Microeconomic reform (or often just economic reform) comprises policies directed to achieve improvements in economic efficiency, either by eliminating or reducing distortions in individual sectors of the economy or by reforming economy-wide policies such as tax policy and competition policy with an emphasis on economic efficiency, rather than other goals such as equity or employment growth.
"Economic reform" usually refers to deregulation, or at times to reduction in the size of government, to remove distortions caused by regulations or the presence of government, rather than new or increased regulations or government programs to reduce distortions caused by market failure. As such, these reform policies are in the tradition of laissez faire, emphasizing the distortions caused by government, rather than in ordoliberalism, which emphasizes the need for state regulation to maximize efficiency.
Microeconomic reform in Australia
Microeconomic reform dominated Australian economic policy from the early 1980s until the end of the 20th century. The beginning of microeconomic reform is commonly[who?] dated to the floating of the Australian dollar in 1983. The last major policy initiatives associated with the microeconomic reform agenda was the package of tax reforms centered on the Goods and Services Tax (GST) which came into force in July 2000, and the privatization of Telstra which began in 1998 and was completed in 2006.
There were, however, some instances of microeconomic reform before the 1980s, notably including the Whitlam government’s 25 percent tariff cut. Similarly, the consequences of some microeconomic reforms initiated in the 1990s, such as National Competition Policy are still being worked through.[clarification needed]
The policy agenda associated with microeconomic reform included:[citation needed]
The Chinese economic reform (simplified Chinese:改革开放; traditional Chinese:改革開放; pinyin:Gǎigé kāifàng) refers to the program of economic changes called "Socialism with Chinese characteristics" in the People's Republic of China (PRC) that were started in 1978 by pragmatists within the Chinese Communist Party (CCP) led by Deng Xiaoping and are ongoing as of the early 21st century. The goal of Chinese economic reform was to generate sufficient surplus value to finance the modernization of the mainland Chinese economy. Neither the socialistcommand economy, favored by CCP conservatives, nor the Maoist attempt at a Great Leap Forward from socialism to communism in China's agriculture (with the commune system) had generated sufficient surplus value for these purposes. The initial challenge of economic reform was to solve the problems of motivating workers and farmers to produce a larger surplus and to eliminate economic imbalances that were common in command economies. Economic reforms started since 1978 have helped lift millions of people out of poverty, bringing the poverty rate down from 53% of the population in 1981 to 8% by 2001.[1]
The economic liberalization of 1991, initiated by then Indian prime minister P. V. Narasimha Rao and his finance minister Manmohan Singh, did away with investment, industrial and import licensing and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors.[2] Since then, the overall direction of liberalization has remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labor laws and reducing agricultural subsidies.[3]
The effect of these reforms has been positive, and since 1990, India has had high growth rates and has emerged as one of the wealthiest economies in the developing world. During this period, the economy has grown constantly with only a few major setbacks. This has been accompanied by increases in life expectancy, literacy rates, and food security since then.
The policies included cutting subsidies and trade barriers, privatising public assets and the control of inflation through measures rooted in monetarism. These policies were regarded in some quarters of Douglas's New Zealand Labour Party as a betrayal of traditional Labour ideals. The Labour Party subsequently retreated from these policies, but it became the core doctrine of the New Zealand ACT party.
The reforms created a very business-friendly regulatory framework. A 2008 study ranked New Zealand 99.9% in "business freedom", and 80% overall in "economic freedom", noting amongst other things that it only takes 12 days to establish a business in New Zealand on average, compared with a worldwide average of 43 days. Other indicators measured were property rights, labor market conditions, government controls and corruption, the last being considered "next to non-existent" in The Heritage Foundation and Wall Street Journal study.[4]
Economic reforms began in the Soviet Union when Perestroika was introduced in June 1985 by the then Soviet leader Mikhail Gorbachev. Its literal meaning is "restructuring", referring to the restructuring of the Soviet economy.
During the initial period (1985–1987) of Mikhail Gorbachev's time in power, he talked about modifying central planning, but did not make any truly fundamental changes (uskoreniye, acceleration). Gorbachev and his team of economic advisers then introduced more fundamental reforms, which became known as perestroika (economic restructuring).
