POLI 243 Lecture Notes - Lecture 24: International Monetary Fund, United States Department Of The Treasury, Import Substitution Industrialization

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Malaysia and Capital Controls
April 11, 2016
The Washington Consensus
The Washington Consensus is a set of 10 economic policy prescriptions considered to
constitute the "standard" reform package promoted for crisis-wracked developing countries by
Washington, D.C.based institutions such as the International Monetary Fund (IMF), World
Bank, and the US Treasury Department.
The cold War ends: Fukuyaa calls it the 'end of history'
o History is a series of big debates -- Cold War perspectives
communist argument: centralize authority, reorganize society, top-down,
no market
Capitalist/west argument: democracy, classical liberal ideas (comparative
advantage, specialization), market based principles
o New intl economic order: managed international trade, welfare components,
similar to domestic economies
o Economic development: developing countries need govt regulation not market
based approach
o Ideological battle ends: liberal (democracy, capitalism) arguments won
Market based approach is the proper one for economic development
Systemic and ideological constraints on economically developing countries change
o USSR no longer providing assistance in the early 90s causes communist countries
to re-evaluate their economic and political practices
o USSR failing is seen as an economic collapse not a revolution from below
Centrally planned economies are seen as failures alternative is market
Neo-liberal models dominate (classical liberal economic idea re-emerges)
IMF and World Bank encourage:
o Free trade
Development strategy: import substitution industrialization put up tariffs
to maintain domestic market for internal producers South Korea tried
this, but was not satisfied with it
90s many countries give up on this strategy
Effective for some countries
o Open capital markets:
Limited the in-flow, or out-flow (often both) of capital
Need capital to industrialize
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