You know, the one thing the people on the left and the right in this country seem to agree about is that everything must be done to enable America's "job creators." 

I bring this up because The Fletcher School is, well, creating a job: 

Assistant Professor of International Political Economy

Rank of assistant professor beginning September 2012. While we are open to specialty, consideration will be given to candidates with a substantive interest in emerging market economies or Europe and a methodological interest in quantitative approaches (emphasis added).

Review of applications will begin January 3, 2012.  Questions relating to this search should be emailed to IPEsearch-at-Tufts.edu

Now I know there's just a booming market for junior IPE types, so I'm sure no one reading this will be interested in a tenure-track position in the Boston area.  Still, I thought I'd put it out there. 

And, now that my home institution is actually creating a job, I'd like all of the tax cuts and subsidies that politicians seem so eager to proffer nowadays.  That, or a dedicated parking spot. 

Your humble blogger is off at another conference again, so blogging will be intermittent for the rest of the week.  However, I wanted to highlight Damien Cave's outstanding New York Times story on the decline of illegal immigration from Mexico to the United States.  The gist of Cave's story: 

The extraordinary Mexican migration that delivered millions of illegal immigrants to the United States over the past 30 years has sputtered to a trickle, and research points to a surprising cause: unheralded changes in Mexico that have made staying home more attractive.

A growing body of evidence suggests that a mix of developments — expanding economic and educational opportunities, rising border crime and shrinking families — are suppressing illegal traffic as much as economic slowdowns or immigrant crackdowns in the United States....

Douglas S. Massey, co-director of the Mexican Migration Project at Princeton, an extensive, long-term survey in Mexican emigration hubs, said his research showed that interest in heading to the United States for the first time had fallen to its lowest level since at least the 1950s. “No one wants to hear it, but the flow has already stopped,” Mr. Massey said, referring to illegal traffic. “For the first time in 60 years, the net traffic has gone to zero and is probably a little bit negative.”

The decline in illegal immigration, from a country responsible for roughly 6 of every 10 illegal immigrants in the United States, is stark. The Mexican census recently discovered four million more people in Mexico than had been projected, which officials attributed to a sharp decline in emigration.

American census figures analyzed by the nonpartisan Pew Hispanic Center also show that the illegal Mexican population in the United States has shrunk and that fewer than 100,000 illegal border-crossers and visa-violators from Mexico settled in the United States in 2010, down from about 525,000 annually from 2000 to 2004. Although some advocates for more limited immigration argue that the Pew studies offer estimates that do not include short-term migrants, most experts agree that far fewer illegal immigrants have been arriving in recent years.

The question is why. 

You'll have to read the whole thing to find out the whys of this phenomenon.  Cave's story is so good, however, that it's worth detailing exactly why the story is so good: 

1)  It's totally counterintuitive.  It flies in the face of the stylized facts about immigration in the U.S. ("we can't control our borders!") as well as Mexico ("the country is falling apart!").  This story bursts every rhetorical bubble that exists in American political debate on this topic.   

 2)  It's also counterintuitive in describing why this phenomenon has occurred.  Much of it is structural -- changing economic circumstances in both countries -- but policy shifts have mattered as well.  Those shifts cut across ideological lines:  dramatically loosened visa restrictions, combined with tougher enforcement, appears to have had some impact. 

3)  Cave relies adriotly on more academic analyses from the Pew Hispanic Center and the Mexican Migration Project at Princeton to back up his interviews and other reportage. 

4)  From a normative policy perspective, this is a win-win story.  As Doug Mataconis notes:

[T]hese are, of course, highly positive developments. That Mexico might stabilize politically and economically and become, if not as prosperous as Canada just yet, at least a far more prosperous southern neighbor than we’ve ever had is a development we should welcome and encourage. Not only because it will reduce cross-border illegal immigration, but also because a strong Mexican economy is good for the U.S. economy. 

 See Joe Klein and Matthew Yglesias on these points as well.  Indeed, it's such good news that stories like this one might not trigger cable news debates about the dreaded (and mythical) NAFTA superhighway. 

[Doesn't declining immigration into the United States foretell long-term doom for America's great power status?--ed.  Immigration undoubtedly provides a dose of demographic vitality for the United States.  Cave's story, however, it about illegal immigration from Mexico.  The data points to high rates of immigration from other Latin American countries and an expansion of legal immigration from Mexico proper.  The U.S. still remains a magnet economy.] 

One week into 2011, there's already a lot of really interesting stuff to read on the global political economy -- which means I better announce the 2010 Albies right now!! 

The Albies -- inspired by David Brooks' Sydney awards and named in honor of Albert Hirschman, represent the best writing in the global political economy of the past year -- in other words: 

Any book, journal article, magazine piece, op-ed, or blog post published in the last calendar year that made you rethink how the world works in such a way that you will never be able "unthink" the argument.

