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This chapter examines the role of the Secretary-General as the “face” of the United Nations, focusing specifically on the two African Secretaries-General: Boutros Boutros-Ghali (1992–1996) and Kofi Annan (1997–2006). Though I characterize Boutros-Ghali and Annan respectively as “the pharaoh” and “the prophet”, every Secretary-General has exhibited such traits, as well as those of a third and more common metaphor of being a sort of “Pope”. Through these three lenses, the chapter examines the major achievements and failures of Boutros-Ghali and Annan, as well as the reaction of key actors at the United Nations to the efforts of both men to achieve their objectives in the areas of peace and security, socio-economic development, and “humanitarian intervention”. Since both Africans occupied the post for the fifteen years after the end of the Cold War, this is also a study of the role of the Secretary-General in the post-Cold War era. This period saw tremendous changes in the geopolitical landscape, including the collapse of the Communist Bloc and the rise of a unipolar world, the eruption of conflicts in the Balkans and Africa, and an increase in the membership of the United Nations from 159 to 192. All of these transformations had an impact on the United Nations in general but led, in different ways, to greater attention being paid to the role of its Chief Administrative Officer. Another reason to focus on the two African Secretaries-General concerns the importance of the United Nations to Africa and vice versa. [ABSTRACT FROM AUTHOR]

Introduction In his revolutionary work, the godfather of modern fiscal policy Lord Maynard Keynes gave a central role to discretion in fiscal policy. Thus, in some ways, he, and even more his followers, who probably pushed his ideas beyond where he would have liked, gave policy makers what many of them had always wanted: a justification for spending more or, in particular cases, for reducing taxes without cutting public spending. A correct or effective discretionary fiscal policy is, however, difficult to pursue because it requires information and attitudes that are often in short supply. When countries try to fine-tune their fiscal policy, they often end up making mistakes. This chapter focuses on those difficulties within the European context. It discusses problems that have not received the attention that they deserve. Since it was first proposed, and then endorsed by the Keynesians, with a revolutionary fervor that at times paralleled that of true religious believers, countercyclical fiscal policy has been subjected to occasional criticism. Three major lines of criticism can be distinguished. First is the existence of various lags. It was noticed from the beginning that there are likely to be lags in (1) the recognition that fiscal action is needed, (2) the taking of the action, and (3) the time that passes between when the action is taken and when the economy begins to feel its effects. These lags reduce the effectiveness of countercyclical policy. [ABSTRACT FROM AUTHOR]

Introduction Three developments with significant implications for the management of the world economy in the 1990s were growth in emerging markets, capital mobility, and the rise of regionalism. After the “lost decade” of the 1980s growth accelerated in the developing world. Exports from developing countries grew twice as rapidly as production, by nearly 10 percent per annum. Disturbances in emerging markets, including financial crises, became a prominent concern. And emerging market economies, for their part, increasingly insisted on a voice in the management of the international system. The preceding reference to financial crises points to the second important development, namely rising capital mobility. A growing number of countries relaxed controls on capital movements in the 1980s and 1990s. Advances in information and communications technologies reduced the costs and increased the attractions of investing across borders. In response, net private capital flows to developing countries rose sixfold between 1983–1989 and 1993–1996. Capital mobility promised to extend the benefits of portfolio diversification, consumption smoothing, and higher rates of capital formation to developing countries. But capital flows proved not just large but also volatile. Their management thus proved a major challenge. The third important development was the rise of regionalism. The 1990s saw the deepening and widening of the European Union. It also saw the establishment of NAFTA (the North American Free Trade Agreement) and the development of Asian regionalism. [ABSTRACT FROM AUTHOR]

The EC's policy of conditional recognition, we have seen, represents a significant departure from legal thinking and historic state practice as well as a novel approach to conflict management. It is not, however, the first time that conditionality has been used in support of political aims. For more than two decades, states and multilateral organisations have been employing political conditionality in their relations with developing countries, often in pursuit of objectives akin to those of the EC in Yugoslavia, such as the promotion of human rights and, more recently, democratisation and ‘good governance’. Indeed, since the 1970s the EC/EU itself has used and continues to use political conditionality as part of its trade and aid programmes, imposing on recipient states requirements relating to their domestic political structures that in many ways are not unlike the requirements it stipulated for the new state authorities in Yugoslavia. This final chapter examines these parallel uses of political conditionality for what they suggest about the potential for, and the limitations of, conditional recognition as an instrument of conflict management. It charts the evolution of these policy initiatives and the thinking behind them – politically conditioned aid in particular – and explores the similarities they bear to the EC's use of conditional recognition. It also looks at how effective political conditionality has been and identifies factors that may account for its successes and shortcomings. [ABSTRACT FROM AUTHOR]

Chapter 3 argued for a view of diplomatic recognition as an informal regime governed by its own set of norms, legal as well as political, that historically have contributed to the maintenance of a stable order in the international system. Because the practice of recognition originates with states and serves to protect their interests, it is an inherently conservative institution. Outside of decolonisation states are reluctant to confer recognition on new claimants unless their claims are undisputed, for in the absence of terrae nullius (territories belonging to no one) recognition can only be achieved at the expense of existing states, and the dismemberment of one state is perceived to pose a threat to the integrity of all states as well as to weaken the foundations of the state-based international order. Although the EC's policy with regard to Yugoslavia might seem to contradict this view – to reflect instead an incautious and even subversive use of recognition – the EC, we have seen, sought to contain the disruptive effects of its actions by interpreting them so narrowly as to have limited application to other states. Statehood for Croatia thus would not mean statehood for, say, Spain's Catalonia or Russia's Chechnya. There is another way in which the practice of recognition, rather than serving to ensure stability, can be disruptive of the established order, and that is in its potential for exacerbating the violence that may accompany the creation of a new state, particularly if the parent state is contesting and seeking to suppress the emergence of the entity. [ABSTRACT FROM AUTHOR]

