The debt crisis that emerged in the late 1970s and early 1980s forced a number of states in Asia, Africa and Latin America to seek out financial assistance from the International Monetary Fund and the World Bank. Assistance was given in exchange for a dismantling of the developmental state and the implementation of structural adjustment polices based upon macroeconomic stabilization, external trade de-regulation, and internal market liberalization. These policies have effectively continued into the 21st century, in the form of Poverty Reduction Strategy Papers in developing countries and austerity in the developed countries. Yet the success of these policies on their own terms can be questioned. At the same time, these policies laid the basis of contemporary globalization, and the inequality associated with contemporary globalization, by opening up states to inflows and outflows of trade and investment.

In Part 1 of this Episode, the origins and consequences of the debt crisis are discussed.