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Commanding Heights: Questions Describe The Term Paper

Unregulated speculation in the U.S. stock market created a great crash in the financial markets that affected every corner of the globe. Global economic cooperation was essential to prevent such a worldwide catastrophe again, and without government involvement, such economic and political instability would reoccur, with devastating consequences. In the 1970s, however, dissatisfaction with the social welfare state began to surface. Distrust with the federal government in the wake of the Vietnam War began to rise. Nixon's attempts to instate wage and price controls and failed. Powerful trade unions in Britain brought the nation to a standstill, spurring on the rise of Thatcherism. America applauded Ronald Regan's union-busting policies regarding the air traffic controllers in America. World economic events had demonstrated that higher inflation did not necessarily assure lower unemployment, just like the Chicago School economists had said, rather high government deficits to correct high unemployment only created a more unstable economy. The devastating hyperinflation affecting Latin American nations, such as Argentina, were the result of a capitalist yet highly regulated and protectionist regimes. These called into question the applicability of Keynes' government-based solutions to the current economic instability.

Describe whose ideas were shaped into the economic remedy known as "Shock Therapy" and what were the main countries it influenced?

Towards the end of the 20th century, with the fall of communism, the question arose as to how to undo the damage caused by a purely command economy. How to create competitive market structures in a land once dominated by a single, state-run regime that planned every facet of people's economic life? The former republics of the Soviet Union and members of the Warsaw Pact were faced with this dilemma. The answer proposed by the International Monetary...

government, was to begin a rapid transition to a capitalist economic system. Hence the name 'shock therapy.'
The formerly communist economy must be 'opened up' to allow for foreign imports. Price and wage controls must be removed, and state subsidizes to industries were also ended. In particular, the end to price controls was hard for the majority of ordinary citizens, as inflation almost immediately skyrocketed, while wages did not increase, or fell. To reign in the inflation, the government, again under the oversight of the IMF and World Bank, pursued a tight monetary policy and cut government spending sharply as advocated by Chicago School economists.

Finally, what set of ideas are most prevalent in today's global economy and why?

Free trade has become accepted in almost every corner of the globe. Although many nations have retained some vestiges of a social welfare state to some degree, capitalism dominates even the formerly command economies of the once-communist world. "The 20th century opened with markets ascendant and an expanding global economy, buttressed by a spirit of optimism. That economy was fractured by war, depression, nationalism, and ideology," but now that philosophy has returned (Yergin & Stanislaw, 2002: 416-18). There is more multinational cooperation between private enterprises in different nations, and nations strive to foster such international exchanges through treaties such as NAFTA. Although the correct balance between command and capitalism is always being tinkered with, the balance has inexorably swung, it seems, towards freedom.

Works Cited

The Commanding Heights." 2003. PBS.com. 12 Apr 2007. http://www.pbs.org/wgbh/commandingheights/lo/index.html

Yergin, Daniel Joseph Stanislaw. The Commanding Heights: The Battle for the World

Economy. 2002.

Sources used in this document:
Works Cited

The Commanding Heights." 2003. PBS.com. 12 Apr 2007. http://www.pbs.org/wgbh/commandingheights/lo/index.html

Yergin, Daniel Joseph Stanislaw. The Commanding Heights: The Battle for the World

Economy. 2002.
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