The 2008 financial crisis and its aftermath are still topic numero uno.  As I told the editors of FP when they asked me for my favorite books of the past year, "If last year's crop of books was about the tick tock of what happened, this year's harvest was more about why it happened."  Topic numero duo for me was the future of Sino-American relations in the global political economy.  These two topics govern my list: 

1)   Michael Lewis, The Big Short:  Inside The Doomsday Machine, Norton.  By honing in on the few people who bet against the subprime mortgage boom, Lewis's book nicely demonstrates the myriad ways in which the bubble was allowed to inflate for so long -- and why the people who got it right were, to be blunt, too socially awkward to help the markets correct sooner. 

2)  Raghuram Rajan, Fault Lines, Princeton University Press.  The best combined political economy take on the underlying domestic and international factors that contributed to the crisis.

3)  John Quiggin, Zombie Economics, Princeton University Press.   Quiggin ruthlessly deconstructs the ways in which market-friendly ideas devolved from rigorous theory into caricature.  Free market advocates won't want to read this book, but they should. 

4)  Yu Yongding, "A Different Road Forward," China Daily, December 23, 2010.  Anyone who thinks that it's possible to extrapolate China's recent growth trends indefinitely into the future needs to read this, like, now.  Yu's brutally candid assessment of what's wrong with China's current growth model could easily be written off as the musings of a crank -- if it wasn't for the fact that the guy was a former member of the monetary policy committee of the Peoples' Bank of China, and that China Daily printed the op-ed in the first place.    

5)  McKinsey Global Institute, "Farewell to Cheap Capital," December 2010,  and Goldman Sachs Global Economics Paper No. 204, "EM Equity in Two Decades:  A Changing Landscape," September 2010 (tie).  Both of these reports make a similar point -- a lot of the action in capital markets over the next two decades will be taking place in the developing world.  The McKinsey report is particularly intriguing on this point:  it suggests that United States will stop seeing historically low interest rates very soon, and won't see them again for at least a generation.   

6)  Nicholas Eberstadt, "The Demographic Future," Foreign Affairs, November/December 2010.  Eberstadt's essay provides a cogent summary of the demographic future of every great power in the world, and the challenges each country -- including the United States -- faces in confronting its demographic future.   

7)  Pew Global Attitudes Survey responses to "economic power" question, April 2010.   In their surveys, Pew asked respondents to identify "the world's leading economic power."  Compare and contrast the countries where the plurality response was "The United States" versus those responding "China."  

8)  The Wikileaks' economics cables.   The cables I've read that touch on economic policy are revealing, not because they say anything different from what one could read from open sources, but because they say the exact same thing as what one could divine from open sources.  Now, there are important caveats that need to be kept in mind when interpreting these cables -- but I find this observation to be veeeeeerrrrry interesting.   

9)  GOP, "A Pledge To America," September 2010.  When the GOP disappoints deficit hawks and Tea Party activists in 2011 -- and they will, they so, so will  -- go back and look at this craptastic document to understand why.  Marvel at a document that pledges to cut America's deficit while not touching Social Security, Medicare, Medicaid, defense, or raise taxes.  After reading this, I stopped taking GOP economic policy pronouncements seriously. 

10) Linda Jakobson and Dean Knox, "New Foreign Policy Actors in China," SIPRI Policy Paper No. 26, September 2010.  This isn't just about foreign economic policy, but it provides a very useful lens into the fotreign policymaking machine of the Chinese government and the Chinese Communist Party. 

I have to close with the depressing observation that there was no single peer-reviewed scholarly article in this bunch.  Now, in fairness, it's very difficult to get something through the peer-review mechanism and have it still be au courant.  Still, I'd be happy to hear from among the academics in the audience if there was any peer-reviewed scholarship that belongs on this list. 

Spencer Ackerman doesn't think the Senate will ratify the START treaty because the GOP wants revenge on health care: 

It would be a mistake to view the outcome of this vote as a function of the treaty’s merits. Look at it from the GOP’s political vantage. It’s an opportunity to deal Obama’s hippie aspiration for a nuke-free world an embarrassing setback, right after suffering a humiliating defeat on health care, the issue that fight most to their voters. Every Republican interest inclines them against voting for the bill, and the constitutional math of treaty ratification gives them the chance to give Obama a bloody nose in front of the world. If the Obama team starts arguing the merits of the bill as opposed to outlining a raw-politics strategy for passage, then the treaty is fucked. (emphasis added)

I agree that treaty ratification is not going to be easy -- but Ackerman's political acumen seems off, and his timetable is way off.  As Peter Baker and Ellen Barry reported for the New York Times, START won't be going up for a vote anytime soon: 

The two sides have begun preparing for a signing ceremony in Prague on April 8, timing it to mark the anniversary of Mr. Obama’s speech in the Czech capital outlining his vision for eventually ridding the world of nuclear weapons....

