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Why do developing countries adopt the Washington consensus?

Points covered in this lecture: South Africa’s apartheid system The ANC’s Freedom Charter Why did South Africa adopt free market reform (‘Washington Consensus’)?. Why do developing countries adopt the Washington consensus?. ‘Separateness’ along racial lines

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Why do developing countries adopt the Washington consensus?

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  1. Points covered in this lecture: • South Africa’s apartheid system • The ANC’s Freedom Charter • Why did South Africa adopt free market reform (‘Washington Consensus’)? Why do developing countries adopt the Washington consensus?

  2. ‘Separateness’ along racial lines South Africa’s multiethnic society: - 20% ‘whites’/’Europeans’ (Afrikaners/ British) - 10% ‘coloureds’ - 70% Africans Apartheid

  3. 1913: Land Act (‘Homelands’) 1923: Natives Act 1927: Immorality Act 1936: Land Act Examples of discrimination

  4. 1910: Union of South Africa 1948: NP election victory 1960: Sharpville massacres 1976: Soweto uprisings (reaction to 1974 Education Act) Some important dates

  5. 1960s-80s: increasing isolation of S. Africa from international community (sanctions, boycotts, etc.) 1994: elections with universal suffrage bring Nelson Mandela to presidency More dates

  6. http://www.anc.org.za/ancdocs/history/charter.html “The mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole”. “Restrictions of land ownership on a racial basis shall be ended, and all the land re-divided amongst those who work…”. ANC’s freedom charter (1955)

  7. The post-apartheid government embraced a free-market policy. Why? Does this confirm the ‘race to the bottom’ hypothesis? What happened?

  8. Declining value of the Rand • Indebtedness • Capital flight • Increasing health costs (HIV)

  9. 1993: S. Africa borrows from IMF Conditions of loan: • financial liberalization • trade liberalization • Privatization/cuts in budget deficit (The ‘Washington Consensus’) IMF loan and conditionalities

  10. 1997: Medicines Act (compulsory licensing) US threatens trade sanctions Pharmaceutical companies’ legal action Did S. Africa contravene TRIPS? HIV and intellectual property

  11. Domestic pressure on Clinton/Gore International awareness of ‘profits-before-life’ policy of US. US compulsory licensing (anthrax) Why did us drop its opposition?

  12. 2009: S. Africa’s public debt = 29.5% of GDP. The post-apartheid government inherited a national debt of US$ 20.9bn. Paying it off meant channeling money away from other areas (health, education, housing, etc.) The national debt

  13. Why should the post-apartheid government pays the debts bequeathed to it by its predecessor? Post-apartheid government owed money to international banks, other governments, international organizations (e.g. IMF) who had all lent money to the apartheid regime. Introduction to historical injustice

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