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Economic liberalization

February 16, 2024

Economic liberalization, or economic liberalisation, is the lessening of government regulations and restrictions in an economy in exchange for greater participation by private entities. In politics, the doctrine is associated with classical liberalism and neoliberalism. Liberalization in short is "the removal of controls" to encourage economic development.[1]

Many countries have pursued and followed the path of economic liberalization in the 1980s, 1990s and in the 21st century, with the stated goal of maintaining or increasing their competitiveness as business environments. Liberalization policies may or often include the partial or complete privatization of government institutions and state-owned assets, greater labour market flexibility, lower tax rates for businesses, less restrictions on both domestic and foreign capital, open markets, etc. In support of liberalization, former British prime minister Tony Blair wrote: "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."[2]

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, in part, from having liberalized their economies to foreign capital.[3]

Many countries nowadays, particularly those in the third world, arguably were given no choice but to "liberalize" their economies to remain competitive in attracting and retaining both their domestic and foreign investments. This is referred to as the TINA factor, standing for "there is no alternative". For example, in China after Cultural Revolution, reforms were introduced,[4]. Similarly, in the Philippines, the contentious proposals for Charter Change include amending the economically restrictive provisions of their 1987 constitution.[5]

By this measure, an opposite of a liberalized economy are economies such as North Korea's 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 actively trades with China, through Dandong, a large border port and receives aid from other countries in exchange for peace and restrictions in their nuclear programme.[6][7] Another example would be oil-rich countries such as Saudi Arabia and the United Arab Emirates[citation needed], 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.

Liberalization of services in the developing world edit

Potential benefits edit

The service sector is probably the most liberalized of the sectors. Liberalization offers the opportunity for the sector to compete internationally, contributing to GDP growth and generating foreign exchange. As such, service exports are an important part of many developing countries' growth strategies. India's IT services have become globally competitive as many companies have outsourced certain administrative functions to countries where costs (esp. wages) are lower. Furthermore, if service providers in some developing economies are not competitive enough to succeed on world markets, overseas companies will be attracted to invest, bringing with them international "best practices" and better skills and technologies.[8] The entry of foreign service providers can be a positive as well as negative development. For example, it can lead to better services for domestic consumers, improve the performance and competitiveness of domestic service providers, as well as simply attract FDI/foreign capital into the country. In fact, some research suggest a 50% cut in service trade barriers over a five- to ten-year period would create global gains in economic welfare of around $250 billion per annum.[8]

Potential risks of trade liberalization edit

Trade liberalisation carries substantial risks that necessitate careful economic management through appropriate regulation by governments. Some argue foreign providers crowd out domestic providers and instead of leading to investment and the transfer of skills, it allows foreign providers and shareholders "to capture the profits for themselves, taking the money out of the country".[8] Thus, it is often argued that protection is needed to allow domestic companies the chance to develop before they are exposed to international competition. This is also supported by the anthropologist Trouillot who argues that the current market system is not a free market at all, but instead a privatized market (IE, markets can be 'bought'). Other potential risks resulting from liberalisation, include:

  • Risks of financial sector instability resulting from global contagion[8]
  • Risk of brain drain[8]
  • Risk of environmental degradation[8]
  • Risk of a debt spiral due to decreased tax revenue among other economic problems (oftentimes linked to IMF restructuring though the state government in Kansas is currently encountering this issue).[9]
  • Risk of increased inequality across race, ethnicity, or gender lines. For example, according to the anthropologist Lilu Abu-Lughod we see increased gender inequality in new markets as women lose labor opportunities that existed prior to market liberalization.

