REBLL growth was built on foreign borrowing and structurally vulnerable to external shocks
Evidence
By the eve of the 2008 crisis, the REBLLs had developed a unique growth model based on massive foreign investment, even more massive foreign borrowing, and economic institutions that could only be described as open to money coming in and people going out. The problem with this growth model was that it was extremely vulnerable to external shocks due to its high degree of dependence on transnational capital flows, its tendency to develop large current account deficits, and its chronically weak export performance. — Mark Blyth, Austerity, 595
Categorization
- XREF: Links to the broader literature on financialized growth models and external imbalances (e.g., Mattei’s account of how sovereign debt masks private sector causes). — connects to: Western banks flooded REBLL markets with foreign-currency consumer credit after buying local banks — Mark Blyth, Austerity: The History of a Dangerous…, 597; The REBLLs’ post-communist growth was a banking crisis waiting to happen — Mark Blyth, Austerity: The History of a Dangerous…, 594; Financial fragility plus stagnant wages produce debt-driven growth regimes prone to crisis — Natascha van der Zwan, Making Sense of Financialization, 34 (+4 more)
Broader Connections
- REBLL states cut sovereign debt while private sectors borrowed hugely for construction
#qualifies(0.85) — Mark Blyth, Austerity, 598 - Euro-induced cheap credit caused periphery current account deficits and vulnerability
#expands(0.80) — Mark Blyth, Austerity, 221 - Financial fragility plus stagnant wages produce debt-driven growth regimes prone to crisis
#expands(0.78) — Natascha van der Zwan, Making Sense of Financialization, 34 - Deindustrialization made Spain’s growth model dependent on external income and debt
#corroborates(0.72) — Mark Blyth, Austerity, 186 - Financial bubbles burst when current production cannot repay loans borrowed from the future.
#expands(0.72) — Yanis Varoufakis, Technofeudalism, 825