Tuesday, July 8, 2014

World Cup 2014: The Semi-Finals

In a rocky Round of 16, my rule to pick teams according to how much a country has done for my career scored just 4 wins and 4 losses. But the rule swept through the Quarter Finals with 4 wins and 0 losses. Not surprisingly, then, all four remaining countries have contributed in major ways to my career. (Face it, France, you're never going to win another World Cup without putting in a bit more effort.) So let's see how the remaining four teams stack up. Below, I present the critical features of each team: (1) Number of co-authors, (2) Number of publications with co-authors, (3) Total citations to those publications, and (4) Sponsored days visiting universities of the country.

    • Co-authors: 0
    • Co-authored publications: 0
    • Citations to co-authored publications: 0
    • Sponsored days visiting: 60
    • Assessment: I greatly appreciate the conferences, presentations, and teaching I've done in Argentina, but the country is just not going to measure up to the other contenders.

    • Co-authors: 1
    • Co-authored publications: 3
    • Citations to co-authored publications: 458
    • Sponsored days visiting: 5
    • Assessment: Thanks to my co-author Jan-Egbert Sturm, Netherlands has been a heavy favorite from the beginning of the tournament. One of our publications even won an award. And I had the chance to visit the country thanks to De Nederlandsche Bank, which sponsored my attendance at a conference (after which I visited the lovely town of Vreeland).

Bottom line: Netherlands > Argentina

    • Co-authors: 1
    • Co-authored publications: 3
    • Citations to co-authored publications: 607
    • Sponsored days visiting: 30
    • Assessment: Thanks to Zé Cheibub and Fernando Limongi, Brazil has a real shot. Limongi sponsored my visit to USP, and Cheibub has co-authored with me. We may not have many publications (yet), but we've got a lot of citations. Brazil is going to be tough to beat.

Bottom line: Brazil has a very slight edge in citations, but Germany dominates in all other categories. I'll have to side with Germany.

    Remaining games:
    • Prediction for third place: Brazil over Argentina
    • Prediction for first place: Germany over Netherlands

Thursday, June 26, 2014

World Cup June 26

This is it - the final day of the World Cup group stage. Going into it, I'm at 22 wins, 13 losses, and 8 ties. Some analysis of those results will be coming up. But for now, here are my picks using my fun rule to pick teams according to what each country has done for my career:

Portugal v. Ghana: Neither country has done any direct favors for me, so I'm going to the book index for this one. 11 to 17, Ghana.

USA v. Germany: There's only one country that has definitely done more for my career than Germany. Go USA!!!

South Korea v. Belgium: With apologies to Pierre-Guillaume Méon and the Université Libre de Bruxelles (ULB), I've got to go with Korea University's summer campus where I taught back in 2009. I also should thank the Bank of Korea for inviting me to their International Conference on the Future of the International Financial Architecture back in 2011. Go Korea!

Algeria v. Russia: Thanks the ESADE/Georgetown GEMBA program, I've taught three times in Russia. Russia didn't pay me, though, so I'm only slightly leaning their way. I'll happily switch to Algeria if any universities want to invite me for a visit in the next few hours. Otherwise, I guess I'm with Russia.

Wednesday, June 25, 2014

World Cup June 25

One win, one tie, and two losses yesterday, bringing me to 20 wins, 13 losses, and 7 ties. Here are today's picks, using my rule of choosing teams according to what each country has done for my career:

Nigeria v. Argentina: Having taught at the Universidad Nacional de San Martín (UNSAM), my choice is clear. ¡Vamos Argentina!

Bosnia and Herzegovina v. Iran: If I didn't have a preference for actually rooting for a winner, I'd go with a 0-0 tie here - because that's what I've got with these country. Time to go to the index of my new book with Axel Dreher. What a battle! Iran makes 21 appearances, while Bosnia-Herzegovina appears 11 times. Iran it is.

Honduras v. Switzerland: Thank you, ETH. Thank you Review of International Organizations. Hopp Schwiiz!!

Ecuador v. France: I've got to go back to 1992 to find a connection with either of these countries: study abroad in the Sorbonne's cours de la civilisation française pour les étrangers. Vive la France.

Tuesday, June 24, 2014

World Cup June 24

Yesterday: 4 games, 4 wins! Made me feel a little better and brought my record to 19 wins, 11 losses, and 6 ties. I'm not feeling so confident about my picks for today, but I'm sticking to my rule of choosing teams according to what each country has done for my career:

Costa Rica v. England: Oh, England... when will you learn the lessons of Soccernomics and play as one United Kingdom? The full force of the UK economy is what produced my connections to your country - the London School of Economics and my co-authors Matthew Gould, Matthew Rablen, and Alastair Smith... Good luck, United Kingdom.

Italy v. Uruguay: Tough call. I've got two Italian co-authors: Silvia Marchesi and Paolo Spada. But Diego Aboal and Juan Andrés Moraes translated a paper of mine and included it in their book Economía Política en Uruguay: Instituciones y Actores Políticos en el Proceso Económico. I'll have to go to the citation count... and, according to Google Scholar, the prediction is Italy.

Greece v. Côte d'Ivoire: I must root for Harris Mylonas and Eleftherotypia. Greece.

Japan v. Colombia: Not at all confident about this, but the closest connection I have to either country is my article about Japan in World Politics with Daniel Yew Mao Lim. Go Japan.

Monday, June 23, 2014

World Cup June 23

I don't want to talk about yesterday. I'm at 15-11-6. Nuff said. Here are today's picks:

Australia v. Spain: Does this match even matter? (No.) I've got connections to both countries and wanted them both to do so much better. A few more connections to Spain. ¿Vamos España?

Netherlands v. Chile: Going with my co-author Jan-Egbert Sturm. Hup, Holland, Hup... Clockwork Oranje!

Cameroon v. Brazil: Going with my co-author José Cheibub and with Fernando Limongi thanks to our co-teaching at USP. Força Brasil!

Croatia v. Mexico: Thank you for inviting me to present my research, CIDE... ¡Vamos México!

Sunday, June 22, 2014

World Cup June 22

Two wins and a tie yesterday, using my rule to pick World Cup matches according to what the countries have for my career. I'm now at 14-10-5. Here are today's picks:

Belgium v. Russia: Tough call. I've taught 3 times in Russia - but it was for the Georgetown/ESADE GEMBA program. I didn't receive a cent from a Russian university. No Russian co-authors either. Meantime, Pierre-Guillaume Méon invited me to give a talk at the Université Libre de Bruxelles (ULB). Had a great visit...so go Belgium!

South Korea v. Algeria: I had a wonderful time teaching for Korea University's summer campus back in 2009. Global KU Frontier Spirit all the way!

United States v. Portugal: Sooo excited for this one... USA!!!

Saturday, June 21, 2014

World Cup June 21

Another tough one yesterday for the teams I picked using my rule to favor countries that have done the most to help my career: 2 losses and 1 win, bringing me to 12-10-4. Here are today's picks:

Argentina v. Iran: Great times teaching for the Universidad Nacional de San Martín (UNSAM). ¡Vamos Argentina!

Germany v. Ghana: Going with the co-authors: Axel Dreher, Martin Gassebner, Stephan Klasen, and Michael Lamla. Schland!

Nigeria v. Bosnia and Herzegovina: I wrote a bit about Nigeria in my first book. Go Nigeria!