Chapter 2 examined the tradition of legal thinking and historic practice with respect to the recognition of states. The rationale for that exercise was the claim, in part, that if the EC's recognition of Yugoslav republics was driven primarily by political and strategic considerations, one could not dismiss the relevance of international law altogether. The claim rested on two observations: first, that the EC consciously and deliberately considered the question of recognition within a legal framework, evident most notably in its establishment of the Badinter Commission; and second, that the legal framework, once invoked, both facilitated and constrained the EC in some of its actions. This chapter returns to the latter point. For to suggest that the EC's response was at all moulded by international law would not only seem to contradict the views of legal scholars and political analysts alike who maintain that the Community's actions were motivated largely, if not entirely, by extra-legal considerations; it also begs a number of fundamental questions about the relationship between international law and politics in general and the bearing that both have on the recognition of states in particular. For instance, how does one distinguish conformity to law from the fortuitous coincidence of law and politics? And if international law at times does indeed facilitate and constrain international behaviour, how does it achieve that effect? [ABSTRACT FROM AUTHOR]

The whole history of our state has been a search for ways to settle and provide stimuli to settle Siberia. Thanks to the industrialization and mass settlement of Siberia … Russia's population is scattered across a vast land mass in cities and towns with few principal connections between them…. One-third of the population has the added burden of living and working in particularly inhospitable climatic conditions…. Costs of living are as much as four times as high as elsewhere in the Russian Federation, while costs of industrial production are sometimes higher. Introduction Having experienced a probably unprecedented economic decline throughout the 1990s, Russia finished the decade and entered the new millennium with unexpectedly good economic news. After the 70 percent drop in the ruble's value in August 1998, Russian domestic production picked up. The multiplication of world oil prices since then – between January 1999 and summer 2000, the price of oil increased from $9 to $35 per barrel, while in early 2003, on the eve of the U.S.-led invasion of Iraq, the price approached $40) – has filled Russian state coffers to an unanticipated extent, enabling the state to finance the war in Chechnya and still meets its external debt-servicing obligations as well as wages and pension arrears at home. [ABSTRACT FROM AUTHOR]

I stand above the court! The long and the short of it is that Russia, after fair and democratic elections in December of 2003, legitimately rejected democracy in favor of an updated authoritarian Soviet-type regime. Introduction It was the first of the two Russian revolutions of 1917 that gave substance to Woodrow Wilson's call for the United States to “make the world safe for democracy” through its intervention in the First World War. The sudden collapse of the Tsarist monarchy and the establishment of a liberal democratic Russian government under the leadership of Alexander Kerensky in the winter of 1917 gave credence to the hopes of American democrats that Allied military victory over Imperial Germany would usher in an age of universal democracy and with it an age of universal peace. The tide of democratic sentiment also flowed westward from the Russian capital Petrograd, where Kerensky's government, anxious to convince its British, French, and now American allies of Russia's newfound democratic allegiance, kept a grieviously weakened Russia engaged in the fourth year of war with Germany and launched ill-conceived offensives that by the summer of 1917 had resulted in the disintegration of the Russian Army as an effective combat force. Sir George Buchanan, the British ambassador in Petrograd, wondered in his diary whether it might not have been prudent of the Western democracies to have withdrawn the military pledges they had extracted from what had become a gravely weak Russia and let the country negotiate its own path out of the war. [ABSTRACT FROM AUTHOR]

Numerous bribe takers are also usually seen as corrupt. [This is wrong because] only those who have links with the organized criminal gangs can be regarded as corrupt officials. Do not mistake bribe-taking for corruption. Introduction In the previous chapter, we established that the USSR itself represented a patrimonial society, albeit one that was both more comprehensive and intensive than Tsarist Russia ever was. The distinctive fusion of communist political monopoly and Soviet state monopoly ownership of capital, in the context of a generally hostile international environment, cemented the Soviet party-state system that was to last for the better part of the twentieth century. Given the virtual asphyxiation of organized public life outside the framework of the communist party-state system, down to the apparently most innocuous levels (such as fishing clubs), the sudden collapse of that system could be expected to have the most dramatic consequences for the integrity of the economy and the society, not to mention the country's international standing. The disintegration of the USSR in 1991 thus represented the end of a fixture in Russian life, with only brief interruptions (1917–20 and the early 1600s), since the emergence of Muscovy in the course of the fifteenth and sixteenth centuries: the presence of a powerful, highly centralized, militarized, and largely unaccountable patrimonial state. Interestingly, that state disintegrated (1989–91) precisely as the international political system was becoming the least threatening in the millennium of Russian statehood. [ABSTRACT FROM AUTHOR]

Since the Thirty Years' War, no people have been more profoundly injured and diminished than the Russian people by the successive waves of violence brought to them by this past brutal century. Introduction Karl Marx famously observed that while men make history, they do not usually do so in the manner that they intend. History itself, in the form of political, economic, social, cultural, and other historical influences or legacies, decisively shapes the range of public choice realistically available to leaders and societies. To what extent and how has Russia's distinctive historical experience in the Soviet period – which lasted for three-fourths of the twentieth century (compared to twelve years for Nazi Germany) – shaped the country's postcommunist circumstances and possibilities? The Soviet Union that emerged from the Russian Revolution developed a patrimonial society that was both more comprehensive and more intensive than that of Tsarist Russia at least since the freeing of the gentry from obligatory service to the crown under Catherine the Great. The fusion of de facto sovereign power in the form of the communists' monopoly of political power with the communist state's monopoly of virtually all forms of capital in the state-owned economy both reflected and propelled a level of international hostility that served to justify the Soviet patrimonial party-state system itself. [ABSTRACT FROM AUTHOR]

