The slow or negative growth rates combined with high rates of inflation in the 1970s led to strong reactions. These reactions would give more power to the market while reducing that of governments. Various economic theories, some new and some rediscovered old ones, were advanced, to call for a reduced government role. Some of these were the Ricardian equivalence, rational expectations, Laffer Curve, efficient markets, effects of high compensations on some individuals, impact of globalization, etc. The new environment made some very conservative politicians win elections, in the United Kingdom, the United States, New Zealand, and some other countries. The era of welfare states was over and that of market fundamentalism had arrived. Future years would be different from past ones. To some exient it would be a return to laissez faire.

The economies in the 1970s were characterized by high inflation and low growth. Labor acquired great power that was used to increase wages and to reduce effort and labor efficiency. This was the beginning of a trend toward opening global markets and globalization. There was an assumption that opening of markets would increase global efficiency and standards of living. Enterprises with “global reach” become important. China joined the global economy at this time. There was significant change in favor of market-based policies and against high taxes and public spending, and the role of the market came to be seen more favorably and that of governments less favorably. There was a view that a free market can do almost anything. Pro-market theories become popular. Political elections were affected in several countries. Globalization left some industrial workers without work and without income and conservative governments were reluctant to assist them. In dealing with this problem, domestic markets work less well than expected from theory, while global financial markets grow significantly. There was the collapse of the Bretton Woods Agreements and the growing use of flexible exchange rates.

Chapter 8 studies the record of macroeconomic and financial crises, high inflation episodes, currency collapses, political crises, and collapses of democracy in Latin America and the financial crises and recession episodes in East Asian economies in the period 1970–2015. The chapter focuses on countries – such as Argentina and Venezuela – with high incidence of growth, inflation, and political crises, and also examines the cases of Chile and Mexico. The chapter examines the effects of the East Asian crisis of 1997–98 on Korea, Indonesia, the Philippines, Thailand, and Malaysia (the Asia-5 countries) and compares its impact on China, Vietnam, Singapore, and Hong Kong. The chapter offers a discussion on a wide variety of crisis and stabilization occurrences in a comparative perspective, highlighting economic and political economy factors.