Currently we are witnessing an era of globalization where economic policy reform has assumed paramount importance. This is more the case in developing countries. It was back in the 1980s that the term globalization started gaining prominence. Today, many nations have adopted the Liberalization, Privatization and Globalization (LPG) approach.
Following World War II, countries sought to facilitate the movement of capital and other factors of production across geographical borders. As such, the mobility of the four main factors of production (capital, labor, goods and services, and technology) increased and the era of globalization began.
With the international economic situation changing rapidly, developing countries felt it necessary to introduce economic reforms that accommodated the processes of globalization. While globalization is an international phenomenon, economic reforms at national levels are required to promote its growth.
Many developing economies that were still following a state-controlled economic structure began introducing economic reforms, with the objective of shifting towards a liberal economic structure and fostering globalization.
Economic reforms promoting globalization focus on shifting to an open market economy. Giving more autonomy to financial institutions, encouraging private and international investments, and allowing economic agents to operate without undue regulations are some of the key features of such economic reforms.
IMF and the World Bank have played a major role in globalization and economic reforms. Incentives offered to many developing countries in exchange for making economic reforms have helped the spread of globalization. The Liberalization, Privatization, Globalization (LPG) approach received a big boost due to IMF and World Bank policies. The GATT (General Agreement on Tariffs and Trade) also played a significant role in ushering in globalization-minded economic reforms.
China and India are the two countries that have successfully implemented economic reforms in the era of globalization. China’s economy has been socialist in structure while India’s is a traditional, agriculture-oriented, feudalistic economy. Both economies implemented numerous reforms over the last few years. The results in both the cases have been highly encouraging and have set a high standard for other developing economies.
Last Updated on : 20th Feb 2017