Few Latin American countries have witnessed a cycle of contention as lengthy and as intense as that of El Salvador in the late 1970s going into the early 1980s. Nor have many witnessed a sharper confrontation between a highly mobilized mass movement and a state willing to kill unarmed civilians as necessary in order to defeat its challengers. What is less well known is that within just a few years of the crushing of El Salvador's nonviolent contentious movement, a new protest cycle developed again in the mid-1980s in the capital. And, of course, throughout the 1980s a civil war raged that even after a decade of fighting found neither side able to defeat the other. This chapter will give close attention to the relationship between contention and repression in El Salvador, utilizing datasets for both sides of the relationship that, while not as complete as those used for Guatemala, are far better than those commonly utilized for such studies. The final section of this chapter then closes the study by analyzing the contention/repression relationship at the level of the individual. Precursor Movements This analysis of the relationship between cycles of contention and repression in El Salvador is organized by the same hypotheses utilized in the prior chapter on Guatemala. As with its larger neighbor, this analysis will show that there is a close fit between these hypotheses and the Salvadoran experience, as seen both with events data and with conventional accounts of the periods under examination. Repression by authoritarian regimes – along with other means of limiting access to the political system – normally keeps nonviolent protest at a minimal level. [ABSTRACT FROM AUTHOR]

We began with the question, Why Poland? The answer in Chapter 1 was based on comparing the pace and early success of the Polish reforms, both economic and political, with those of other transitional countries. The comparisons suggested that Poland was a relative success, at least in the initial years, and that we could learn important lessons about transitions from studying the Polish transformation in detail. This chapter addresses the same question, but with a different meaning. We can now interpret the question in terms of what factors explain Poland's relative success. We have observed and analyzed in great detail the more and less successful aspects and consequences of Poland's transition. According to this interpretation, the answers are unique in some respects but broadly general in others. The challenge is to examine factors contributing to the Polish transition in the context of other political economies in Central and Eastern Europe. LESSONS FROM THE POLITICAL ECONOMY OF TRANSITION The answer begins with the two main lessons from our study. Our analysis suggests that Schumpeter's model of economic development, though nearly a century old, is applicable in a broad range of settings. Successful development and transitions depend on what he called the creative destruction process in which firms with outdated technologies, organizational structures, or products are replaced by new enterprises embodying new forms. The presence and growth of these new enterprises stimulates a political constituency that supports liberal policies and continued economic reform. [ABSTRACT FROM AUTHOR]

Immediately after the collapse of communism in Europe, many students of international relations predicted a return to balance-of-power politics among the great European powers. Others foresaw new balancing between the United States and Europe as the international system moved from a bipolar order to a multipolar world. A decade later, the distinguished observer Joseph Joffe argued that Western Europe and Russia might join together to offset American power: “Ten years after victory in the cold war, the United States is still No. 1 by any conceivable measure. But the lesser actors – Russia, Europe, China – are beginning to make true what history and political theory have predicted all along: Great powers will generate ‘ganging up.’ Nos. 2, 3, and 4 will seek to balance against Mr. Big.” And a recent book by a leading Europe scholar, Charles Kupchan, predicts that a united Europe will emerge as America's main long-term strategic challenger. Joffe, Kupchan, and other realists like John Mearsheimer and Kenneth Waltz eventually may be right. Perhaps the German, French, and Russian coalition during the 2003 Iraq war is just the beginning. In the future, realpolitik and balance of power may return as the organizing principles of international politics on the European continent. Someday, the “lesser” powers may seek to balance against the United States. To date, however, what is more striking is how wrong these realist predictions since 1989 have proven to be. [ABSTRACT FROM AUTHOR]

In this chapter we complement the quantitative analysis of the previous chapters with an historical narrative that follows the evolution of the global capital market from its formative stages in the late nineteenth century. How did the market evolve to such levels of sophistication and geographical extent by the period 1870–1913? Why did it then decline so dramatically in the first half of the twentieth century, from 1914 to the 1940s? And why was the pace of rebuilding so slow in the postwar era? Where do we stand now, at the start of the twenty-first century? And how do the economic, historical, and political events of the twentieth century inform these questions? Capital without constraints: The gold standard, 1870–1931 The classical gold standard era The story begins with the emergence of a global gold-standard monetary regime in the 1870s and 1880s and the rise of a world capital market centered on the key financial center of that era, London. The story of the convergence by many different nations on a single monetary standard is now well know, and it exhibits all of the “network externality” properties. Of course, those same increasing-returns aspects driving the adoption of this institutional device, the gold standard, made it also equally susceptible to extinction in the event of crisis and suspension, as we shall see. Nonetheless, with British leadership, the gold standard eventually became an almost universal regime by the 1890s and 1900s, especially in the principal trading nations of the world, replacing silver and bimetallic standards along the way. [ABSTRACT FROM AUTHOR]

INTRODUCTION On February 13, 2002, Japanese Prime Minister Koizumi directed ministries to formulate emergency countermeasures to deflation, stating, in a press release that “while deflation has a varied background, the resolution of the immediate financial problems is indispensable to overcoming deflation” (italics added). Koizumi linked deflation, shown in Figure 9.1, to banking problems and a credit crunch, and called on the Bank of Japan to take action. The same press release goes on to state, “In particular, with regard to the disposal of non-performing loans which presently stands as a top-priority issue, actions shall be taken to achieve concrete progress in line with the ongoing process of special inspections, thereby solidifying the prospects for an early resolution of the so-called ‘non-performing loans problem.’ Meanwhile, the government shall stand ready to take any and all necessary measures to prevent a financial crisis. Overcoming deflation will require the government and the Bank of Japan to act in unison. Therefore, we turn to the Bank of Japan with the request that it act with due audacity in implementing monetary policy” (italics added; Japan Ministry of Foreign Affairs 2002). The call by the Prime Minister for the government to take emergency action reflects the concern that the deflation in Japan, if allowed to persist, would gradually erode the foundation of the economy and eventually lead to a much deeper and dramatic decline reminiscent of the Great Depression in the 1930s. Initially viewed by policy makers as a “good deflation,” price declines were now seen as a harbinger of economic collapse. [ABSTRACT FROM AUTHOR]

