Man4660 Exam 2

EXAM---10? (6-10 sent): written & essay

2hrs

topics:

what Washington Consensus(Neo-Liberalism):3stages,policies

know why Reagan and admin. aggressive in promoting the Washington Consensus? to keep paying its debt to the northern commercial banks, the IMF, and the World Bank

3 stages:

• Stabilization: curbing inflation- cut public spending & raise interest rates, wage controls. 2nd objective was to keep paying its debt to the northern commercial banks, the IMF, and the World Bank

• Structural Adjustment: remove distortions such as price controls or trade tariffs, deregulation,

• Export-Led growth: diversify and find new markets for products

• Stabilization- curbing inflation & generate trade surplus to maintain debt payments

o Policies:

• Reduce money supply by cutting public spending

• Raise IR

• Depress/Control wages

• Structural Adjustment- “getting prices right” by getting state out of the economy-“marketization”

o Policies:

• Deregulate

• Reduce tariffs

• Remove price control

• Eliminate subsidies

• Restrict trade unions

• Eliminate deficits

• Floating (lender valued exchange rate)

• Export-Led Grants- back to commodities

o Policies:

• Priority to exports

• Diversification subsidies to non-traditional exports (salmon, shrimp, veggies, wine, etc)

• Suppress domestic demand

• Remove trade barriers

• Encourage foreign investment (DFI)

• Lender valued exchange rates

Washington Consensus

a neo-liberal view of globalization. The framework included:

• Fiscal discipline - strict criteria for limiting budget deficits

• Public expenditure priorities - moving them away from subsidies and administration towards previously neglected fields with high economic returns

• Tax reform - broadening the tax base and cutting marginal tax rates

• Financial liberalization - interest rates should ideally be market-determined

• Exchange rates - should be managed to induce rapid growth in non-traditional exports

• Trade...