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Debt Crisis to Neoliberalism

Debt Crisis to Neoliberalism - Debt Crisis to Neoliberalism...

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Debt Crisis to Neoliberalism: o Economic Slowdown in 1970s: South needs international loans to outweigh economic slowdown —source of revenue or loans to stimulate economic growth Oil crisis contributes to economic crisis Commodity prices are going down OPEC countries (have oil and revenue) have money to deposit to Northern banks, enabling banks to give loans Southern accumulation of debt, banks give loans with variable interest rates o Banks gave “floating” interest rates to governments with the fact that governments couldn’t go bankrupt LA countries accumulate external debt End of 1970s and early 80s, interest rates are going up around the world and the prices for commodities LA countries are exporting are going down o “Stagflation”—economic production stagnation, while prices go up o In order to combat inflation, needs to slowdown economy and increase interest rates Interest rates were 10% in late 1970s Interest rates by 1982 were 18% “Capital Flight”—as economies turn down in LA, economic elites start investing money in foreign banks— US banks and stock markets o By 1982 sum total of debt causes the Mexican Finance Minister Herzog to say to the international community that we can’t make the next payment on debt o Rushed to US given emergency loans—interest payments would continue as scheduled o Mechanism for communication between Mexico and creditor banks was created
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Debt Crisis to Neoliberalism - Debt Crisis to Neoliberalism...

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