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Comparative Econ - Assignment Example

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This paper seeks to answer several comparative economics questions relating to economic policies such as Washington consensus in Latin America, chaebol and keiretsu in…
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Comparative Econ
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Comparative Economics It is interesting to the macroeconomic events that happened to several countries after the World War II. This paper seeks to answer several comparative economics questions relating to economic policies such as Washington consensus in Latin America, chaebol and keiretsu in Asian region.
“Washington Consensus”
Washington consensus refers to a set of ten reform policies that were generated by one of the world’s economist called Williamson in 1989. He proposed a package of ten policies, which he believed to be essential for recovery of weakening economies especially in developing countries. The Washington consensus package consisted of ten policies elaborate enough to cover macro and micro economic variables in respect to market and trade. The package included stimulus recommendations relating to tax reforms, fiscal policies, liberalization of trade, deregulation among others (Scott 357).
Origin of “Washington Consensus”
Contrary to what the name suggests, “Washington Consensus” was not made in Washington. The Washington Consensus package was in fact borrowed from the economic stimulus policies that were being used in Latin America to mitigate the effects of economic crisis. Actually, Williamson resents the fact that the package was named Washington Consensus since it has nothing to do with Washington.
Washington Consensus in Latin American
The Washington Consensus ideology was very popular in Latin American countries. The events that happened immediately after the World War II disrupted the economic structures of countries in Latin America. This prompted the need for economic reforms that would ensure recovery of the overall economy amidst influential factors of politics. “Washington Consensus” came to happen because this region needed the back up of Washington in order to succeed (Scott 185).
Economic Reforms in Chile and Washington Consensus
The economic reforms in Chile can greatly be attributed to the Washington consensus albeit indirectly. The “Chicago Boys” made economic recovery after the fall of military rule and prowess of the same possible. Friedman and Harberger trained these young economists in the department of economics in University of Chicago. The idea was generated by the U.S as it sought to influence reforms of Chilean economy. The Chicago boys brought the same ideas of market-oriented economy common with Washington Consensus to Chile. All these events happened after Pinochet, head military ruler, stepped down. Currently Chile finds pride in their economic and social status in the world, which they owe indirectly to Washington Consensus (Scott 208).
Chaebol and Keiretsu
The aftermath of WWII left Japan in ruins with no viable political leaders, most homes destroyed, and not enough food for citizens. However, through the American occupation of American soldiers, Japan came to understand the “American Standard” of living. The United States realized that they needed to create and help execute economic recovery. This was not only to benefit the Japanese, but also to ease the costs of occupation.
The Dodge plan was implemented and helped to cut inflation, create land reform, promote education, secure a high savings rate, and create a booming export focused economy. This was also a benefit to both the United States and Japan because of the soon coming Korean War. The United States would use Korea as a supply base consequently creating a great need for exporting which would help to rid Japan of eminent recession. All of this was possible because of the Japanese work ethic, unity, and desire for not only a better life, but also a better Japan. 
After WWII, South Korea emerged because of the Korean Conflict with both Russian and American military, which divided Korea into a Northern and Southern States. It is not something that the Korean people, who wished for independence, wanted. While the failed U.S-Russian negotiations were taking place, Kim II Sung lead the Interim Peoples Committee to become North Koreas (NK) first central, communist government. The south became the Republic of Korea (SK).
The U.S and Russia withdrew their forces and left Korea to solve its problems. At one point, NK attacked a vulnerable and SK who had a weak military. The U.S intervened with SK, as did China with NK. With no winner, a truce was called. South Korea would come to focus on Japan with their past influence from the occupation of Korea to their current American Standards and booming exports. Like the Japanese, the S. Koreans wanted to establish a strong, proud, economic nation. 
In order for these two countries to prosper after WWII, they needed an economic plan. Japan’s Ministry of Industry and Trade (MITI) adapted to the keiretsu. The keiretsu replaced the old system of zaibatsu, “the great industrial/financial combinations.” (Page 161) With the new keiretsu system, the Japanese government created opportunities for entrepreneurs, loosened the bond between banks and industry, and focused on exports as a way of growing their economy. Its focus on this and the world’s economy, instead of internal development, gave Japan a huge gain in their economy and became a huge economic force in the global economy. 
South Korea sought to duplicate the success of Japan by exporting and government intervention on business. Chaebol was a program where the government took already thriving businesses, promoted and invested in them. This helped to create companies that went global. These companies ranged from automakers, to the military. Unlike the Japanese model, the S. Koreans used a tight model between businesses and banks.
Works Cited
Scott, Bruce. Capitalism: Its Origins and Evolution as a System of Governance. London: Springer, 2011. Print. Read More
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