Part One How do global economic s like the IMF/WB and the WTO facilitate countries adherence to the Golden Straightjacket?
The Golden Straightjacket is a characteristic of economic Globalization. It became prominent after the end of the cold war. The Golden Straightjacket calls for a country to adopt a free market in today’s global economy. When a country adopts such a policy, it is expected to implement them. The global economic institutions have been active in ensuring that countries adhere to the Golden Straightjacket. Such institutions include the World Bank, International Monetary Fund, and World Trade Organization. They ensure strict adherence to the Golden Straightjacket in various ways. Firstly, they encourage countries to tighten money supply and reduce fiscal stimulus (Friedman 4). Secondly, they advocate privatization of public enterprises (Friedman Web). They also advocates for liberal, free market economy. These institutions also force countries to adopt tax rate that prevail in other countries. They also demands countries to maintain their deficit to GDP ratio to international standards. In addition, they allow the removal of restrictions on the flow of international capital and the removal of barriers to trade (Quiggin 5). Countries are also required to maintain zero tolerance to corruption. In fact, after the 1980’s debt crisis, the IMF required the government to cut public expenditure, sell or close public institution operating at a loss followed by removal of regulatory policies (Quiggin 32).
What are some of the implication and repercussion for countries following and not following the Golden Straightjacket?
Several benefits exist to countries that follow the Golden Straightjacket. The first benefit is the increased acceleration of the economy and decreased political interference (Friedman 4). The Golden Straightjacket fosters more growth and higher average income (Friedman 4). This happens through increased trading activities, foreign investments, privatization and efficiency in resources used due to the pressure of global competition (Friedman 4). On the political front, the political and economic choices of those in power are limited by the global economic standards (Friedman 4). In fact, the government control on the economy minimizes as it adopts more policies that are liberal. This means the degrees of freedom on fiscal policies are limited (Friedman 101-111). On the other hand, some countries are against the Golden Straightjacket. Consequently, there is a consequence to such countries. Firstly, there is decreased investment. Secondly, there is reduced spending or withdrawing of money from such countries. Moreover, such countries are required to pay higher interest rates to borrow from foreign institutions (Chaudhry 5-10).
React to and analyze the following cartoon Free Trade Explained.
In this cartoon, there is an individual probably from an already developed country. The individual is mostly representing the views and aspiration of the already developed countries. The person is discussing with an individual from the third world country. The cartoon shows how the third world countries are lured into subscribing to free trade in the name of economic prosperity and expansion. According to the carton, third countries are forced to sign various agreements that allow implementation of free trade. In those agreements, countries are forced to sell their state owned utilities to foreign firms and institutions. The image shows that free trade allows a country to remove political risks to foreign firms. Moreover, free trade allows foreign firms to make profit at the expense of the third world countries labor and environmental rights.
How does the image use the concept of economic liberalization?
The image portrays the concept of economic liberalization. The image shows in order for the third world countries to progress, they have to open up for foreign firms and institutions investment through implementation of liberal trade policies. The image also shows that failure to comply such countries will remain poor.
What are some of the assumptions about development, free trade, the inevitability of globalization, labor and environmental rights, democracy and freedom does this image make?
The image assumes that for development to be realized there must be foreign investments. Secondly, the image assumes that free trade is the only way that foreign investment will be possible in third world countries. Thirdly, it assumes that globalization is the only way countries will be able to rely on each other to eliminate their economic and financial challenges. Moreover, the image assumes that free trade will affect labor force in third world countries, and foreign firms will abuse the environment as they exploit various resources. The image also shows that democracy and freedom is not part in agreement with free trade. In fact, democracy and freedom will make a country live in isolation (Nguyen Web).
What makes this representation so powerful?
The representation is powerful as it shows ramification of free trade to the third world countries. It is easy to get the theory behind free trade.
Chaudhry, Kiren Aziz. Economic Liberalization and the Lineages of the Rentier State. Comparative Politics 27(1), (1994), 1-25
Friedman, T. The Golden Straightjacket. New York, NY. Anchor Books, 2000. Print
Friedman, T. The Golden Straitjacket. Edublogs.org. Web 06 December 2012. lt. http://sdarcy.edublogs.org/files/201a1/03/goldenstraightjacket-pu084c.pdfgt. Nguyen, Joseph. Economic Effects of Country Liberalization. Investopedia.com . Web 06 December 2012. lt. http://www.investopedia.com/articles/economics/11/economic-benefits-country-liberalization.aspgt. Quiggin, John. Interpreting Globalization. Neoliberal and Internationalist Views of Changing Patterns of Global Trade and Financial System (200), 1-