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Difficulty: MediumEconomics in the Global Age

The following is an excerpt from a speech by the president of a Southeast Asian country in 1996, discussing national economic strategy:

"In this era of global competition, our nation cannot afford to rely solely on traditional agricultural exports. We must integrate ourselves into the global manufacturing network. By establishing free-trade zones, offering tax incentives to foreign enterprises, and investing in the skills of our workforce, we have attracted major multinational corporations from North America and East Asia. Today, the components of a single consumer electronic device are designed in California, manufactured in our factories, assembled in China, and sold worldwide. Our integration into this global division of labor is the key to our future prosperity."

The economic strategy described in the passage was most directly facilitated by which of the following developments in the late twentieth century?

  1. The spread of neoliberal economic principles and the reduction of international trade barriersAnswer
  2. B
    The revival of mercantilist policies to protect domestic agricultural sectors from foreign competition
  3. C
    The establishment of direct political administration over Southeast Asian nations by Western powers
  4. D
    The global implementation of the Green Revolution to maximize traditional agricultural exports

Answer

The spread of neoliberal economic principles and the reduction of international trade barriers
The correct answer is correct because the late twentieth century saw a widespread shift toward neoliberal economic policies. Governments around the world deregulated economies, privatized state-owned industries, and signed trade agreements that reduced tariffs. This liberalization of trade and capital flows directly facilitated the creation of global supply chains and allowed multinational corporations to distribute different stages of production across multiple countries, as described in the passage.

Step-by-Step Solution

1
Analyze the stimulus passage.
The passage describes a Southeast Asian nation's strategy to attract multinational corporations, establish free-trade zones, and participate in a global division of labor for manufacturing consumer goods.
Understanding the context of globalized manufacturing and corporate supply chains is necessary to identify the facilitating historical development.
2
Identify the historical context of the late twentieth century related to this strategy.
During the late twentieth century, the global economy was characterized by the spread of free-market (neoliberal) policies, deregulation, and agreements that lowered tariffs (such as GATT and the WTO).
This global shift allowed companies to easily move capital and production across borders, enabling the international division of labor described.
3
Evaluate the options against the identified historical context.
The option concerning the spread of neoliberal economic principles and the reduction of trade barriers aligns perfectly with the passage's description of free-trade zones and global networks. The other options either confuse mercantilism with free markets, describe outdated colonial administration, or focus on agriculture instead of industrialization.
Evaluating the options ensures that the selected answer is historically accurate and directly addresses the question.

Key Concept

Economics in the Global Age
Estimated Time:1m 30s
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Economics in the Global Age

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