Money was lent on the assumption that countries could

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money was lent on the assumption that countries could not go bankrupt. When the 1980s debt crisishit, austerity measures undid many of the gains of the development project. Third, TNCs producedmore and more manufactured goods and agricultural products for world, rather than domestic,markets. Fourth, by the 1980s, the discourse switched to “world market participation” as the key todevelopment.”Debtregime“The 1980s debt crisis instituted a new era of global governance in which individualnational policies were subjected to external, rule-based procedures that strengthenedthe grip of the First World through the international financial institutions (the IMFand the World Bank). In other words, the debt crisis spawned a debt regime. The
22divisions in the Third World enabled global political and economic elites to arguethat a country’s debt stress stemmed from failure to copy the NICs’ strategy ofexport diversification in the world market.Although represented as examples ofmarket virtue—to justify neoliberal ideology—the NICs were in fact state-managedeconomies.”How it is important doe global governanceThe Debt Regime in the early 1980sarose form a particular set of circumstancesLed to as invasion in which debtor countries in the third world labor south, local not payback their debts to first world countriesUnderpinning the globalization Project is along with Global Production, global financeNeoliberalism rose in advanced economies in the advanced economies starting in the 1930SThree pillars were challenged in he advanced economiesObjection of Keynesian and Central bank policy became focused on controlling theinflation rather than promoting full-employmentImportant source of this changes :firstoil shock 1973sOPEC(cartel)oil prices significantly increasedinflation raisescentral bank with rise in inflation use restrictive monetary policies1.to control inflationgovernmentInterest ratespeople cut back their purchases and investment2.loweraggregated demandlower production3.higher loan costunemploymentwithin the economy more overcapacity(company don’t want to lower price)4.lower price increasecontrol inflationCentral bank rate: interest rate charged to banks when they borrow from the centralbankbank balances been closed and funds been shifed, central bankprovide the low interest loan to meet all their transactions,central bank rates is used to signal to commercial banks what theyshould happe on their loansEarly 1980s
22Second oil shockAnother round of the oil price increase in 1979-80sround of inflation (afer war)central banks increase interest rates dramaticallyin 1981-82---major recessiondeep drop I commodity priceslower export earning for third world economieslower ability to pay back them loans to western banksexpanded role for the world bank and IMF in restructuring the debtBank recycle petrodollarsto third world wallets

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Term
Spring
Professor
Smardon
Tags
Government, Capitalism, The Land, development project, Keynesian Welfare State

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