From 1958 to 1978, New China experienced four economic fluctuations, but during this period, China's economy was not embedded in the world development trend. The United States is trying to establish a new order in adjustment, and the theme of the Western world is crisis and breakthrough. (8159 words, 25 minutes to read)
01
The world situation is divided into three parts
After the turmoil, differentiation and development of the 1960s, by the 1970s, the world's political and economic forces were relatively stable, forming a basic pattern of the three worlds.
The United States and the Soviet Union were the only two superpowers, vying for world hegemony.
In the 1960s, the Soviet Union vigorously developed its military industry, marked by the armed occupation of Czechoslovakia in 1968, and presented a military confrontation between the United States and the Soviet Union on a global scale.
The United States invaded Indochina and launched the Vietnam War, interfered in the internal affairs of various countries in the Middle East, and supported South Africa and Israel.
The Soviet Union supported Vietnam and India in engaging in regional hegemonism, interfered in the internal affairs of Angola and Yemen, and provoked wars in Somalia and Ethiopia.
Developed countries such as Western Europe and Japan are the second world.
After years of development, Japan, Western Europe have re-emerged and competed fiercely with the United States.
Since 1968, Japan has occupied the second largest gdp in the capitalist world, while the Western European Economic Community has surpassed the united States in terms of overall economic strength.
During this period, there was a financial crisis in the capitalist world. The contradictions between the United States and Japan and Western Europe have become fierce, and financial wars, currency wars, and trade wars have continued.
The vast number of developing countries in Asia, Africa and Latin America are all third worlds.
The national liberation movements in Asia, Africa and Latin America continued to develop, giving birth to dozens of newly independent countries and becoming important forces in the Third World. Its influence on world politics has increased, and it has begun to play a role in international organizations such as the United Nations.
Of the 127 States Members of the United Nations up to 1970, 92 were former colonial and semi-colonial countries, of which 58 were newly independent states after the war.
At the end of the 140s, 104 of the 140 member states of the United Nations were former independent states of Asia, Africa and Latin America.
Dividing the world into three is a correct understanding of the balance of world forces at that time, which is conducive to grasping the main contradictions, understanding the international situation, and determining the diplomatic policy.
Secondly, the vast number of oil-producing countries in the Middle East have "risen".
After the Fourth Middle East War in 1973, the oil-producing countries in the Middle East imposed an "oil embargo" on the Netherlands, Britain and other Western countries that supported Israel, forcing Western countries to end their high-speed economic development and enter the stage of low-speed growth or "stagflation", causing great chaos in the Western economy.
02
With the development of the United States, the dividends of order have begun to appear
Under the leadership of the United States, the economies of Western countries have entered a period of rapid growth for 20 years, which is an important period in the history of economic development in the contemporary capitalist world.
The main factors driving the rapid growth of the economies of developed countries:
First, the leap in productive forces caused by the post-war scientific and technological revolution;
The second is the comprehensive regulation of the process of social reproduction by state monopoly capitalism;
Third, the economic order established by the United States after the war has provided a relatively stable development environment for the Western world, and developed countries can obtain cheap energy and raw materials from other countries to support economic prosperity;
Fourth, the large-scale fixed asset investment carried out by countries in the specific period after the war and the boom in demand for consumer goods released after the war are factors that cannot be ignored in stimulating rapid economic growth.
In the past 20 years, due to the scientific and technological revolution, Western countries have achieved rapid growth.
The economic power of the superpower, the United States, continues to increase, and countries weakened by war have created economic "miracles" one after another, and the industrial capacity of Western countries has grown rapidly, looking for overseas markets.
The economic growth of the 1950s and 1960s covered the United States, Canada, the major capitalist countries of Europe, as well as Japan and Australia.
In 1958, the gdp of developed countries was $820 billion, and by 1973 it had increased to $3,254.6 billion, with a nearly fourfold increase in production in 15 years and a nearly fivefold increase in trade over the same period.
