Globalization A political/economic relationship Relationship between:  nations  governments and citizens of nations. Policies & Practices A guiding question:  In whose interest?

Debt Crisis & SAPs Debt Crisis (1980s)  The inability of developing countries to repay loans.  Events that Sparked the Crisis Rising Interest Rates Rising Interest Rates Falling commodity prices Falling commodity prices

Brief History 1970s U.S. and Western European lenders granted development loans. Loans considered low risk because: Friendly relations between dictatorships and lenders Rising commodity prices Tax citizens to repay loans. Mutual benefits of commodity exchange Goods (machinery) were purchased from “first world”. Development provided jobs in developing countries.

Example The 1973 Organization of Petroleum Exporting Countries (OPEC) oil embargo led to rising oil prices. Mexico had oil reserves. Development loans helped Mexico develop oil. Mexican wages rise & Mexico can repay loans.

The Crisis Sparked by 2 Events  Rising interest rates  Falling commodity prices for goods produced in developing countries (e.g., oil, food, metals)

Interest Rates 1979: Federal Reserve Bank raised interest rates to fight inflation. Consequences:  Increased interest payments on debt. Over 60% of the money that Latin America borrowed between 1976 & 1981 went to repay interest on loans.Over 60% of the money that Latin America borrowed between 1976 & 1981 went to repay interest on loans.

Consequences Cont.  High interest rates sparked capital flight Which, diminished investment in development projects & eroded the tax base in developing countries.diminished investment in development projects & eroded the tax base in developing countries.

Commodity Prices As interest rates rose commodity prices fell. Reason:  High interest rates triggered a global recession.  Recession reduces the demand for goods. Prices also fell because:  Development of new commodities in “first world” (e.g., North Sea oil development).

Enter the World Bank & IMF Leaders of “first world” called on the World Bank & IMF to manage the crisis. IMF granted an expanded role. Gave IMF the power to impose neo-liberal model.  accomplished by implementing SAPs

SAPs SAPs imposed a neo-liberal model which Aimed to increase trade surplus and budget surpluses in developing countries so countries can pay back debt. Supported practices of TNCs.

SAPS require that developing countries: Increase exports Eliminate trade tariffs Devalue currency (makes exported goods cheap)  Problem (falling commodity prices meant that profits did not rise even with increase in exports) Eliminate subsidies Privatize state run businesses (e.g., telephone, oil, airlines, banks, etc). Liberalize investment laws (TNCs could purchase state run businesses cheap) Taxing citizens Cut social spending

Impact on Developing Countries Greater environmental degradation. Rapid urbanization as sustainable farming is replaced by agri-business. Reduction of sustainable farming & increased reliance on food imports. Rising prices (Resulting from elimination of subsidies & devaluation of currency.) Falling wages Cuts to social programs (housing, education, health care)

Impact on Workers in “First World” Loss of jobs because of increased import of cheap goods to “developed countries”. Loss of jobs because of factory relocation to developing countries. Loss of jobs because of decrease in imports to developing countries.  Example: Between 1980 & 86 exports to Mexico fell by $10 billion.

Impact on Lenders Declared losses to qualify for tax credits. Could still collect on debt even if loss declared. Debt repayment continued. Banks charged off debt.  Between 1987 & 1990 “over $20 billion of U.S. bank debt was charged off, which yielded in 6.8 billion in tax credits to banks.  Shifted the burden to tax payers.

Globalization & Colonization Many developing countries were once colonies of Western European countries. Colonies provided cheap labor and raw materials for industrialization in “first world.” Barriers to industrial development. De-colonization Colonial powers pull out Former colonies are left undeveloped Which, generated the need to apply for development loans

MemmiCaptures:  Legitimation process (representations of colonized) How are the colonized depicted? What practices do this depiction support?

Depiction of the colonized  distorts representation of the colonized.  can lead result in internalized oppression (colonial mind)  reinforces paternalism (big daddy)