Advantages Of Economic Liberalism

1149 Words 5 Pages
This issue to be discussed in the following essay concerns developing countries and whether or not they should approach the structure of their economy in an economically liberal manner. When discussion arises on how developing countries should organize their economies two conflicting ideas arise: economic liberalism or modernization theory, and dependency theory which is a critique of economic liberalism. Modernization theory is a view that believes in sustainable economic growth through efficient production, invention, and capital investments. This theory promotes free trade and privatization. Dependency theory is a view which believes that the core capitalist countries exploit countries on the economic periphery. This theory pegs free trade …show more content…
Economic liberalism is the mindset that should be adopted, the approach needs be weary because any massive overhaul of an economic system is likely to through a country into turmoil. An example provided by Dr. Jeske (2016b) takes in to consideration food subsidies of a poor country, an economic liberalism approach would remove these subsidies which subsequently cause a rise in food prices, and a vast majority of the poorest of the populous would starve. This demonstrates the need for economic liberalism to be integrated in a thoughtful and meticulous manner. An economically liberal approach is more effective than one based off dependency theory because it has worked before. This is illustrated by one of N. Gregory Mankiw 's principles of economics, that “Markets are usually a good way to organize economic activity” (1998, 9). Economic liberalism will expedite the development of a country, because developed countries are encouraging it with aid assistance. Developing countries are more likely to be assisted if they are taking an economically liberal approach to their own economy, which is a form of foreign investment that is part of the modernization …show more content…
John Boyer refers to three strategies to escape the economic periphery: Nationalize a resource, Import-substitution, and specialization (2015, 85-86). The first two play more toward dependency theory, nationalizing a resource prevents corporations from taking advantage of that country. Import-substitution completely blocks free trade of a certain product, forcing that product to be domestically produced and sold. Specialization is a way to escape the periphery that relies on a free market, and an export based economy. China has specialized in manufacturing, India in services, and Brazil in steel, which has set them on the fast-track to development (Boyer 2015, 86). Taiwan and South Korea are also members of states that are working their way from the economic periphery to the core (Boyer 2015, 86), proving that an economic liberalism approach has worked. The issue is that when a developing economy becomes export based they are at the mercy of international markets, this is especially present if they have a comparative advantage in few areas. That is why it is important that these developing countries are careful in how they expose themselves to this risk, and drawing out full integration of economic liberalism will be the best way to mitigate immediate risk while building a more modernized

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