The growth of the globalized division of labour is expected to be strengthened.
The rapid growth of the economy is also manifested in changes in the industrial structure and a substantial increase in labor productivity.
The proportion of agriculture in the national economy has declined, the proportion of industry has risen, the proportion of services has risen the fastest, and the proportion of sectors engaged in technological development, services and high-tech industries has increased.
Due to the rapid development of industry, the United States also has serious pollution of rivers and lakes, widespread air pollution, freshwater fish production has decreased, quality has declined, and Americans have gradually given up eating freshwater fish.
Due to the seriousness of water and air pollution, people began to pay attention to environmental issues, and some environmental laws were gradually introduced. At the same time, with the development of the United States climbing to the higher end of the technology tree, it began to transfer some low-end production capacity out of the country.
In the process of low-end capacity transfer, developing countries such as Latin America and Asia have introduced the production lines eliminated by the United States into the country by borrowing from the United States, and then sold products to the United States.
The United States, through its first-mover advantage, began to reap the benefits of globalization.
When other Chinese countries move toward higher levels of science and technology, the United States will use its global military, financial, and order leadership to actively restrict and suppress them.
03
Bike for motorcycle
Western Europe rapid development, Japanese miracle
Western Europe is developing rapidly
Between 1950 and 1973, Western Europe's economic growth was unprecedented. Gross national product increased by 3.5 times from US$274.5 billion to US$1,225 billion, total foreign trade increased by 10.8 times, and gold foreign exchange reserves increased by 8.6 times.
During this period, the economic development of Western Europe maintained steady growth, with unemployment greatly reduced and consumer prices rising slowly.
The reason for such a huge economic development in Western Europe is that, in addition to the huge impetus of the third scientific and technological revolution, state monopoly capitalism has become the basis for stabilizing the economy.
Through the formulation of economic policies, economic legislation, etc., the state directly or indirectly participates in the process of capitalist reproduction and realizes comprehensive intervention and regulation of the economy.
The organization that played an important role in the economic growth of Western Europe was the European Economic Community established in 1958, the core of which was the establishment of a customs union and an agricultural common market, the gradual coordination of economic and social policies, and the realization of the free flow of goods, services, capital and people.
Promote economic leap forward through the establishment of regional organizations.
The first six member states of the European Economic Community (EEA) accounted for 20.8 per cent of world industrial production in 1951 and rose to 28.6 per cent in 1970; their share in world trade increased by more than 10 times to 39.7 per cent in 1970.
The establishment of an economic and monetary union was formally set at the Summit of the States of the Community in December 1969 as an important objective.
Suspended due to its complex content and the economic crisis of the mid-70s, as well as U.S. intervention.
Japan's Economic "Miracle"
In the mid-1950s, the United States launched the Korean War, Japan became the US logistics support base, its industrial level recovered rapidly, and went all out to develop the economy with all its might, realizing the "miracle" of high-speed economic growth.
Japan achieved catch-up with Europe and the United States at a low starting point.
In 1955, Japan's GDP was only 56% of that of West Germany and 6% of that of the United States, and its per capita national income was 34th in the Western world.
From 1955 to 1973, Japan's economic growth rate was as high as 9.8%, more than 1 times that of western developed countries, and its gross national product successively surpassed that of Italy, France, and the United Kingdom, and in 1968, it surpassed West Germany, becoming the second largest economic power in the West after the United States.
The rapid growth of the Nippon-japan economy has promoted changes in the industrial structure and trade structure, and achieved a leap in the development of the heavy chemical industry.
From 1955 to 1973, Japan focused on the development of heavy chemical industrial sectors such as iron and steel, machinery, and chemicals, and then gradually transferred to the production and export of automobiles, integrated circuit equipment and durable consumer goods, and the proportion of heavy chemical industry in the manufacturing industry increased from 44.8% to 62%.
Japan has modernized with mechanization, chemistry, and electrification as the main components.
