Crises in capitalism, capitalism(s) in crisis
Central European University
Department of Political Science
MA Program, Fall Semester 2014/2015
4 CEU credits, 8 ECTS credits
Instructor: Dorothee Bohle
Time and Place: Mondays and Wednesdays, 11-12.40, FT 908
Office hours: Mondays 13.30-17.30
The “Great Recession” of 2007 onwards is a powerful reminder that capitalism is a highly
unstable order, or, as argued by Wolfgang Streeck, an “institutionalized disorder”. Dominant
approaches especially in comparative political economy have in the last decades become too
comfortable with the idea that capitalism is successfully domesticated by institutions – be it the
regulatory institutions of liberal capitalism, or the more deeply engrained interlocking networks
governing coordinated market economies. Change, if it all, was to occur gradually. The aim of
this course is to revitalize concepts of capitalism as a highly dynamic system that is reproduced
through cycles of destruction and institutional reform. It seeks to provide analytical tools and a
long-term perspective on capitalist dynamics which foster an understanding of the destructive
forces of capitalism; and the historical conditions under which these forces could be tamed and
turned into sources of growth and social progress.
Course structure The course has three major parts. First, we will revisit some of the classic and more recent
theoretical perspectives on the political economy of capitalism and its crises. We will discuss
Marxist, Schumpeterian and Polanyian perspectives. The second part of the course will explore
earlier crises and the lessons we can learn from them for the current crisis. We will take a closer
look at the Great Depression of the 1930s, and the crisis of the 1970s, and the financial crises of
the 1980s and 1990s. We will then move on to analyze in greater detail the international and
domestic origins of the most recent global financial crisis, and its unfolding in the US and
Europe.
Course requirements and evaluation: 1. Attendance and in-class participation demonstrating the familiarity with the key
readings. This is a discussion-based seminar, where attendance and participation are crucial. (30 % of the grade)
2. One presentation. During the first two weeks of the class, each student is asked to choose a topic for presentation (topics are indicated in the syllabus) and prepare, either alone or in a small group a 15 minutes presentation (individual presentations can be slightly shorter, group presentations slightly longer, but not exceeding 20 minutes) (20 % of the grade). I will assist you with identifying core readings for the presentations.
3. Two position papers. This is a reading intensive seminar which will proceed almost entirely by discussions of the required readings supported by position papers. Position papers are small essays on the weekly readings. They should shortly summarize the readings, reflect on the major arguments, and include questions for further discussion. Position papers can compare the readings to other readings of the class, or apply the readings to an empirical case. The papers should be 4-5 pages long, and are to be distributed electronically to the whole class latest by noon the day prior to the class. Students might be asked to shortly present their papers in class (20 % of the grade).
4. Research paper of approximately 3000 words (excluding the bibliography). The final paper will be either a study of how the current crisis has affected a particular country, or region, how specific actors have contributed to the crisis, or are trying to solve aspects of the crisis. You can also develop your presentation into a research paper. The topic of the final paper is to be agreed upon with the instructor. A short outline of the research paper has to be submitted by week 11 (30% of the grade).
Learning outcomes By the end of the class, students will have acquired basic knowledge of important classical
theories of political economy, their applications in different historical contexts, and will be able
to analyze contemporary events in broader social, economic and historical contexts. They will
also be familiar with major debates of the origins, the unfolding and the dimensions of the
Great Recession. The course enhances critical thinking and writing, multidisciplinary
orientation, contributes to the mastery of academic writing and oral skills. Learning outcomes
are supported by the course’s requirements and assessed accordingly.
Reading Material All the course material is available in electronic form through a pass word protected folder.
Additional material and information will be posted at the e-learning site at http://e-
learning.ceu.hu/. The password will be communicated to students who enroll for the course. All
students are required to register for the e-learning site.
General readings
Students are highly recommended to read the Financial Times on a regular basis.
As the crisis is unfolding, an increasing number of books are being published on its different
aspects. Students who are interested in learning more might consult
Raghuram G. Rajan. Fault-Lines. How Hidden Fractures Still Threaten the World Economy. Princeton, Pricenton University Press, 2010.
Michael Lewis: The Big Short. Inside the Doomsday Machine. London and New York: W.W. Norton and Company 2010.
