Office Hours Tuesdays 4:00-5:00 and by Appointment

IR331: The Global Economy 2030 Fall 2016

Professor: John Eatwell Email [email protected] Office: KAP360 Office Hours Tuesdays 4:00-5:00 and by appointment Class: TT 2:00 - 3:20

Professor: Jonathan D. Aronson

Email [email protected] Office: KER206 but will meet in VKC Office Hours Tuesdays 3:30-5:00 and by appointment Class: TT 2:00 - 3:20

TA: Mark Paradis Email: [email protected] Office Hours: TBD

The Global Economy 2030

This is not a course in prediction or even crystal ball gazing - leave that to the fortunetellers. Precise economic predictions around 20 years ahead are almost invariably wrong (just think of what someone in 1990 would have predicted for the global economy when there was no such thing as a digital telephone, and the Chinese economy was about a 10% of the size it is today). Instead, what the course seeks to do is to identify some of the main forces that will shape the global economy in 2030, to provide a “tool-kit” for evaluating those forces, and to suggest some ways in which they may work out. (You are certainly free to contest our suggestions).

Along the way a significant amount of macroeconomics and finance will be covered. But this will be integrated with a discussion of practical issues in the

-1- global economy. A major part of the course will be about the US (after all, the US is the largest economy in the world). But the recent financial crisis has taught, if it wasn’t realized before, that the performance of the US is not independent of the performance of the global economy as a whole. John Eatwell anchors the course with first set of lectures – introducing the basic analytical concepts needed to start to understand what is happening in the global economy. Jonathan Aronson will then take over, preparing, on most Tuesdays, the discussion that will take place with visiting speakers on Thursdays.

Guest Lecturers will include:

Steve Lund (USC) on the Earth’s resources (10/6) Ron Lee (UC Berkeley)` on Demography (10/13) Gabe Kahn (USC-Annenberg) on Environmental policy (10/20) Security expert on Hard Power (11/3) Don Abelson (former US Gov) on Trade (11/10) Baizhu Chen (USC-Marshall) on the Challenge of China (11/15) Jake Soll (USC-History) on Europe going forward (11/17)

Requirements:

1) 45% of your grade will be based on three closed-book, mid-term examinations that will cover the content of the early readings and lectures delivered by John Eatwell. (Examinations in Class on September 8th (15% of grade), September 29th (15% of grade), and October 29th (15% of grade)

2) 15% of your grade will be based on the final examination (a non- cumulative exam that is in effect a fourth mid-term) on December 8th.

3) 30% of your grade will be based on a final project paper. Due in class on December 1st

4) 10% of you grade will be based on class participation/interaction.

-2- Required Books for the Global Economy 2030

Anat Admati and Martin Hellwig (2013) The Bankers’ New Clothes: what’s wrong with banking and what to do about it. Princeton University Press

John Eatwell and Lance Taylor (2000) Global Finance at Risk: the case for international regulation, The New Press

John Eatwell and Murray Milgate (2011) The Fall and Rise of Keynesian Economics. Oxford University Press

Barry Eichengreen (2011) Exorbitant Privilege: the rise and fall of the dollar. Oxford University Press

Mariana Mazzucato (2013) The Entrepreneurial State: debunking public vs. private sector myths. Anthem Press.

Eswar S. Prasad (2014) The Dollar Trap: how the US dollar tightened its grip on global finance. Princeton University Press

Ruchir Sharma, (2016) The Rise and Fall of Nations. W.W. Norton.

Reference

For basic concepts in macroeconomics it may prove valuable to refer to a basic textbook, such as N. Gregory Mankiw, Principles of Macroeconomics

Your Project Paper/Report

A description of possible project topics will be provided in class in early October. Students may undertake a topic not on the initial list if first approved by the faculty. We are considering, but have not yet decided, whether to permit group projects.

-3- Academic Integrity:

The School of International Relations is committed to upholding the University’s Academic Integrity code as detailed in the Scampus Guide. It is the policy of the SIR to report all violations of the academic code. Any serious violation or pattern of violations of the Academic Integrity Code will result in the student’s expulsion from the International Relations major or minors. The University may also decide on further consequences.

Disability Accommodation:

Students requesting academic accommodations based on disability are required to register with Disability Services and Programs (DSP) each semester. A letter of verification for approved accommodations can be obtained from DSP when adequate documentation is filed. Please be sure the letter is delivered to me as early in the semester as possible. DSP is open M-F, 8:30-5:00pm. The office is in STU 301 and their phone is 740-0776.

-4- Part I: The Toolkit – concepts and methods for analyzing economic trends

Week 1:

Aug 23: Session One: The Problem: Thinking about the Global Economy 2030 (JE)

Eatwell and Taylor, Global Finance at Risk, pp. 1-28.