The development of the heavy chemical industry provided agriculture with a large number of mechanical, chemical, and fertilizer products, as well as an abundant supply of electricity, and agriculture has made leaps and bounds.
The proportion of agriculture in the net national output value fell from 22.7 percent in 1955 to 6.8 percent in 1973, the national economy has changed, and the people's living standards have been greatly improved.
There are many factors that promote Japan's rapid economic growth during this period, the main reason is that Japan has continuously guided and coordinated economic development through government guidance, the use of scientific and technological progress, the efficient introduction, development and transformation of the old industrial base, and its unique enterprise management system and powerful trade and industrial policy.
The line of development of state capitalism was formed.
04
How big the face is, how big the eyes are
The U.S.-Vietnam War
The development of the United States has always been accompanied by war.
The United States, like Japan and Japan, has been looking for opportunities to return to the Asia-Pacific region and strengthen its right to speak after the Korean battlefield was suppressed.
However, the 10-year Vietnam War has exhausted its national strength and become a painful memory of a generation of American people.
After the Korean War, the United States took advantage of vietnam's internal struggle to participate.
In 1964, the United States created the "Gulf of Tonkin Incident" and bombed North Vietnam continuously. In 1965, the Johnson administration sent 3,500 Marines to Vietnam.
U.S. planes bombed North Vietnam, and the U.S. Seventh Fleet blockaded the South Vietnamese coast.
China gave its full support to the Vietnamese people at the beginning of the War to Resist US Aggression. Assistance was requested by Vietnamese leaders Ho Chi Minh and Nguyen Chi Thanh.
The Chinese Government declares: The Chinese Government and people resolutely and unreservedly support the just stand of the Vietnamese people in defending their great motherland.
The United States attempted to subdue Vietnam with large-scale military aggression while at the same time making military threats against China. In April 1965, the US plane invaded the aircraft over China's Hainan Island and sneaked into the aircraft that China was training. In August, US planes bombed Chinese cargo ships. Bombing of the Chinese embassy in Hanoi, the capital of Vietnam, in December.
Since 1965, China has been providing material and military support. By 1968, China had sent more than 320,000 air defense, engineering, railway, logistics support and other support troops to Vietnam, and it was not until 1970 that all of them were withdrawn to China.
Under the resolute resistance of the Vietnamese people, although the Johnson administration invested more than 500,000 troops in the war, used all modern weapons except atomic bombs on the battlefield, and spent hundreds of billions of dollars, it did not achieve any victory, on the contrary, it brought deep disasters to the American people.
Since 1965, the United States has run a deficit in the balance of payments for many years. Popular resentment boiled over, the anti-war movement soared, the social crisis deepened, and President Johnson stepped down.
In 1969, Nixon became president of the United States, and the United States and Vietnam began secret bilateral talks.
Nixon wanted to end the Vietnam War and save face for the United States, not to admit defeat.
In 1970, more than 70,000 U.S. and South Vietnamese troops were sent to invade Cambodia, and in 1971, tens of thousands of U.S. and South Vietnamese troops were dispatched to attack Laos, hoping to change the situation in the Vietnam War, but the purpose was not achieved.
China's stand of resolutely supporting the three Indochina countries in resisting THE United States and saving the country is clear and firm, and warmly welcomes Prince Sihanouk to China to lead the struggle to resist the United States and save the country.
From 1968 to 1972, the Chinese government signed and implemented more than 30 agreements on providing free economic and military assistance to Vietnam.
Aid from 1950 to 1973 was VND28 billion (about US$1.56 billion).
The quagmire of the Vietnam War led directly to the decline of the United States.
From 1965 to 1975, the US invasion of Vietnam suffered serious defeats, and a total of 600 billion US dollars of military expenditure was spent in 10 years, which seriously depleted the strength of the United States and brought unexpected political, economic and social crises.
