Meaning of Economic liberalization
Economic liberalization is a very broad term that usually refers to fewer government regulations and restrictions in the economy in exchange for greater participation of private entities.
The arguments for economic liberalization include greater efficiency and effectiveness that would translate to a “bigger pie” for everybody. Thus, liberalisation in short refers to “the removal of controls”, to encourage economic development.
Most first world countries, in order to remain globally competitive, have pursued the path of economic liberalization, partial or full privatisation of government institutions and assets, greater labour-market flexibility, lower tax rates for businesses, less restriction on both domestic and foreign capital, open markets, etc. British Prime Minister Tony Blair wrote that: “Success will go to those companies and countries which are swift to adapt, slow to complain, open and willing to change. The task of modern governments is to ensure that our countries can rise to this challenge.”
In developing countries, economic liberalization refers more to liberalization or further “opening up” of their respective economies to foreign capital and investments. Three of the fastest growing developing economies today; Brazil, China and India, have achieved rapid economic growth in the past several years or decades after they have “liberalized” their economies to foreign capital.
Many countries nowadays, particularly those in the third world, arguably have no choice but to also “liberalize” their economies in order to remain competitive in attracting and retaining both their domestic and foreign investments. This is called TINOA factor (i.e. there is no alternative). For example, In 1991, India had no choice but to implement economic reforms.