Michael Lewis. Boomerang. Travels in the New Third World. London and New York: W.W. Norton and Company 2010.
Carmen M. Reinhart and Kenneth S. Rogoff. This Time is Different. Eight Centuries of Financial Folly. Oxford and Princeton, Princeton University Press.
Robert W. Kolb. The Financial Crisis of Our Time. Oxford: Oxford University Press, 2011.
Joseph Stiglitz. Freefall: America, free markets and the sinking of the world economy. New York: Norton and Company, 2010.
Jack Rasmus. Epic Recession: Prelude to Global Depression. London ; New York: Pluto Press, 2010.
Wolfgang Streeck. Buying Time: The Delayed Crisis of Democratic Capitalism. Brooklyn, NY: Verso, 2014.
Philip Mirowski. Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown. Reprint edition. Verso, 2014.
Mark Blyth. Austerity: The History of a Dangerous Idea. Oxford ; New York: Oxford University Press, 2013.
You can find a regularly updated bibliography on the crisis at
http://www.eui.eu/Documents/Research/Library/ResearchGuides/Economics/PDFs/GlobalCrisi
sBibliographyWebed.pdf
There are also a number of very useful and informative websites and blogs you might want to
take a look at. These include
Planet Money, especially the podcasts; at http://www.npr.org/rss/podcast/podcast_detail.php?siteId=94411890
Crooked Timber, at http://crookedtimber.org/
Eastern Europe Economy Watch at: http://easterneuropeeconomy.blogspot.com/
Bruegel: http://www.bruegel.org/bruegel-and-the-european-crisis/
Project syndicate at: http://www.project-syndicate.org/
Naked Capitalism at: http://www.nakedcapitalism.com/
Fistful of euros at: http://fistfulofeuros.net/.
Vox, at: http://www.voxeu.org/
Eurointelligence at: http://www.eurointelligence.com/eurointelligence-news/home.html
Topics and Readings
I. What is capitalism and why are there crises in capitalism?
Theoretical Foundations
Week 1: Introduction
Seminar 1
*Fulcher, James. Capitalism: A Very Short Introduction. OUP Oxford, 2004, Chapters 1-3, pp. 1-
57
Seminar 2
*Fulcher, James. Capitalism: A Very Short Introduction. OUP Oxford, 2004, Chapters 4-6, pp. 58-
128
Week 2: Marx
Seminar 1
*Wright, Eric Olin. “Alternative Perspectives in Marxist Theory of Accumulation and Crisis”,
Critical Sociology 2/3 1975, pp. 115-142
Seminar 2
*Marx, Karl. Crisis Theory. From Theories of Surplus Value. In: The Marx-Engels Reader, edited
by Robert C. Tucker. New York/London: Princeton University Press, 1978, pp. 443-468
Recommended
Crotty, James. “The Centrality of Money, Credit, and Financial Intermediation in Marx’s Crisis
Theory: An Interpretation of Marx’s Methodology.” Rethinking Marxism: Struggles in Marxist
Theory, 1985, 45–81.
Kenway, Peter. “Marx, Keynes and the Possibility of Crisis.” Cambridge Journal of Economics,
1980, 23–36.
David Harvey: Reading Marx’ Capital with David Harvey,
https://www.youtube.com/watch?v=gBazR59SZXk
Arrighi, Giovanni (1978) ‘Towards a theory of capitalist crisis, New Left Review, I/111, pp. 3-24
Week 3 Schumpeter
Seminar 1
* Schumpeter, Josef A. “Can Capitalism Survive?” in Schumpeter Joseph, 1942 Capitalism,
Socialism and Democracy Harper & Row Publishers, chapters 12-14, pp. 130-165
Seminar 2
* Schumpeter, Joseph A. ‘The Instability of Capitalism’, in Schumpeter: Essays: On
Entrepreneurs, Innovations, Business Cycles, and the Evolution of Capitalism, edited by Richard
V. Clemence. New Brunswick, N.J., U.S.A: Transaction Publishers, 1991, pp. 47-73.
Presentation Topic: Marx and Schumpeter’s understanding of capitalism’s creative destruction:
what are similarities and differences?