Adair Turner, Wealth, debt, inequality and low interest rates: four big trends and some implications, http://www.cass.city.ac.uk/__data/assets/pdf_file/0014/216311/RedingNotes _Lord-Turner-Annual-Address-at-Cass-Business-School-March-26-2014.pdf

Slides associated with this lecture are available at: http://www.cass.city.ac.uk/__data/assets/pdf_file/0020/216290/Slides_Lord- Turner-Annual-Address-at-Cass-Business-School-March-26-2014.pdf

Aug 25: Session Two: Economic Categories: National Income, Growth and Distribution (JE)

National Income Accounting (simple) www.johnzietlow.com/MACROECON/PPTs/Chap005.ppt

Barry Wickes, Lecture Notes on National Income Accounting, (more difficult) http://econ.la.psu.edu/~bickes/nia.pdf

Mankiw, Macroeconomics, Chapter 1

-5- Week 2:

Aug 30: Session Three: Money, Finance and Interest Rates (JE)

Mankiw, Macroeconomics, (Chapter 13 and 14).

Eatwell and Taylor, Global Finance at Risk, pp. 180-239 (Chapters 6 and 7)

Sharma, The Rise and Fall of Nations: Chapter 9

Sep 1: Session Four: The determination of economic output (JE)

Mankiw, Macroeconomics, (Chapters 20 and 21)

Eatwell and Milgate, The Fall and Rise of Keynesian Economics. Preamble, and Chapters 1, 8-10.

Week 3:

Sep 6: Session Five: Session Five: Interconnectedness: international trade and economic performance (including Brexit) (JE)

Francis Cripps, John Eatwell and Alex Izurieta, Financial Imbalances in the World Economy, Economic and Political Weekly, http://www.epw.in/system/files/pdf/2005_40/52/Financial_Imbalances_in_th e_World_Economy.pdf

Francis Cripps and Alex Izurieta The UN Global Policy Model (GPM): Technical Description http://unctad.org/en/PublicationsLibrary/tdr2014_bp_GPM_en.pdf, pp.4-8

-6- Richard Thaler, Britain pays the price for a badly designed Brexit choice, https://www.ft.com/content/bc816fae-5999-11e6-9f70-badea1b336d4

Martin Wolf, Brexit will reconfigure the UK economy, https://www.ft.com/content/29a7964c-3953-11e6-9a05-82a9b15a8ee7

Sep 8: Session 6: First Mid-Term Exam (15%)

Week 4: Sep 13: Session Seven: The distribution of income (JE)

Read reviews of Thomas Piketty, Capital in the Twenty-First Century, Harvard University Press, 2014 (Chapters 7 to 10), pp. 237-376.

The Guardian, http://www.theguardian.com/books/2014/jul/17/capital-twenty-first- century-thomas-piketty-review

James Galbriath in Dissent https://www.dissentmagazine.org/article/kapital-for-the-twenty-first- century

Lawrence Summers in Democracy http://www.democracyjournal.org/33/the-inequality-puzzle.php?

Sep 15: Session Eight: International Monetary Policy (JE)

Mankiw, Macroeconomics, (Chapters 18 and 19).

Eichengreen, Exorbitant Privilege, pp. 1-96. (Chapters 1-4).

Eatwell and Taylor, Global Finance at Risk, pp. 29-95, (Chapters 2 and 3).

-7- Week 5:

Sept. 20: Session Nine: The Financial Crisis and the Future of Finance (JE)

Admati and Hellwig, The Bankers’ New Clothes, Part I and Part III

Sep 22: Session Ten: International Trade and Finance (JE)

Eatwell and Taylor, Global Finance at Risk, pp. 54-179, (Chapters 3-5).

Sharma, The Rise and Fall of Nations: Chapter 5.

Week 6:

Sep 27: Session Eleven: The Role of the State (JE)

Eatwell and Milgate, The Fall and Rise of Keynesian Economics, Chapters 6,7 and 12.

Mazzucato, The Entrepreneurial State, Chapters 1, 2, 4 and 5.

Sep 29: Session Twelve: Second Midterm Exam (15%)

-8- Part II: Issues and Guest Lectures

Week 7: Resources: Water and Energy

Oct 4: Session Fourteen: Session Nineteen: (JA) Driver: Water

Watch TED Talk by Allan Savory: “How to fight desertification and reverse climate change,” at http://www.ted.com/talks/allan_savory_how_to_green_the_world_s_deserts _and_reverse_climate_change

Watch: TED Talk by Amory Lovins, “A 40-Year Plan for Energy,” http://www.ted.com/talks/amory_lovins_a_50_year_plan_for_energy

Amanda Little, “Can Desalinization Counter the Drought?” New Yorker, July 22, 20 15. Available at: http://www.newyorker.com/tech/elements/can- desalinization-counter-the-drought?intcid=mod-most-popular?reload

Ben Sutherland, “Water shortages 'foster terrorism'” http://news.bbc.co.uk/2/hi/science/nature/2859937.stm

Oct 6: Session Fourteen: Guest lecture: Steve Lund on the Earth’s resources

Readings tbd

-9- Week 8: Demography

Oct 11: Session Fifteen: (JA) Driver: Demography and Migration

Watch TED Talk: Jared Diamond: How societies can grow old better http://www.ted.com/talks/jared_diamond_how_societies_can_grow_old_bett er

Watch TED Talk: Hans Rosling, “Religions and Babies,” https://www.ted.com/talks/hans_rosling_religions_and_babies

Sharma, The Rise and Fall of Nations: Prologue and Intro & Chapter 1.