The vietnam war wasting, the rise of Western Europe and Japan, the competition in the global market, and the united states had three serious problems: unemployment, inflation, and the dollar crisis.
At the beginning of his presidency, Nixon tried to reduce government intervention and cut government spending, but failed to alleviate inflation and instead exacerbated unemployment.
05
Nixon's New Deal
Inevitable economic crisis
(1) Nixon's New Deal
In 1971, the United States published Nixon's "New Economic Policy." The purpose is to maintain the economic hegemony of the US dollar externally, control inflation internally, and stimulate economic recovery. It is carried out in four phases:
The first stage (August 15, 1971 - 1971.11) was to freeze wages and prices, prohibit foreign countries from exchanging dollars for gold and increase the import surcharge of 10%;
The second stage (1971.11-1972.12) imposed wage and price controls, controlled inflation at 2 to 3 percent, wage growth rates of no more than 5.5 percent, agreed to devalue the dollar by 7.89 percent, and abolished the 10 percent import surcharge;
The third and fourth phases are aimed at limiting wage and price growth rates. In 1973, the dollar was devalued by 10% against gold.
The "New Economic Policy" is based on Keynesian economic theory to overcome the double crisis of economic stagnation and inflation. It marked the shaking of the dollar's hegemonic position in post-war international finance.
When the sharp depreciation of the us dollar greatly harmed the interests of other countries, it was opposed by the developed countries in Europe.
Due to economic development, western developed countries have gradually begun to pursue their own interests in politics and foreign affairs, and are no longer completely dependent on the United States.
The policies of Western European countries in dealing with the Soviet Union are basically the same as those of the United States, and in East Asia, Japan is basically the same in following the United States in opposing China, but there are differences in terms of their own actual interests.
France announced its withdrawal from the North Atlantic Treaty Organization in 1966, drove out nato commands, military commands and military bases in Europe and the United States in 1967, and openly opposed the collusion between the United States and the Soviet Union in 1968 and adopted a treaty on the prevention of nuclear proliferation at the United Nations.
The confrontation between the East and the West, represented by the United States and the Soviet Union, has seen a phenomenon of "détente," which in essence means that the influence of the United States has declined and the Offensive of the Soviet Union has intensified.
At this time, the two hegemons of the United States and the Soviet Union pushed the fierce confrontation to a new level, and both feared each other's strength and tried to avoid head-on confrontation.
(2) Economic crisis
The investment in the war, the military equipment competition, and the trade struggle of the newly developed countries have caused bottlenecks in the development of the United States and Europe.
After 20 years of rapid growth, stagflation has become the main feature of economic life in developed countries.
In 1973, the crisis broke out in Britain, the United States and Japan, and then spread to other countries, forming a situation of low growth and high inflation. Marks the beginning of the stagflation phase.
At that time, the gross domestic product of the advanced capitalist countries grew at an average annual rate of 2.4% (1973-1983), while consumer prices rose by an average of 9.9% per year (1974-1981), an increase of nearly twice that of 1951-1973, a situation that lasted for nearly 10 years.
Under the conditions of stagflation, labor productivity, fixed capital investment, and export growth in various countries have declined, and unemployment has become a regular phenomenon.
The number of unemployed in OECD countries was 15.6 million in 1975 (unemployment 5.4%) and in 1983 it was 30 million (unemployment rate 8.8%).
Economic indicators have fallen, resulting in a vicious circle of stagflation in all corners of the capitalist world.
The factors that cause stagflation come from both inside and outside.
First, with the decline of the hegemonic status of the United States, the international economic order based on the United States has been violently impacted, and the stable environment required for economic operation has been broken.
In the early 1970s, the collapse of the international monetary system centered on the US dollar caused turmoil in the international financial markets;
Intensification of competition in foreign markets, prevalence of international trade protectionism;
Developing countries have safeguarded their sovereignty over resources, opposed the old international economic order, and blocked stable and cheap sources of energy and raw materials, which have greatly aggravated the economic difficulties of developed countries.
