Organization of the course:
Each student will be required to write one paper on a topic related to the course material. This paper must include an appropriate bibliography; it must incorporate one or more theoretical models and insights; and it must include references to some important institutional or empirical findings.
Each student will also be required to write a plan of action for a local firm or community economic agency of his or her choosing. This plan must describe the background of the agency or firm in question; the key economic problems faced, including financing problems; an analysis of options given the structure of markets; and a recommendation for action. This plan should be presented to the agency or firm about which it is written.
The course will consist of eight four-hour lectures. The lectures will be divided into parts, with time arranged for discussion. Each four-hour session will focus on one theme, as follows.

Content of the course.
Financial and banking systems around the world are now being rapidly transformed by processes of deregulation, mergers and acquisitions, and consolidation. These shifts are profoundly changing the economic roles of financial institutions and markets. Financial institutions in advanced economies are absorbing fewer risks than before, and are more likely to look for mutual fund investors than loan customers in developing markets. Financial institutions in developing economies have experienced extreme stress and insolvencies, and must be renewed or sold off.
This global transition point requires a rethinking of the most basic ideas of what banks and financial markets do, and of how economic and enterprise development is to be financed. New strategies for financing local economic development and entrepreneurial activity, especially in lower-income areas and regions, are needed. Previously, the focus of market-based systems like the US was on how banking and financial markets can facilitate and finance enterprise, with little attention to the problem of economic development; and the focus of bank-based systems like Korea and Japan was on how banking and financial relations can facilitate and finance economic development, with little attention to the problem of the entrepreneur and the enterprise. Now market-based systems must consider how to facilitate economic development, while bank-based systems must consider how to facilitate entrepreneurship.
New strategies responding to these challenges must be formulated in the face of an increasingly polarized wealth and income distribution. How can the financing needs of small and medium enterprises outside the ambit of multinational enterprise be met? How can economic activities in impoverished communities be encouraged and built up through financing and other mechanisms?

Sessions and Readings

The following list of readings is long. These readings are intended to provide a starting point for deeper explorations of the topics covered in the class. Since this class weaves together many topics, there are many readings. The readings that are more important for the immediate class are indicated with an asterisk (*).

1. The Role of Finance in Enterprise and Economic Development (Lecture 1)

CORE THEORETICAL IDEAS ABOUT MONEY, FINANCE, AND ENTREPRENEURSHIP

*Duncan Foley, "Money in economic activity," The New Palgrave: Money. Edited by J. Eatwell, M. Milgate, and P. Newman. New York: Macmillan, 1987, 248-262.

Alexander Gerschenkron, Economic Backwardness in Historical Development. Cambridge: Harvard University Press, 1915. Chapter 1.

Schumpeter, Joseph A., Theory of Economic Development. Cambridge: Harvard University Press, 1951. Chapters 2-3.

*Keynes, John Maynard. The General Theory of Employment, Interest, and Prices. London: Macmillan, 1934. Chapter 12.


Finance in the Neoclassical and microfoundational approaches

Robert King and Ross Levine, “Financial intermediation and economic development,” in Capital Markets and Financial Intermediation. Ed. By Colin Mayer and Xavier Vives. Cambridge: Cambridge University Press, 1993. Chapter 6.

Kenny, Charles, and David Williams, “What do we know about economic growth? Or, why don’t we know very much?” World Development 29(1), 2001, 1-22.

*Joseph Stiglitz and Andrew Weiss, "Credit rationing in markets with imperfect information," American Economic Review, March 1983.


2. Post-War Banking and Economic Regimes: Growth under Regulation (Lecture 2)
United States Experience

*Gary Dymski, “Banking in the New Financial World: From Segmentation to Separation?” Arte, Special issue on macroeconomics, Candido Mendes University, Ipanema, Rio de Janeiro, Brazil, 1998.

Gary Dymski, “A Keynesian Theory of Bank Behavior.” Journal of Post Keynesian Economics, 10(4), Summer 1988. Pp. 499 526.