INTRODUCTION Over the last two decades, most industrialised and developing countries have experienced episodes of boom and bust in credit markets. These credit cycles often coincided with cycles in economic activity and asset prices. The unwinding of the imbalances built up in the boom has, in some cases, led to severe problems in the financial sector, sometimes culminating in an outright banking crisis. In Japan, the second biggest economy of the world, asset price deflations, both in equity and property, were followed by a decade of financial fragility and deflationary developments in goods prices, with consumer prices falling continuously after 1999.With short-term interest rates having reached the zero lower bound, the country appears to be trapped in a deflationary spiral out of which it finds itself unable to escape. Other South-east Asian countries, such as Hong Kong and Singapore, have also experienced asset price deflations followed by a marked drop in credit creation and goods price deflation in recent years. Some commentators argue that the United States and other industrialised countries are also now, in the wake of the worldwide slump in share prices, on the brink of deflation. Both the experience from historical episodes of financial crisis in the late nineteenth and early twentieth centuries and from recent boom–bust cycles in credit markets, suggest that consumer prices respond with a lag to developments in credit markets. Consumer price inflation is often low or falling during credit booms and peaks after the onset of the bust. Asset prices, especially property prices, on the other hand, appear to follow closely behind or even to lead bank lending. [ABSTRACT FROM AUTHOR]

INTRODUCTION Episodes of sustained declines in consumer prices have been rare since the 1930s. Recently, however, in addition to Japan's well-known ongoing experience with deflation, persistently falling consumer prices have been seen in other countries, such as Argentina, China, Hong Kong, Singapore, and Taiwan. Indeed, international success in reducing inflation by the mid-1990s was quickly followed by fresh fears of deflation. Deflation may be “worse” than inflation because of firms confronting rising real wages should nominal wage rigidity prevail. In the United States, Federal Reserve Bank of Richmond President J. Alfred Broaddus, having cast more dissents than anyone else in favor of tighter monetary policy in Federal Open Market Committee (FOMC) meetings in the past decade, recently stated that it would be “ironic to have fought all this time to bring the inflation rate down … and then lose price stability on the down side” (see Ip 2002: p. A1). Meanwhile, the FOMC meeting of May 6, 2003, gave official notice of the Fed's concern that “the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup in inflation from its already low level.” As Ip (2003: p. A1) points out, this represented “a profound shift from half a century of preoccupation with fighting inflation.” In the euro area, deflation is a distinct possibility in some of the major economies, especially in Germany (International Monetary Fund 2003). [ABSTRACT FROM AUTHOR]

The period between the summer of 1964 and the autumn of 1965 saw the position of the Western powers in South East Asia transformed once more. From the British perspective, they now approached the region no longer as a power with formal colonial interests and responsibilities, but as one tied to the area by treaty commitments, a sense of obligation to regional friends and the need to preserve and show solidarity with the Americans. British relations with Kuala Lumpur were subject to the kind of strains experienced in 1963, but in even more pronounced fashion, as the Malaysian Government ran the affairs of the new Federation in ways that offended London's sensibilities and seemed to threaten the fragile sense of national unity that had been established by the conflict with Indonesia. Indeed, the old colonial ties and patterns of thinking were being supplanted in Malaysian official circles by a greater willingness to demonstrate independence from the overbearing advice and presence of the British (though the need to maintain close ties for the purposes of security was still widely and uncomfortably acknowledged). This was a situation the British did not relish but had anticipated since at least the late 1950s, having never taken the preservation of a moderate and pro-Western UMNO leadership for granted. By the mid-1960s, that conservative leadership still held sway under the Tunku, but its future disposition could not be assured, leading many to question how long the obtrusive British bases could be maintained before local hostility was generated and they were driven out. [ABSTRACT FROM AUTHOR]

The idea of a negotiated resolution to the tensions produced by the formation of Malaysia was certainly welcome to the architects of the Kennedy Administration's accommodating approach to Indonesia. There would be little likelihood of assembling international backing for a package of financial assistance for the Indonesian economy when the leadership in Jakarta was promoting insurgency against its Western-orientated Malayan neighbour and indulging in virulent anti-imperialist rhetoric. Moreover, the Indonesian Government was responding only slowly to the IMF's conditions that a stabilization plan, involving a real effort to reduce expenditures and balance the budget, should be put in place before large-scale Western financial help to ease chronic shortages of foreign exchange could be authorized. Compounding this difficulty was the fact that strong criticisms within the United States were now being directed at the Administration's handling of relations with Indonesia, and in particular, its readiness to extend further aid to Sukarno's regime. Much to the consternation of US officials, in March 1963 the Clay Committee had delivered its comprehensive and critical report on the foreign aid programme. This investigation had been instigated by President Kennedy after the congressional mauling inflicted on the 1962 aid bill, and widespread dissatisfaction with the work of the Agency for International Development. The expectation had been that a specially selected panel, including several business-minded and conservative members, under the respected guidance of General Lucius Clay, would look over existing programmes with a faintly critical eye, and then reach the considered verdict that they were necessary to national security. [ABSTRACT FROM AUTHOR]

Improving the state of relations with Jakarta occupied an important place in the foreign policy agenda of the Kennedy Administration. Indonesia's size, possession of natural resources, including oil, rubber and tin, strategic location astride lines of communication in the south west Pacific, and the fact that it was home to a significant level of US commercial investment, meant that in the late 1950s and early 1960s the state was often seen as a key prize in the Cold War competition for influence in the non-aligned world. The evident interest that the Soviet Union, under Khrushchev's energetic new leadership, exhibited during this period in cultivating ties with Jakarta, necessarily seemed to enhance Indonesia's importance to American eyes. Sukarno's visit to Moscow in September 1956 was accompanied by the extension of a $100 million long-term credit, while in early 1958 an arms deal totalling $250 million was negotiated, with Poland and Czechoslovakia acting as Soviet intermediaries. President K. I. Voroshilov's state visit to Jakarta in May 1957 had been followed up, even more significantly, by a ten-day tour of Indonesia by Khrushchev in February 1960. When put alongside other initiatives in Russian policy during this period, many American observers came to the conclusion that a Soviet economic offensive was under way in the Third World, with Indonesia one of the prime targets. Trends within Indonesia's own complex polity did little to reassure the Americans that external Communist influence would not find a welcome audience. [ABSTRACT FROM AUTHOR]