Friday, June 20, 2014

World Cup June 20

Still having a lot of fun rooting for the countries I have connections with... but not nearly with as much success as I had in 2010. I'm now at 11-8-4. But I just love watching these games and cheering for one team over another, which is why I never go for ties. So here are today's picks:

Italy v. Costa Rica: This time, I'm with my Italian co-authors: Silvia Marchesi and Paolo Spada (who published with me here and here).

Switzerland v. France: Studied abroad in France back in 1992. But what have you done for me lately? Nothing. And Switzerland has done so much! (Thank you, ETH. Thank you Review of International Organizations.) Hopp Schwiiz!!

Honduras v. Ecuador: Nothing. So, I'll choose the country that contributed the most to my recent book with Axel Dreher: Honduras appears once. Ecuador appears 17 times. (Makes you curious to see what we have to say about Ecuador, eh? The book is in stock and on sale at Amazon!) Meantime... ¡Vamos Ecuador!

Thursday, June 19, 2014

World Cup June 19

Mixed results yesterday using my rule to pick countries that have done the most to help my career: 1 win, 2 losses. Overall record is now 10-7-3 (I definitely did better in 2010). Today's picks:

Colombia v. Côte d'Ivoire: Once again, I've got nothing. If you want my support, invite me for a visit :-) Meantime, I've got to make a choice. So, I'll go with the country that appears the most times in my new book with Axel Dreher about money and influence at the United Nations Security Council: 15 for Colombia, and 3 for Côte d'Ivoire. Colombia it is!

Uruguay v. England: With respect to Diego Aboal and Juan Andrés Moraes, who included a chapter by me in their volume entitled Economía Política en Uruguay: Instituciones y Actores Políticos en el Proceso Económico, I've got to go with my co-authors: Matthew Gould, Matthew Rablen, and Alastair Smith (published here and here). Go England!

Japan v. Greece: Splitting hairs here. Never been to either country. My connection to Japan is that I published a scholarly article about it in World Politics with the great Daniel Yew Mao Lim. My connection to Greece is that I co-authored a blog piece with the amazing Harris Mylonas. I also once got some very nice press in Greece. But let's face it. Academia doesn't (yet) reward blogs or press. It rewards academic publications. I guess I must side with Japan.

Wednesday, June 18, 2014

World Cup June 18

Using my fun rule to pick countries that have done the most to help my career, I had an ok day yesterday: 1 win, 2 ties, and no losses. I'll take it. Overall record is now 9-5-3. Today's picks:

Australia vs. Netherlands: Loved visiting Bond University in Australia (thanks to my friend Barry Williams), but it's hard to top the 3 publications with my friend and co-author Jan-Egbert Sturm (in JDE, JCR, and EER). Go Orange!

Spain vs. Chile: Time to give some love back to my friends at ESADE. Special shout out to the colleagues who have taught with me: Luisa Alemany, Fernando Ballabriga, and Pedro Parada. ¡Vamos España!

Cameroon vs. Croatia: I've got nothing here. I'll pick the country that appears the most times in my new book with Axel Dreher about money and influence at the United Nations Security Council: 7 for Cameroon, and 1 for Croatia... but don't forget that Croatia used to be part of Yugoslavia, which appears 23 times in the book (but mostly in footnotes and the index)... Goodness, I have no idea what to do. Go Cameroon.

Tuesday, June 17, 2014

World Cup June 17

Wow! Yesterday's US victory was the best! What a rush. Overall, I had a great World Cup day: 2 wins, 1 tie. My overall record now stands at 8-5-1. And the tie was in a game where my connections to each team were tenuous at best. Today, I have direction connections to five of the six teams playing. Here are my picks using my silly rule of choosing countries that have done the most for my career:

Belgium vs. Algeria: Thanks to my awesome friend Pierre-Guillaume Méon, I gave a talk at the Université Libre de Bruxelles (ULB). Go Belgium!

Brazil vs. Mexico: Loved giving a talk at CIDE in Mexico. But Brazil has won my loyalty, thanks to my co-author José Cheibub and my co-teaching with Fernando Limongi at USP. To paraphrase from Casablanca, "[Mexico], I love you. But [Brazil] pays me."

Russia vs. South Korea: Thanks the ESADE/Georgetown GEMBA program, I've taught three times in Russia. But Russia didn't pay for it. Meantime, I had a great time teaching for Korea University's summer campus back in 2009. Global KU Frontier Spirit all the way!

Monday, June 16, 2014

World Cup June 16

Some redemption yesterday. My rule of rooting for countries that have done the most to advance my career went 3 for 3, bringing my total record to 6 wins, 5 losses.

Here are today's picks:

Germany vs. Portugal: Easy. German co-authors include Axel Dreher, Martin Gassebner, Stephan Klasen, and Michael Lamla. We've published in Journal of Conflict Resolution (twice), Public Choice (twice), Economic Development and Cultural Change, European Economic Review, and Journal of Development Economics. Plus, Axel and I just published a book with Cambridge University Press! These guys have made a major impact on my career and my life. Gotta root for their home country today!

Iran vs. Nigeria: Other than great students from these countries, I haven't had much contact. So I'll pick the country that appears the most times in my new book with Axel about the United Nations Security Council. Iran comes up 21 times, Nigeria 29. Plus, I wrote a bit about Nigeria in my first book. Go Nigeria!

Ghana vs. United States: Rematch with the team that stopped us during the last World Cup. Gotta go with my own home country here!

Sunday, June 15, 2014

World Cup June 15

Crushed. Yesterday my picks went 0-4, bringing my overall record to 3-5. That's the kind of risk you face when you bet on spurious correlations!

As for the real research on international competitions, another variable that matters, which does not factor into the Vreelander rule, is home field advantage. It's been shown to matter in the Olympics and in the World Cup. The mechanism is unclear. I've seen some evidence of a lagged effect, so it might be the investment that a country puts into their team when hosting. But it could also have to do with the more intuitive support of the home crowd, being in the right time zone, or just being in a more familiar setting. If so, then it might help Ecuador, Honduras, and Argentina.

But it's still great fun to simply cheer for the countries that have done so much for me and my career. A way to give back some of the love...(although if this pattern keeps up, some of these countries might prefer that I *not* root for them ;-) I'm not going to give up on my countries, so here are today's picks:

Switzerland vs. Ecuador: Easy pick. I've spent a lot of time at the amazing university ETH and have a little publication on Switzerland. I'm with the Swiss!

France vs. Honduras: Last World Cup I went against France in some key matches because the country has never invited me for a visit. France, you really should invite me to visit at least once! But I did study abroad at the Sorbonne back in 1992... and I've got nothing from Honduras. Don't expect much loyalty in future matches, but for now, vive la France.

Argentina vs. Bosnia and Herzegovina: Easy pick. I've taught a few times down at the Universidad Nacional de San Martín (UNSAM). ¡Vamos Argentina!

Saturday, June 14, 2014

World Cup June 14

Picking World Cup matches according to my connections to the home countries is silly, but turns out to do ok thanks to a spurious correlation: populous and rich countries are likely to have both (1) good performances in international sports competitions and (2) strong universities that can contribute to my career in many different ways. So far, the record is 3 wins and 1 loss (and I picked Netherlands to beat Spain). Here are the Vreelander picks for today's matches:

Colombia vs. Greece: Never been to either country. I've got great students, colleagues, and friends from both. But my good friend Harris Mylonas co-authored a little piece with me. So, go Greece!