Asian Experience

*Hugh T. Patrick, The Financial Development of Japan, Korea, and Taiwan: Growth, Repression, and Liberalization. New York: Oxford University Press, 1994, Ch. 8.

*Joseph E. Stiglitz, “The role of the state in financial markets,” Chung-hua series of lectures by invited eminent economists, No. 21. Nankang, Taipei, Taiwan: Institute of Economics, Academia Sinica, 1993.

Joseph Stiglitz and M. Uy, “Financial markets, public policy, and the East Asian miracle,” World Bank Research Observer 11(2), August 1996, 249-276.

Joseph Stiglitz, “Financial markets and development,” Oxford Review of Economic Policy, 5(4), 1989, 55-68.

McKinnon, Ronald. “Financial Liberalization and Economic Development: A Reassessment of Interest-Rate Policies in Asia and Latin America,” Oxford Review of Economic Policy, 5(4), 1989, no page numbers.

3. Banking Strategies and Financial Market Deregulation in the US (Lecture 3)

*Gary Dymski, “The Evolution of U.S. Bank Behavior: Five Strategies, 1935 to 1998,” Discussion Paper, Institute of Economic Research, Chuo University, August 1998.

4. The Latin American Debt Crisis and its “Lessons” (Lecture 4)

Jonathan Eaton, Mark Gersovitz, and Joseph Stiglitz, "The Pure Theory of Country Risk," European Economic Review 30, 1986: 481-513.

Gary Dymski and Manuel Pastor, "Debt Crisis and Class Conflict in Latin America," Review of Radical Political Economics 22(1), 1990, 155-178.

*Jonathan Eaton, “Sovereign debt: a primer,” World Bank Economic Review 7(2), May 1993, 137-172.

4.1-The Crisis of State-Led Development and the Asian Financial Crisis (Lecture 5)

Ilene Grabel, “Speculation-led economic development: a Post-Keynesian interpretation of financial liberalization programs in the Third World,” International Review of Applied Economics 9(2), 1995, 127-149.

Ilene Grabel, “Rejecting Exceptionalism: Reinterpreting the Asian Financial Crisis,” Cambridge Journal of Economics 22(6), August 1998.

Ha-Joon Chang, Hong-Jae Park, and Chul Gyue Yoo, “Interpreting the Korean Crisis: Financial Liberalisation, Industrial Policy, and Corporate Governance,” Cambridge Journal of Economics, 22(6), August 1998.

*James Crotty and Gary Dymski, “Can the Global Neoliberal Regime Survive Victory in Asia? The Political Economy of the Asian Crisis,” forthcoming, International Papers in Political Economy. Mimeo, November 1998.

*Guitian, Manuel, “The Challenge of Managing Global Capital Flows,” Finance and Development, June 1998, 14-17.

5. Financial Consolidation in the Era of Globalization (Lecture 6)

Berger, Allen N, Rebecca S. Demsetz, and Philip E. Strahan, “The Consolidation of the Financial Services Industry: Causes, Consequences, and Implications for the Future,” Journal of Banking and Finance 23 Nos. 2-4, February (1999): 135-194.

*Gary Dymski, The Bank Merger Wave: The Economic Causes and Social Consequences of Financial Consolidation in the United States. M.E. Sharpe, Inc., Armonk NY. 1999. Chapters 1-5.

Nigel Thrift, “A phantom state? International money, electronic networks and global cities,” in Spatial Formations. Beverly Hills: Sage, 1996. Pages 213-255.

Ron Martin, “Stateless monies, global financial integration and national economic autonomy: the end of geography?” in Money, Space and Power, edited by Stuart Corbridge, Ron Martin, and Nigel Thrift. London: Blackwell Publishers, 1994. Pages 253-278.

6. Inequality, Segmentation, and Emerging Economic Areas: The Development Crisis after the Development Crisis (Lecture 7)

Joseph E. Stiglitz, “Peer monitoring and credit markets,” World Bank Economic Review 4(3), September 1990, 351-366.

