Political Economics

As we know, and based in the movie “The Corporation”, many economic liberals in particular tend to believe that global markets today are dominated less by states and more by banks and other agenciesand private capital flows such as corporations and global companies.

Due to this a lot less developed countries, most of them from Latin America and Asia suffered debt crisis around the 1980’s, theuncoordinated actions of the market generated a debt for both debtor states and their creditors. In retrospect, too much was loaned to too many, the debt continued to grow exponentially risking thesolvency of the financial institutions involved. I would like to compare what happened to debtor nations with a case in daily life, we can compare the debtor nations with the credit card payment, inthis case you buy and buy, increasing your debt and sometimes you ask for a loan to pay the minimum amount in the credit card causing a never ending and un payable debt, like this debtor nations owedmore than they could reasonably be expected to repay, yet they continued to borrow more and more in order to meet their short-run obligations.

In order to this problems, the world bank and IMF loanswere made subject to structural adjustement policies wich are a series of conditions or actions to wich the borrowing government must agree before receiving a loan. A typical IMF debt planinvolves a number of politically unpopular SAP’s designed to restore economic balance including currency devaluation to generate trade export and encourage price stability. The logic of IMF is to reduce thecurrent account deficit by increasing exports and reducing imports, austerity measures like this generally hurt the poor the most but here is when the government must intervene, having the populationcalm and in order.

After all, we know that financial crisis do not appear suddenly overnight, there are seven common features or stages in the development of the crisis: displacement that refers...