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Difficulty: MediumEconomics in the Global Age

"The opening of our borders to trade and investment is not merely a policy choice; it is an economic necessity in the modern age. By integrating our economy with those of our northern neighbors, Mexico will transition from a closed, state-guided market to a competitive player on the global stage. This agreement will attract foreign direct investment, create manufacturing jobs in our northern states, and lower prices for consumers. We must embrace the realities of global interdependence if we are to achieve sustainable growth."
— Jaime Serra Puche, Mexican Secretary of Commerce and Industrial Development, speech on the proposed North American Free Trade Agreement (NAFTA), 1992

The economic policies advocated in the passage represent a transition away from which of the following earlier twentieth-century economic approaches?

  1. A
    The establishment of mercantilist systems that prioritized the accumulation of bullion through colonial monopolies
  2. State-directed economic models, such as import substitution industrialization, that protected domestic industriesAnswer
  3. C
    Marxist-inspired command systems that aimed to completely eliminate private enterprise and property
  4. D
    Imperialist strategies of direct territorial annexation and political administration to control foreign markets

Answer

State-directed economic models, such as import substitution industrialization, that protected domestic industries
The correct answer is correct because the passage explicitly describes a transition away from a 'closed, state-guided market' toward global interdependence and free trade. In Mexico and other Latin American countries, the dominant mid-twentieth-century model was Import Substitution Industrialization (ISI), which used state intervention, high tariffs, and subsidies to protect domestic industries. Neoliberal reforms and trade agreements like NAFTA dismantled these protectionist systems.

Step-by-Step Solution

1
Analyze the stimulus context and the author's argument.
The speech by a Mexican government official in 1992 promotes the North American Free Trade Agreement (NAFTA), advocating for economic integration, foreign direct investment, and a move away from a 'state-guided market.'
Understanding the source is essential for identifying the economic shift being discussed.
2
Identify the historical shift in late-twentieth-century globalization economics.
The late twentieth century was characterized by neoliberal reforms, deregulation, and free-market integration, which replaced mid-century protectionist strategies like Import Substitution Industrialization (ISI) in developing regions.
Connecting the stimulus to the broader Unit 9 economic trends establishes the correct historical contrast.
3
Evaluate the options to determine which model the author is transitioning away from.
The author explicitly mentions transitioning away from a 'closed, state-guided market,' which corresponds directly to state-directed development and ISI.
This isolates the correct choice by contrasting it with incorrect eras (mercantilism), ideologies (Marxism), and political structures (direct colonial rule).

Key Concept

The global spread of free-market policies and the decline of state-directed economic systems in the late twentieth century.
Estimated Time:1m 30s
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Topics

Economics in the Global Age

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