INTD 200 Lecture Notes - Lecture 7: State-Owned Enterprise, Neoliberalism, Poverty Reduction

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Lecture 7: Debt and Structural Adjustment
12/16/12 9:22 AM
International Debt Crisis
1970s: era of surplus capital and loan pushing
End of 70s: economic crisis
Imposed Neoliberal policies
Early 80s: increased interest rates
Movement of south to north
Imposed by Ragan
Too high for these countries to pay ! take loans to pay interest on
loans they had taken
1982: debt crisis in South, Mexico, Brazil, Argentina, Poland default on loan
payments
worried about a massive breakdown of the banking system
Restructuring of debt payments, borrowing/lending of more money to pay
debt interest
Allowed a longer repayment time
More money loaned and borrowed
Interest charged on interest
Movement of capital from the south to the north
Structural Adjustment Programs (SAPs)
Reversion to free market: Neo-liberalism
1. Promotion of free trade and mobilization of domestic production for the
market
Generation of foreign exchange revenue from increased export of
tradition commodities (produced by the country)
o Export promotion, comparative advantage, first world
benefitted
Currency devaluation
Promotion of free trade/economic liberalization
o Removing trade barriers
Tax reductions (to motivate foreign and local individuals and
businesses to invest and save)
Looking for foreign investment
2. Reduce role of the state (in government size and government control)
Public sector wage freeze
Downsizing civil service
Reduce government spending on public services
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