There once was a time, not long ago, when Europe was close to full employment. In the 1960s and early 1970s, after the completion of the postwar recoveries and before the demise of the Bretton Woods exchange rate regime, unemployment rates throughout Europe were generally in the range of 2 to 3 percent or lower (European Commission 1998b: 224–53). It appeared, as Andrew Shonfield proclaimed in Modern Capitalism, that, with few exceptions, governments had – through indicative planning; increased cooperation between business, government, and labor; and the application of Keynesian principles to macroeconomic policy – overcome the job-destroying effects of business cycles and recessions (Shonfield 1969). Now, some three decades later and in the wake of the major recessions of 1974–75, 1980–84, and 1991–94, Europe is afflicted with enduring high levels of unemployment. Throughout the 1990s, the fifteen member states of the European Union (EU) experienced an average rate of unemployment of about 10 percent, an almost fivefold increase from the average for the fifteen states in the 1960s. Even some half-dozen years after the end of the last major recession, and despite the sustained recovery in much of Europe in the last half of the 1990s, the rate of unemployment remained close to double digits in the EU as a whole and in double digits in the eleven member states that formed the euro-zone, and it was expected to remain at or close to those levels in the foreseeable future. What makes the long-term deterioration in employment in Europe especially notable, of course, is the fact that it has been far more severe than in other advanced economies (see Table 1.1). [ABSTRACT FROM AUTHOR]

Our exposition so far has provided a detailed account of the creation of the semiconductor industry in four East Asian countries. We have analysed the organisational and institutional strategies employed, and sought to account for the achievements outlined in Chapter 1. We now shift gear to examine the strategies employed in comparative perspective, probing them for strengths and weaknesses. In this chapter, we confine our attention to the semiconductor industry, looking at the character of the industry created in each of the different countries, and extrapolating from this to analyse, at least to a first approximation, what may be the core strengths and the potential pitfalls of the leverage and learning approach to creating new industries. The advantage of our approach is that we are focusing on a single industry, over the course of its entire trajectory. Thus, many of the concerns and issues expressed in more general terms by other scholars can be tackled with greater precision in the case of this specific industry, and be subjected to more searching scrutiny. We examine the institutional pathways followed by the industry creation process characteristic of each country, look at their commonalities and differences, and attempt to account for them. The implications of such an analysis are brought out in our study of the sustainability of the industries created. In Chapter 7 we probe the leverage strategies more generally, examining their strengths and limits to their applicability, and the potential pitfalls involved in using them. [ABSTRACT FROM AUTHOR]

Juscelino Kubitschek first met Admiral Lúcio Meira, a staunch advocate of the Brazilian automotive industry, in 1955 while campaigning for the presidency in the state of Bahia. Meira had directed a subcommission on motor vehicles during the 1951–4 Getúlio Vargas administration before he was “exiled” to this post in northeastern Brazil by then-President Joāo Café Filho, Vargas's successor. Meira used the encounter as an opportunity to convince Kubitschek that automobiles should be included in his proposed Target Plan, a state-sponsored industrialization program. At a political rally later that same day, Kubitschek tested the idea by promising that, if elected, he would initiate production of a national automobile. The idea was received enthusiastically. Convinced of the project's political expediency, he quickly added automobiles to his list of developmental targets. Despite the haphazard route by which Kubitschek came to include autos among his campaign pledges, the industry would become central to his industrialization program. After the elections, Meira returned to Rio de Janeiro, the capital, as Kubitschek's minister of transportation and public works, with supervisory responsibility for the formulation and implementation of the automobile program. Meira's suggestion did not come out of the blue. It emerged from years of discussions on government policies toward this sector in which he had played a vital role. This chapter outlines how the decision to produce automobiles was arrived at in Brazil. It shows how the idea of a domestic auto program first emerged in response to the country's postwar balance-of-payments crises but soon took on more strategic significance. [ABSTRACT FROM AUTHOR]

Until very recently, the economic ideology that inspired Japanese industrial policy has been largely neglected in social science discussions in English-speaking countries (but see Pyle 1974). It was widely believed that the Japanese experience of economic development had little intellectual foundation. Not only does every educated person in North America know that Western mainstream economics is largely irrelevant to the study of Japanese-type economies, even specialists in Japanese studies believe that neither academic nor government economists played a major role in Japan's high-growth strategy. Academia in general has long indulged in what Saitō Seiichirō (1981:298) calls “a fallacious contrast between the prosperity of the Japanese economy and the desolation of Japanese economics.” These perceptions may be correct in the sense that neoclassical economics has not exerted any notable influence on Japanese development. Academicians, however, have neglected the fact that a group of Japanese economists represented by Arisawa Hiromi (1896–1988), Nakayama Ichirō (1898–1980), and Tōbata Seiichi (1899–1983), who belonged to the generation educated before World War II, played a very important role in the state's policy making. These economists helped the nation to establish an urgent agenda, to identify the future direction of economic development, and to build a theoretical framework for Japan's industrial policy in the context of international pressures and domestic turmoil from the 1930s to the 1960s. Their major propositions, reflected in successive state policies, constituted the core of what Japanese economist Kanamori Hisao (1985:127) calls “Jissen-ha economics” (the economics of actual fighting) – the logic of Japanese industrial policy. [ABSTRACT FROM AUTHOR]

Introduction It is easier to date the beginning of revolutions than their endings. The dismissal of the Derg from Tigray in 1989 marked an ending of sorts, but the war went on until the overthrow of the Derg and the EPRDF's capture of the entire country in 1991. That date served as another important marker, although struggles within the state and for development continued unabated, albeit under the very different conditions of peace and with the TPLF in a leading position in which to influence the political agenda of all Ethiopia. It is these new conditions and the challenges they pose in Tigray in the period from 1991 to 1996 that will be outlined in the first part of this concluding chapter. The second part of the chapter will summarily examine political developments at the Ethiopia-wide level during this period, and in particular, link the revolutionary struggle for Tigayran national self-determination with the EPRDF's efforts to reconstruct the Ethiopian state. Tigray: from revolutionary struggles to peace-time struggles Although the overthrow of the Derg brought much-desired peace, Tigray's transition from a regime of virtual independence to one of measured autonomy in post-1991 Ethiopia has not always been easy. In spite of the widely held assumption outside Tigray that the province was the beneficiary of enormous funds from a government dominated by Tigrayans, development, and even emergency, funds for war-affected areas in the province were slow to materialise. [ABSTRACT FROM AUTHOR]

