In 1994, Mexico faced political and economic crisis, and the country came to the brink of defaulting omits foreign debt. There was real fear that the country, left to its own devices, could fall into chaos, and millions of refugees would head north into the U.S. Clinton had crisis meetings with his advisors over the issue and decided to give Mexico a $50 billion loan. It worked to stabilize the country, Mexico repaid the money ahead of schedule, and the U.S. looked like a benevolent actor to the world. However, many critics considered Clinton’s actions to be a prime example of moral hazard: By bailing out the Mexican government, the U.S. was in essence bailing out thousands of private investors who had put money into the country without properly weighing the risks.
The bailout signaled the private sector that it could make similarly bad future investment choices without fear since the U.S. would again rescue them. Critics feared this would make sovereign debt crises more likely. “Globalization” is defined as the free flow of goods, services, capital, and labor across national borders. China has a number of “Free Trade Zones,” which are small geographic areas in which companies can build factories to build and export anything with very few restrictions. The Zones are exempt from China’s otherwise strict business and export laws. Seaports and airports are usually located very close