Economic liberalization Economic liberalization is a very broad term that usually refers to fewer government regulations and restrictions in the economy in exchange for greater participation of private entities; the doctrine is associated with classical liberalism. Thus, liberalisation in short refers to the removal of controls, to encourage economic development. Most first world countries have pursued the path of economic liberalization in recent decades with the stated goal of maintaining or increasing their competitiveness as business environments. Liberalization policies include partial or full privatisation of government institutions and assets, greater labour market flexibility, lower tax rates for businesses, less restriction on both domestic and foreign capital, open markets, etc. In support of liberalization, British Prime Minister Tony Blair wrote that: Success will go to those companies and countries which are swift to adapt, slow to complain, open and willing to change. The task of modern governments is to ensure that our countries can rise to this challenge. In developing countries, economic liberalization refers more to liberalization or further opening up of their respective economies to foreign capital and investments. Three of the fastest growing developing economies today; Brazil, China, and India, have achieved rapid economic growth in the past several years or decades after they have liberalized their economies to foreign capital. Many countries nowadays, particularly those in the third world, arguably have no choice but to also liberalize their economies in order to remain competitive in attracting and retaining both their domestic and foreign investments. This is referred to as the TINOA factor, standing for there is no alternative. For example, in 1991, India had no choice but to implement economic reforms. Similarly, in the Philippines, the contentious proposals for Charter Change include amending the economically restrictive provisions of their 1987 constitution. The total opposite of a liberalized economy would be North Koreas economy with their self-sufficient economic system that is closed to foreign trade and investment (see autarky). However, North Korea is not completely separate from the global economy, since it receives aid from other countries in exchange for peace and restrictions in their nuclear programme. Another example would be oil-rich countries such as Saudi Arabia and the United Arab Emirates, which see no need to further open up their economies to foreign capital and investments since their oil reserves already provide them with huge export earnings. The adoption of economic reforms in the first place and then its reversal or sustenance is a function of certain factors, presence or absence of which will determine the outcome. Sharma (2011) explains all such factors. The authors theory is fairly generalizable and is applicable to the developing countries which have implemented economic reforms in the 1990s
Posted on: Mon, 27 Jan 2014 10:04:04 +0000
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