By Dipesh Ghimire
Liberal Economic Policies for Economic Development
This article explores the connection between economic development, liberal economic policies, and liberalization. It emphasizes the necessity of prudent and effective regulation for implementing liberal policies, analyzes their positive impacts, and addresses the challenges posed by weak regulatory frameworks. The article concludes with practical solutions to accelerate Nepal's economic growth through refined liberal policies.
Economic Development:
Economic development refers to the comprehensive growth of physical infrastructure (such as transport, electricity, and communication) and social infrastructure (such as education, healthcare, and drinking water). It also involves the overall advancement of the real sector, public finance, financial sector, and external sector. Nobel laureate economists view development as a form of freedom — freedom from poverty, corruption, and poor governance, enabling individuals to improve their quality of life and make independent choices.
Economic Policy and Liberal Economic Policy:
Economic policy encompasses the strategies adopted by a state to manage, develop, and stabilize its economy. Liberal economic policy specifically reduces or eliminates government intervention, allowing market forces to operate freely. While countries like North Korea and Cuba follow command economies, developed nations like the USA and the UK adopt liberal policies. Mixed economies like Nepal and India combine elements of both systems, but the global trend since the 1990s has leaned toward liberalization, even influencing socialist countries like China.
Economic Liberalization in Nepal and Other Countries:
Economic liberalization involves reducing government control and adopting policies that enhance competitiveness. Nepal began this process post-1990, following the restoration of democracy. Licensing systems were abolished in industries like banking and communication, and foreign investment was encouraged. Despite political instability, Nepal's economy has gradually progressed under this framework. India, starting in 1992, achieved remarkable growth, becoming the world’s fifth-largest economy. China also embraced liberalization in the late 1970s, transforming into a global economic power.
Objectives of Liberal Economic Policies:
Foster a competitive environment for rapid economic growth.
Modernize the economy and integrate it into global markets.
Encourage private sector involvement and foreign investment.
Promote trade and industrial development.
Strengthen economic efficiency and reduce public debt burdens.
Significance of Liberal Economic Policies:
Liberal economic policies symbolize economic freedom, empowering citizens and fostering sustainable development. In Nepal, these policies have led to structural changes, with private sector contributions reaching 80% of the economy. Effective regulation, however, remains crucial to mitigate challenges like inflation, unemployment, and inequality.
Challenges of Liberalization and Weak Regulation:
Political Instability: Frequent government changes disrupted policy continuity.
Weak Regulation: Inadequate regulatory capacity hampered effective liberalization.
Inflation and Unemployment: Initial phases of liberalization led to economic instability.
Monopolistic Practices: Cartels and syndicates undermined competitiveness.
Regulatory Deviations: Over-regulation and inefficiencies weakened the impact of liberalization.
Recommendations for Refining Liberal Policies:
Establish multi-party consensus on economic policies for stability.
Enhance regulatory capacities and align liberalization with governance capabilities.
Ensure free or subsidized healthcare and education for disadvantaged groups.
Balance liberal policies with social welfare through progressive capitalism.
Strengthen governance and management for effective policy implementation.
Liberal economic policies have brought structural transformations and driven economic growth globally. Despite challenges, their benefits far outweigh their drawbacks. For Nepal, refining and advancing liberal policies with multi-party consensus and robust regulatory frameworks is critical for economic acceleration. Adopting progressive capitalism, as advocated by Nobel laureates, would ensure inclusive and sustainable development, positioning Nepal on a trajectory toward economic prosperity.
