Economic Liberalization
ECONOMIC LIBERALIZATION
1. Introduction:
From the end of World War II into 1960s, the formative period of what we now call “Development Economics” intense debate centered on why some countries grew rich while others languished. Because scars from the great depression were still fresh, the traditional nineteenth-century liberal approach based on free trade in domestic and foreign markets was somewhat discredited.
Instead, influential economists tended to emphasize problems of market failure and the need for informed official intervention – with import tariffs or domestic subventions – to overcome economic or technical backwardness.
Also, in the 1950s and 1960s the centrally planned economies of Eastern European apparently grew exceedingly fast, with the former Soviet Union (FSU) in particular showing impressive overall technical achievements.
Thus governments in less developed countries (LDCs) throughout Latin America, Africa and parts of Asia were emboldened to intervene quite massively in their domestic economics.
Protectionism in foreign trade, price controls, and subsides in domestic trade and exclusive franchises for parastatals (State Owned Enterprises) proliferated in all branches of industry. Instead of an open capital market, detailed controls over the flow of money and credit ensured that the repressed financial markets passively served the governments’ own ends. Indeed, in the centrally planned socialist economies, the banking system was completely passive: credit at zero or disequilibrium low rates of interest were provided automatically if necessary to ensure plan fulfillment.
However, in mid of 1980s, astonishing change occurred in this once dominant ideology of economic development.
In the marketplace of ideas in the late 1970s few could have predicted that the principle of decentralized economic liberalism would by 1990s triumph so completely over that of centralized of planning and control.
Nowhere is this change in economic thinking, although
1. Introduction:
From the end of World War II into 1960s, the formative period of what we now call “Development Economics” intense debate centered on why some countries grew rich while others languished. Because scars from the great depression were still fresh, the traditional nineteenth-century liberal approach based on free trade in domestic and foreign markets was somewhat discredited.
Instead, influential economists tended to emphasize problems of market failure and the need for informed official intervention – with import tariffs or domestic subventions – to overcome economic or technical backwardness.
Also, in the 1950s and 1960s the centrally planned economies of Eastern European apparently grew exceedingly fast, with the former Soviet Union (FSU) in particular showing impressive overall technical achievements.
Thus governments in less developed countries (LDCs) throughout Latin America, Africa and parts of Asia were emboldened to intervene quite massively in their domestic economics.
Protectionism in foreign trade, price controls, and subsides in domestic trade and exclusive franchises for parastatals (State Owned Enterprises) proliferated in all branches of industry. Instead of an open capital market, detailed controls over the flow of money and credit ensured that the repressed financial markets passively served the governments’ own ends. Indeed, in the centrally planned socialist economies, the banking system was completely passive: credit at zero or disequilibrium low rates of interest were provided automatically if necessary to ensure plan fulfillment.
However, in mid of 1980s, astonishing change occurred in this once dominant ideology of economic development.
In the marketplace of ideas in the late 1970s few could have predicted that the principle of decentralized economic liberalism would by 1990s triumph so completely over that of centralized of planning and control.
Nowhere is this change in economic thinking, although
References: | | | 1. The Order of Economic Liberalization: Financial Control in the Transition to a Market Economy, Ronald Mckinnon: Johns Hopkins studies in Development. 2. Economic Liberalization and Labor Markets: Contributions in Labor (Num51) : Parviz Dabir-Alai, Mehmet Odekon. 3. Liberalisation and Globalisation of Indian Economy, Volume 7 - Kulwant Rai Gupta 4. Chaudhary, C.M... India 's economic policies. Sublime publications. pp. 131. ISBN 978-81-8192-121-5. 5. Tony Blair (2005). "Europe is Falling Behind". Newsweek. http://findarticles.com/p/articles/mi_kmnew/is_200511/ai_n16073679. Retrieved 2007-12-04. 6. Economic liberalization and poverty reduction : http://www.un.org/esa/socdev/rwss/docs/2010/chapter6.pdf