Free Markets DO Work in Developing Countries
The assumption that free market reforms have failed to resurrect the economies of developing countries has become orthodoxy in some circles. Critics contend that market approaches are incompatible with the realities in developing countries. Yet despite the assault on market reforms in developing regions, there is insufficient evidence to justify the discontent of critics.
Successful markets are not contingent on geography and race, but culture can determine the effectiveness of economic reforms. In an analysis of economic freedom reforms, researchers from Winthrop University aver that individualism bolstered the efficacy of democracy in cultivating economic freedom in eighty countries between 1950 and 2015. Correspondingly, similar research shows that there is a link between support for markets and a country’s economic freedom.
Economic reforms are often imposed on developing countries by Western agencies and are perceived as illegitimate by citizens and politicians. Usually, countries invest in reform programs because they were coerced to do so rather than because they believe in the efficacy of markets. Economic reforms compete with long-held cultural beliefs, elite privileges, and the short-termism of politics.
The failure of market-reform programs to scale in the developing world results from institutional and political deficits rather than an innate defect in markets. Improved institutions, especially in economics, promote long-term growth. Policy makers ought to
Article from Mises Wire