Jeffry Frieden

Invested interests: the politics of national economic policies in a world of global finance

Capital moves more rapidly across national borders now than it has in at least fifty years and perhaps in history. This article examines the effects of capital mobility on different groups in national societies and on the politics of economic policymaking. It begins by emphasizing that while financial markets are highly integrated within the developed world, many investments are still quite specific with respect to firm, sector, or location. It then argues that contemporary levels of international capital mobility have a differential impact on socioeconomic groups. Over the long run, increased capital mobility tends to favor owners of capital over other groups. In the shorter run, owners and workers in specific sectors in capital-exporting countries bear much of the burden of adjusting to increased capital mobility. These patterns can be expected to lead to political divisions about whether or not to encourage or increase international capital market integration. The article then demonstrates that capital mobility also affects the politics of other economic policies. Most centrally, it shifts debate toward the exchange rate as an intermediate or ultimate policy instrument. In this context, it tends to pit groups that favor exchange rate stability against groups that are more concerned about national monetary policy autonomy and therefore less concerned about exchange rate stability. Similarly, it tends to drive a wedge between groups that favor an appreciated exchange rate and groups that favor a depreciated one. These divisions have important implications for such economic policies as European monetary and currency union, the dollar-yen exchange rate, and international macroeconomic policy coordination.

Internationalization and Domestic Politics: The Impact of the International Economy on National Policies: An Analytical Overview

A stethoscope in which two diaphragms are used to amplify sound. The diaphragms are axially spaced, and to one diaphragm a piece of stainless steel is attached and a magnetized metal is attached to the other diaphragm, whereby a magnetic field exists between the spaced diaphragms. In order to better transmit sound, the interior of the Y-fitting is coated with carbon.

The Political Economy of International Trade Enduring Puzzles and an Agenda for Inquiry

A similar set of concepts has been central to the literatures on the formation of trade policy coalitions and the “new economics of institutions”: the political and economic consequences of the degree to which assets are specific to a particular economic activity. In this survey, the authors take the necessary first step of summarizing the main findings of these two literatures and then suggest ways in which the issue might be joined. In addition to providing a more coherent understanding of the findings of these two literatures and some new directions for them, the authors show that many puzzles remain in the field of trade politics—puzzles for which there are no appealing answers or, where there are answers, no strong evidence in support of them. This essay, then, in addition to being a theoretical review of the literature, puts forward an agenda for future study of international trade politics.

Sectoral conflict and foreign economic policy, 1914–1940

The period from 1914 to 1940 is one of the most crucial and enigmatic in modern world history, and in the history of modern U.S. foreign policy. World War I catapulted the United States into international economic and political leadership, yet in the aftermath of the war, despite grandiose Wilsonian plans, the United States quickly lapsed into relative disregard for events abroad: it did not join the League of Nations, disavowed responsibility for European reconstruction, would not participate openly in many international economic conferences, and restored high levels of tariff protection for the domestic market. Only in the late 1930s and 1940s, after twenty years of bitter battles over foreign policy, did the United States move to center stage of world politics and economics: it built the United Nations and a string of regional alliances, underwrote the rebuilding of Western Europe, almost single-handedly constructed a global monetary and financial system, and led the world in commercial liberalization.

The Political Economy of European Monetary Unification

* Preface * 1. The Political Economy of European Monetary Unification: An Analytical Introduction * Barry Eichengreen and Jeffry Frieden * 2. Making Commitments: France and Italy in the European Monetary System, 1979-1985 * Jeffry Frieden * 3. Divided Opinion, Common Currency: The Political Economy of Public Support for EMU * Matthew Gabel * 4. A Retrial in the Case Against the EMU: Local-Currency Pricing and the Choice of Exchange-Rate Regime * Charles Engel * 5. The Politics of Maastricht * Geoffrey Garrett * 6. International and Domestic Institutions in the EMU Process and Beyond * Lisa L. Martin * 7. From EMS to EMU: Are We Better off? * Paul De Grauwe, Hans Dewachter, and Yunus Aksoy * 8. Beyond EMU: The Problem Of Sustainability * Benjamin J. Cohen * Contributors * Index

Sustaining Fixed Rates: The Political Economy of Currency Pegs in Latin America

Government exchange rate regime choice is constrained by both political and economic factors. One political factor is the role of special interests: the larger the tradable sectors exposed to international competition, the less likely is the maintenance of a fixed exchange rate regime. Another political factor is electoral: as an election approaches, the probability of the maintenance of a fixed exchange rate increases. We test these arguments with hazard models to analyze the duration dependence of Latin American exchange rate arrangements from 1960 to 1999. We find substantial empirical evidence for these propositions. Results are robust to the inclusion of a variety of other economic and political variables, to different time and country samples, and to different definitions of regime arrangement. Controlling for economic factors, a one percentage point increase in the size of the manufacturing sector is associated with a reduction of six months in the longevity of a countryÂ’s currency peg. An im pending election increases the conditional likelihood of staying on a peg by about 8 percent, while the aftershock of an election conversely increases the conditional probability of going off a peg by 4 percent.

International investment and colonial control: a new interpretation

The impact of economic factors on colonial imperialism in the late nineteenth century has long been a topic of debate. This article examines the expected relationship between different forms of international investment and different patterns of political ties between developed and developing countries. Drawing on the literature on relational contracts and collective action, it argues that direct colonial control was likely to be associated with cross-border investments whose rents were particularly easy to seize or protect, and whose protection did not require multilateral action. Where such rents were difficult to seize or protect unilaterally, colonialism is expected to be less likely. The most common example of the former sort of investment is primary (raw-materials or agricultural) investment; of the latter, multinational manufacturing affiliates. The argument is weighed against both a survey of the qualitative evidence and some simple quantitative evaluations. The approach also has potential applications to more general problems of international conflict and cooperation.

Exchange rate politics: Contemporary lessons from American history

Abstract This essay makes two analytical points about the domestic and international politics of exchange rate issues. First, it argues that changes in the political prominence of currency values over time are best explained by changes in the level of international economic integration. The more cross‐border trade and investment takes place, the more national macroeconomic policies implicate the exchange rate, and the more exchange rates affect important socioeconomic actors. Second, the article provides a starting point to understand the pattern of domestic political conflict over currency values by analyzing the distributional impact of different currency regimes and levels. Internationally oriented economic groups prefer fixed exchange rates, domestically based groups prefer floating rates. Similarly, tradables producers prefer a relatively depreciated currency, producers of non‐tradable goods and services a relatively appreciated one. The arguments are brought to bear on American political conflict ov...

Politics and Exchange Rates: A Cross-Country Approach to Latin America

This paper explores the impact of political economy factors on exchange rate policy in Latin America. It studies the determinants of the choice of exchange rate regime in Latin America, placing special emphasis on political, institutional and interest group explanations. The presumption is that differences in institutional and political settings, as well as differences in economic structure, can have an effect on the choice of regime and, more generally, on exchange rate policy. In addition to these structural elements, the paper examines whether such political events as elections and changes in government affect the pattern of nominal and real exchange rates.

Monetary Populism in Nineteenth-Century America: An Open Economy Interpretation

The battle over gold is typically explained as driven by proinflation debtors. However, going off gold would also have caused a depreciation, raising tradable prices relative to nontradables prices and helping producers of exportable primary products. An analysis of Congressional votes on monetary legislation indicates that higher constituency debt levels were not associated with opposition to gold, whereas mining and agricultural production were. This suggests that gold politics was at least as much about the impact of the exchange rate on relative prices as it was about inflation of the overall price level.