The purpose of this paper is threefold, first to provide a synopsis of the third episode of the PBS video ‘Commanding Heights’, second to assess the success or failure of NAFTA and its implications for U.S. economy and in the future., and thirdly to explain the three most important issues faced by the WTO and the World Bank.
The third episode of the Commanding Heights series is titled “The New Rules of the Game” and examines the growth of globalization from the 1990’s through today. Globalization, which moved to a grand scale in the 1990’s, has ushered in the greatest expansion of trade in world history. This unprecedented level of trade provides many opportunities for wealth, but also creates crises which had not been
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Thai banks were approving loans for risky projects such as buildings with no tenants and an entire city the size of Boston. In addition to these risky loans, the Thai central bank pegged its currency, the baht, to that of the U.S. dollar. The combination of risky loans and local currency pegged to the U.S. dollar, led to local Thai people requesting U.S. dollars instead of baht from the banks. The Thai government met the people’s requests in handing out U.S. dollars, however, in doing so were quickly depleting its foreign reserves. The baht came under intense market pressure, as well as ‘shorting’ by hedge fund managers as was forced to de-value its currency in July of 1997. This de-valuation was the beginning of a free fall for all ‘Asian Tiger’ economies, and became known as ‘contagion’. Unlike Mexico, the U.S. had decided not to intervene with a bailout, as it did not see Thailand as a big market. The U.S. was right in the fact that Thailand was not a big market, but quite wrong about the impact of the Thai currency de-valuation on the rest of Asia.
Contagion spread from Thailand to neighboring Malaysia, and then onto Indonesia and finally South Korea. In all, $116 billion flowed out of Southeast Asian economies. The IMF responded with huge loans on the condition that these countries cut government spending, raise interest rates and eliminate corruption. Many of the Asian leaders viewed the IMF conditions as a new kind