Mr. Obama met at the White House on Wednesday with Senators John Kerry of Massachusetts and Richard G. Lugar of Indiana, the senior Democrat and Republican on the Senate Foreign Relations Committee, to brief them on the negotiations. Mr. Kerry later said he would hold hearings between Easter and Memorial Day on the history of arms control and promised action by year’s end. “I assured the president that we strongly support his efforts and that if the final negotiations and all that follows go smoothly, we will work to ensure that the Senate can act on the treaty this year,” Mr. Kerry said.

Lugar told FP's Josh Rogin that "he intends to support the agreement and hearings could begin in May."

So, we know two things.   First, by the time hearings and votes on START are taken, health care will have faded from view.  Second, at least one prominent Republican senator intends to vote in favor of the treaty. 

Does this mean START will sail through?  Hardly.  But it's also not going to fail because GOP Senators decided en masse to "give Obama a bloody nose in front of the world" because of health care.  

Put me down as "cautiously optimistic" that START will be ratified.  If the press reports are accurate, then opponents will have to argue that non-binding preamble language will somehow bind future U.S. presidents.  Maybe hardcore ideologues can spin that kind of tale, but this is not health care -- fewer activists are going to care about an arms control treaty with a fading great power.  Furthermore, if Obama's popularity has rebounded by the time the treaty comes up for a vote, some individual GOP senators will see a decided advantage to bipartisanship on foreign policy. 

UPDATE:  see Josh Rogin for more on this question -- though he's leaning more towards the Ackerman position.  Laura Rozen, on the other hand, thinks Lugar's endorsement will carry some weight. 

So I see Paul Krugman has thrown his lot in with the neoconservatives who disdain multilateral institutions and prefer bellicose unilateralism when they confront a frustrating international situation. 

His op-ed today is about China's currency manipulation. ...  again. After explaining that China has less leverage than is commonly understood on the foreign economic policy front (gee, where have I heard that before), he closes with the following: 

In 1971 the United States dealt with a similar but much less severe problem of foreign undervaluation by imposing a temporary 10 percent surcharge on imports, which was removed a few months later after Germany, Japan and other nations raised the dollar value of their currencies. At this point, it’s hard to see China changing its policies unless faced with the threat of similar action — except that this time the surcharge would have to be much larger, say 25 percent. 

Whoa there, big fella!!  That's a nice but very selective reading of international economic history you have there. 

It's certainly true that the dollar was overvalued back in 1971.  What Krugman forgets to mention -- and see if this sounds familiar -- is that the Johnson and Nixon administrations contributed to this problem via a guns-and-butter fiscal policy.  They pursued the Vietnam War, approved massive increases in social spending, and refused to raise taxes to pay for it.  This macroeconomic policy created inflationary expectations and a "dollar glut."  Foreign exchange markets to expect the dollar to depreciate over time. Other countries intervened to maintain the dollar's value -- not because they wanted to, but because they were complying with the Bretton Woods system of fixed exchange rates. Nixon only went off the dollar after the British Treasury came to the U.S. and wanted to convert all their dollar holdings into gold.  

In other words, the United States was the rogue economic actor in 1971 -- not Japan or Germany.   

So, how about acting multilaterally first before engaging in unilateral action that alienates America's friends and allies alike? 

To be fair to Krugman, many of the multilateral processes appear to be stymied, as Keith Bradsher explains in this NYT front-pager: 

Beijing has worked to suppress a series of I.M.F. reports since 2007 documenting how the country has substantially undervalued its currency, the renminbi, said three people with detailed knowledge of China’s actions....

Last September, Presidennt Obama, President Hu Jintao of China and other leaders of the Group of 20 industrialized and developing countries agreed in Pittsburgh that all the G-20 countries would begin sharing their economic plans by November. The goal was to coordinate their exits from stimulus programs and prevent the world from lurching from recession straight into inflation.

The G-20 leaders agreed that the I.M.F. would act as intermediary.

But two people familiar with China’s response said that the Chinese government missed the November deadline and then submitted a vague document containing mostly historical data. These people said that China feared giving ammunition to critics of its currency policies at the monetary fund and beyond. Both people asked for anonymity because of China’s attitudes about its economic policies.

That last part oabout the G-20 process is particularly disturbing, given that this was supposed to be the venue through which macroeconomic imbalances were supposed to be addressed.  So maybe Krugman is right and unilateral is the way to go? 