In the early 1980s, as governments and international financial institutions struggled to manage deep economic problems, the immediate tasks of establishing macroeconomic stability and initiating the process of structural adjustment received almost exclusive attention. Soon, however, policy makers, practitioners, and development specialists began to question why many reforms did not produce expected results more quickly. As they asked this question, the issue of the administrative capacity of the state acquired greater salience. Some policy reforms required long chains of administrative action if they were to be implemented – improved tax collection, customs reform, health sector restructuring, and decentralization of decision making, for example. Some required public officials to be active managers and problem solvers – deregulation, tariff reform, and privatization, for example. And the success of other reforms required procedures and institutional structures to facilitate market activities and to encourage risk taking by the private sector – the development of financial sector institutions and economic regulation, for example. Initial adjustment efforts in Latin America and Africa confirmed that if government institutions were to monitor public spending, stimulate trade, expand the revenue base, manage an effective foreign exchange regime, and encourage private sector investment, they had to be organized effectively to carry out routine functions and they had to be able to count on administrators able to perform assigned tasks willingly, competently, and efficiently. The same realization applied even more to efforts to decentralize government to local and regional levels and encourage reforms in agriculture, health, and education. [ABSTRACT FROM AUTHOR]

Technical capacity relates centrally to the influence of science and reason in policy making, the role of ideas in the search for solutions to public problems, and the institutionalization of analytic problem solving within the public sector. Technical capacity varies among states and within states over time, and technical analysis is rarely the sole basis on which public decisions are made. Nevertheless, the ability to use scientific knowledge as an input into decision making, and into the management of public affairs, is a distinguishing characteristic of modern states. As the problems faced by modern governments have grown increasingly more complex, and as the informational and analytic bases on which to make decisions has increased, technical capacity is increasingly required to identify the origin and nature of public problems and assess possible solutions to them. A wide range of activities carried out by the state can provide evidence of its technical capacity. A national statistics agency that is able to collect, process, analyze, and disseminate information about economic and social conditions is one example. Promoting policy-relevant research on important public health issues is another, as is the ability to build bridges and roads that meet reasonable construction and safety standards. Similarly, introducing and managing complex information systems, ensuring air traffic safety, monitoring inflation, regulating financial markets, carrying out research on new agricultural and livestock technologies, and providing for safe drugs and water supplies are all functions that imply the need for technical expertise in a variety of fields. [ABSTRACT FROM AUTHOR]

Prior to the 1980s, Mexico and Kenya had strong reputations for effective state-led economic development and sustained state-dominated political stability in their respective continents. This chapter documents the extent to which expectations based on these reputations eroded and then broke down. The experiences of the two countries differ, yet the combined effect of economic and political change altered the context for state action in similar ways. In Mexico, the interaction of economic and political conditions indicates that economic crisis sharpened and accelerated an emergent political crisis. In contrast, Kenya provides a case of a country whose political crisis contributed significantly to deepening its economic problems. Deep and sustained economic crisis has farreaching consequences, as the case of Mexico explored here demonstrates. Although most frequently measured and discussed in terms of stagnant or declining rates of growth and indices of social welfare, extended economic crises also stimulate critical reassessment of the intellectual underpinnings of national development strategies. Such crises encourage citizens, policy makers, and politicians to question prior growth strategies and policy regimes, even those that had produced positive results in the past. In consequence, long-accepted notions about how development is best achieved become subject to greater skepticism and at times are held responsible for creating current conditions. Along with this questioning of appropriate routes to development, sustained economic crisis also has a profound impact on the economic interests supporting and benefiting from existing policies. [ABSTRACT FROM AUTHOR]

Introduction The classical gold standard era from 1880 to 1914, when most countries of the world defined their currencies in terms of a fixed weight (which is equivalent to a fixed price) of gold and hence adhered to a fixed exchange rate standard, has been regarded by many observers as a most admirable monetary regime. They find that its benefits include long-run price level stability and predictability, stable and low long-run interest rates, stable exchange rates (McKinnon, 1988), and hence that it facilitated a massive flow of capital from the advanced countries of Europe to the world's developing countries. Others have taken a less favorable view of the gold standard's performance. Some criticize the record of relatively high real output and short-term price variability (Bordo, 1981; Cooper, 1982; Meltzer and Robinson, 1989), and some have faulted it for subordinating domestic stability to the maintenance of external convertibility (Keynes, 1930). A persistent critique of the gold standard is that it provided a favorable experience for the core countries (France, Germany, the United Kingdom, and the United States), but a less favorable experience for the peripheral countries of the developing world (DeCecco, 1974). For the core countries the balance of payments adjustment mechanism was stable, so few crises occurred; the peripheral countries, by contrast, were subject to shocks imported under fixed exchange rates from abroad and frequently suffered exchange rate crises and a destabilized growth pattern. [ABSTRACT FROM AUTHOR]

After twenty years of floating exchange rates, there is now considerable interest, among those concerned over its perceived shortcomings, in an eventual return by the world to a fixed exchange rate regime. This interest has been enhanced by the apparent success of the European Monetary System (EMS) and the prospects for European monetary unification. The Bretton Woods system was the world's most recent experiment with a fixed exchange rate regime. Although it was originally designed as an adjustable peg, it evolved in its heyday into a de facto fixed exchange rate regime. That regime ended with the closing by President Richard Nixon of the gold window on 15 August 1971. Twenty years after that momentous decision, a retrospective look at the performance of the Bretton Woods system is timely. This chapter presents an overview of the Bretton Woods experience. I analyze the system's performance relative to earlier international monetary regimes – as well as to the subsequent one – and also its origins, operation, problems, and demise. In the survey, I discuss issues deemed important during the life of Bretton Woods and some that speak to the concerns of the present. The survey is limited to the industrial countries – the G-10 and especially the G-7.1 do not examine the role of the International Monetary Fund (IMF), the fundamental organization of Bretton Woods, in the economies and international economic relations of the developing nations. [ABSTRACT FROM AUTHOR]