Economic reform began in Africa throughout Africa in the mid-1990s. Before that, the two decades of donor-sponsored reform efforts to Africa failed to help most sub-Saharan economies to overcome the fiscal and balance of payments deficits. During the mid-1990s, several civil wars ended and a wave of democratization started. The growth rate reached 1.2 percent a year between 1994 and 1997 which is the highest rate during that generation. However, the growth is a result of a donor-led process of structural adjustment as compatible with the survival of the status quo. The growth rate started to decline after 1998 and civil wars reactivated again by then. The two-decade failure reform leaves many African countries incapable of leading another economic reform.[5]
North Korea is a communist country with the central economic planning system. With the ongoing nuclear issue, North Korea is politically and economically isolated from other countries. Therefore, several tries for economic reforms did not appear to be successful.[original research?]
Its economy relied heavily on the defense industry and the consumer goods industry had been overlooked according to the juche policy. Under the Third Seven-Year Economic Plan (1987–93), DPRK aimed to focus on technology-based industry and to solve their scarcity of electricity.[6] Nevertheless, it did not give a satisfiable result. One of the causes was its relationship with trading partners and losing supportive allies. In response, North Korea tried to attract foreign investors by endorsing joint venture and opening some free-trade zones. Unluckily, with other factors, this policy was not practical. In addition, it also had to encounter a massive military expenditure to secure its leader with both internal and external threat.[7]
Later in 2002, there was another attempt to make a market liberalization reform, which the government tries to let the demand and supply determine the price level, which used to be controlled by the central government. It also gave some authority to local producers to make some economic decisions by themselves. Other than the decentralization policy, North Korea also kept trying to induce foreign investors in several ways, including depreciation of its currency and the initiation of Sinuiju Special Administrative District.[8]
Still, its solution to successfully reform its economy appears to be contradicting with its leader security regimes. Kim Jong-il's goal, “kangsong taeguk” or “rich nation/strong army,” appears to be unachievable. It caused him facing a reform dilemma. Opening up the country likely to facilitate the reform to be successful, while it would also make its dictatorship insecure. [original research?]
The economy of Chile is a market economy and high-income economy as ranked by the World Bank. The country is considered one of South America's most prosperous nations, leading the region in competitiveness, income per capita, globalization, economic freedom, and low perception of corruption. Although Chile has high economic inequality, as measured by the Gini index, it is close to the regional mean.
Perestroika was a political reform movement within the Communist Party of the Soviet Union (CPSU) during the late 1980s widely associated with CPSU general secretary Mikhail Gorbachev and his glasnost policy reform. The literal meaning of perestroika is "restructuring", referring to the restructuring of the political and economic systems of the Soviet Union, in an attempt to end the Era of Stagnation.
The economy of South Korea is a highly developed mixed economy. By nominal GDP, it has the 4th largest economy in Asia and the 12th largest in the world. South Korea is notable for its rapid economic development from an underdeveloped nation to a developed, high-income country in a few generations. This economic growth has been described as the Miracle on the Han River, which has allowed it to join OECD and the G-20. South Korea remains one of the fastest-growing developed countries in the world following the Great Recession and the COVID-19 recession. It is included in the group of Next Eleven countries as having the potential to play a dominant role in the global economy by the middle of the 21st century.
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and policy that taxes foreign products to encourage or safeguard domestic industry. Protective tariffs are among the most widely used instruments of protectionism, along with import quotas and export quotas and other non-tariff barriers to trade.
In microeconomics, economic efficiency, depending on the context, is usually one of the following two related concepts:
In economics, shock therapy is a group of policies intended to be implemented simultaneously in order to liberalize the economy, including liberalization of all prices, privatization, trade liberalization, and stabilization via tight monetary policies and fiscal policies. In the case of post-Communist states, it was implemented in order to transition from a command economy to a market economy.
Structural adjustment programs (SAPs) consist of loans provided by the International Monetary Fund (IMF) and the World Bank (WB) to countries that experience economic crises. Their stated purpose is to adjust the country's economic structure, improve international competitiveness, and restore its balance of payments.
