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3171. Exploiting Europe's Strong Potential: Governance, Institutions and Policies

Author:
Paola Subacchi, Benedicta Marzinotto, and Vanessa Rossi
Publication Date:
01-2008
Content Type:
Policy Brief
Institution:
Chatham House
Abstract:
With the euro approaching the tenth anniversary of its establishment, this is a timely as well as critical moment to review policies and performance. Enough experience of the convergence and adjustment processes has been gained to better understand how they work and what problems have been created rather than solved. As the strengths – and the success – of the euro become more visible, so too do its weaknesses and the conflicts it creates. Are the appropriate mechanisms and governance in place to help manage Europe's economy so that it can realize its potential? Governance is critical because of the institutional complexity of the monetary union. Independent policy targets and policy instruments not only have to be consistent with each other, but also need to be integrated in a nonconflicting framework. There are two threads to this debate: convergence and adjustments across the euro area, and how the region as a whole is performing with regard to the rest of the world. Both imply a new approach to governance. When EMU was established, the euro area comprised 11 founding members. Now it comprises 15 and is slowly expanding. Ten years ago the emergence of China was more a possibility than a reality, while the 'Asian Tigers' were coming to terms with a devastating financial crisis. Now the rise of the emerging market economies and the enlargement of the global economy's playing field pose significant challenges to the competitiveness of the euro area. With the euro now becoming the second pillar of the international monetary system, EMU's external dimension has become very relevant. The way forward needs to blend the traditional concerns for macroeconomic stability and competitiveness with the more recent concern about the role of Europe in the global economy. All these dimensions need to be organized into a coherent agenda. The right policy should be implemented at the right time.
Topic:
Economics and Foreign Exchange
Political Geography:
Europe

3172. New Action Plan for Southeastern Turkey

Author:
Taha Ozhan
Publication Date:
07-2008
Content Type:
Working Paper
Institution:
SETA Foundation for Political, Economic and Social Research
Abstract:
Currently, GAP is a regional development project that covers nine southeastern provinces extending over the wide plains in the basins of the lower Euphrates and Tigris rivers. Political and economical instability in Turkey in the 1980s diverted attention from the GAP Project and led to consecutive failures in meeting official targets for its progress within the initial time framework. Within the last five years, Turkey has undergone a significant social and economic transformation whereby fiscal discipline, effective inflation control and an average of greater than 7% growth have been achieved ahead of many expectations. Turkish government launched its long-awaited plan for the GAP Project, now scheduled for completion by 2012 at an expected cost of around 27 billion YTL ($20 billion). The government described its action plan to boost social and economic development in the country's southeast as “a turning point for Turkey.” The GAP Project was designed not only as a rural development plan but also as an economic initiative intended to have positive social and political consequences for Turkey's Kurdish issue. However, although it is certain that the Kurdish issue has an important socioeconomic dimension; it would be a mistake to reduce the issue to the economic backwardness of the region alone.
Topic:
Economics
Political Geography:
Turkey

3173. Finance and the Macro-economy: The Politics of Regulatory Reform in Europe

Author:
Sofía Perez and Jonathan Westrup
Publication Date:
01-2008
Content Type:
Working Paper
Institution:
Minda de Gunzburg Center for European Studies, Harvard University
Abstract:
This paper analyzes major changes in the regulation of the financial sector in Europe over the last three decades. Focusing on the pattern of change across five countries (Britain, France, Germany, Italy and Spain), the paper identifies two major periods of regulatory change: first, the shift away from postwar patterns of credit regulation in the 1970s and 1980s, and second, the intensification of state supervisory powers and the introduction of new regulatory structures from the 1990s to the present. In both cases, the authors point to the way in which different models of financial sector regulation affect the political consequences of macro-economic policy for political elites as an explanation for choices that governments have made in the regulatory arena. More specifically, while regulatory change in the first period may be largely explained by the way in which different postwar models of credit regulation impinged upon a government's political ability to impose disinflation, choices in favor of different regulatory structures in the second period (single regulator in Britain and Germany versus multiple regulators in the other countries) can be related to differences in the area of pension reform. By focusing on the political implications that different modes of financial regualtion can have for elected officials in the context of different macroeconomic scenarios, the authors offer an explanation of regualtory change that differs from accounts which emphasize the primacy of financial market forces in driving such change.
Topic:
Economics and Government
Political Geography:
Britain, Europe, France, Germany, Spain, and Italy

3174. Ripples in a Rising Tide: Why Some EU Regions Receive More Structural Funds Than Others Do

Author:
Thilo Bodenstein and Achim Kemmerling
Publication Date:
01-2008
Content Type:
Working Paper
Institution:
Minda de Gunzburg Center for European Studies, Harvard University
Abstract:
We investigate the distribution of European Union (EU) Structural Funds across EU regions. We draw from literature concerning the political economy of national intergovernmental grants, and regarding the EU's two-tiered bargaining process. Bargaining over the distribution of Structural Funds takes place between regions and their respective national governments, but is also influenced by bargaining that occurs on an intergovernmental level. We test our claims with a data set containing the distribution of Objective-1 and Objective-2 funds across EU regions, as well as other economic, institutional and electoral variables. Adjusting for selection bias, we find that the official allocation criteria are not sufficient determinants for explaining the distribution of regional transfers. For Objective-2 they may even be said to bear the opposite sign. Moreover, federalist regions and those with stronger electoral competition receive significantly more transfers than other regions.
Topic:
Economics and Political Economy
Political Geography:
Europe