Uruguay vs. Costa Rica: Thanks to Diego Aboal and Juan Andrés Moraes, I've got a piece published in their edited volume entitled Economía Política en Uruguay: Instituciones y Actores Políticos en el Proceso Económico. ¡Vamos Uruguay!

England vs. Italy: This one is tough to decide. Two of my co-authors, Silvia Marchesi and Paolo Spada come from Italy. But I once had a job offer from the London School of Economics. Publications are rewarded... but jobs are the reward. Then throw in the fact that three English scholars, Matthew Gould, Matthew Rablen, and Alastair Smith have co-authored with me, and the choice becomes obvious. Go England!

Japan vs. Côte d'Ivoire : No co-authors, no visits to either country. But Daniel Yew Mao Lim and I published an article about Japan in World Politics. Go Japan!

Friday, June 13, 2014

World Cup is Back!

It's been too long. Time once again to start blogging about the World Cup! Since I know nothing about soccer, I just pick teams according to how I'm connected to them... Since I'm a quantitative type guy, I typically root for the country that has contributed the most to my career in academia. There turns out to be a nice, albeit spurious, correlation because big and rich countries are likely to have both (1) good performances in international sports competitions and (2) strong universities that can contribute to my career in many different ways.

I've been away from blogging for a while because I got busy finishing my co-authored book with Axel Dreher: The Political Economy of the United Nations Security Council: Money and Influence.

The book has just been released, and I'll have more to say about that soon enough. But for now, how about some ridiculous analysis of the World Cup?

Yesterday's victory for Brazil was a no-brainer for the Vreelander rule. Between my co-author José Cheibub and my co-teaching with Fernando Limongi at USP, Brazil has done way more for my career than has Croatia. It was an easy pick for me.

Vreelander picks for today's matches:

Mexico v. Cameroon: Thanks to my wonderful friend Covadonga Meseguer, I once had the wonderful opportunity to visit Mexico City and give a talk at CIDE. Cameroon -- I'm still waiting... So, I'm with Mexico all the way!

Spain v. Netherlands: Tough call. I love teaching with Spain's ESADE Business School through the joint Georgetown GEMBA program. And I also had the excellent experience of giving a talk in Madrid for Santander. But I've got 3 really nice publications with my co-author Jan-Egbert Sturm (in pretty darn good journals: JDE, JCR, and EER). Since academia rewards research more than teaching, I'm going to have to go with the Netherlands. (Plus, with a name like Vreeland, how can I not?) But, fear not, GEMBA Family, I'm sure to be with Spain in future matches.

Chile v. Australia: Easy call. Never been to Chile. And I had a cool research affiliation with the Globalisation and Development Centre at Bond University in Gold Coast, Australia (thanks to my friend Barry Williams). Aussie, Aussie, Aussie oi,oi,oi!

More to come tomorrow!

Tuesday, June 19, 2012

Introducing the BMF

We've been saying it for years. If emerging markets don't get a stronger voice in international institutions like the International Monetary Fund (IMF), they may pick up their marbles and play their own game. Well, here it is: The BMF.

No, this is not a reference to Samuel L. Jackson's Pulp Fiction wallet. It's the BRICS Monetary Fund.

As reported by the Financial Times, the governments of the BRICS (Brazil, Russia, India, China, and South Africa) - who have all suffered under-representation in the governance of the IMF - announced yesterday that they will build their own financial safety net, based on the Chiang Mai Initiative. The Chiang Mai Initiative (CMI), itself is based on the IMF - basically it's a Asian version of the IMF (an Asian Monetary Fund). So this is the BRICS version of a monetary fund.... a BMF!

Now, the BMF and the CMI have a long way to go to become full-fledged international organizations. When you build a financial safety net like this, you encourage good governments to take risks by ensuring them that if the global economy is unkind, there's insurance. But you're also inviting bad-credit governments to a bailout, which can create moral hazard.

The IMF's answer to this problem has been "conditionality": in return for a loan, you need to adjust your policies. Conditionality is pretty unpopular - just ask the Greeks... or people who suffered under the East Asian Financial Crisis. It's actually that very crisis that led Asian governments to start their Asian version of the IMF - to escape IMF conditionality. Funny thing is that they worried so much about moral hazard, they ultimately decided that if a government wants to borrow a significant amount from the CMI, it must have an IMF program in place... In other words, the Asian answer to moral hazard was old-fashioned IMF conditionality! As a result, nobody has actually borrowed from the CMI.

So, we'll have to see just where this BMF goes. If there are no conditions attached to BMF loans, then you can be sure that it will be a lot more popular among developing countries than the IMF. Heck, Greece may even be knocking at the BMF door. But zero conditions? That's unlikely. The BRICS don't want to lend away their money to the worst-credit countries in the world with no strings attached.

The question is: What conditions will the BRICS attach? IMF conditionality is ostensibly based on economic factors, but a lot of research suggests that politics matters too. So, will the BRICS use the BMF for purely economic purposes or will the BMF also serve as a tool of foreign policy?

Ok - so, in sum - the BRICS are putting some money into a wallet marked with the letters BMF.

Will they just give their money away, as does Pulp Fiction's Jules Winnfield with his BMF wallet?

Or will the BMF be more like the Godfather, who provides gifts in return for a service?...

Oh yeah! You can bet that this BMF is going to be a lot of fun for me to write about!

Monday, December 19, 2011


The Vreelander Holiday Edition: Looking for an original gift? Here's one that is perfect for someone interested in global affairs from an intimate perspective...

Writing beautifully. Youssef Cohen tells his story as a man searching for memories of his mother, Odette, who passed away when he was just a little boy.

The adventure will take you around the world, from New York, to Venice, Sao Paulo, and Cairo. You won't travel as a tourist, but will be welcomed nostalgically by old friends and family, with all the bitter sweet joy and melancholy these relationships bring.

You will also travel through history: Amsterdam, Syria, Paris, Portugal, Buenos Aires... Wars and crises impose migration as neighborhoods, societies, even countries are crushed then reconstituted, and your friends and family make their lives, finding their way through life around the globe.

Click here for the link on Amazon!

Friday, August 19, 2011

Who's on first?

Listening to NPR morning news today - they're referring to Xi Jinping as Joe Biden's "counterpart." Ok, technically, they're both "vice" guys. But Xi has been pre-selected as the next President of China, meaning that if all goes well, he will become, arguably, the 2nd most powerful man in the world. As for our Vice President, if all goes well, he will never become President.

This inspires me to write up a fun little script that you can play with your kids to help them get a sense of three prominent figures in Chinese politics.

ABBOTT: The newspaper says that Xi will be the next President of China.

COSTELLO: The next President of China will be a woman?

ABBOTT: No, Xi is a man.

COSTELLO: Weird. What is his name?


COSTELLO: I thought you said he is a man.

ABBOTT: He is.

COSTELLO: So what is his name?


COSTELLO: Wait a minute! Just tell me - who is the next President of China?

ABBOTT: No. Hu is the current President of China.

COSTELLO: I don't know who is the current President of China.

ABBOTT: Well, he is.





COSTELLO: Yes is the President of China?

ABBOTT: No! Hu is the President of China!

COSTELLO: I don't know! You said "Yes" is the President of China.

ABBOTT: No, I said Hu is the President of China.

COSTELLO: I don't know! Just tell me, who is the President of China?



