Internationalization of capital markets

First, due to internationalization of capital markets and liberalization of capital flows, the suppliers of capital are the ones dictating financial markets, ‘making and breaking’ many governments and their countries. Countries who want to draw this capital or FDI must adapt to the wishes of those who have the capital, and in this way they are pressurized to adapt their policies to the demands of the market, that is, those who hold the capital. Developing countries are pressurized to prioritize export and payment of foreign debt.

The result is that these countries citizens “interests and needs remain neglected as long as their governments do no see or do not opt for a way out of the IMF’s straightjacket” (p27). So, even though factories in the EPZs do not pay taxes or create infrastructure, they are there because of the trickle-down theory: the belief that EPZs create jobs and workers income from these jobs will boost the local economy. Governments of developing countries fear the loss of foreign factories and investment and offer 5-10 year tax breaks, lax regulations, their own workers with the lowest wage, and dirt-cheap rent: “a fantasyland for foreign investors” (Klein, 2000, p207).

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