However, researchers at thinks tanks such as the Overseas Development Institute argue the risks are outweighed by the benefits and that what is needed is careful regulation.[8] For instance, there is a risk that private providers will 'skim off' the most profitable clients and cease to serve certain unprofitable groups of consumers or geographical areas. Yet such concerns could be addressed through regulation and by a universal service obligations in contracts, or in the licensing, to prevent such a situation from occurring. Of course, this bears the risk that this barrier to entry will dissuade international competitors from entering the market (see Deregulation). Examples of such an approach include South Africa's Financial Sector Charter or Indian nurses who promoted the nursing profession within India itself, which has resulted in a rapid growth in demand for nursing education and a related supply response.[8]

Examples edit

Historical examples edit

See also edit

References edit

  1. ^ Chaudhary, C. M. (2008). India's economic policies. sublime publications. p. 131. ISBN 978-81-8192-121-5.
  2. ^ Tony Blair (2005). "Europe is Falling Behind". Newsweek. Retrieved 4 December 2007.
  3. ^ Zuliu Hu, Mohsin S. Khan. "Why Is China Growing So Fast?". International Monetary Fund.
  4. ^ Gorbachev, Deng to meet on rough roads to reform
  5. ^ . Archived from the original (ASP) on 3 October 2006.
  6. ^ . www.nationalgeographic.com. National Geographic. 24 May 2018. Archived from the original on 24 May 2018. Retrieved 26 March 2019.
  7. ^ "China: Tyranny Tourism Thrives at North Korea's Border". Time. Retrieved 26 March 2019.
  8. ^ a b c d e f g h Massimiliano Cali, Karen Ellis and Dirk Willem te Velde (2008) The contribution of services to development: The role of regulation and trade liberalisation London: Overseas Development Institute
  9. ^ https://news.yahoo.com/kansas-tax-collections-short-expectations-january-222746060.html[dead link]