ABBOTT: Yes. Hu.

COSTELLO: I don't know. Who?

ABBOTT: Yes. Now that we cleared that up. Tell me, what do you think of Xi?



COSTELLO: The woman?

ABBOTT: Xi is a man!

COSTELLO: Who is a man?

ABBOTT: Back to him? Yes.

COSTELLO: Yes is a man?

ABBOTT: Now you're just talking nonsense... Let's just get this straight. Xi is a man, and Hu is a man.

COSTELLO: She is a man?

ABBOTT: Yes. And the next President of China.


ABBOTT: No!!! Hu is the current President of China!



COSTELLO: And the next President of China?


COSTELLO: The woman with no name, who is a man.

ABBOTT: More nonsense! There is no woman. Xi will be the next President of China. Hu is the current President.


ABBOTT: Yes. You've got it?

COSTELLO: I don't have any idea what you're talking about!!! When will the new President take over?


COSTELLO: Yes, when?

ABBOTT: No, Wen is the Premier.

COSTELLO: Is that what it's called, the "premiere" of the next President?

ABBOTT: No, just the Premier.

COSTELLO: Sheesh. Ok. When is the premiere?


COSTELLO: Him again? I don't want to know who, I want to know when!

ABBOTT: The Premier.

COSTELLO: Yes. When is it?

ABBOTT: That's right.

COSTELLO: What's right? When will be the next President of China?

ABBOTT: Wen will not be the next President of China. Wen is the Premier!

COSTELLO: I have no idea when will be or not be the transition!

ABBOTT: Hu will step down as Communist Party leader in 2012 and as president the following year.

COSTELLO: I don't know. Who?



ABBOTT: Yes, Hu.




ABBOTT: The Premier.

COSTELLO: In 2013?

ABBOTT: Xi will be President.



COSTELLO: The woman?

ABBOTT: No, the man, Xi. Hu is also a man and the current President of China!!!


ABBOTT: Yes!!! Got it?

COSTELLO: I have no idea... I know nothing. When is the premiere? Who is the President?

ABBOTT: That's it!

COSTELLO: That's it?

ABBOTT: Yes, Wen is the Premier. Hu is the President. What do you think of Xi?

COSTELLO: I don't know when! I don't know who!! And I have know idea about she!!!

ABBOTT: Well, then, that puts you about even with most people.

Anyway, you get the idea. Have fun with the kiddies. And if you're too young to know about the inspiration for this, check out this classic clip. (Even if you know it, it's always worth another look!)

Tuesday, August 16, 2011

It's the election, stupid

Many are suggesting that now is not the time to cut spending. Now is not the time to raise taxes. With interest rates so low, we have a golden opportunity to rebuild our public infrastructure – increasing the debt makes sense under current circumstances. And since the economy is so fragile, any hint at fiscal austerity would have an immediate contractionary effect.

Well, of course this is true. But it misses the point. We have an election on the horizon!

Right now may not be the appropriate moment to pay for the stimulus. But we are going to have to pay for it *eventually*. The question is, who is "we"? How are "we" going to pay for it?

This is about distribution. We can cut public spending. Or we can raise taxes. (Or both.)

If we cut spending, let’s be clear about who "we" means: That person who stops by your house every day delivering mail – might take a hit. Those folks who educate your kids – might take a hit. The guys fixing up the roads – might take a hit. Disabled people who rely on government assistance – might take a hit. Old folks on medicare - might take a hit. The people you call during an emergency – police, firefighters, the military – might take a hit. And if you’re in the private sector but have customers who work for the government, you’ll take a hit too – because those customers will stop shopping.

If, alternatively, we raise taxes, people are talking about targeting the rich. So, in this case, "we" means the very top of the income distribution. If you make less than $250,000 per year, you’re out of that group.

Now, if we try to understand the manufactured debt-ceiling crisis in terms of promoting economic growth, it makes no sense. It was bad for growth – period. But if we consider it in terms of income distribution and realize that there is a major election on the horizon in 2012, things come into focus.

Consider some data. The following figure comes from the website of Douglas Hibbs, who has proposed an intuitive "bread and peace" model of winning presidential elections. In this figure, we just have "bread" – i.e., economic growth - across the x-axis. It’s the average rate of growth during a 4-year presidential term – weighted so that the last few months before the election count far more than the previous time period. Along the y-axis, we have the incumbent party’s share of the vote (that is, the share out of the votes cast for the 2 major parties).

The relationship is clear: more growth, more votes for the incumbent party.

The "peace" part of the model is captured by the data-points marked in red, where military fatalities were high, so that incumbent parties lost despite solid economic growth. One thing is clear – if economic growth is low when an election approaches, the incumbent party loses.

So, how do things look for President Obama? Not so good. Here is a picture according to the latest prediction from Hibbs’s model. Note that in this figure, the x-axis combines weighted economic growth with military fatalities. The red point is the prediction for Obama:

If this looks bad for the President, you can be sure that the debt ceiling crisis made things worse. Not only did it contribute to volatile losses in the stock market, it also signaled to the world that the US stimulus is over. If you put through such contractionary policies... voilà, you’ll get a contraction. According to the "bread and peace" model, this will contribute to the Democrats losing the White House.

If you are rich, you face a trade-off. Either your income contracts because your tax rate goes up or due to the manufactured negative shock to growth. If the economy picks up towards the end of Obama’s term, he has a good chance of getting reelected. This means that when it’s time to pay for the stimulus, the Democrats will be in a strong position to raise taxes on the rich. If we can manage to keep growth low for the next year, however, then the Republicans will take over the White House, and taxes on the rich will remain low.

When you think of it this way, the manufactured crisis not only makes sense, it was brilliant. We trade low growth, for low taxes. This is a great trade for us. We may not know where the global economy is going, but we know that raising taxes cuts our incomes. Of course, by "us," I mean the rich.

For the other "us" – the 98% percent of us earning less than $250,000 a year – it was a bad trade.

For more on how governments can take advantage of manufactured economic crises to push through policies that are bad for growth and exacerbate income inequality, see my book: Vreeland, James Raymond. 2003. The IMF and Economic Development. New York: Cambridge University Press. (This book has also been endorsed by the American Medical Association as a non-narcotic alternative sleep-aid. Just read 2 pages. Zzzzz...)

Thursday, August 11, 2011

Imagined Lines Are Not Imaginary

I was traveling last week, so I didn't get a chance to re-post the following. It's something I've been talking a lot about on FB, and I put something together quickly when asked by Joshua Tucker (NYU) and John Sides (George Washington). It's always a privilege to be featured on their blog, The Monkey Cage, which they co-author along with Erik Voeten (Georgetown), Andrew Gelman (Columbia), and Henry Farrell (George Washington). So here is the original Monkey Cage post from 6 Aug 2011, and here is the text:


If we had raised the debt limit with no fanfare, like usual, it would have had no effect – it’s just an arbitrary line.

But if you treat it like a line in the sand, drawing the attention of the world to our unsustainable fiscal situation, and then you fail to cut much spending or raise taxes, you send a powerful coordinating signal to the global herd: It’s time to run.

See, our twin deficits – fiscal and current account – are sustainable only as long as people believe they are. But if people stop believing, then they will start to run from the dollar and from US bonds. If that happens, you don’t want to be the last one left at the party.