*Gary Dymski and John Veitch, “Financial transformation and the metropolis: booms, busts, and banking in Los Angeles,” Environment and Planning A 28(7), July 1995, 1233-1261.

*Gary Dymski, “Why does race matter in credit and housing markets? Current Research and Future Directions,” in Race, Markets, and Social Outcomes. Edited by Patrick L. Mason and Rhonda Williams. Boston: Kluwer Academic Press.

7. Strategies for Local Enterprise Financing (Lecture 8)

Bradford Barham, Stephen Boucher and Michael Carter, “Credit constraints, credit unions, and small-scale producers in Guatemala,” World Development 24(5), May 1996, 793-806.

*Clive Bell, “Interactions between institutional and informal credit agencies in rural India,” World Bank Economic Review 4(3), September 1990, 297-328.

Colin Danby, “Challenges and opportunities in El Salvador’s financial sector,” World Development 23(12), December 1995, 2133-2152.

*Bhatt, Nitin, and Shui-Yan Tang, “Group-based micro-finance and economic development,” Handbook of Economic Development, ed. Tom Liou. New York: Marcel Dekker, 1998, 115-138.

Dymski, Gary, Wei Li, Hyeon-Hyo Ahn, Yu Zhou, Carolyn Rodriguez, and Maria Chee. “Ethnic banking in Los Angeles,” mimeo, UC Riverside, May 2000.

8. Strategies for Impoverished Communities (Lectures 9-10)

*Gary Dymski, “Financing Strategies and Structures of Impoverishment: The Grameen and South Shore Models,” mimeo, UCR, 1996.

*Gary Dymski, “Can Entrepreneurial Incentives Revitalize the Urban Inner Core?” Journal of Economic Issues, forthcoming, May 2001.

*Michael E. Porter, “The Competitive Advantage of the Inner City,” Harvard Business Review, May-June 1995.

*Gary Dymski, “Business Strategy and Access to Capital in the Inner City,” Review of Black Political Economy 24(2-3): Winter 1996. Pp. 51-65.

Brian Levy, “Obstacles to developing indigenous small and medium enterprises: an empirical assessment,” World Bank Economic Review January 1993, 7(1), 65-83.

*Harvey, David, “Ch. 12: The Insurgent Architect at Work,” Spaces of Hope. New York: Routledge, 2000.

Bibliography:

The readings listed here represent materials on which lectures will be based. Specific reading assignments will be assigned.

Alexander Gerschenkron, Economic Backwardness in Historical Development. Cambridge: Harvard University Press. Chapter 1.

Ammar Siamwalla et al, “The Thai rural credit system: public subsidies, private information, and segmented markets,” World Bank Economic Review 4(3), Sept. 1990, 271-296.

Andrei Shleifer and Rob Vishny, “The Limits of Arbitrage,” Journal of Finance, March 1997.

Andrew Leyshon and Nigel Thrift, “Financial exclusion and the shifting boundaries of the financial system,” Environment and Planning A 28(7), July 1995, 1150-1156.

Berger, Allen N, Rebecca S. Demsetz, and Philip E. Strahan, “The Consolidation of the Financial Services Industry: Causes, Consequences, and Implications for the Future,” Journal of Banking and Finance 23 Nos. 2-4, February (1999): 135-194.

Berger, Allen N., Anil K. Kashyap, and Joseph M. Scalise. “The Transformation of the U.S. Banking Industry: What A Long, Strange Trip It’s Been.” Brookings Papers On Economic Activity. (1995, No. 2): 55-218.

Bradford Barham, Stephen Boucher and Michael Carter, “Credit constraints, credit unions, and small-scale producers in Guatemala,” World Development 24(5), May 1996, 793-806.

Brian Levy, “Obstacles to developing indigenous small and medium enterprises: an empirical assessment,” World Bank Economic Review January 1993, 7(1), 65-83.

Carlos Diaz-Alejandro, “Goodbye financial repression, hello financial crash,” Journal of Development Economics. 1982.

Christopherson, Susan, and Rebecca Hovey, “‘Fast money’: financial exclusion in the Mexican economic adjustment,” Environment and Planning A 28(7), July 1995, 1157-1178.

