In 1979 and 1980, two political leaders came into power who would turn this economic revolution into a political one. Margaret Thatcher in [music] the UK and Ronald Reagan in the US.
for - economic history - Volcker Shock - 2 political allies - Thatcher (1979) and Reagan (1980) came to power - cast taxes, social programs and regulation as the bogeyman
David Harvey calls this [music] accumulation
for - economic history - Volcker Shock - David Harvey - accumulation by dispossession. Defaulted countries signing with IMF: - increased poverty - exploded inequality - collapsed public service - gave up economic sovereignty to global financial institutions - continuation of colonialist practice of extractionism and appropriation
conditions were called structural adjustment programs and they forced countries to adopt a very specific set of economic policies mainly the privatization [music] of public assets
for - economic history - Volcker Shock - IMF Structural adjustment program - privatize public assets, - cut spending of welfare, - austerity across the board - deregulation, - open domestic markets to foreign corporations, - remove protection of local businesses and workers - IMF - a deal with the devil
they had to turn somewhere for help. And that somewhere was the International Monetary
for - economic history - Volcker Shock - defaulted countries turn to IMF
subsaharan African countries and parts of Asia were also plunged into crisis
for - economic history - Volcker Shock - second casualties - Sub-Saharan African & Asian countries defaulted
the Latin American debt crisis
for - economic history - Volcker Shock - first casualties - Latin American debt crisis - Mexico, Brazil, Argentina defaulted on loans
Most global finance is denominated in dollars. US interest rates effectively set global interest rates. So when Fuler pushed rates towards 20%, developing countries who had borrowed dollars just a few years earlier saw their interest payments on those loans explode.
for - economic history - Volcker Shock - developing countries loans became unpayable overnight
Paul Fulker was appointed chairman of the Federal Reserve, essentially the head of the United States Central Bank. in 1979 and his appointment signaled a dramatic shift in US economic governance
for - economic history - 1979 - Paul. A. Volcker appointed chairman of Federal Reserve - Volcker Shock - shift - from employment to inflation - raised interest rates to an astounding 20%, intentionally causing a recession
monitoism offered Fulkar the intellectual and political cover he needed for this shift in monetary policy. Away from the Keynesian commitment to full employment and [music] economic stability and towards protecting the value of capital which had been eroded by years of high inflation.
for - economic history - Volcker Shock - used Milton Friedman's theory to provide cover to stop Keynesian commitment to full employment and instead protect capital from inflation. - Volcker raised interest rates to 20%,, causing massive plant shutdowns and unemployment to surge above 10%. - The recession closed shops, and labor lost its bargaining power when plants are shut down.