Now, we all know that US imbalances are unsustainable. The only question is just how far they can be pushed, and what exactly triggers them to come back towards balance. I have been hoping that they might someday be addressed by China addressing their exchange rate as their economy develops. For a long time, China has benefited from a weak exchange rate against the dollar, as the United States is the main destination of their powerful export sector. But there is another pressure on the rise: competition for scarce resources. At some point, the Chinese government will see that the marginal benefit for the export sector from a weak exchange rate has met the marginal benefit from a strong exchange rate for cheaper oil.

If this day had come before the current mess, then we might have had nice market forces addressing US imbalances – and it would have been a slow and steady soft landing. With the revaluation of the renminbi, US consumers would be able to afford fewer exports from China, and the Chinese would buy more from the United States. A market solution would be nice because domestic politics on both sides of the border were not going to address this. Certainly not the “non-tax and spend” Congress. Our government simply lacked the political will to do what was necessary.

But, dammit, the last thing you want to do is to call attention to the lack of political will! Changing the debt ceiling issue into a global focal point forced Congress to finally put up or shut up. They failed to put up. The way you address a fiscal deficit is to cut spending and raise taxes. Every country that has been subject to IMF austerity knows this all too well. In their arrogance, (some members of) Congress believed the United States is above this logic. Now we’re heading for no man’s land. We have announced to the global herd in a focused manner that the United States lacks the political will to address its deficit. Sadly, this is going to hurt global economic transactions, which many people believe contribute to a more peaceful world. The foolishness of making the debt ceiling a focal point – especially with what is going on in Europe – cannot be underestimated. Hard times are ahead.

Sunday, July 10, 2011

Culture vs. Institutions: The Soccer Edition

Brazil and the United States battled today in soccer. Brazil: a nation of 200 million dedicated exclusively to soccer – perhaps the #1 soccer-nation in the world. VERSUS The United States: a nation that devotes most of its vast resources – its time, money, and best athletes – to... baseball, football, and basketball. Let's face it, we don't even call soccer by its proper name.

But this was also a battle of culture versus institutions. Of markets versus states. And when it comes to supporting sports, markets have a bias towards testosterone. Without government intervention, men have many more incentives than women to devote their lives to sports. And Brazil doesn't intervene on behalf of women. The United States does.

Yes, I'm talking about the 2011 Women's World Cup Tournament.

To understand today’s match, we need a little history of US institutions. In 1972, the United States passed a law called "Title IX," which requires educational institutions to devote equal resources to male and female athletics (or any education program/activity receiving Federal financial assistance).

American universities were spending a lot of money on their men's American football teams, and they wanted to continue to do so. But how can you maintain football expenditures and also find money to spend on women's sports teams? Well, first, you cut expenditures on other men's sports... like men's soccer. (This helps to explain why we lag behind the rest of the world in men's soccer. Title IX implicitly encourages our best male-athletes to play something else.) You also, obviously, increase the money that you spend on women's sports – on any women’s sport you can find.

Title IX thus produces incentives for millions of little girls to play various sports. Think about the incentives for parents to support their daughters. Take my cousin, for example. He was coaching his amazing son to be a bowler. (They’re both really good, having both bowled perfect 300 games on pro-shot lanes.) His younger daughter was tagging along at the lanes, bowling for fun. Somebody in the bowling alley noticed that she was pretty good, so he mentioned something to my cousin. "Ever heard of Title IX?"

This question set in motion a bowling career for Jennifer Vreeland. She wasn't so keen on joining the school bowling team at first. Frankly speaking, it wouldn't have happened without the motivation of her father, who, in turn, was motivated to get her a scholarship because of Title IX. Yet, Jenn grew to love the bowling team. By her senior year in high school, she was team captain and enjoyed self-esteem, camaraderie, and good health thanks to Title IX. Today she is an NCAA bowler on scholarship at St. Francis College. In her first season, she set a new team record, scoring 288 in an important match.

This is a personal anecdote, and there are literally millions more like it across America. Mothers and fathers recognize that by encouraging their daughters to play sports, they give them a better chance of getting into college – and getting scholarship money.

And that brings us back to today's AMAZING victory of the United States over Brazil. Yes, you guessed it. Today, institutions triumphed over culture. And it's not the first time. US women's soccer is a dominant force in international sports. If you haven't heard what happened in today's game... well, find out. This game is one for the movies. I can't do it justice here. Seriously, if you had pitched today's story to Hollywood, they wouldn't have taken it because they would have thought it unbelievable. And the victory is due, in part, to Title IX.

The case I'm making here is not meant to diminish the powerful influence that culture can have. Brazil has a smaller population and a smaller economy than the United States. Still, they have an incredible team, including, arguably, the best player in the world. But Brazil doesn't invest in women's sports the way that the United States does. (Interestingly, the American broadcasters on ESPN questioned just how great Brazilian women's soccer might be if only their country actually invested in it.)

The bottom line is that there are a number of factors that determine how well a country's national team does. The obvious are population size, income, and culture. But one factor that should not be overlooked is government action, especially when it comes to women's sports.

With this in mind, I believe that the United States has one of the greatest soccer programs in the world. Our nation may not yet have won a men's world cup trophy, but we don't really need national teams to inspire boys to play sports. Millions of fans tune in to watch high-testosterone professional league games. Ultimately, sports should promote self-esteem, camaraderie, and good health for the whole population. If you rely exclusively on markets, you only provide incentives for half of your population to play. You should thus judge a nation by the policies it puts in place to incentivize the other half of its population.

Congratulations to the US women's soccer team. Score another victory for Title IX. And God bless the United States of America.

Thursday, June 2, 2011

Leading a Multi-Polar World

Crazy recent events have opened an opportunity for new leadership at the International Monetary Fund (IMF). The Managing Director position has always gone to a European. The United States - which provides the most IMF resources and gets the most votes in return- has been fine with this arrangement. We get the IMF headquarters (just down the block from the White House and US Treasury) and the head of the other major financial institution, the World Bank. The front-runner to lead the IMF is yet another European - Christine Lagarde. But appointing another Western European would be a mistake for the United States.

No matter what happens, the IMF will remain mainly under the influence of the United States. But if we fail to open up the leadership of this institution, then the emerging market world will take the institution less seriously. Then the United States will be in charge of an institution that risks irrelevance, or one that is no longer an International but rather a European Monetary Fund.

Consider how power is distributed at the IMF Executive Board - the body charged with selecting the Managing Director. The United States controls nearly 17%. The European Union, if it votes as a bloc, controls about 30%. The Directorships of Japan, China, Singapore, and India collectively control nearly 17% of the votes. Latin America is weaker - with less than 10% of the votes, and Africa much weaker, with less than 5% of the votes (see here). But the point is that this is not a decision that the United States or the European Union can make alone. At least part of the rest of the world also has to go along. And the de facto approach has to make the decision by consensus.

So, suppose that the rest of the world does go along. Suppose that once again the IMF appoints a European. It won't be because emerging market and developing countries failed to propose alternatives. There are potential candidates from all over the world (e.g., Asia, Africa, and Latin America). Note that the emerging market and developing world can force the issue if they choose. Right now, Europe is over a barrel. Europe needs the IMF. The rest of the world does not.

Ultimately, if we see another European running the IMF, it's because emerging market and developing countries don't really care. If we see another European Managing Director, it will be because the rest of the world doesn't want to bother to mobilize the necessary political capital to overcome the Europeans (which would be substantial). And herein lies the problem. The emerging market world is done with the IMF.