Second, from the perspective of internal factors, developed countries have long implemented various national monopoly capital policies and measures, resulting in adverse consequences.
After World War II, in order to stimulate economic growth, the governments of advanced capitalist countries became the norm with deficit finance and over-issuance of currency.
In the 38 years from 1946 to 1983, the deficit year accounted for most of the time, the United States was 30 years, Japan was 31 years, France and the United Kingdom were 34 years, and Italy was in deficit for consecutive years.
In 1978, the US debt exceeded $1 trillion, and in order to make up for the deficit, the money supply increased at a faster rate than the economic growth rate, and it was far greater than the amount of money needed for circulation, and inflation continued to increase.
Inflation rates in countries such as the United Kingdom and Italy reached double digits in the 1970s. The sharp rise in prices has greatly reduced the ability to pay, resulting in overproduction, slow development, and further reduced incomes.
Stagflation puts countries' economic policies in a dilemma.
(3) The imbalance in the economic development of developed countries in the process of stagflation has intensified
In the period of rapid economic growth, the economic gap between other countries and the United States has narrowed, and the economic pattern has changed from the hegemony of the United States to the three-legged position of the United States, Japan and Western Europe. Entering the stage of stagflation, there have been new changes in the uneven development of various countries.
The time for which economies have fallen into stagflation is not exactly the same, and the impact of stagflation is not the same.
For example, the stagflation in the United States predates Japan, West Germany and other countries. When the economic crisis erupted during the 1969 War of Aggression against Vietnam, its economy began to shift to a stage of stagflation.
Japan, Western Europe and other countries have slowed down their economic growth after entering the 1970s, but the stagflation situation has only really emerged after the crisis, and the degree of stagflation is greater than that of the United States.
In addition to high unemployment and high prices, the average annual growth rate of its gross domestic product and industrial production is no longer as good as that of the United States. The world market share of the best-selling industrial exports is declining.
In stark contrast to the situation in Western Europe is Japan. In the same stagflation situation, Japan's economic growth rate is still significantly higher than that of Western Europe, maintaining an average annual growth rate of nearly 5% throughout the 1970s.
As a result, Japan's economic strength continued to grow during this period.
In 1982, Japan's GDP reached $1,082.8 billion, surpassing West Germany's per capita GDP and jumping to second place among the seven Western countries. At the same time, Japan's automobile production and machine tool output rose to the top of the world, and foreign investment increased sharply.
After a period of stagflation, the balance of economic power among the advanced capitalist countries has changed further.
In the field of foreign trade, in 1982, the exports of the United States, Japan and the European Community accounted for the proportion of world export trade from 13.6%, 6.2% and 35.9% in 1970 to 11.9%, 7.8% and 28.8% respectively.
As the U.S. declined, Western Europe declined, and Japan's position rose further. The economic and trade frictions between the United States, Western Europe, and Japan began to deepen, and the three-party competition began to be greater than cooperation.
(4) The impact of the economic crisis on the Western economy during the period of stagflation
Stagflation is the result of the accumulation of capitalist contradictions and is accompanied by an economic crisis.
The economic crisis of 1973-1975 broke out after the high-speed economic growth of the developed countries entered the end, opening the prelude to the stagflation of the capitalist world economy.
The ensuing crisis of 1979-1982 erupted under conditions of stagflation in the economies of Western countries. It was not until 1982 that the United States came out of the bottom of the crisis and led to the recovery of the economies of other countries. The whole crisis lasted for about 3 years.
Since the 1970s, within the developed capitalist countries, the decline of a large number of traditional industrial sectors, the stagnation of production, and the large number of unemployment have been a structural crisis caused by the imbalance of industrial structure.
The long-term inflation and credit inflation that prevail in various countries are also structural crises caused by imbalances between the money supply and the actual need for commodity circulation, respectively, and the imbalance in the scale of credit to the scale of social reproduction.