I don't think so.  The big difference between the end of the Bretton Woods era and the current Bretton Woods II situation is the distribution of interests.  In 1971, everyone was opposed to a continuation of U.S. policies.  This time around, there appears to be a growing consensus that China is the rogue economic actor. 

If Krugman gets to repeat himself, then so do I:   

[T]he United States is not the country that's hurt the most by this tactic.  It's the rest of the world -- particularly Europe and the Pacific Rim -- that are getting royally screwed by China's policy.  These countries are seeing their currencies appreciating against both the dollar and the renminbi, which means their products are less competitive in the U.S. market compared to domestic production and Chinese exports. 

So why should the U.S. act unilaterally?  Why not activate an international regime that does not include China but does include a lot of other actors hurt by China's currency policy?    

Am I missing anything? 

UPDATE:  Well, Brad DeLong clearly thinks I've missed a great deal.  Response to him -- and Krugman -- here. 

Over at Politico, Eamon Javers notes an odd trend in the Drudge Report: 

On Tuesday, Matt Drudge ran a headline about the weakening U.S. dollar on his website, Drudgereport.com. In and of itself, that would be unremarkable, except that it was the 18th time Drudge had posted a link to a story about the weak dollar this month.

And October was only 20 days old.

Clearly, Matt Drudge has developed a fascination with the declining U.S. dollar.

“He’s fixated on it,” said Tom Rosenstiel, director of the Pew Research Center’s Project for Excellence in Journalism. “There’s no question that Drudge can alter what people are paying attention to.”

Market watchers say it’s unlikely that Drudge is actually moving the currency markets with his relentless attention.

“I don’t think that anyone who seriously trades currencies reads The Drudge Report before making important buy or sell decisions,” said Chris Roush, a professor of business journalism at the University of North Carolina at Chapel Hill. (emphasis added... because that's a priceless quote)

Drudge isn't the only one obsessed about the dollar.  Last week, James Pethokoukis blogged the following for Reuters: 

The aftershocks of the global financial crisis may now be propelling the dollar back to the political forefront. The greenback’s continuing slide makes it a handy metric that neatly encapsulates America’s current economic troubles and possible long-term decline. House Republicans for instance, have been using the weaker dollar as a weapon in their attacks on the Bernanke-led Federal Reserve.

For more evidence of the dollar’s return to political salience, look no further than the Facebook page of Sarah Palin. The 2008 GOP vice presidential nominee — and possible 2012 presidential candidate — has shown a knack for identifying hot-button political issues, such as the purported “death panels” she claims to have found in Democratic healthcare reform plans. In a recent Facebook posting, Palin expressed deep concern over the dollar’s “continued viability as an international reserve currency” in light of huge U.S. budget deficits.

She might be onto something here, politically and economically. A recent Rasmussen poll, for instance, found that 88 percent of Americans say the dollar should remain the dominant global currency. Now, the average voter may not fully understand the subtleties of international finance nor appreciate exactly how a dominant dollar has benefited the U.S economy. But they sure think a weaker dollar is a sign of a weaker America.

OK, let's be as plain as possible about this - as a reserve currency, the dollar is not going anywhere.  Really. 

The dollar's slide in value has been predictable, as the need for a financial safe haven has abated.  By and large, a depreciating dollar helps the U.S. trade balance (though it would help much more if the Chinese renminbi got in on the appreciation).   

Even the Chinese, who have spoken like they want an alternative to the dollar as a reserve currency, are in point of fact not doing much to alter the status quo.  Why?  To paraphrase Winston Churchill, the dollar is a lousy, rotten reserve currency - until one contemplates the alternatives. 

Because all of the alternatives have serious problems.  The euro, the only truly viable substitute for the dollar, is not located in the region responsible for the largest surge of growth.  It would be unlikely for the ASEAN +3 countries to agree to switch from the dollar to a new currency over which regional actors have no influence (the Europeans wouldn't be thrilled either, as it would lead to an even greater appreciation of the currency).  Oh, and the European Union has no consolidated sovereign debt market.  The euro is worth watching, but it's not going to replace the dollar anytime soon.  

The other alternatives are even less attractive.  Most other national currencies beyond the euro - the yen, pound, Swiss franc, Australian dollar - are based in markets too small to sustain the inflows that would come from reserve currency status.  The renminbi remains inconvertible.  A return to the gold standard in this day and age would be infeasible - the liquidity constraints and vagaries of supply would be too powerful.  There's the using-the-Special-Drawing-Right-as-a-template-for-a-super-sovereign currency idea, but this is an implausible solution.  As it currently stands, the SDR is not a currency so much as a unit of account.  Even after the recent IMF authorizations, there are less than $400 billion SDR-denominated assets in the world, which is far too small for a proper reserve currency. 

