Document Type

Article

Publication Date

Fall 2013

Abstract

The theory of trade and capital market liberalization has been floated around in discussions about economic stability and development for decades. Due to the fact that the world is becoming more and more interdependent and interconnected each and every day, the necessity for a global market emerged in the early 1990’s. The Western response to globalization in many cases was dubbed the "Washington Consensus," of which trade liberalization is a huge part. The idea of trade liberalization is centralized in the idea of a free-market economy, originally posited by Adam Smith. His model proposed the idea of the "invisible hand", the idea that the market would regulate itself and would not need government interference in order to do so; this led to many of the ideas discussed in the concept of trade liberalization. By opening markets and removing or at least reducing trade barriers with countries around the world, the hope was that economies would thrive. This theory of aggressive trade liberalization, however, has numerous flaws which must be taken into consideration before applying the policies to developing nations. While the Washington Consensus policies of trade liberalization may work for some countries, it has effectively crippled numerous others, due to its inability to take into account numerous other factors within a country. As economic and political history has shown, the idea of aggressive policies of trade liberalization is not always the smartest option to pursue, while a greater focus on the inner development of a country and slow liberalization may be the true keys to economic success in developing countries. Discussions about such policies of trade liberalization were brought about through a concerted realization of the need for a global economic structure and stability following one of the most devastating wars in recent memory.

Comments

Senior capstone project by Stephen T. Hanshaw as part of the requirement for participation in the Thomas More Honors Program at Sacred Heart University. The paper was part of the course work for the Government and Politics Department (PO-395-A, faculty advisor Dr. Alka Jauhari).


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