Clive Bell, “Interactions between institutional and informal credit agencies in rural India,” World Bank Economic Review 4(3), September 1990, 297-328.

Colin Danby, “Challenges and Opportunities in El Salvador’s Financial Sector,” World Development 23(12), December 1995, 2133-2152.

David C. Cole and Yung Chul Park, Financial Development in Korea: 1945-1978. Cambridge: Harvard University Press, 1983. Chapters 1, 8, 9.

David Lipton and Jeffrey Sachs, “Creating a market economy in Eastern Europe: the case of Poland,” Brookings Papers on Economic Activity I: 1990.

Douglas Diamond, “Financial intermediation and delegated monitoring,” Review of Economic Studies 51, 1984, 393-414.

Duncan Foley, "Money in economic activity," The New Palgrave: Money. Edited by J. Eatwell, M. Milgate, and P. Newman. New York: Macmillan, 1987, 248-262.

Dymski, Gary, Wei Li, Hyeon-Hyo Ahn, Yu Zhou, Carolyn Rodriguez, and Maria Chee.”Ethnic Banking in Los Angeles,” mimeo, UC Riverside, May 2000.

Gary Dymski and John Veitch, “Financial transformation and the metropolis: booms, busts, and banking in Los Angeles,” Environment and Planning A 28(7), July 1995, 1233-1261.

Gary Dymski and Manuel Pastor, "Misleading Signals, Bank Lending, and the Latin American Debt Crisis," International Trade Journal 6(2), 1990, 151 191.

Gary Dymski, "Basic choices in Keynesian models of money and credit," in Money in Motion: The Circulation and Post Keynesian Approaches. Ed. by Edward Nell and Ghislain Deleplace. New York: Macmillan, 1996.

Gary Dymski, “A Keynesian Theory of Bank Behavior.” Journal of Post Keynesian Economics, 10(4), Summer 1988. Pp. 499 526.

Gary Dymski, “Banking in the New Financial World: From Segmentation to Separation?” Arte, Special issue on macroeconomics, Candido Mendes University, Ipanema, Rio de Janeiro, Brazil, 1998.

Gary Dymski, “Financial Consolidation and the Social Efficiency of the Banking System: Lessons from U.S. Experience,” mimeo, UC Riverside, August 2000.

Gary Dymski, “Financing Strategies and Structures of Impoverishment: The Grameen and South Shore Models,” mimeo, UCR, 1996.

Gary Dymski, “From Schumpeterian credit flows to Minskyian fragility: The transformation of the US banking system, 1927 1990.” Mimeo, UC Riverside, 1995.

Gary Dymski, “The Bank Merger Wave and the Future of U.S. Banking,” mimeo, UC Riverside, October 2000.

Gary Dymski, “The Evolution of U.S. Bank Behavior: Five Strategies, 1935 to 1998,” Discussion Paper, Institute of Economic Research, Chuo University, August 1998.

Gary Dymski, “Why does race matter in credit and housing markets? Current Research and Future Directions,” in Race, Markets, and Social Outcomes. Edited by Patrick L. Mason and Rhonda Williams. Boston: Kluwer Academic Press.

Gary Dymski, The Bank Merger Wave: The Economic Causes and Social Consequences of Financial Consolidation. Armonk, NY: M.E. Sharpe, 1999.

Grzywinski, Ronald, “The New Old-Fashioned Banking,” Harvard Business Review. May-June 1991. Pages 87-98.

Guillermo Calvo, Morris Goldstein, and Eduard Hochreiter, Private Capital Flows to Emerging Markets after the Mexican Crisis. Washington, DC: Institute for International Economics, 1996.

Ha-Joon Chang, Hong-Jae Park, and Chul Gyue Yoo, “Interpreting the Korean Crisis: Financial Liberalisation, Industrial Policy, and Corporate Governance,” Cambridge Journal of Economics, 22(6), August 1998.

Hal Varian, "Monitoring agents with other agents," Journal of Institutional and Theoretical Economics 1988.

