The Recent Move in Less Developed and Newly Industrializing Countries Towards the Market Economy and Globalization

Abstract

After WW2 and till mid '70s most LDCs and NICs implemented a closed economy, import-substitute industrialization model with excessive interventionism, protectionism and statism. The results were slow growth due to balance of payments crises and worsening income distribution due to inflation.Therefore, since mid '70s most moved to market economy, outward orientation and export encouragement. This necessitated encouraging private investments and DPIs, flexible exchange regime, freer foreign trade, and implementation of privatization.Since '90s, this time large flow of financial funds from DCs to LDCs and NICs, III addition to free foreign trade and flow of DPIs ushered in the process of globalization. 1997-8 global financial crisis slowed the flow of funds and DPIs, but globalization continued in essence while China and India entered free market economy with remarkable success.What is important, market economy and globalization reduces excesses of interventions, protectionism and statism. But there is still room and need for "good governance" on the part of the governments of LDCs and NICs to avoid pitfalls and reap greater benefits.