Economic Reform Movement

Abstract:
Economic reform movements have been undertaken in many countries to bring about changes in prevailing economic structures. Many countries who adopted controlled economic systems in the 1950s and 1960s faced severe economic crisis during late 1960s and economic reform movements took place to shift to an open market system.
Important reform movements took place in Chile, Britain, USA, Russia and China. Economic reform movements refer to the movements of the people that have taken place in several countries across the globe with an aim to bring about a change in the prevailing economic system. In recent times most economic reform movements have been undertaken with the aim of changing towards a liberal economy with lesser government intervention.

Reform movements generally lead to gradual changes. The results from economic reform movements have been encouraging.

After the success of liberal economic policies in the eighteenth and nineteenth centuries, a shift occurred towards a state controlled economy in the early 20th century.
The Great Depression and the consequent economic theories by J.M. Keynes played an important role in this aspect. Moreover with the rapid growth of industrialization in USSR and the growing economic perception that free market economic systems were not capable of effective industrialization further augmented the shift towards controlled economies during the 1950s and 1960s.

However towards the late 1960s, this system faced economic crisis and the need was felt to shift towards an open market economic system by many. The growing problems of stagnation of economic growth and inflation under a controlled economy lead to economic reform movements being undertaken to bring about a change in the economic system. Economic reform movements in many countries have been considerably successful and although reform measures have been implemented slowly, in phases, many countries have grown significantly after the economic reform movements. Moreover the global economy has also benefited from these economic reform movements.
Economic reform movements in different countries
Chile – In Chile economic reform movement was undertaken under the leadership of Augusto Pinochet. This reform movement however had a significant political aspect as well, including a coup to overthrow the government of Salvador Allende. In 1970 the government of Salvador Allende came to power in Chile and implemented several socialist economic policies. In the next three years the economy of Chile and particularly the industrial sector faced several crises and the need of an economic reform movement became necessary. The army was requested to step in, and under the leadership of Augusto Pinochet the armed forces overthrew the Allende government and took up reform measures to restructure the economy.

The major initiatives included –
Extensive re-privatization of banks and public sector enterprises.
Privatization of the pension system.
Abolition of minimum wage regulations.
Abolition of price control on food items.
Reduction of trade union rights.
Lowering taxes on profits.

Great Britain – In Britain economic reform movements were led by Margaret Thatcher when the British economy was facing stagnation. After she was elected as prime minister she adopted reform measures to solve the economic problems.

These included –
Controlling inflation.
Removing economic controls.
Reducing the power of trade unions.

USA – In USA the economic reform movement was led by Ronald Reagan who took stringent decisions to achieve a liberal free market economy. He deregulated the American economy significantly. His policies are termed as “Reaganomics”.

Russia – BorisYeltsin led the economic reform movement in Russia long with Yegor Gaydar, a reform economist. Yeltsin and his supporters undertook economic reform movements in October 1991, two months before the collapse of the Soviet Union.

The important aspects of the reform movement included –
Reduction on government spending
Reducing budget deficit.
Removal of price controls.
Introduction of Value Added Tax (VAT).

China – In China economic reform movements were led by Deng Xiaoping. The reform movement was aimed at development of the Chinese economy by introducing structural changes in regulations and production process and is sometimes dubbed as China’s “Second Revolution”.

 

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Last Updated on : 26th June 2013

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