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Capitalism, Not Globalism

Capital Mobility, Central Bank Independence, and the Political Control of the Economy

William Roberts Clark

Publication Year: 2003

Capitalism, Not Globalism shows that, while much has been made of recent changes in the international economy, the mechanisms by which politicians control the economy have not changed throughout the postwar period. Challenging both traditional and revisionist globalization theorists, William Roberts Clark argues that increased financial integration has led to neither a widening nor a narrowing of partisan differences in macroeconomic polices or outcomes. Rather, he shows that the absence of partisan differences in macroeconomic policy is a long-standing feature of democratic capitalist societies that can be traced to politicians' attempts to use the economy to help them survive in office. Changes in the structural landscape such as increased capital mobility and central bank independence do not necessarily diminish the ability of politicians to control the economy, but they do shape the strategies they use to do so. In a world of highly mobile capital, politicians manipulate monetary policy to create macroeconomic expansions prior to elections only if the exchange rate is flexible and the central bank is subservient. But they use fiscal policy to induce political business cycles when the exchange rate is fixed or the central bank is independent. William Roberts Clark is Assistant Professor, Department of Politics, New York University.

Published by: University of Michigan Press


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pp. ix-xi

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Chapter 1 Introduction

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pp. 1-11

On May 2, 1997, Tony Blair, an advocate of “Christian socialism” since his university days, became prime minister of the first Labour government in Britain in eighteen years. On May 6, his “New Labour” government moved to enhance the independence of the Bank of England by transferring day-to-day control over monetary policy from Whitehall to...

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Chapter 2 The Structural Context of Macroeconomic Policy Choice

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pp. 13-39

Both the partisan and electoralist models tend to assume that incumbents have sufficient control over the instruments of monetary and fiscal policy that they can produce the macroeconomic outcomes they desire. In the partisan model, this means manipulating monetary and fiscal instruments so as to produce the combination of growth, employment, and inflation most preferred by the incumbent’s constituency...

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Chapter 3 Partisanship and Fiscal and Monetary Policy

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pp. 41-83

At the beginning of this book, I pointed to the apparent rightward leaning of British prime minister Tony Blair and German chancellor Gerhard Schroeder as two instances of the popular view of the effects of globalization. It is frequently argued that in today’s global economy, left-wing politicians have had to mimic the policy actions...

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Chapter 4 Elections and Fiscal and Monetary Policy

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pp. 85-104

In the previous chapter, evidence was presented that called into question the partisan perspective on macroeconomic policy. The extant empirical literature is full of contradictory findings.An attempt to control for the modifying effects of institutional context deduced from the theoretical models in chapter 2 failed to clarify this web of tangled...

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Chapter 5 Partisan Differences and Macroeconomic Outcomes

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pp. 105-140

In this chapter, I examine arguments about the effect of the partisan composition of government on macroeconomic performance. I examine propositions, including those drawn from the game-theoretic model in chapter 2, regarding the effects of central bank independence, capital mobility, and eroding national policy autonomy on partisan differences in macroeconomic performance. I begin with a reexamination...

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Chapter 6 Elections and Macroeconomic Outcomes

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pp. 141-167

In chapters 3 and 5, I presented evidence that called into question the existence of partisan differences both in the use of monetary and fiscal policy instruments and in macroeconomic outcomes. The scarcity of partisan differences, furthermore, appears to be general. Before and after capital mobility, under fixed and flexible exchange rates, under...

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Chapter 7 Conclusion

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pp. 169-176

I have offered detailed and, I hope, measured summaries of this book’s empirical findings at the end of each of the empirical chapters. In this conclusion, I emphasize the broadest findings and what I see as their main implications, attempting to step out from among the trees and get a glimpse of the broader forest. The empirical...

Appendix A Derivation of Proposition 1

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pp. 177-178


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pp. 179-192


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pp. 193-203


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pp. 205-210

E-ISBN-13: 9780472024919
E-ISBN-10: 0472024914
Print-ISBN-13: 9780472031160
Print-ISBN-10: 0472031163

Page Count: 224
Illustrations: 26 drawings, 29 tables
Publication Year: 2003