Due to the intensification of the imbalance in the development of the world economy, the dollar crisis and even the collapse of the international monetary system have been led to.
The competition for the international market in the advanced capitalist countries and the escalation of the trade war are all manifestations of the deepening structural crisis.
06
The old ones don't go, the new ones don't come
New system of dollar oil
The Bretton Woods system collapsed
Due to the expansion of the United States abroad and the loosening of domestic currency, the money was obviously insufficient, and an economic crisis soon broke out. The United States began to resolve economic contradictions by printing a lot of money. The money issued soon far exceeded the equivalent gold reserves.
France began exchanging all its pounds and dollars for gold, shouting that it would "go home with gold." De Gaulle even made a cruel remark that he would ship dollars to the United States on warships and return gold that should have belonged to France.
By 1971, France had bought back 3,000 tons of gold. Germany, Italy and other Western European countries have followed france's example and shipped gold back from the United States.
By 1970, there were fewer than 10,000 tons of gold left in the U.S. treasury.
Finally, the United States could not sit still.
In 1971, Nixon officially announced that the dollar would stop exchanging gold! The Bretton Woods system, which had been in operation for 27 years, collapsed, and the world entered the era of credit money, which was the first time that the dollar hegemony faced a collapse.
The rise of oil-producing countries in the Middle East
The end of the dollar's gold peg has greatly weakened the dollar's influence, and the United States has targeted oil.
From the time of its discovery, oil has existed as the blood of industry.
Its initial exploitation has always been controlled by multinational companies in Western capitalist countries such as Britain and the United States.
With the rise and fall of the national movement, the oil in the Middle East was gradually nationalized, and several major Countries in the Middle East formed a circle to form the "Organization of the Petroleum Exporting Countries", referred to as "OPEC".
OPEC began to become an oil pricing organization. With the binding of economic interests, members gradually have a unified political position.
The United States, in its usual equilibrium of fragmentation and disintegration, began to prop up Israel and give it a foothold in the Middle East.
Since then, the Middle East has been a powder keg for war for many years. The United States began to play balancing tactics and reaped the benefits.
In 1967, the Third Middle East War broke out. Israel was the first to strike, defeating Egypt, Jordan and Syria in just 6 days.
The casualties in the three countries exceeded 60,000, while Israel suffered only 983 casualties and occupied 65,000 square kilometers of Arab land.
In 1973, the Fourth Middle East War broke out. The Egyptian and Syrian armies, taking advantage of Yom Kippur Day, launched a fierce raid that destroyed the Israeli army's "Bar-Lev Line."
In this process, the Egyptian army did not make a single effort, and after recovering some of the lost land, it built fortifications on the spot to give the Israeli army a chance to breathe.
Subsequently, with the support of advanced American weapons and intelligence, Israel began to counterattack, turning the tide of the war from the third day, beating the Arab countries without temper and raising a white flag to truce.
In the fourth Middle East war, Egypt and Syria received strong support from Arab countries.
In addition to direct economic assistance and military assistance, the Arab countries have also jointly engaged in an oil economic war against Western countries led by the United States, through production cuts, price increases, embargoes and nationalization measures, so that the price of crude oil soared.
This has caused huge losses to many Countries in the West, with factories closing down, unemployment soaring, and transportation and life almost paralyzed.
This situation has the most serious impact on the United States, the world's number one capitalist power, and American society almost stagnated because of the absence of oil.
This oil crisis has also made the world aware of OPEC's strength. In 1974 alone, OPEC's oil revenues amounted to $115 billion, contributing to the largest transfer of wealth in human history.
The United States quickly adjusted its strategy, "Whoever controls oil can control the whole world." ”
When the Americans approached The Saudis, they said they would provide them with military protection and weapons on the condition that the Saudis would buy U.S. Treasuries, all of which would have to be traded in dollars. The two countries began to promote the "dollar oil" system in unison.