So, what's really going on here with the dollar obsession?  I suspect that with the Dow Jones going back over 10,000, Republicans are looking for some other Very Simple Metric that shows Obama Stinks.  The dollar looks like it's going to be declining for a while, so why not that?  Never mind that the dollar was even weaker during the George W. Bush era -- they want people to focus on the here and now. 

The thing is, I'm not sure this gambit is going to work.  People who already think Obama is a socialist will go for it, sure, but that's only rallying the base.  I'm not sure how much fence-sitters care about a strong dollar, however.  If anything, populist movements tend to favor a debasing of the currency rather than a strengthening of it. 

Still, I'm just a political scientist -- I'm sure that, "theories on political behavior are best left to CNN, pollsters, pundits, historians, candidates, political parties, and the voters." 

So, have at it, readers!  Will the falling dollar be a source of populist outrage if Drudge links to it enough? 

UPDATE:  contrasting takes from Kevin Drum and Megan McArdle. 

Back in the spring, I hinted that I would be willing to produce a top ten list of must-read books on the international political economy/global political economy (IPE or GPE for those in  the know), provided there was sufficient demand. 

Judging by the e-mail response, the demand is robust and quite persistent.  So I've decided... to postpone that list for another month or two.

Because you're not ready yet. 

Let's face it, if you have read this far in the post, it means you're either: 

• A curious professor ready to minimize this page if anyone walks in;
• A grad student seeking the keys to success in the profession;
• An intense undergraduate student who really wants to study IPE. 

This is great.  The thing is, most graduate programs in political economy don't give you that much historical background before throwing the cutting-edge theory and methodology at you.  This year I was lunching with some Ph.D. students at one of the top IPE schools in the country, and the students (and some of the professors) made it pretty clear that they didn't know all that much about the topic beyond the tricks of the trade - formal modeling, econometric techniques, etc. 

If you're expecting me to go off on a rant here about the uselessness of these tools, well, you're going to be sadly disappointed.  There are some pretty good reasons to learn these techniques - among other things, they'll help you to separate the wheat from the chaff when it comes to what blogs, pundits and public intellectuals are saying about the global economy. 

That said, the opportunity cost can be significant - a failure to learn anything about global economic history beyond the stylized facts contained in the most-cited articles.  This would be a weird collection of scattered knowledge, ranging from the 1860 Cobden-Chevalier Treaty to the 1934 Reciprocal Trade Agreements Act to the birth of the Washington Consensus. 

Soooo..... before you are ready to ready the ten books in IPE that you have to read, you should first read these ten books on global economic history.  I'm leaving a lot out here (North and Thomas' The Rise of the Western World; Karl Polanyi's The Great Transformation; anything and everything by William McNeill, Joel Mokyr, David Landes, Alfred D. Chandler, Jr., Joseph Needham; some things by Niall Ferguson, etc.).  That's partly because I've slanted this list towards more recent scholarship, and partly because while these books are excellent economic histories, they don't focus as much on the international dimension. 

[There are some other newly-released books, such as Liaquat Ahamed's Lords of Finance or Justin Fox's The Myth of the Rational Market, that might very well belong on this list.  I'm still in the middle of reading them, however, so the jury is still out.]

Once you imbibe the (sometimes contradictory) information contained in these books, you can look at what the stylized facts contained in IPE books with a much more astringent perspective.  It's not a coincidence that the foundational IPE texts are by the twentieth century's greatest economic historians - Eli Heckscher, Albert Hirschman, Charles Kindleberger, and Jacob Viner.  Trust me - you will feel much the wiser for it. 

The following would be my preferred order of how to read them, but it's hardly the only way to do it: 

1.  Gregory Clark, A Farewell to Alms:  A Brief Economic History of the World (2007). I've already tagged this book as an interesting read.  If nothing else, the first chapter of this book - "The Sixteen-Page Economic History of the World"  - actually matches the audacity of the title.  As I said, I don't completely buy Clark's explanation of Malthus + genetics = Industrial Revolution in Great Britain.  His attempt to explain away the irrelevance of institutions doesn't hold up to scrutiny.  Still, I will say I better appreciated the heyday of mercantilism after reading Clark. 

2.  Nathan Rosenberg and L.E. Birdzell, Jr., How the West Grew Rich (1986).  Perfect when paired with Clark, because Rosenberg and Birdzell present the classical argument for why Western Europe was the birthplace of the Industrial Revolution. 

3.  Jared Diamond, Guns, Germs, and Steel (1997).  The third leg in the triad of "why did Europe dominate the globe?" explanations.  If Clark focuses on genetics/culture, and Rosenberg and Birdzell focus on institutions, Diamond proffers a geographical determinism.  Simply put, he thinks the temperate climate of Eurasia was bound to produce the most sophisticated societies with the most advanced animals, germs, and technologies.  Diamond's argument complements rather substitutes for the institutions and culture arguments.  If nothing else, it is impossible to read this book and ever buy the ending to War of the Worlds.

