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Malaysia and Capital Controls.docx

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Political Science
POLI 243
Mark Brawley

Malaysia and Capital Controls The Washington Consensus Critical turning point in what the international political economy looks like Fukuyama refers to the end of history Cold war ends not with great bloodshed but with a fizzle Soviet Union has decided not to compete anymore or incapable Either way, the consequence is the end of ideological conflict Competition between different ways of organizing society Centralized communist style vs liberal democracy with capitalism “The End of History” Systemic and ideological constraints change Back then, playing with superpowers was how smaller states operated How many benefits can a superpower give them That was no longer an option Neo-Liberals models dominate The clear path towards economic development is more through markets The CONSENSUS is what the proper set of policies should be IMF and World Bank encourage Free Trade and Open Capital Markets Free trade was not a big deal but open capital markets was a big deal Most countries had decided that over the years, the best thing was to have their own set of banks Advantages and Disadvantages Capital inflows increase – international investment grows Economic Development means final more capital Amass more capital and will sink into their firms EOI and ISI work that way, to make profits, accumulate capital Convince foreign investors to lend you money Increased vulnerability too Balance advantages and disadvantages Vulnerability can be quite complicated Exchange rates were instable during these years East Asian Financial Crisis hits (1997-98) Starts with Thailand Thailand going to be the spark of the trouble because money was going there and it was lent to locals When prices on real estate burst Invest
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