Political Science 2211E Lecture Notes - Lecture 2: Free-Trade Zone, Special Economic Zone, Maquiladora
4 Jul 2019
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Document Summary
Collapse of bretton woods and end of capital controls. Led to globalization of finance w more money moving across borders. Contemporary globalization era : capital mobility and discretion over monetary policy. Allowed commercial banks to make more high risk investments. Allowed mergers between commercial and investment banks. Led to bigger banks and more risk taking. Deregulated use of specialized financial instruments called derivatives. Led to even more risk taking by banks and investors. Characterized by low taxes, regulations and government oversight. Legal construct within states where normal laws don"t apply. Special economic zone within a country where taxes and regulations are lower. Firms/wealthy can relocate on paper with "nameplate residence" Pay lower taxes of their "home" country. Allows company to be subject to much lowers regulations of the offshore market. Can therefore follow lower standards and take more risks. Foreign ships fly another country"s flag to benefit from lower taxes and regulations.