February 16, 2024
economic, liberalization, economic, liberalisation, lessening, government, regulations, restrictions, economy, exchange, greater, participation, private, entities, politics, doctrine, associated, with, classical, liberalism, neoliberalism, liberalization, shor. Economic liberalization or economic liberalisation is the lessening of government regulations and restrictions in an economy in exchange for greater participation by private entities In politics the doctrine is associated with classical liberalism and neoliberalism Liberalization in short is the removal of controls to encourage economic development 1 Many countries have pursued and followed the path of economic liberalization in the 1980s 1990s and in the 21st century with the stated goal of maintaining or increasing their competitiveness as business environments Liberalization policies may or often include the partial or complete privatization of government institutions and state owned assets greater labour market flexibility lower tax rates for businesses less restrictions on both domestic and foreign capital open markets etc In support of liberalization former British prime minister Tony Blair wrote 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 2 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 in part from having liberalized their economies to foreign capital 3 Many countries nowadays particularly those in the third world arguably were given no choice but to liberalize their economies to remain competitive in attracting and retaining both their domestic and foreign investments This is referred to as the TINA factor standing for there is no alternative For example in China after Cultural Revolution reforms were introduced 4 Similarly in the Philippines the contentious proposals for Charter Change include amending the economically restrictive provisions of their 1987 constitution 5 By this measure an opposite of a liberalized economy are economies such as North Korea s 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 actively trades with China through Dandong a large border port and receives aid from other countries in exchange for peace and restrictions in their nuclear programme 6 7 Another example would be oil rich countries such as Saudi Arabia and the United Arab Emirates citation needed 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 Contents 1 Liberalization of services in the developing world 1 1 Potential benefits 1 2 Potential risks of trade liberalization 2 Examples 2 1 Historical examples 3 See also 4 ReferencesLiberalization of services in the developing world editPotential benefits edit The service sector is probably the most liberalized of the sectors Liberalization offers the opportunity for the sector to compete internationally contributing to GDP growth and generating foreign exchange As such service exports are an important part of many developing countries growth strategies India s IT services have become globally competitive as many companies have outsourced certain administrative functions to countries where costs esp wages are lower Furthermore if service providers in some developing economies are not competitive enough to succeed on world markets overseas companies will be attracted to invest bringing with them international best practices and better skills and technologies 8 The entry of foreign service providers can be a positive as well as negative development For example it can lead to better services for domestic consumers improve the performance and competitiveness of domestic service providers as well as simply attract FDI foreign capital into the country In fact some research suggest a 50 cut in service trade barriers over a five to ten year period would create global gains in economic welfare of around 250 billion per annum 8 Potential risks of trade liberalization edit Trade liberalisation carries substantial risks that necessitate careful economic management through appropriate regulation by governments Some argue foreign providers crowd out domestic providers and instead of leading to investment and the transfer of skills it allows foreign providers and shareholders to capture the profits for themselves taking the money out of the country 8 Thus it is often argued that protection is needed to allow domestic companies the chance to develop before they are exposed to international competition This is also supported by the anthropologist Trouillot who argues that the current market system is not a free market at all but instead a privatized market IE markets can be bought Other potential risks resulting from liberalisation include Risks of financial sector instability resulting from global contagion 8 Risk of brain drain 8 Risk of environmental degradation 8 Risk of a debt spiral due to decreased tax revenue among other economic problems oftentimes linked to IMF restructuring though the state government in Kansas is currently encountering this issue 9 Risk of increased inequality across race ethnicity or gender lines For example according to the anthropologist Lilu Abu Lughod we see increased gender inequality in new markets as women lose labor opportunities that existed prior to market liberalization However researchers at thinks tanks such as the Overseas Development Institute argue the risks are outweighed by the benefits and that what is needed is careful regulation 8 For instance there is a risk that private providers will skim off the most profitable clients and cease to serve certain unprofitable groups of consumers or geographical areas Yet such concerns could be addressed through regulation and by a universal service obligations in contracts or in the licensing to prevent such a situation from occurring Of course this bears the risk that this barrier to entry will dissuade international competitors from entering the market see Deregulation Examples of such an approach include South Africa s Financial Sector Charter or Indian nurses who promoted the nursing profession within India itself which has resulted in a rapid growth in demand for nursing education and a related supply response 8 Examples editEconomic liberalization by region Economic liberalisation in India Economic liberalisation in Myanmar Economic liberalisation in Pakistan Effects of Economic Liberalisation on Education in Tajikistan Baltic Tiger Estonia Latvia Lithuania c 2000 present Economy of Cuba starting in 1994 and accelerating under Raul Castro Indonesian economic boom Starting after the Secession of East Timor in 1999 with the beginnings of the 21st Century Historical examples edit Economic liberalization in the post World War II era Chinese economic reform Perestroika Soviet Union Economic history of Brazil in the 1980s and 1990s Miracle of Chile Đổi Mới Vietnam See also editMultilateral development bank International Monetary Fund IMF World Bank WB Asian Development Bank ADB New Development Bank Capitalism Economic liberalism Free market Globalization Liberalization Neoliberalism PrivatizationReferences edit Chaudhary C M 2008 India s economic policies sublime publications p 131 ISBN 978 81 8192 121 5 Tony Blair 2005 Europe is Falling Behind Newsweek Retrieved 4 December 2007 Zuliu Hu Mohsin S Khan Why Is China Growing So Fast International Monetary Fund Gorbachev Deng to meet on rough roads to reform Philippines Gov Ph About the Philippines Archived from the original ASP on 3 October 2006 A photo journey through China s lesser known cities www nationalgeographic com National Geographic 24 May 2018 Archived from the original on 24 May 2018 Retrieved 26 March 2019 China Tyranny Tourism Thrives at North Korea s Border Time Retrieved 26 March 2019 a b c d e f g h Massimiliano Cali Karen Ellis and Dirk Willem te Velde 2008 The contribution of services to development The role of regulation and trade liberalisation London Overseas Development Institute https news yahoo com kansas tax collections short expectations january 222746060 html dead link Retrieved from https en wikipedia org w index php title Economic liberalization amp oldid 1195157316, wikipedia, wiki, book, books, library,

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