Definitions of liberalization
The term “liberalisation” means “economic freedom” or “freedom for economic decisions.” It follows that the consumers, producers and owners of factors of production all are free to take their decisions to promote their self interest.
Even the classical economists advocated economic liberalization to promote economic growth and wellbeing. According to them, “the economic policy which leads to reduction, if not removal, of barriers in the working of market mechanism and free competition is called economic liberalization.”
Classical economists such as David Ricardo and Adam Smith were strongly in favor of free trade, believing that it led to the economic prosperity of civilizations. They pointed to examples of civilizations that had flourished as a result of increased trade liberalization, such as Egypt, Greece, and the Roman Empire, as well as the more modern example of the Netherlands.
Classical Economists pointed out that, “free trade is the best policy,” as it leads to optimum use of world’s resources through international division of labour and specialisation.
Modern economists who favor trade liberalization cite evidence that it creates jobs, fosters economic growth, and improves the standard of living because of increased consumer choice in the marketplace.
According to Dr M Ramanjaneyalu, “economic liberalization means scrapping of the undesirable restrictions, controls and licensing over investment, imports and production.”
Thus liberalization means a complete abolition of trade barrier. In other words it means to make the economy free from unnecessary controls and regulations such as licensing, import quota, tariffs etc which hinders the economic development.