politics for global economy final paper

POLITICS FOR THE GLOBAL ECONOMY FINAL PAPER

Ecuador experienced many economic and political difficulties during the 1990’s. These different economic displacements, as Kindleberger will name them, lead the Ecuadorian government, into finally declaring the U.S. dollar as the official national currency early in 2000. This policy was implemented as a “policy of last resort” since it was the last resource that could possible provide a path out of economic recession and help avoid the disastrous effects of a fully developed hyperinflation. The book, Crisis and Dollarization in Ecuador: Stability, Growth and Social Equity, examines both the micro and macro conditions that led the Ecuadorian executive branch to the adoption of dollarization. By analyzing several aspects like historical main features of the country’s economic development and main factors that determined its late 1990’s-early 2000’s political background, this book describes and explains the repeated cycles of crisis and failed stabilizations that ended up weakening local and international confidence in the Ecuadorian Sucre. It then looks in detail into the characteristics of the economic crisis and the subsequent dollarization along with the latter’s initial results. The book focuses on clearly presenting the impact of the crisis (plus the following stabilization through dollarization) on poverty, inequality, marginalization, gender, and, in general, on the life of the typical Ecuadorian family. In addition, it also evaluates the effectiveness of the government to cope with severe economic crises and promote smooth transitional paths to economic and political stabilization through existing and/or new government policies and social-protection institutions implemented during this period of time. Finally, it also makes sure to examine the Ecuadorian dollarization experience in an international perspective; looking for potential weaknesses, strengths and points of improvement in contrast to other nations that also decided to dollarize under different or similar political and economic conditions. It is important to point out that the book itself has no main argument as it is divided into five chapters that explore the aspects of the pre-dollarization crisis, the dollarization process, and the aftermath of this process from a very different perspective. Leaving aside Chapter 1, which is a general introduction to the context in which the crisis took place. Chapter 2, for example, focuses on a broad analysis of long-term historical characteristics of the Ecuadoran economy. Some of them are: the economic structure, geography, social structure, regional discrepancies; governance crisis; dependence on volatile commodity prices; fiscal and financial structure; and the Ecuador’s exposure to natural disasters. On the other hand, Chapter 3 is an in-depth analysis of the Ecuadorian situation following dollarization. It then looks at factors like the new monetary system, the behavior of the fiscal and banking systems, the adjustment in prices and the in the real exchange rate, as well as the economic activity after official dollarization. Chapter 4 elaborates on the effects of the crisis on a social perspective, leaving the political, structural and economic perspectives aside. It touches on subjects like unemployment, real wages, and income distribution as well as the effects and limitations of developed and implemented policies to counteract adverse social effects of the crisis and dollarization on all the previous mention areas of study. Finally, chapter 5 goes more in depth into the social analysis and narrows the investigation to the gender and family dimensions of Ecuador’s pre-dollarization economic crisis. Each of these chapters is based on its own main argument that reflects the analysis of the area of study that the chapter referred to. Therefore there is no overall argument throughout the book. The only central idea that can be found and applied to tie all

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