3175. Does the Price of Watermelons Matter? Economic Performance and Political Legitimacy in the Islamic Republic of Iran

Author:
Nicholas Gossen
Publication Date:
09-2008
Content Type:
Journal Article
Journal:
al Nakhlah
Institution:
The Fletcher School, Tufts University
Abstract:
Despite Ayatollah Khomeini's famous comment that the Iranian revolution was “not about the price of watermelons,” the Islamic Republic of Iran was in part founded on economic promises of redistribution, equality, and justice. The strength of this rhetoric has formed a core basis of political support for the regime, but it has also established public expectations that the Islamic Republic has been chronically unable to meet. Many analysts have cited Iran's poor economic performance since the revolution and resulting public dissatisfaction as a key weakness of the clerical regime and a potential source of its downfall. Indeed, this is a crucial element of the argument advanced by advocates of stronger multilateral economic sanctions against Iran in the dispute over its nuclear program. However, underlying this logic is an implicit assumption that regime legitimacy is tied to economic performance. While intuitively appealing, this assumption bears further scrutiny, particularly if it forms a basis for American policy decisions towards Iran. The primary goal of this paper is to examine the political and economic factors that have caused the gap between economic rhetoric and performance in Iran, and to assess the extent to which that gap has affected the political legitimacy of the Iranian regime.
Topic:
Economics
Political Geography:
America, Iran, Middle East, and Beijing

3176. Uncertainty and the Market for Patents

Author:
Irene Troy and Raymund Werle
Publication Date:
07-2008
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Modern societies regard knowledge as a production factor in its own right. The market is the prevailing governance mode of their economies, and it is supposed to be the most appropriate mode of trading and allocating knowledge assets, too. But socio-economic research has revealed that knowledge markets are far from functioning smoothly. Building on ongoing qualitative research into patent trading we suggest that the emergence of a well-functioning market for patented new technological knowledge is confronted with several obstacles, which can be characterized as different facets of uncertainty. They are included in the process of creation of innovative knowledge, in its transformation into a fictitious knowledge commodity (patent), in its uniqueness, in the strategy of transaction partners, in the estimation of the future market potential of final products (based on the patent), and generally in the problem of incomplete and asymmetric information. Also a commonly accepted method of determining a patent's value is missing. We analyze structural and organizational responses to the problem of uncertainty. Potential traders often rely on contractual options, especially licensing agreements, and complementary procedural principles facilitating the trade of patents.
Topic:
International Relations, Economics, and Markets
Political Geography:
Europe

3177. Friedman and Russia

Author:
Andrei Illarionov
Publication Date:
01-2008
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
One day I asked Milton Friedman a question. That question was in my mind every time we met: “Could he have achieved the same status he did in America if he had lived in Russia—not only in terms of his research, but in shaping his outlook on life and in his under-standing of freedom?” Having kept silent for a moment, he answered: “no.”
Topic:
Economics
Political Geography:
Russia, United States, America, Europe, and Asia

3178. An Indian Economic Miracle?

Author:
Deepak Lal
Publication Date:
01-2008
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In explaining the acceleration in Indian growth, and to judge if an Indian economic miracle is on its way, it is first necessary to establish when this acceleration began, as this is still subject to controversy. Second it is necessary to identify the sources of this acceleration and to see to what extent these are the results of policy. Third, to provide some reading of the tea leaves until 2030, it is necessary to outline the current constraints on growth. But before that, the current change in Indian economic fortunes needs to be put into historical perspective. This is done in the first part of this article, followed by the next three parts, which deal with the other three broad themes outlined above. As this article is in honor of Angus Maddison, I rely wherever possible on the growth accounting method that he has made so much his own.
Topic:
Economics
Political Geography:
India and Asia

3179. Approaching a Triumphal Span: How Far Is China Towards its Lewisian Turning Point?

Author:
Fang Cai
Publication Date:
02-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
With the aid of an analytical framework of the Lewis model revised to reflect the experience of China, this paper examines the country's dualistic economic development and its unique characteristics. The paper outlines the major effects of China's growth as achieved during the course of economic reform and the opening-up of the country: the exploitation of the demographic dividend, the realization of comparative advantage, the improvement of total factor productivity, and participation in economic globalization. By predicting the long-term relationship between the labour force demand and supply, the paper reviews the approaching turning point in China's economic development and examines a host of challenges facing the country in sustaining growth.
Topic:
Development and Economics
Political Geography:
China and Asia

3180. China in the World Economy: Dynamic Correlation Analysis of Business Cycles

Author:
Jarko Fidrmuc and Ivana Bátorová
Publication Date:
01-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We analyse the business cycles in China and in selected OECD countries between 1992 and 2006. We show that, although negative correlation dominate s for nearly all countries, we can also see large differences for various frequencies of cyclical developments. On the one hand, nearly all OE CD countries show positive correlations of the very short-run developments that may correspond to intensive supplier linkages. On the other hand, business cycle frequencies (cycles with periods between 1.5 and 8 years) are typically negative. Nevertheless, countries facing a comparably longer history of intensive trading links tend to show also slightly higher correlations of business cycles with China.
Topic:
Economics and International Trade and Finance
Political Geography:
China and Asia