The gold standard: A subject of perennial interest The classical gold standard ended in 1914 but it has been the focus of great interest by policymakers and scholars ever since. On four occasions in this century the gold standard rose to the forefront of discussion: after World War I, during World War II, in the mid-1960s, and in the early 1980s. After World War I, in the face of high inflation and volatile exchange rates, the great powers pushed to return to the gold standard. The Cunliffe Committee report of 1918 urged a return to the prewar standard except that the system would be based upon gold bullion rather than gold coin. The Genoa conference of 1922 recommended restoration of a gold exchange standard as soon as feasible. By 1928 most of the world was part of a gold exchange standard that collapsed several years later during the Great Depression. During World War II, American planners for the postwar international monetary order attached priority to a gold nominal anchor for the dollar and hence for other currencies pegged to the dollar. Adherence to limited gold convertibility, they believed, would ensure exchange rate stability and thereby encourage the growth of international trade. The resulting Articles of Agreement negotiated at Bretton Woods in 1944, although incorporating the gold parity (at least for the dollar) of the classical gold standard, eschewed many of its other features. [ABSTRACT FROM AUTHOR]

David Thomas (in the previous chapter) has discussed how Anglo-US relations affect British policy toward Latin America. This chapter is concerned with how British participation in the European Community (EC) affects our relations with Latin America. Both the strength of our ties with the United States and traditional British reserve about Europe have impeded close harmonisation of policy between London and Brussels. The still unresolved conflict between Britain and Argentina over the sovereignty of the Falkland/Malvinas Islands sharpens that divide. So the first question to consider is whether Britain has, or can have, an autonomous policy toward Latin America, separate from those of both the United States and Europe. Certainly the British government has a policy of its own on the Antarctic; we have substantial post-colonial interests in the Caribbean and residual colonial commitments both there and in the South Atlantic; we have a policy on drug-trafficking, a standpoint on the Third World debt issue, a set of general policies on trade, investment and commodity markets, all of which impinge on Latin America without being specifically tailored to the concerns of that region. Britain also has a tremendous historical presence in the region. Between the early nineteenth and early twentieth centuries we were the most significant external power in South America and one of the major sources of both political and economic influence in Mexico, the Caribbean and Central America as well. Yet since the bond defaults of the early 1930s and the liquidation of most of the assets in the 1940s, our direct political and economic stake has gone into such an eclipse that we have difficulty nowadays even in recalling the nature of our former presence. [ABSTRACT FROM AUTHOR]

The key issues to be addressed in this chapter are: Why did British banks become so heavily exposed in Latin America in the 1970s and early 1980s, when other British links (such as trade and direct investment) with the subcontinent were relatively weak and declining during that period? What initiatives could (or should) be taken in the United Kingdom (by government, banks, exporters) to: (a) relieve the burden of debt on developing countries' economies? (b) strengthen the stability of British and British-based banks? (c) change the asymmetrical nature of British links to Latin America, so that the importance of trade and other links is enhanced relative to that of the currently dominant financial links? The evolution of UK financial links with Latin America As is well known, international private banks played a major role in funding the very large deficits that Latin American and other Less Developed Countries (LDCs) experienced after the early 1970s. Within this very rapid expansion British-based banks played a major role, as London was, and still is, the major international financial centre in the world and also the main centre for the so-called Euro-dollar market, through which most of the loans to LDCs and to Latin America were carried out. The importance of London as an international financial centre has its origins in the leading role played by Britain in the world economy and in international trade up to the beginning of the twentieth century. [ABSTRACT FROM AUTHOR]

Early Metzler: formal I An early formal development of the keynesian model of an open economy was Lloyd Metzler's thesis (submitted at Harvard University in 1942), from which two chapters were published in the journals. The two papers are clearly of a piece. They are different in style, as befit the respective journals (Econometrica and the Journal of political economy) at that time, but in content they are both studies in the application of keynesian analysis to the open economy problem. Distinguishing between various channels of adjustment, price (including price level, exchange rate, and interest rate changes), real income effects, and Ohlin-type expenditure and purchasing power changes, he concentrates his attention on the real income effects. While not as rich as Machlup's study (see below) in the proliferation of disturbances and varying institutional environments, Metzler's two papers here are spare and elegant; they constitute a breakthrough in the formal application of the keynesian apparatus to the open economy. The model is the same in both – a simple two-country keynesian model, in which consumption, imports, and investment are lagged functions of income. The first paper treats the issue of the dynamic stability of income in an open economy. If any parameter of the model changes, will income converge to a new equilibrium, given that the current account is unconstrained? If stable, what will the new equilibrium for the two countries, and the world, look like? [ABSTRACT FROM AUTHOR]

The neoclassicals viewed short-term capital movements as a phenomenon that resulted from central bank policy and performed the role of financing imbalances. The anti-neoclassicals either denied that this was the way the world functioned or, more often, argued that it ought not to work that way. Hawtrey challenged the neoclassical concept of short-term capital movements as playing a benevolent role: adjusting and financing imbalances. Hayek argued that short-term financial capital movements should not be thought of or treated differently from any other kind of trade in assets (including goods), and should not be deliberately elicited by central bank policy (see Chapter 7). The late classicals used long-term capital movements as a starting point for analyzing the classical adjustment mechanism. That is, capital flows constituted the disturbance they chose in exploring empirically (“inductively”) the process of adjustment; short-term capital movements were often, in their work, important components of the adjustment, substituting for gold movements, and offering temporary financing. The group of writers I am discussing now fixed their attention on capital movements, primarily short-term capital movements, with the aim of sorting out when they were endogenous and when exogenous, when financing, when destabilizing. They emphasized monetary and money market phenomena, and the possibly stabilizing or destabilizing effects of these, through internal, domestic monetary repercussions. I am thinking here of people such as Bloomfield (1950), Kindleberger (1937), Nurkse (1944). Predating most of these is the Italian, Marco Fanno (1935 and 1939). [ABSTRACT FROM AUTHOR]