Recommended
Elliott, J. 'Marx and Schumpeter on Capitalism's Creative Destruction', The Quarterly Journal of
Economics (HB/1/.Q3), 95 (1980), pp. 45-68
Schumpeter Joseph, Capitalism, Socialism and Democracy Harper & Row Publishers, 1942.
Streeck, Wolfgang:Re-Forming Capitalism Institutional Change in the German Political Economy
Oxford: Oxford University Press, 2009, especially chapter 17.
Mathews, J.A. (2002) “An evolutionary theory of the economy as a whole: reflections on
Schumpeter's ‘lost’ seventh chapter to The Theory of Economic Development”, MGSM Working
Paper, at http://hdl.handle.net/1959.14/99596
Schumpeter, J.A. (1939) Business Cycles: A Theoretical, Historical and Statistical Analysis of the
Capitalist Process (abridged) downloadable at
http://classiques.uqac.ca/classiques/Schumpeter_joseph/business_cycles/schumpeter_busines
s_cycles.pdf
Week 4 Polanyi
Seminar 1
* Polanyi, Karl The Great Transformation, Beacon Press 1957, chapters 6, 11, 12, pp. 71-81, 136-
156
Seminar 2
*Silver, Beverly J., and Giovanni Arrighi. “Polanyi’s ‘double Movement’: The Belle Époques of
British and US Hegemony Compared.” Politics & Society 31, no. 2 (2003): 325–55.
Presentation Topic: What is the double movement, and how does it differ from class based
movements and from social movements?
Recommended:
Fred Block, “Karl Polanyi and the Writing of the Great Transformation”, Theory and Society, Vol.
32, No. 3, 2003
Fred Block and Margaret Somers, “Beyond the Economistic Fallacy: The Holistic Science of Karl
Polanyi”, in Vision and Method in Historical Sociology, edited by Theda Skocpol, Cambridge
University Press, 1984, pp. 47-84
II. Historical Precedents
Week 5 Gold Standard and the Great Depression
Seminar 1
*Frieden, Jeffry A. “Globalization and Exchange Rate Policy” (http://scholar.harvard.edu/jfrieden/files/Globalization_and_exchange_rate_policy.pdf).
Seminar 2
* Frieden, Jeffry A. 2006. Global Capitalism: Its Fall and Rise in the Twentieth Century. New
York: W. W. Norton & Company, chapters 8 (The Established Order Collapses) and 9 (The Turn
to Autarchy), p. 173-228.
Presentation Topic: How did the gold standard impact on democracy? Recommended
Eichengreen, Barry. Golden Fetters. The Gold Standard and the Great Depression. 1929-1939.
New York, Oxford: Oxford University Press, 1992. Chapters 8 and 9, pp. 221- 286
Kindleberger, Charles P. The World in Depression, 1929-1939, Harmondsworth: Penguin Books.
Gourevitch., Peter. Politics in Hard Times. Compartive Responses to International Economic
Crises. Cornell University Press 1986. Chapter 4: Breaking with Orthodoxy: The Formation of a
Mixed Economy, pp. 124-180
Hall, Thomas E and Ferguson, J. David: The Great Depression: an international disaster of
perverse economic policies, Ann Arbor, The University of Michigan Press, 1998, pp. 63-131.
Katznelson, Ira. 2014. Fear Itself: The New Deal and the Origins of Our Time. New York:
Liveright.
Week 6 The Postwar Order and the Crisis of the 1970s
Seminar 1:
* Frieden, Jeffry A. 2006. Global Capitalism: Its Fall and Rise in the Twentieth Century. New
York: W. W. Norton & Company, chapter 12: The Bretton Woods System in Action, p. 278-300
Seminar 2:
*Helleiner, Eric. 1996. States and the Reemergence of Global Finance: From Bretton Woods to
the 1990s. Ithaca, NY: Cornell University Press, chapters 6 and 7, pp. 123-168.
Presentation Topic: What was the Bretton Woods system, and how did it contribute to the
stability of post war capitalism?
Recommended
Ruggie, John Gerard. 1982. “International Regimes, Transactions, and Change: Embedded
Liberalism in the Postwar Economic Order.” International Organization 36 (02): 379–415.
