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Commanding Heights episode 2

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Alexis Nakandakari

on 10 December 2013

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Transcript of Commanding Heights episode 2

Hyperinflation of 60'000 % (1985)
Shock Therapy stopped the high level of inflation and shortage. However, at a high social prices (e.g. unemployment)
Soviet Union of Gorvachev
Peristroika, a gradual political change to create the infrastructure of a market economy (e.g. slow process of privatization)
State Controlled Economies
"Soviet Union Economy"
The story of the new global economcy
Its partial success create a little momentum of casting doubt the state controlled economies such as in the Soviet Union
Dissolution of the Soviet Union, the end of the communist due to, among other thing, its inefficiency to promote economic growth.
Moving away from State controlled economies into free market capitalist economies
The story of how states start...
Inefficient system, people do not want to work due to the lack of incentives
Put a gun of their heads
Give them incentives
The economy was not working
Centralized planning, control all its economy
The main goal was a self-sufficient economy. it shut down all imports (over-protection)
(Toyota vs. the Indian ambassador)
Result in inefficiency, low productivity, high level of bureaucracy that lead to corruption
Dependency Theory in Latin America
If you want high economic growth, then put up barriers that restrict imports and growth domestically; otherwise, you will be victimize by the world trade.
However, it put barriers to technology, investment and know-how
High level of state intervention in the market (e.g. business were nationalized, price control)
As a consequence, tremendous level of inflation and extreme polarization of its society.
Pinochet era
A profound structural reform was needed to stop the inflation of that time.
"Chicago boys"
Milton Freedman
Important international pressure for free market economy from the "West" (USA-
-and Britain-
Polish stood against the communist government due to economic depression, food shortage, and so on and request FREEDOM!
Freedom give dignity and prosperity to people (Thatcher)
The root of the problem was government finances. They were spending more than the taxes they collected.
Bolivia was running out of time, therefore, radical Structural Reform was needed to avoid the highest inflation rate of the world.
Gonzalo Sanchez
Jeffrey Sachs
"Shock Therapy"
The opposite option to the dependency theory
Government expenses were reduced, national budget were balanced, import fees were cut, and so on.
Shock therapy was applied in Argentina and Brazil and other part of the World
Socialism with Chinese Characteristics
Keep political system of communism and go for a market socialism
Political control
Market benefits
Lead to the incredible economic growth
From 1991, free market was introduce in the Russian Economy. Entrepreneurship was not lost after 70 years of state control.
There were not more shortage. But, unemployment was also an important social consequence.
Collapse of the Soviet Union challenge the efficiency of a command-control economy
Russia and
its price for free market
Yelstin vs the red directors
Political support to Yelstin in exchange of the commanding heights.
"Goal justify the means"
Ideas for discussion
At to what extent social consequences can be tolerated in order to implement a free market economy?
This video focus on the economic benefits of transforming economies into a free-market one, what about its impact in other areas such as environment?
Full transcript