What became known as the keynesian theory of international payments was not, to my knowledge, ever spelled out by Keynes. The marginal propensity to import, and then the multiplier, began to appear in the late 1930s and early 1940s, associated with the names of Harrod (1933), Machlup (1939, 1943), Metzler (1942a, 1942b), Neisser and Modigliani (1953), Paish (1936), and others. A detailed account of these is presented in Chapters 14 and 15 on “the keynesians.” The full-blown integration of keynesian macroeconomic theory with endogenous capital mobility, monetary changes, and some notion of balance of payments equilibrium (even of a short- or medium-run nature) did not appear until the 1950s, with Meade, Mundell, Fleming, and, with great qualification, Metzler, whom I discuss in Chapter 16. Keynes himself, after the Treatise and the Macmillan Committee testimony, which were roughly coeval, wrote nothing of importance on international economics except for the proposals and correspondence regarding the postwar monetary plans. These, however, constitute a major body of work expressing his views on the international monetary system and the problems he thought were likely to arise in the postwar period. While they are less formally expressed, more diffuse, and more “politically” oriented than the earlier writings I have discussed, they do reveal an analytical stance which is highly recognizable and worth exploring. In the letters and drafts (and redrafts) of plans for the postwar monetary system (Keynes 1940–4 [1980]) several themes are prevalent throughout. [ABSTRACT FROM AUTHOR]

How do the fluctuations in economic activity affect the number of strikes? Obviously, through their effect on unemployment. When this goes down, when the working day gets longer in the factories, due to new orders, when workers are employed six or seven days a week, instead of four or five, they realize (without having to consult the statistics) that business is going well and they try to take advantage of the situation. Hence, strikes. When, on the contrary, unemployment soars, when workers see some of their fellow workers being dismissed, and the number of working hours and days curtailed, they hesitate to strike, at least over wage issues, for fear of being replaced by the army of the unemployed. The curve of strikes dwindles. Therefore, there is a relationship of cause and effect between the fluctuations of unemployment and those of strikes. HOW THE LABOR-MARKET ARGUMENT RUNS Labor-market theories of strikes claim that union behavior and the propensity to strike are heavily dependent on the state of the labor market. As early as the beginning of the twentieth century, in two seminal articles, Rist (1907, 1912) argued that there exists a strong relationship between the business cycle and strike activity, but that this relationship is mainly indirect, mediated by the state of the labor market. According to Rist (1912, pp. 748–9), “the rise or fall of strikes is related to the fluctuations of unemployment, because it is through the rise or fall of unemployment that industrial hardship or prosperity is felt by the workers.” [ABSTRACT FROM AUTHOR]

Economic issues were among the most vexing of those that arose between the United States and Great Britain during the period under consideration. While not precluding the extraordinarily close bonds between the two countries that Churchill desired and that his government worked for, questions like those which developed over Lend-Lease versus Britain's sterling balances, civil aviation, and oil resources proved very divisive. In 1943, United States officials, moved mainly by the Treasury, began to question payments to Great Britain for raw materials, many of which went back to the UK as Lend-Lease manufactured items. In addition, the Americans maintained that the sole object of Lend-Lease was to provide Britain with war supplies when she lacked foreign exchange to buy them. By 1943, however, they calculated that Britain, partly as a result of Lend-Lease, had accumulated over one billion (1,000 million) dollars of exchange and consequently should pay for war materials until her exchange reserves dropped under the one billion level. The view was opposed in vain by Dean Acheson, then an Assistant Secretary of State, but supported by no less influential a group than Secretary of Treasury Henry Morgenthau, Jr; Secretary of State Cordell Hull; then Undersecretary of State Edward Stettinius, Jr, and Foreign Economic Administrator Leo Crowley. British officials pointed out that a greater accumulation of foreign exchange would make an important difference in what they foresaw would be an economically difficult postwar period. [ABSTRACT FROM AUTHOR]

In the view of her political guardians in the mid-1940s Britain needed to marry and for the most worldly of reasons. She had lost approximately one quarter (£7,300 million) of her prewar wealth (£30,000 million) during the war. She had been forced to undertake a total disinvestment of more than £4,000 million and although she had gold and dollar reserves valued at $1,800 million in July 1945, she also had overseas liabilities of approximately $13,000 million. She had managed to hold imports to 62% of the prewar total but had seen exports fall to 46%. To quote H. G. Nicholas, ‘It was as if all the resources and treasures which in the days of her pre-eminence had been built up by Victorian thrift and enterprise had now been flung, with a kind of calculated prodigality, upon the pyre of total war.’ Recognising the wasting process in which the nation was caught, its leaders sought a partnership that might bring to Britain something of a restoration not just of treasure but of influence. Furthermore, it was clear during the war that, besides the drain of its assets, Britain faced a ‘manpower famine’. This boded ill for the future if great power status would require her to maintain armed forces on the scale of World War II or to provide major contingents to police the peace of the world. Britain's major deficiency was in ground forces with their high manpower component. [ABSTRACT FROM AUTHOR]

Awaking one night ‘with a sharp stab of almost physical pain’, Winston Churchill realised that he might be dismissed as Prime Minister by Britain's voters in the summer of 1945. Brooding, he said ‘The power to shape the future would be denied me. The knowledge and experience I had gathered, the authority and goodwill I had gained in so many countries, would vanish.’ But, in fact, even after his defeat at the polls, his influence on world affairs was far from spent. If his credit at home was limited for the time being, it remained vast in the United States, the largest unit of the English-speaking peoples, a community of which he often spoke, exaggerating its cohesiveness. The extent of his prestige in America was never clearer than when he delivered his ‘Iron Curtain’ speech in Fulton, Missouri, on 5 March 1946. On that occasion he was not simply warning the world of the danger of communism or of Soviet imperialism, or trying to stimulate the West to more appropriate policies. He was continuing an effort made since he had become Prime Minister to join Great Britain and the United States, at least their military and foreign policy directorates, in a much closer union. By the time of his defeat the previous July he had not succeeded, and at Fulton he made a last attempt. Churchill and the government he headed were determined to maintain a relationship with the United States unique among modern sovereign powers. [ABSTRACT FROM AUTHOR]