Block, Fred: The Origins of International Economic Disorder : a Study of United States
International Monetary Policy from World War II to the present , Berkeley : University of
California Press, 1978.
Strange, Susan: Mad Money. When Markets outgrow Governments, Ann Arbor, The University
of Michigan Press, 1998.
Rodrik, Danni: How Far Will International Economic Integration Go?” The Journal of Economic
Perspectives, Vol. 14, No. 1 (Winter, 2000), pp. 177-186 John Gerard Ruggie “International
Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order”
International Organization, Vol. 36, No. 2, pp. 379-415
Week 7: After the Golden Age: a Sequence of Crises
Seminar 1
Wade, Robert. “The Asian Debt-and-Development Crisis of 1997-?: Causes and Consequences.”
World Development 26, no. 8 (August 1998): 1535–53. doi:10.1016/S0305-750X(98)00070-9.
Seminar 2
Streeck, Wolfgang. “The Crises of Democratic Capitalism.” New Left Review, no. 71 (2011): 5–
29.
Presentation Topic: The Latin American Debt Crisis of the 1980s and the Rise of the Washington
Consensus
Recommended
Dani Rodrik ‘Who needs Capital account convertibility’, Harvard University February 1998
Pempel, T.J. (ed.). The Politics of the Asian Crisis. Ithaca, New York: Cornell University Press
1999
Krugman, Paul: The Return of Depression Economics, 2008, pp. 3-30; 139-191
Wade, Robert “Wheels within wheels: Rethinking the Asian Crisis and the Asian Model”, Annual
Review of Political Science, 2000, (3), pp. 85–115
Stallings, Barbara 1992, “International Influence on Economic Policy: Debt, Stabilization and
Structural Reform”, in Haggard Stephen and Kaufmann Robert R. (eds): The Politics of Economic
Adjustment, New Jersey: Princeton University Press.
Neely, Christopher 1999. “An Introduction to Capital Controls,”Federal Reserve Bank of St. Louis
Review 81(6):13--‐30.
Roberto Chang.1999.“Understanding Recent Crises in Emerging Markets,” Federal Reserve Bank
of Atlanta Economic Review, Second Quarter, pp.6--‐16.
III. The Great Recession
Week 8: From Subprime Mortgages to the Global Financial Crisis
Seminar 1:
*Schwartz, Herman. “Housing, Global Finance and American Hegemony: Building Conservative
Politics One Brick at a Time.” In The Politics of Housing Booms and Busts, edited by Herman M.
Schwartz and Leonard Seabrooke, 28–52. Basingstoke ; New York: Palgrave Macmillan, 2009.
Seminar 2
Film Screening: Inside Job
Presentation Topic Is the high level of American debt a sign of weakness?
Recommended
Gowan, Peter “Crisis in the Heartland. Consequences of the New Wall Street System”. New Left
Review, January/February 2009, pp. 5-29
Crotty, James “Structural causes of the global financial crisis: a critical assessment of the ‘new
financial architecture’,” Cambridge Journal of Economics, 2009, (33): 563–580
Panitch, Leo and Konings, Martijn: Myths of Neoliberal Deregulation. New Left Review 57,
May/June 2009, pp. 67-83
Brenner, Robert: The economics of global turbulence: the advanced capitalist economies from
long boom to long downturn, 1945-2005, London; New York : Verso, 2006
Stiglitz, Joseph: The Roaring Nineties: A New History of the World's Most Prosperous Decade,
2004
Wade, Robert “From global imbalances to global reorganizations” Cambridge Journal of
Economics, 2009, (33) 539-562
Week 9: The Crisis of Privatized Keynesianism
Seminar 1:
*Colin Crouch, “Privatised Keynesianism – An unacknowledged policy paradigm” The British
Journal of Politics and International Relations, Vol. 11, No. 4, 2009, pp. 382-399.
Seminar 2
*Bohle, Dorothee. “Post-Socialist Housing Meets Transnational Finance: Foreign Banks,
Mortgage Lending, and the Privatization of Welfare in Hungary and Estonia.” Review of
International Political Economy 21, no. 4 (2014): 913–48. doi:10.1080/09692290.2013.801022.
Presentation Topic: Has privatized Keynesianism been a leading policy paradigm in Europe or
do we see major differences across countries?
