Stalin with a Zil Automobile
The New Russia
This is Saint Basil’s
Cathedral in Red Square
in Moscow, symbolic
of the centralized
power of the Russian
State. The building on
new churches in Moscow
is symbolic of the end
of Communism.
Figure 10-3. Annual Growth in GDP in the Russian
Federation, 1981-2006, in Percentages
Source: World Bank, World Data '95 CD-ROM (Washington, D.C.: World Bank,
1995); World Bank, World Development Indicators 2008.
Russia Real GDP Growth, 20032010
Figure 10-5. Budget Deficit/GDP and Growth in Consumer
Prices in the Former Soviet Union and Russia, 1985-2006, in
Percentages
Sources: Stanley Fischer, “Russia and the Soviet Union Then and Now,” in Oliver J.
Blanchard, Kenneth A. Froot, and Jeffrey D. Sachs, eds., The Transition in Europe:
Country Studies (Volume 1) (Chicago: University of Chicago Press, 1994), p. 234;
and Keith Bush, The Russian Economy in March 2002 (Washington: Center for
Strategic and International Studies, 2002).
Russian GDP Growth and Crude Oil
Prices, 1999-2007
Figure 10-4. Annual Growth in GNP in Eastern Europe,
1986-2006, in Percentages
Source: World Bank, World Development Indicators 2008.
Figure 10-7. FDI Inflows in Billions of Current Dollars,
1990-2006
Source: World Bank, World Development Indicators 2008.
Figure 10-6. Long-Term Debt Outstanding in Russia and
Three Countries in Eastern Europe in Billions of Current
Dollars, 1981-2006
Source: World Bank, World Development Indicators 2008.
Lessons Learned
• A fast economic transition (shock therapy)
may be better than a slow one.
• In Russia, the transition was slow.
• In Poland, Hungary, and Czechoslovakia
the transition was relatively more rapid.
• In Eastern Europe, the prospect of entry into
the EU played a major role in both
transition strategies and political reform.
Deng Xiaping’s 1978 Economic
Reforms
• Household responsibility
system
• Land use rights
• Township and Village
Enterprises (TVEs)
• Special Economic Zones
(SEZs)
Lester Thurow video
Example: Shenzhen SEZ
Real GDP Growth in China, 1961-2008
Source: World Bank, World Development Indicators 2008.
Per Capita Income in China, 1980-2006, in Dollars
Source: World Development Indicators 2008.
Figure 10-9. U.S. Exports to and Imports from China, 19892007, in Billions of Current Dollars
Source: U.S. Census Bureau, Foreign Trade Statistics.
Note: The trade balance is the difference between exports and imports.
Figure 10-11. Inflows and Outflows of Foreign Direct
Investment into and from China, 1982-2006, in Billions of
Current Dollars
Source: World Bank, World Development Indicators 2008.
Figure 10-10. Long Term Debt Outstanding in China in
Billions of Current Dollars, 1979-2006
Source: World Bank, World Development Indicators 2008.
.
Summary
• Russia elected to pursue a state-controlled
energy-based growth strategy
• China elected to pursue its own form of the
Asian developmental state approach,
following the examples of Japan, Korea and
Taiwan
• China’s strategy has been more successful
but both are growing rapidly now