Saudi Arabia accepted the treaty out of its own interests. The situation in the Middle East is chaotic, and with US weapons and equipment, its own security is guaranteed. And a large number of dollars in the hand is a waste, buy U.S. Treasury bonds, but also appreciate.
So an agreement was signed with the United States.
The value of the dollar is highlighted, and the demand for US dollars will rise sharply in the future. Saudi Arabia then announced that it would settle oil transactions only in dollars.
Soon, OPEC members followed Saudi Arabia's lead and equated the dollar with oil.
The consequence of this is that from then on the dollar is oil, oil is the dollar, and the world's money has gone around in the Middle East and then back into the hands of the United States.
The dollar was freed from the shackles of gold and could continue to print money only as a guarantee with government credit. The United States has also "weaponized" the us dollar and imposed financial sanctions on those countries that disobey at every turn, and Iran, Cuba, Russia and other countries have suffered greatly.
This is the petrodollar circulation, and the U.S. economy is taking off again.
Not only oil, the United States, which has tasted the sweetness, has also linked the dollar to many commodities, forming a circulation: steel dollars, coal dollars, non-ferrous metal dollars... This hot money flowing back to the United States was exported overseas by Wall Street, opening the era of global wool.
07
The dollar is our problem
But it's your crisis
Risk Transfer – The Latin American Crisis.
During the period from 1970 to 1980, two oil crises caused oil prices to soar, the United States began to implement a loose monetary policy, Europe and the United States experienced serious inflation, the United States, Japan, Europe, the Middle East countries of commercial banks continued to lend, a large number of capital outflows from Europe and the United States.
Under the temptation of low interest rate funds, Brazil, Argentina and other Latin American countries vigorously borrowed debt to develop their economies, which promoted the economic prosperity of Latin America in the 1970s. The way in which the economy was developed through debt raising has led to a sharp spike in Latin American debt.
From 1970 to 1982, it climbed to $328.7 billion, an increase of 15.5 times.
Debt is expanding rapidly, with a large amount of short-term foreign debt, and with the extension and renewal of borrowing, interest rates have risen with interest rate hikes.
By the early 1980s, the Fed was constantly raising interest rates to combat inflation.
As the Federal Reserve tightened monetary policy and the dollar index rebounded, international capital began to flow out of Latin America in large quantities, returning to the United States by investing in U.S. futures and Treasuries.
Due to the sharp increase in interest rates and the outflow of foreign capital, Latin American countries that rely on the development of borrowing are unable to repay their debts. At the same time, interest rates in Latin American countries are rising, external demand is weakening, the dollar is strong enough to make the prices of export products lower and lower, the economy is weak, borrowing new is not enough to pay off the old, and the debt crisis has begun to break out in full swing.
Finally, in 1982, Mexico could not hold back, announcing that 80 billion of mature dollar bonds could not be repaid and defaulted.
Other countries, which were miserable, also showdowns, collectively defaulted.
By 1983, 16 Latin American countries had defaulted, totaling more than $200 billion, more than the reserves of bank creditors.
After the debt default, the local currency depreciated severely, the import cost increased significantly, the external import inflation pressure was huge, the economy was hit hard, and gradually evolved into hyperinflation, the inflation rate was as high as 3 digits - and the accompanying gap between the rich and the poor widened, high unemployment, the surge in the number of poor people, murder, prostitution, drug trafficking can not be avoided.
The prices of various assets in Latin America plummeted, and then U.S. capital took the opportunity to bottom out and pocket a large number of high-quality assets in Latin America.
Latin America, where the economy is up and down, has fallen into the "middle-income trap". Latin America white was busy, transfusing the U.S. economy.
The next time the United States raises its sickle to harvest assets will be the 1997 Asian financial crisis. Capital never sleeps, and every time it is in crisis, it will look for new victims, like a bloodthirsty shark, not letting go of every opportunity.
Preview: The next chapter looks at 1958-1978, the development of the Soviet Union, the exploration of socialist reform.