So, we can appoint another European, but we will further alienate the rest of the world from this institution.

The opportunity for the United States is to draw the rest of the world back into supporting this institution - an institution where the United States will still have the lion's share of voting power.

Of course, irrelevance may be the IMF's destiny.

Global financial power is shifting. In the days of bi-polarity and uni-polarity, it made sense for the global hegemon (the United States) to provide the lion’s share of resources to global financial institutions and receive commensurate political control in return. In the new multi-polar world, however, emerging markets will demand more and more political power as they are able to provide more resources. Meanwhile, Western powers will be less and less willing to support an institution where they have declining control. Power at the IMF is on a tightrope.

The logic of collective action suggests that problems can be overcome when there are power-asymmetries, with the most powerful actor providing the public good. As power-asymmetries diminish at the global level so will the political support for a powerful global financial institution.

Yet, the multi-polar world does not spell the end of international cooperation. Power asymmetries persist at the regional level. There may not be a global economic hegemon, but there are regional economic hegemons. And there is increasing political will for Regional Financial Institutions (for a longer discussion, see this piece by Raj Desai and me).

As the relative financial power of the United States continues to decline, so will the power of the global institutions set up at the end of World War II. In a multi-polar world, political and financial power will be more decentralized. This process will speed up if the next head of the IMF is a European. It will return the IMF to its roots: an institution designed for Europeans, led by a European. But the rest of the world will turn away. If the United States wants to maintain the power of an institution where it exercises the most influence, it should not hasten the decline of the IMF. It should, instead, try to draw in the rest of the world by supporting a leader who comes from outside of Europe.

(Considering their lack of voting power, how about someone from Africa? I vote for Trevor Manuel.)

Thursday, December 23, 2010

The Best of Young Spanish-Language Novelists... and Political Economy?

Last week, NPR did a story on the awards of Granta, the prestigious literary magazine, for "The Best of Young Spanish-Language Novelists." The host (Don Gonyea) noticed that Argentina is the home country of 8 out of the 22 total awards. Spain comes in 2nd place with 6 award recipients. That's a lot of the awards, considering that there are over 20 Spanish-speaking countries – most countries had zero award-winners.

When asked about Argentina, Valerie Miles, one of the founding co-editors of Granta en español, suggested the following:

"...Argentina is a country with a very long and strong literary tradition... it also has to do with the fact that it has wonderful bookstores. Some of the really great and really important publishing companies that ran away from Franco's Spain ended up in Argentina..."

I like her answer and would like to take it a step further. Why might Argentina (and Spain) have the best publishing companies, the best bookstores, and the best novelists in the Spanish-speaking world?

I would suggest a general explanation, which draws on the broader literature on who wins international competitions.

When it comes international sports – whether we’re talking World Cup or Olympics – three basic factors matter: population, income, and interest. Let me explain.

Population: more people, more chances that your country will have someone who is great.

Income: mo’ money, mo’ opportunities (with apologies to Biggie). Money translates into better athletics and education.

Interest: here’s where culture comes in. When it comes to soccer, for example, you have to actually care about it to be internationally competitive (sorry China and the United States). When it comes to literature, well, I guess you’ve simply got to have some interesting experiences on which to draw for your writing.

So, I applied these basic ideas to the Granta awards. First, let's consider overall economic size. The recipients were all born between 1971 and 1981. For this time period, Spain and Argentina had the largest economies in the Spanish-speaking world. The GDP of Spain averaged $8.4 billion and that of Argentina $7.1 billion (in constant 2000 $). The next 3 largest economies were Venezuela, Uruguay, and Mexico – Uruguay and Mexico are both home to Granta award winners. The 5 smallest economies were: Honduras, Bolivia, Paraguay, Ecuador, and Nicaragua. And there's only 1 winner amongst them (Bolivia).

Now let's take a broader look at the data by country-income:

And here's a picture of the data by the overall economic size of countries:

To put a little rigor into this, I applied regression analysis to the number of award recipients for each country. (Warning to techies: don't get your hopes up, I'm not going to spend any serious effort on this...)

I took the average population and income (in constant 2000 $) for 1971-1981. (Interestingly, constant 2000 $ fits a little better than purchasing power parity measures.)

To proxy culture, I recalled something a French lit prof in college taught me: il faut la crise pour la création – artists need crisis in order to create. Now, there are plenty of ways to measure crises in the Spanish-speaking world. In the 1970s and 1980s, it had more than its fair share by several measures. I tried number of IMF arrangements and years of dictatorship, but the measure that works best is the number of times that democracy was subverted by a coup. It makes sense – these often combine economic and political problems.

Results? These three variables explain about 50% of the variance. Bigger and richer countries that have seen democracy breakdown are more likely to produce Granta award-winners. For the curious, click here for a set of regression results. There is a lot more I could do with this to make it more accessible for the non-technical readers... but I’ve got Xmas shopping to do. Sorry.

Now, true fans of the Vreelander are, of course, much more concerned with my personal correlation with the Granta award recipients. After all, I was able to use a spurious correlation between my career statistics and soccer performance to predict many World Cup matches this summer. The countries that have done the most for my career also did the best during the first round of the World Cup (but in the second round, my good friend, Martin Gassebner, would remind us that I got beat by an 8-legged monster... twice). The reason for the spurious correlation? Big economies mean better soccer and better universities... and countries with more money in their university system are more likely to be able to fly me over for a visit :-)

So, how does the spurious correlation work out for the Granta awards? Pretty well. I've spent more time working in Argentina than any other Spanish-speaking country. Second place? Spain. After that, Mexico,... and then a lot of zeroes – just like the Granta awards for most poor Spanish-speaking countries. All by itself, the variable measuring the number of days I have spent working in Spanish-speaking countries explains more than 80% of the variance in the Granta awards.

(And I can't help noticing one thing. The economic model does not predict the award for Bolivian author Rodrigo Hasbún. But the Vreelander model kind of does, because my connection to Spain is through the excellent ESADE Professor Pedro Parada of the Georgetown-ESADE GEMBA program... Parada hails from... you guessed it: Bolivia.)

A silly sidenote for the technical readers: When I put the Vreelander variable in the OLS model, it actually blows away the other variables in terms of statistical significance. This does not hold in the more appropriate Poisson model.

Bottom line: Why do more award recipients come from Argentina and Spain than any other Spanish-speaking country? They are the richest and the biggest, and they’ve had enough crises to motivate their craft.

Sunday, December 5, 2010

Enter the Dragon... or Rabbit?

Back in 2009 when I was teaching at Korea University, I asked my Korean friends if they knew that China is shaped like a rooster. They did not. But they proceeded to tell me that Korea is also shaped like an animal... well actually like two animals.

From one perspective, Korea is shaped like a dragon:

From another perspective, Korea is shaped like a bunny rabbit:

For people interested in international relations and national identities, there are two take-aways:

(1) Korea-Japan relations:
My Korean friends explained that if you see Korea as a dragon, it is ready to handle an imperial Japan. If you see Korea as a rabbit, however, then the Japanese islands represent the animal's refuse. (I mean no offense to Japan - I'm just reporting what I was told.) My friends couldn't decide which image they prefer. They like the powerful Dragon-Korea. But they delight in the idea of Japanese islands representing rabbit-refuse.