Oct 13: Session Sixteen: Guest Lecture: Ron Lee on Demography (10/8)

Week 9: Climate:

Oct 18: Session Seventeen: Environment and Climate Change (JA)

Read: Introductory Essay on Climate Change at: http://www.ted.com/read/ted-studies/environmental-studies/introductory- essay

Review: Environmental Policy, Scientific American, August 2014, http://www.scientificamerican.com/topic/environmental-policy/

Watch: James Hansen, “Why I must speak out about climate change,” at http://www.ted.com/talks/james_hansen_why_i_must_speak_out_about_cli mate_change

-10- Oct 20: Session Eighteen: Gabe Kahn, Annenberg School of Journalism on Environmental policy

Gabe Kahn, “Did California Figure Out How to Fix Global Warming?” researched and reported. At: http://www.motherjones.com/environment/2016/03/california-cuts- greenhouse-gas-jerry-brown-growth-energy

Week 10: Jobs and Inequality

Oct 25: Session Nineteen: (JA) Driver: Jobs and Productivity

Watch TED Talk: Andrew McAfee: What will future jobs look like? http://www.ted.com/talks/andrew_mcafee_what_will_future_jobs_look_likealk:

Peter Diamond and Emmanuel Saez, 2011. “The Case for a Progressive Tax: From Basic Research to Policy Recommendations,” Journal of Economic Perspectives, 25(4): 165-190. http://eml.berkeley.edu/~saez/diamond- saezJEP11full.pdf

Oct 27: Session Twenty: Review and Third Midterm Exam (15%)

-11- Week 11: Foreign Policy

Nov 1: Session Twenty-one: Driver: Globalization and International Linkages: Soft Power and Smart Power (JA)

Joseph Nye Reading to be distributed

Nov 3: Session Twenty-two: Guest Lecturer TBD: International Security: Hard Power

Week 12: Democracy, Trade and Communication Policy

Nov 8: Session Twenty-three: Democracy, Authoritarianism, and the Future of the State and of Liberty (JA) (ELECTION DAY)

Nov 10: Session Twenty-Four: Guest Lecturer Don Abelson (Former FCC & USTR Official): On The Future of Foreign Policy and Trade Policy

Sharma, The Rise and Fall of Nations: Chapter 7 and 8.

-12- Week 13: Europe and China

Nov 15: Session Twenty-five: Guest Lecture: Baizhu Chen (USC - Marshall) on the Challenge of China

Dong He and Robert McCauley, Eurodollar banking and currency internationalisation, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2128556

Nov 17: Session Twenty-six: Guest Lecture: Jake Soll (USC-History) (?) Europe the Way Forward:

Readings tbd

Week 14: Innovation and Technology

Nov 22: Session Twenty-seven: (Driver) Innovation and Technology (JA)

Peter F. Cowhey and Jonathan Aronson, Digital DNA: Disruption and the Challenges for Global Governance, Prologue, and Chapters 1 (Will be provided)

WATCH: Dan Breznitz, Strategies for Innovation Based Growth (Online at: https://www.youtube.com/watch?v=5HFk-6euD88)

-13- Nov 24: Thanksgiving: No Class

Week 15: Technology and ICT

Nov 29: Session Twenty-eight: The Information and Production Disruption (JA)

Peter Cowhey and Jonathan Aronson, Digital DNA: PCJA, Chapters 2 and 3 (Most recent draft will be provided)

Craig Lambert, “Disruptive Genius: Innovation guru Clayton Christensen on spreading his gospel, the Gospel, and how to win with the electric car,” Harvard Magazine, July-August 2014. (http://harvardmagazine.com/2014/07 or provided by instructor.

Jill Lepore, “The Disruption Machine: What the gospel of innovation gets wrong, The New Yorker, June 23, 2014 (http://www.newyorker.com/reporting/2014/06/23/140623fa_fact_lepore? currentPage=all

Dec 1: Session Twenty-nine: (Driver) The Web, the Cloud, and Social Networking (JA)

Kenneth Neil Cukier and Viktor Mayer-Schonberger “The Rise of Big Data: How It's Changing the Way We Think About the World, Foreign Affairs, May/June 2013.

Dec 6: Session Thirty: Rethinking economic policy (JE) (Extra) Slides associated with this lecture are available at: http://www.cass.city.ac.uk/__data/assets/pdf_file/0020/216290/Slides_Lord- Turner-Annual-Address-at-Cass-Business-School-March-26-2014.pdf

Reread: Adair Turner, Wealth, debt, inequality and low interest rates: four

-14- big trends and some implications, http://www.cass.city.ac.uk/__data/assets/pdf_file/0014/216311/RedingNotes _Lord-Turner-Annual-Address-at-Cass-Business-School-March-26-2014.pdf

Dec 8: Thursday, 11-1 pm FINAL EXAMINATION