Hugh T. Patrick, The Financial Development of Japan, Korea, and Taiwan: Growth, Repression, and Liberalization. New York: Oxford University Press, 1994, Ch. 8.

Ilene Grabel, “Marketing the Third World – the contradictions of portfolio investment in the global economy,” World Development 24(11), November 1996, 1761-1776.

Ilene Grabel, “Rejecting Exceptionalism: Reinterpreting the Asian Financial Crisis,” Cambridge Journal of Economics 22(6), August 1998.

Ilene Grabel, “Speculation-led economic development: a Post-Keynesian interpretation of financial liberalization programs in the Third World,” International Review of Applied Economics 9(2), 1995, 127-149.

Irfan Aleem, “Imperfect information, screening, and the costs of informal lending: a study of a rural credit market in Pakistan,” World Bank Economic Review 4(3), September 1990, 329-350.

James Crotty and Gary Dymski, “Can the Global Neoliberal Regime Survive Victory in Asia? The Political Economy of the Asian Crisis,” forthcoming, International Papers in Political Economy. Mimeo, November 1998.

Jeffrey Sachs, "Theoretical Issues in International Borrowing," Princeton Studies in International Finance, No. 54, July 1984.

Jenny Corbett and Colin Mayer, “Financial reform in Eastern Europe – progress with the wrong model,” Oxford Review of Economic Policy 7(4), Winter 1991, 57-75.

Jenny Corbett and Colin Mayer, “The assessment: financial liberalization, financial systems, and economic growth,” Oxford Review of Economic Policy 5(4), 1989, 1-12.

Jeremy Greenwood and Brian Jovanovic, “Financial development, growth, and the distribution of income,” Journal of Political Economy 98, 1990, 1076-1107.

John Gurley and Edward Shaw, “Financial development and economic growth,” American Economic Review, 1956.

Jonathan Eaton and Lance Taylor, "Developing Country Finance and Debt," Journal of Development Economics 22, 1986: 209-265.

Jonathan Eaton and Mark Gersovitz, "Debt with Potential Repudiation: A Theoretical and Empirical Analysis," Review of Economic Studies 48, 1981: 289-309.
Jonathan Eaton, “Sovereign debt: a primer,” World Bank Economic Review 7(2), May 1993, 137-172.
Jonathan Eaton, Mark Gersovitz, and Joseph Stiglitz, "The Pure Theory of Country Risk," European Economic Review 30, 1986: 481-513.
Joseph E. Stiglitz, “Peer monitoring and credit markets,” World Bank Economic Review 4(3), September 1990, 351-366.
Joseph E. Stiglitz, “The design of financial systems for the newy emerging democracies in Eastern Europe,” in Christopher Clague and Gordon C. Rausser, editors, The Emergence of Market Economies in Eastern Europe. Cambridge: Blackwell Publishers, 1993.

Joseph E. Stiglitz, “The role of the state in financial markets,” Chung-hua series of lectures by invited eminent economists, No. 21. Nankang, Taipei, Taiwan: Institute of Economics, Academia Sinica, 1993.

Joseph E. Stiglitz, Financial systems for Eastern Europe’s emerging democracies. San Francisco: ICS Press, for the Institute for Policy Reform, 1993.

Joseph Stiglitz and Andrew Weiss, “Credit Rationing in Markets with Imperfect Information”, in New Keynesian Economics, Vol II, Edited by Gregory Mankiw and David Romer, pp. 247-276. Cambridge: MIT Press, 1991.

Joseph Stiglitz and M. Uy, “Financial markets, public policy, and the East Asian miracle,” World Bank Research Observer 11(2), August 1996, 249-276.

Keynes, John Maynard. The General Theory of Employment, Interest, and Prices. London: Macmillan, 1934. Chapter 12.

Kregel, Jan, 1998. “Yes, ‘It’ Did Happen Again--A Minsky Crisis Happened in Asia.” Levy Institute Working Paper No. 234, April 1998.