Either way, the scars of the early 20th century Japanese occupation of the Korean peninsula are still alive in the imaginations of young Koreans. (For a history of the years leading up to the occupation, when Korea was treated as a "protectorate" of Japan, see the work of Georgetown Professor Christine Kim.)

This helps to explain why - even when Japan and Korea have common interests - they rely on the presence of the United States, which acts as a buffer to placate domestic constituencies who may still have hard feelings (see the work of T. J. Pempel). Regional organizations also play a role. Japanese and Korean governments have been able to obfuscate some of the economic assistance that Japan has given to Korea by going through the Asian Development Bank. Japan exercises a great deal of control over this organization, though many other countries, including Korea, are also voting members. (For more on this topic, see this paper, co-authored by my brilliant student, Daniel Yew Mao Lim, as well as the excellent research of my friend and colleague, Christopher Kilby).

(2) North-South relations:
Despite more than half a century of tense and, at times, bloody relations between the North and South, my friends from South Korea can still imagine their country as one. Whether dragon or bunny, the animal has no border dividing it in half. Their imagination pertains to the entire Korean peninsula. Well, at least it did in 2009 when I was last in Korea... I'd love to hear the thoughts of my friends after the most recent round of North Korea's shenanigans. And what I would really like to know is how the youth of North Korea imagine their country...


Hye Jee Cho tells me she was taught that Korea is shaped like a tiger. Hye Jee was my colleague at UCLA, where I was a Global Fellow at the International Institute, and she was doing her Ph.D. Originally from Korea, she is now an assistant professor at the Hong Kong University of Science and Technology. She'll be presenting a paper on the International Monetary Fund at the Fourth Annual Conference on the Political Economy of International Organizations in Zurich this January. She shared this awesome picture from "Strangemaps":

So, Hye Jee recalls what she was taught growing up in Korea:
Koreans believed, from the old days of the Joseon dynasty (1392–1897), that the peninsula was tiger-shaped. But after the invasion by Japan in the early 20th century, the Japanese tried to "downgrade" Korea by conceiving of it as a weaker animal - a rabbit. (Note that Hye Jee does not personally believe that rabbits are inferior to tigers - it's just the story that she was taught.)

Saturday, December 4, 2010

Rise of the Rooster

We all need to know more about China. In today's blog, however, I don't want to get into the litany of facts that others have been covering. Instead, I want to bring up something rather simple: What does China look like?

I mean on the map. The shape of China - what does it resemble?

Everyone in China learns what animal the map of China resembles. But practically no one outside of China knows.

The question came up for me when I was visiting Beijing for the first time a couple of years ago. I found myself in a cafe with some newfound Chinese friends. They could speak English well enough for us to communicate; I was grateful because I don't speak Chinese. Well, somehow, the conversation fell upon my international travels. But my friends did not know the words in English for the various countries of the world. (Funny how the word for "Belgium," for example, doesn't come up when you're learning basic English.)

So, I started sketching a map of the world on a napkin to point out countries. I did a pretty good job with the Americas and an ok job of drawing Europe, but when it came to Asia... well, I just drew a circle where China was supposed to be.

"That's not what China looks like!" said one of my friends, incredulously.

"Um," I said, "I don't know the intricacies of the borders, but I've got the location right: south of Russia and Mongolia, east of the Central Asian countries, northeast of India, Nepal, and Bangladesh, and north of the Southeast Asian countries, west of the Koreas--"

My friend interrupted me. "But China has a very specific shape. It's easy to draw. And it looks nothing like what you drew.

"China is shaped like a rooster!" she concluded.

She drew the rooster on the map, and, sure enough, that was definitely China. I asked her if this is something she came up with herself. She just laughed. It turns out that everyone in China learns this as a child. It is deep-seated in their minds – this is how they imagine their nation to be shaped.

I think that it's taught to children so early in China that they take it for granted. When I ask people from China if they know what the map of China resembles, they simply shrug "of course." But, perhaps because they take it for granted, it doesn't seem to be something that comes up for outsiders. No one I've chatted with from outside of China knows about it. Most people are really surprised by it. Some people mistakenly think I'm making a joke. And almost everyone is struck by how obvious it is, once you point it out.

I should note that ignorance of the rooster connection is something I've found world-wide, whether I ask people from the United States, Europe, Latin America, Africa, Asia... Even people I've met from Taiwan don't know about it. Now, of course, there are some folks who do know. If you Google - China rooster - you'll find plenty of pages. Here's one that came up for me today.

But, ok, so you've learned a bit of trivia. So what? What can knowing the shape of China teach me about international political economy?

One thing that comes to mind is the territorial integrity of China. Chinese people know how their country is shaped, right down to little details.

The capital, Beijing, is at the throat of the rooster.

Harbin is the eye.

Shanghai is on the chest.

The Xizang Autonomous Region (a.k.a. Tibet) is part of the tailfeathers - and it is very much part of the rooster. Try plucking the tailfeathers off of a real rooster and see how fast he gouges you with beak and claws.

And speaking of those claws - some say that the island of Taiwan represents one of the feet - they ask, how long can a rooster stand on one leg? (I ask, can a more moderate conception of the rooster leave Taiwan out?... Or can we someday have 1 rooster with 2 or 3 systems? This may become a central question for the future of international security.)

The territorial integrity of China is important to Chinese governments in part because of the history of empires collapsing following the loss of territory. Let's set aside questions of endogeneity. If this is what Chinese governments believe, then separatist movements will not be tolerated. I learned this from my friend and colleage, Pierre Landry, author of Decentralized Authoritarianism in China: The Communist Party's Control of Local Elites in the Post-Mao Era. On the extent and importance of Chinese nationalism, he recommends China: Fragile Superpower, by Susan Shirk. On the value of Tibet to the PRC, I recommend recent research by my friends/colleagues Andreas Fuchs and Nils-Hendrik Klann (the paper is here). They show that when the Dalai Lama is received by a country's government at the highest level, the country suffers reduced access to Chinese markets - exports to China drop. Check out the story here. (And for my view, click here.)

Finally, the #1 reason to remember the rooster shape is that it is a great way to get young children interested in learning the geography of a country that is going to become even more important over the course of their lives. Also, teach them to ask/state, "who"/"Hu" is the president of China. (They may also have fun with this: "Who is the next President of China? No, Hu is the current President. Xi ("she") is the next President.")

Roosters, wordplays, and China - great fun for the kiddies...

Friday, November 12, 2010

G20 Revisited: ASK IT SAM!

As the G20 Summit closes, I wanted to return to something I posted about over the summer. Once again, we see that the G20 doesn't actually accomplish anything. It is perhaps a useful forum to focus the world's attention on global economic issues, but what is really important about the G20 is not what it does. What is important about the G20 is what it represents: The arrival of the emerging market countries!

If this observation is correct, however, then it's a shame that most people cannot name the members of the G20 (even most scholars of International Relations fail the test). Learning their names will give you a sense of the major players in international relations... and learning who's *not* in is also interesting (see what I said about Iran here).

So, I came up with a mnemonic device to help people remember:


The details are in the previous post. Briefly, the G7 comprises the major players of the last 3 decades of the 20th Century - you should definitely know them. BRIC stands for the 4 biggest emerging markets, you should know them too. EU? That's the seat on the G20 going to the European Union countries not already represented by the G7 (yeah, the EU gets separate seats for Germany, France, Italy, the United Kingdom, and then one more for good measure... also note that there are not actually 20 countries in the G20, only 19, with the 20th seat going to the EU).

