Neo-liberal comic reforms have been undertaken from the 1970s to 1990s in several countries. These reforms reinforce the classical liberalist economy concept. Neo-liberal economic reforms have lead many economies to high growth. These reforms include significant measures that have major impacts on the structure and functioning of an economy.
Neo-liberal economic reforms refer to the reform programs undertaken in different parts of the world from the 1970s to the 1990s and still continuing in many countries. These reforms reinforce the concepts of classical liberalism that originated in the 18th and 19th centuries and propounded the idea of laissez-faire economy.
However, the neo-liberal reforms have innovated characteristics that suit the economic situation prevailing in the late 20th century and are expected to have considerable influence in the 21st century. Neo-liberal economic reforms have spurred growth in several economies.
Countries like China and India have grown significantly after implementing neo-liberal economic reforms. Neo-liberal reforms have been libertarian in their approach and have identified government intervention in economic activities as undesirable and inefficient. These reforms have focused on globalization and increased economic co-operation between nations.
Neo-liberal economic reform measures
Neo-liberal economic reforms have incorporated several measures that are aimed at reducing the control of government on economy and increasing the importance of the private sector. While different policy reform measures have been adopted by different countries, certain aspects have remained at the core of neo-liberal economic reforms worldwide.
- Privatization: Neo-liberal economic reform measures in all countries have focused on privatization of public sector enterprises. This is done to shift the economic power from the public sector to the private sector.
- No price control measures: Neo-liberal reforms have emphasized the prevailing of market prices without any government initiated price control measures.
- No state control on exchange rates: Similar to non-control of price, neo-liberal economic reforms emphasize the non-control of exchange rates y the government. Under neo-liberal reforms, it is expected that exchange rates would be market determined.
- Trade Liberalization: Removing barriers to trade through measures like removal of tax and tariff barriers, withdrawing regulatory control, etc, is at the core of neo-liberal economic reforms.
- Fiscal Measures: Certain important changes are executed in tax structure in neo-liberal economic reforms. Tax benefits are to be provided to boost economic activity in the private sector.
- Non-intervention of Government: Neo-liberal reforms require that Government should not intervene in economic activities through regulations, etc.
- Deregulation: The process of deregulation is important in the context of neo-liberal economic reforms. Deregulation ensures the non-intervention of the state in economic activities and paves the way for a market oriented economy.
Impact of neo-liberal reforms
Neo-liberal economic reforms have had significant impact on the economies that have adopted them. Third world countries have undergone radical structural changes after the implementation of reforms. In most cases these reforms have led to high growth rates in these economies. Although the magnitude of impact of neo-liberal economic reforms has varied in different economies, some general trends have been noticed in the nature of effects –
- Significant decrease in employment in the government sector.
- Rise in the volume of international trade activities.
- Increased spending by governments in the social sector like health, education, infrastructure, housing, etc.
- Smaller size of governments and regulating bodies.
Last Updated on : 26th June 2013