4.  John Nye, War, Wine and Taxes (2007).  David Ricardo's classic example of comparative advantage was English wool for Portuguese wine.  Nye explodes the "natural" aspect of this trade, demonstrating how high tariffs against French wine proved a boon to both the Portuguese and English beer distillers.  Nye stretches his argument too far at times, but the interrelationship between war, protectionism, and statebuilding is pretty damn fascinating. 

5.  Douglas Irwin, Against the Tide:  An Intellectual History of Free Trade (1996).  Irwin's book is more a history of economic thought than economic history, but nevertheless tells a remarkable story:  how did the idea of free trade knock off mercantilism, protectionism, strategic trade theory, and other doctrines?  

6.  Kevin O'Rourke and Jeffrey Williamson, Globalization and History (1999).  A lucid, detailed and fascinating study of how the nineteenth century of globalization went down.  When anyone argues that the current (fast fading?) era of globalization is historically unique, take the hardcover version of this book and whack them on the head with it.  Special bonus book:  people who liked this should go on to read Power and Plenty by Kevin O'Rourke and Ron Findlay). 

7.  Jeffry Frieden, Global Capitalism:  Its Fall and Rise in the Twentieth Century (2006).  This book is to the twentieth centiury as Williamson and O'Rourke's book is to the nineteenth - except it's written for a wider audience, so it's a more accessible read.  Accessible doesn't mean simple, however - this book is chock full of interesting arguments, cases, and counterarguments.  

8.  Barry Eichengreen, Globalizing Capital:  A History of the International Monetary System, second edition (2008).  A more narrow work than Frieden's, Eichengreen's book is the starting point for understanding the classical gold standard, the Bretton Woods regime, and whatever the hell system we have now the Bretton Woods II regime. 

9.  Daniel Yergin and Joseph Stanislaw, The Commanding Heights (1997).  Yergin and Stanislaw tell a cheerleader's tale of how the Washington Consensus displaced the old quasi-Keynesian, quasi-socialist economic order that had its apogee and downfall in the 1970s.  What's particularly interesting is their argument that what mattered was the content and spread of the ideas themselves, and not some coercive power, that led to the re-embrace of markets.  

10. Paul Blustein, The Chastening (2001).  Blustein, a reporter for the Washington Post, tells the you-are-there version of the Asian financial crisis and the reaction from the U.S. Treasury Department.  If you want to know why Pacific Rim economies started hoarding foreign exchange reserves beginning in 1999, read this book. 

OK, readers, which books would you recommend? 

FP readers have no doubt discerned that your humble blogger's #1 topic of interest for 2009 has been the relative rise of China, the relative decline of the United States and the effects of these power shifts on the global political economy.

That said, an emerging subtheme will be breathlessly hyped reporting that melodramatically exaggerates either shifts in China's power or shifts in Chinese preferences. 

For exhibit A, I give you the Financial Times Jamil Anderlini and Javier Blas , who report, "China reveals big rise in gold reserves."  Let's go to the lede:

China has quietly almost doubled its gold reserves to become the world’s fifth-biggest holder of the precious metal, it emerged on Friday, in a move that signals the revival of bullion after years of fading importance.

Gold rose to a three-week high of more than $910 an ounce after Hu Xiaolian, head of the secretive State Administration of Foreign Exchange, which manages the country’s $1,954bn in foreign exchange reserves, revealed China had 1,054 tonnes of gold, up from 600 tonnes in 2003.

The news could spark interest in gold among other central banks. “When the largest holder of foreign exchange reserves discloses an increase in gold holdings, other countries may decide to think more carefully about underweight gold positions,” said John Reade, a precious metals strategist at UBS.

The increase in China’s gold reserves has come primarily from domestic production and refining. However, the news raises questions about the future of Beijing’s foreign reserves policy.

Ooooh.... this could be a Very Big Deal!!  Gold could supplant the dollar!!  Hide the children in the basement!!

Well, let's crunch the numbers first.  Unless MS Excel's my math is way off, China's gold reserves are now roughly worth $30 billion.  Which means they constitute less than two percent of China's total reserve holdings.  Furthermore, China's doubling of its gold reserves in the past five years actually means that Beijing has diversified away from gold, since the total value of China's foreign exchange reserves has increased tenfold during the same period of time. 

No wonder, therefore, that buried deep down into this story you see the following passage: 

Paul Atherley, Beijing-based managing director of Leyshon Resources, said that even after the latest purchases China had a very small percentage of its reserves in gold, far below the US or other developed countries.