That leaves 8 countries. They're the tough ones to remember, so I came up with this word, "MAKTISAS," where each letter stands for one of the remaining countries. The nice thing about it is that it also roughly orders the countries in terms of gross national product (GDP). Buuuut, as many of my friends have pointed out, MAKTISAS only works as a mnemonic device if you can actually remember the made up word, something that has proven to be difficult. Sooo, my good friend and co-author, Raj Desai, came up with an easier acronym to remember:


S=Saudi Arabia
K=Korea (South, duh!)


S=South Africa

So, there you have it:


The full list, in order of GDP (2010 US$ estimates from the International Monetary Fund), is thus:

United States ($14.6 trillion)
Rest of the EU* ($6.0 trillion)
China ($5.7 trillion)
Japan ($5.4 trillion)
Germany ($3.3 trillion)
France ($2.6 trillion)
United Kingdom ($2.3)
Italy ($2.0 trillion)
Brazil ($2.0 trillion)
Canada ($1.6 trillion)
Russia ($1.5 trillion)
India ($1.4 trillion)
Australia ($1.2 trillion)
Mexico ($1.0 trillion)
Korea ($986 billion)
Turkey ($729 billion)
Indonesia ($695 billion)
Saudi Arabia ($434 billion)
South Africa ($354 billion)
Argentina ($351 billion)

*Rest of the EU excludes Germany, France, United Kingdom, & Italy. If they are double-counted, then the total EU GDP is $16.1 trillion

Wednesday, October 6, 2010

The Committees that Rule the World
(Who should lead a multipolar world? Part III)

Last time at The Vreelander, we learned that votes for 187 member-countries countries at the International Monetary Fund (IMF) and the World Bank are out of whack with reality. Advanced industrialized countries have more than their fair share, while emerging market countries are under-represented. But that’s only part of the global governance problem. I think a bigger issue is how the votes of the 187 member-countries are put together to elect the 24-member Executive Boards of the IMF and the World Bank. Who are these guys (yeah, they’re pretty much all guys) helping to rule the global economy?

So, the Executive Boards of the IMF and the World Bank are basically mirror images of each other. Some of the Directors represent single countries – the "great powers" – while the "rest of the world" elects the remaining Directors (elections are held every two years).

At present, there are eight governments with country-specific Directors: the United States, Japan, Germany, France, the United Kingdom, China, Saudi Arabia, and Russia (in order of vote-share).

The "rest of the world" pools their votes into blocs to elect the remaining 16 Directors – and there are no rules. Here’s how things shape up (click the figures for a larger view):

Some things should strike you as strange. Like – why does the guy from li’l Belgium have more votes at the IMF than the guy from France? How on earth could tiny Denmark possibly have more votes than mighty China? And, um, over at the World Bank, the guy from Austria has the largest share second only to the United States??? Are ya kiddin’ me?

What’s going on is that some countries team up as a big voting bloc and elect a very powerful Director to represent their interests. So, out of a bloc of countries, which one gets to have a guy from their country be the leader?

Some groups allow the Directorship to rotate across all members – this is true for the two African Directorships. Other regional blocs are more "hegemonic," with only the most powerful countries in the bloc controlling the Directorships.

Why would a country give its political support to a hegemon?

The case of Spain involves colonial legacies. Spain currently controls an IMF Executive Directorship representing a group of Latin American countries. Spain shares control of this Directorship, alternating with Mexico (the Alternate Director) and Venezuela (the Director at the World Bank).

The Canadian bloc is more geographically diverse, but also follows colonial legacies. Canada partnered early on with Ireland, a fellow former colony of the United Kingdom. The Canadian bloc then took on other former British colonies of the Americas as they became independent and joined the IMF and World Bank.

Then there are blocs that do not exclusively follow regional lines. Iran, for example, leads a bloc at the IMF including Middle Eastern and North African countries, along with Ghana, which was recruited into the bloc in 1973.

Italy is a remarkable case. With more votes than either Saudi Arabia or Russia, Italy has enough votes to elect its own Directorship. Rather than go it alone, however, the government has formed a bloc including mostly Southern European neighbors – Greece, Malta, Portugal, San Marino, and Albania. The bloc also includes Timor-Leste, which is far outside of the regional pattern. By bringing together this coalition, the Director from Italy actually has a greater vote-share than does the Director from China.

The Directorships of the Netherlands and Austria-Belgium are even more outstanding. At the World Bank, they control, respectively, the third and second most powerful Directorships. The Netherlands bloc includes a group of non-obvious partners: Armenia, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Georgia, Israel, Macedonia, Moldova, Montenegro, Romania and Ukraine. Austria and Belgium represent Belarus, Czech Republic, Hungary, Kazakhstan, Luxembourg, Slovak Republic, Slovenia, and Turkey.

And then there is Switzerland. Since joining in 1992, Switzerland has held Directorships at the World Bank and the IMF. Currently, Switzerland represents a hodgepodge group including Azerbaijan, Kyrgyz Republic, Poland, Serbia, Tajikistan, Turkmenistan, and Uzbekistan.

How does Switzerland do it? My research indicates that foreign aid might be helping. This is straightforward political economy: trading money for political influence. Rich countries provide foreign aid to developing countries that offer political support at the World Bank and the International Monetary Fund.

How much Swiss foreign aid is due to Swiss-bloc membership? Consider some statistics from 2008. Total Swiss Official Development Assistance to independent countries was $758 million, and the 6 poor countries in the Swiss-bloc received about 94 million of this – or 12% of the total. Considering that the total population of these 6 poor countries (less than 60 million) accounts for less than 1% of total world population, getting a full 12% is, well, quite a large share of Swiss aid!

Back in 1992 when Switzerland first joined the World Bank and the IMF, the Swiss government worked hard to put together a coalition of other new members so that it could be elected to the prestigious Directorships. By leaving Italy to join Switzerland, Poland earned a promotion to Alternate Director for the Swiss. And the Swiss have maintained a commitment to providing foreign aid to the impoverished members of their bloc. This should come as no surprise to astute observers of Swiss involvement in international affairs. Some policy-makers are rightfully proud of the service they provide for their constituent countries. As they see it, the great power of holding Directorships at the World Bank and the IMF comes with great responsibility.

The question for emerging market countries is this: do they want to get into the game of putting together powerful blocs? I’m sure, for example, that China could put together a supporting cast of countries that would make it much more powerful than the Italian bloc.

The real question is probably this: do emerging market countries even care? See, Western European countries can play all the games they like to maintain their privileged position in global institutions. But if these institutions don’t reflect economic realities about which countries have real power, they may cease to be relevant. Emerging market countries may not yet have the power to take over the global institutions, but they are beginning to run things at a regional level. And thus they may be more interested in focusing their resources on regional institutions.

I will have a paper about this topic that will be coming out soon - co-authored with Raj Desai. For a preview of our views, click here.

As for the IMF and the World Bank, I refer to what I said in Part 1 of this series: they’re in a bind. If the power of the United States and Western Europe is reduced, these countries may be less likely to approve additional funding for the institutions. But if global governance fails to become more inclusive, emerging markets will (continue to) lose interest.

Perhaps this is the signature of a multipolar world, where no one is strong enough to dominate at the international level – and regional hegemons emerge. If this is so, I think a potential solution for the IMF and World Bank is to recognize the growing strength of regional organizations and find ways to engage and work with them.