In justifying opening up and the series of economic reforms that ensued, Deng referred to Marx and his theories, which predicted that nations need to undergo urbanization and a stage of capitalism for a natural socialist transition. One of the most renowned reforms under Deng was establishing four "special economic zones" along the Southeastern coast of China, with Shenzhen, Shantou, and Zhuhai located in Guangdong province and Xiamen located in Fujian province. Special economic zones (SEZs) in mainland China are granted more free market-oriented economic policies and flexible governmental measures by the government of China, compared to the planned economy elsewhere.
The Licence Raj or Permit Raj is a pejorative for the system of strict government control and regulation of the Indian economy that was in place from the 1950s to the early 1990s. Under this system, businesses in India were required to obtain licenses from the government in order to operate, and these licenses were often difficult to obtain.
The term "Hindu rate of growth" was coined by the Indian economist Raj Krishna in 1978. It refers to the annual growth rate of India's economy before the economic reforms of 1991, which averaged 4% from the 1950s to the 1980s. Advocates of liberalisation often use this term. However, modern neoliberal economists criticise the term, as they believe that the low growth rate was caused by the failed five-year plan model and economic mismanagement. Many economists worldwide characterise the economic system after the 1990s as Dirigisme.Dirigiste policies often include indicative planning, state-directed investment, and the use of market instruments to incentivize market entities to fulfill state economic objectives.Eighth Five Year Plan was for managing the transition from a centrally planned economy to market led economy through indicative planning.
The Japanese economic miracle refers to Japan's record period of economic growth between the post-World War II era and the end of the Cold War. During the economic boom, Japan rapidly became the world's second-largest economy. By the 1990s, Japan's population demographics had begun to stagnate, and the workforce was no longer expanding as quickly as it had in the previous decades despite per-worker productivity remaining high.
The economic history of Brazil covers various economic events and traces the changes in the Brazilian economy over the course of the history of Brazil. Portugal, which first colonized the area in the 16th century, enforced a colonial pact with Brazil, an imperial mercantile policy, which drove development for the subsequent three centuries. Independence was achieved in 1822. Slavery was fully abolished in 1888. Important structural transformations began in the 1930s, when important steps were taken to change Brazil into a modern, industrialized economy.
Economic liberalization, or economic liberalisation, is the lessening of government regulations and restrictions in an economy in exchange for greater participation by private entities. In politics, the doctrine is associated with classical liberalism and neoliberalism. Liberalization in short is "the removal of controls" to encourage economic development.
The economic history of China describes the changes and developments in China's economy from the founding of the People's Republic of China (PRC) in 1949 to the present day.
Li Kwoh-ting was a Taiwanese economist and politician best known as the "Father of Taiwan's Economic Miracle" and referred to by the New York Times as the "Godfather of Technology" in Taiwan for his work in transforming Taiwan's economy from an agrarian-based system into one of the world's leading producers of information and telecommunications technology.
The economic liberalisation in India also popularly known as Opening up of Indian economy(within India) refers to the series of policy changes aimed at opening up the country's economy to the world, with the objective of making it more market-oriented and consumption-driven. The goal was to expand the role of private and foreign investment, which was seen as a means of achieving economic growth and development. Although some attempts at liberalisation were made in 1966 and the early 1980s, a more thorough liberalisation was initiated in 1991.
The Chinese economic reform or Chinese economic miracle, also known domestically as Reform and Opening-up refers to a variety of economic reforms termed "socialism with Chinese characteristics" and "socialist market economy" in the People's Republic of China (PRC) that began in the late 20th century. Guided by Deng Xiaoping, who is often credited as the "General Architect", the reforms were launched by reformists within the ruling Chinese Communist Party (CCP) on December 18, 1978, during the "Boluan Fanzheng" period.
China's current mainly market economy features a high degree of income inequality. According to the Asian Development Bank Institute, “before China implemented reform and opening-up policies in 1978, its income distribution pattern was characterized as egalitarian in all aspects.”
Directly after World War II saw many countries adapt policies of economic liberalization in order to stimulate their economies.
Pakistan began a period of economic liberalisation in the 1990s to promote and accelerate economic independence, development, and GDP growth.
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