“Those [gold] holdings are still too low in terms of the size of its economy and the growing significance of its currency,” he said.

China's power is undoubtedly increasing.  Not every action by Beijing, however, is indicative of attempts to alter the current global political economy. 

A few months ago Steve Walt provided a useful guide for how IR theory can provide insights into Valentine's Day. In light of tonight being the first night of Passover, this post reverses the question -- what can this holiday teach us about international relations?   

This question is impossible to avoid for someone who attends a Seder and thinks about international relations. The essence of the seder is to answer the Four Questions -- i.e., to tell the story of how the Jews escaped from enslavement in Egypt.  And while international relations scholars tend to be more fond of using ancient Greek history to inform their theories, the Passover story reveals at least four relevant lessons about politics: 

1)  Minority rights in an autocratic regime are a fragile thing. As the story begins, the Jews are treated well in Egypt, what with Joseph having been a successful prime minister and all. Eventually, however, a new Pharaoh emerges, and then there's trouble: 

[T]here arose a new king over Egypt who feared the Jews because they were different. And he said to his people, "Look at how rich and how powerful are these children of Israel. If war comes, they may join themselves to our enemies and fight against us."

Autocratic leaders can ignore institutional restrictions, and are more likely to exploit ethnic tensions if they perceive a minority group as increasing in power and influence. 

2)  Sanctions against an autocratic regime will rarely yield significant concessions. To get the Pharaoh to let the Jews go, God imposes an escalating series of sanctions against Egypt. These sanctions crippled Egyptian agriculture, health, sanitation and, er, sunlight, inflicting great suffering against the Egyptian people. Not until the first-born male children are killed, however, does Pharaoh relent for a sufficiently long time for the Egyptians to make their escape. Not coincidentally, that plague is the only one to truly hurt the autocrat personally, as his son was killed in the plague as well. Compellence strategies would seem to have a greater chance of success if they target autocratic elites. 

3)  God was not that good at bargaining. For each of the ten plagues, the following pattern recurs:

• Plague descends upon Egypt
• Pharaoh begs Moses to get God to end the plague, promising freedom for the Jews if it happens
• God lifts the plague
• Pharaoh's heart hardens, and he reneges on the deal. 

Pharaoh does this nine -- count 'em, nine times -- before God resorts to the grisly tenth plague. No wonder the Egyptian leader kept reneging -- if anything, the Pharaoh's resolve should have increased over time, because he discovered that cheap talk could get God to stop what he was doing.* 

4)  America's idiotic sugar quotas are particularly bad for the Jews.  During Passover, Jews are not supposed to eat anything that contains yeast, rice, millet, corn, legumes, wheat, rye, oats, barley, and spelt (quinoa is apparently kosher).

All well and good, except that because of America's prohibitively high barriers to most sugar imports, a lot of food manufacturers use corn sweeteners -- i.e., high fructose corn syrup -- as a substitute for sugar.  Which means that for observant Jews, an entire category of goods that in other countries would be Kashrut is off the edible list for the next eight days. 

*Yes, yes, God was the one who hardens Pharaoh's heart, but that just makes the story sound like a seven-year old boy playing both sides of a checkers game. 

For a book-length treatment of how to think about the Old Testament from a strategic perspective, I warmly recommend Steven Brams' Biblical Games: Game Theory and the Hebrew Bible.

William Thomas Cain/Getty Images

Reading through the final G-20 communique and some of the after-action reports, a few quick thoughts on the London summit: 

• As it turns out, things went a lot better than they did at Doha.  Admittedly a low bar, but still...
• Remember how a lot of people (rightly) criticized the Bush administration for deciding that Iraq should be the central front in the Global War on Terror external contingency operations?  That's kind of how I feel about much of the sturm und drang surrounding the summit about tax havens and hedge fund regulation.  Neither of these things played a significant role in triggering the current financial crisis, so why all the hubbub? 
• I confess to finding the whole tax haven obsession to be faintly amusing.  I've heard MEPs talk as if this step will be the cure to all of Europe's ills.  As someone who worked on this stuff back in the day, I must applaud the G-20 for getting back to the point where the G-7 was at the very end of the Clinton administration (click here if you don't believe me).  That's progress, mind you, but it's hardly earth-shattering.
• Kevin Drum does an admirable job of comparing the draft communique with the final version to see what's been added.  He missed a graf though.  Seriously, I'm offering 10 Special Drawing Rights to anyone able to decipher this sucker: 

In addition to reforming our international financial institutions for the new challenges of globalisation we agreed on the desirability of a new global consensus on the key values and principles that will promote sustainable economic activity. We support discussion on such a charter for sustainable economic activity with a view to further discussion at our next meeting. We take note of the work started in other fora in this regard and look forward to further discussion of this charter for sustainable economic activity.