Recommended
Ansell, Ben W. 'Crisis as Political Opportunity? The Role of Partisan Politics in the Response to
the Global Credit Crisis', in Bermeo, Nancy and Jonas Pontusson (eds.) Coping with Crisis,
Russell Sage Foundation. 2012, pp. 327-360.
Manning, Robert D. Credit Card Nation. The Consequences of America’s Addiction to Credit,
Basic Books 2000, Chapter 2, pp. 31-67
Schelkle, Waltraud (ed.), “In the Spotlight of Crisis: How Social Policies Create, Correct, and
Compensate Financial Markets.” Special issue of Politics and Society, 40 (1), 2012.
Week 10 When Small Countries Crash
Seminar 1
Symposium: ‘All that Glitners is not Gold’: The Political Economy of the Icelandic Financial Crisis,
EPS Volume 10, issue 3, September 2011. Read the Contributions by Schwartz and Thorhallson
Kattel, Rainer, and Ringa Raudla. “The Baltic Republics and the Crisis of 2008–2011.” Europe-
Asia Studies 65, no. 3 (2013): 426–49. doi:10.1080/09668136.2013.779456.
Seminar 2
Walter, Stefanie. “Financial Crises and Politics Macroeconomic Adjustments”. Cambridge
University Press”, Chapter 1
Presentation Topic: Discuss the pros and cons of austerity policies. Recommended Michael Lewis. Boomerang. Travels in the New Third World. London and New York: W.W.
Norton and Company 2010.
Mark Blyth. Austerity: The History of a Dangerous Idea. Oxford ; New York: Oxford University
Press, 2013
Week 11 The Crisis of the Eurozone
Seminar 1: Fritz W. Scharpf (2011): “Monetary Union: Fiscal Crisis and the Pre-emption of Democracy.” LSE
Europe in Question Discussion Paper Series, LEQS Paper 36/2011
Seminar 2 Armingeon, Klaus, and Lucio Baccaro. “The Sorrows of Young Euro: The Souvereign Debt Crises
of Ireland and Southern Europe.” In Coping with Crisis: Government Reactions to the Great
Recession, edited by Nancy Gina Bermeo and Jonas Pontusson, 162–97. New York: Russell Sage
Foundation, 2012.
Presentation topic: How does the new European economic governance affect national
democracy? And/or Is Germany’s recent economic leadership in Europe a curse or blessing for
the eurozone?
Recommended Paul de Grauwe. Check his recently published papers at
http://www.econ.kuleuven.be/ew/academic/intecon/degrauwe/
Eric Jones. Check his papers on the issue at
http://www.jhubc.it/facultypages/ejones/EMU_and_the_Financial_Crisis.pdf
http://www.jhubc.it/facultypages/ejones/sovereign_debt_crisis.pdf
Nikolaus Wolf, “Crises and Policy Responses within the Political Trilemma: Europe, 1929-1936
and 2008-2011”, EHES Working Paper in Economic History No 16 (European Historical
Economics Society, 2012)
Kevin H. O’Rourke, A Tale of Two Trilemmas, (Dublin: Department of Economics and IIIS, Trinity
College, 2011), available at
http://ineteconomics.org/sites/inet.civicactions.net/files/BWpaper_OROURKE_040811.pdf
Niamh Hardiman (ed.). Irish Governance in Crisis. Manchester: Manchester University Press.
2012.
Chinn, Menzie and Jeffry Frieden, “The Eurozone in Crisis: Origins and Prospects,” La Follette
Policy Report, Spring 2012
http://scholar.harvard.edu/jfrieden/files/euro_crisis_for_lafollette_report.pdf
Soros, George. “The Tragedy of the European Union and How to Resolve It.” The New York Review of Books, September 27, 2012. http://www.nybooks.com/articles/archives/2012/sep/27/tragedy-european-union-and-how-resolve-it/.
Week 12 Conclusions: The Power of Finance
Seminar 1
Nesvetailova, Anastasia. “Innovations, Fragility and Complexity: Understanding the Power of
Finance.” Government and Opposition 49, Special Issue 03 (2014): 542–68.
doi:10.1017/gov.2014.12.
Seminar 2
Concluding Discussion
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