Kregel, Jan, 1998. “East Asia is not Mexico: The difference between balance of payments crises and debt deflations,” Levy Institute Working Paper No. 235, May 1998.

Makoto Itoh, The Japanese Economy Reconsidered. London: Macmillan, 2000.

Maria Floro and Gary Dymski, “Financial Crisis, Gender, and Power: An Analytical Framework,” with Maria Sagrario Floro, World Development, 28(7), July 2000, 1269-83.

Mark Gertler, "Financial structure and aggregate economic activity: an overview," Journal of Money, Credit, and Banking 20(3) Part 2. 1988: 559 587.

Masahiko Aoki and Hugh Patrick, editors, The Japanese Main Bank System: Its Relevance for Developing and Transforming Economies. New York: Oxford Univ. Press, 1994.

Maxwell Fry, “Eastern European financial sector reforms,” Oxford Review of Economic Policy 8(1), Spring 1992.

Nigel Thrift, “A phantom state? International money, electronic networks and global cities,” in Spatial Formations. Beverly Hills: Sage, 1996. Pages 213-255.

Paul Krugman, “What Happened to Asia?” MIT Department of Economics, January 1998.
Raymond W. Goldsmith, The Financial Development of Japan, 1868-1977. New Haven: Yale University Press, 1983.

Robert E. Litan, What Should Banks Do? Washington, DC: Brookings Institution, 1986.

Robert G. King and Ross Levine, "Finance, entrepreneurship, and growth: theory and evidence," Journal of Monetary Economics 32, 1993, 513-542.

Robert G. King and Ross Levine, "Financial intermediation and economic development," in Capital Markets and Financial Intermediation. Ed. by Colin Mayer and Xavier Vives. New York: Cambridge University Press (for CEPR), 1993. Pages 156-196.
Robert G. King and Ross Levine, “Finance and growth: Schumpeter might be right,” Quarterly Journal of Economics 108, 1993, 717-737.

Robert Wade and Frank Veneroso, “The Asian Crisis: The High Debt Model vs. the Wall-Street-Treasury-IMF Complex,” Russell Sage Foundation, March 1998.

Roberto Chang and Andrés Velasco, “The Asian liquidity crisis,” Working Paper 98-11, Federal Reserve Bank of Atlanta, July 1998.

Ron Martin, “Stateless monies, global financial integration and national economic autonomy: the end of geography?” in Money, Space and Power, edited by Stuart Corbridge, Ron Martin, and Nigel Thrift. London: Blackwell Publishers, 1994. Pages 253-278.

Ronald I. McKinnon, Gradual versus rapid liberalization in socialist economies: financial policies in China and Russia compared. San Francisco: ICS Press, for the Institute for Policy Reform, 1994.

Ronald McKinnon, “Financial liberalization and economic development: a reassessment of interest-rate policies in Asia and Latin America,” Oxford Review of Economic Policy 5(4), 1989, 29-54.

Ronald McKinnon, Money and Capital in Economic Growth and Development. Washington, DC: The Brookings Institution, 1973.

Ronald McKinnon, The Order of Liberalization: Financial Control in the Transition to a Market Economy. Baltimore: The Johns Hopkins University Press, 1991.

S. Charusheela and Colin Danby, “Do microcredit programs help poor women?” mimeo, Franklin and Marshall College, January 1997.

Schumpeter, Joseph A., Theory of Economic Development. Cambridge: Harvard University Press, 1951. Chapters 2-3.

Stephany Griffith-Jones and Zdenek Drabek, Financial Reform in Eastern Europe. New York: St. Martin’s Press, 1995.

Taub, Richard, Community Capitalism. Cambridge: Harvard Business Review Press, 1987.

Timothy Besley, Stephen Coate, and Glenn Loury, "The economics of rotating savings and credit associations," American Economic Review 83(4), September 1993, 792-810.

Udry, Christopher, “Credit markets in Northern Nigeria: credit as insurance in a rural economy,” World Bank Economic Review 4(3), September 1990, 251-269.

William R. Cline, International Debt Reexamined. Washington, DC: Institute for International Economics, 1995.