• It's all about the follow-through -- will the extra 1.1 trillion in IMF and MDB financing actually occur?  More importantly, will it matter?  An absence of trade finance is one reason for the contraction of the poorest countries of the world, but a bigger reason is that we're in a global friggin' recession.  Ending that would be the best medicine for the global economy.  Which means that...
• While there were some significant accomplishments in London, there was no progress on the two biggest issues -- financial regulation and jump-starting the global economy.  Admittedly, the degree of difficulty is high here, but on substance, the summit gets a C+.
• On style, Obama does get an A-.  I loved this bit from Helene Cooper's NYT story:  "In a rare show of emotion from the international press, many in the room stood up and cheered after Mr. Obama was done [with his press conference]."  C'mon, an American was on the global stage and not one shoe was thrown?  Man, times have changed.  Meawhile, as for Michelle Obama, there's this priceless AP quote from a Buckingham Palace spokesman:  "We don't issue instructions on not touching the queen."

After reading Marc Lynch's postmortem of the just-completed Arab Summit in Doha, Qatar, I'm beginning to wonder if I've been too harsh about the G-20 meeting this week. 

Admittedly, the London summit will not accomplish much, but if the draft communique is any guide, some modestly useful steps were taken (expanding the membership of the Financial Stability Forum Financial Stability Board, expanding IMF lending capabilities).  On the margins of the G-20, genuine progress appears to have been made on an arms control treaty between the U.S. and Russia. 

Brad DeLong is exaggerating when he predicts, "the best episode of international policy coordination since Bretton Woods itself" I think the Plaza Accord would win that award.  But, lest one get too discouraged, just read Marc's posts here and here. 

And yes, the title of this post refers to this scene. 

In honor of General Buck Turgidson, I see that the French are pulling away in the diva arms race as the London G-20 Summit approaches: 

France will walk away from this week's G20 summit if its demands for stricter financial regulation are not met, the finance minister has told the BBC.

Christine Lagarde told HardTalk that President Nicolas Sarkozy would not sign any agreement if he felt "the deliverables are not there".

This is yet another example of France's unsurpassed superiority in world politics at doing things that make the global press pay attention to France. 

One could argue that the United States should concentrate its energies on actual policy coordination.  Any great power worth its salt, however, should be able to do the policy coordination and practice diva bargaining tactics. 

I therefore propose that President Obama add Miss Britney Spears to the U.S. negotiating team. Let France try to make its voice heard in that media maelstrom. 

Other proposals to counter France's bargaining tactics are warmly welcomed in the comments. 

UPDATE:  To be fair to Sarkozy, he is not the only Frenchmen who is grandstanding at the moment. 

Bryan Bedder/Getty Images

Susan Strange, the godmother of international political economy, wrote a book that is suddenly very relevant to thinking about today's international monetary system. In Sterling and British Policy, Strange talked about different types of international currency.  Top currencies, for example, are forms of international money where the economic incentive to hold them is pretty overwhelming.  Negotiated currencies, on the other hand, are forms of international money where there the economic incentive is more muted, but political imperatives lead to an agreement on a particular form of currency as the reserve to hold. 

Why am I bringing this up?  Remember, like 48 hours ago, when I said that this news item warranted watching? 

Well, this Financial Times story by Jamil Anderlini drops the other shoe: 

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC....

China has little choice but to hold the bulk of its $2,000bn of foreign exchange reserves in US dollars, and this is unlikely to change in the near future.

Here's a link to the actual paper, which is not long.   

That last paragraph is important -- what China is proposing is not going to happen anytime soon.  Indeed, looking at the actual proposal, I'm not convinced that Beijing's idea is even doable (a show of hands -- who's comfortable with the IMF as the world's central bank?  Anyone?). 

With China and Russia both proposing some sort of change in the international monetary system, we're about to some veeery interesting economic negotiations.  There are other important players -- the EU, UK, Japan, Brazil, the Gulf economies, etc.  And their incentives to switch away from the dollar are more cross-cutting.  For example, while the EU would probably love to switch to a system that keeps the euro from appreciating too much, I suspect they will be loathe to reallocate the IMF voting quotas that China would demand in any switch to a new system.  Both Japan and the Gulf economies have security considerations that make them less eager to change.   

If this does happen, however, the United States will suffer a serious loss of standing and, oh yes, a much harder budget constraint.  And whatever happens, it would be difficult to call the dollar a top currency anymore.  I think we have clearly crossed some threshhold where the dollar is now a negotiated currency -- and some of the negotiating partners are pretty hostile to U.S. hegemony. 

Developing....