The two terms, liberalisation and globalisation have come to dominate the discourse in development economics. In simple words, liberalisation refers to the freeing of trade, investment and capital flows between countries.
It implies the simplifying procedures of business, i.e. merchandise trade, foreign investments, and trade in services, etc., so that countries can do business without hassles. It underlines the less interventionist and more cooperative role of the government in facilitating international business.
The core of trade liberalisation is reduction in import tariff (i.e. custom duties) and non-tariff barriers. The liberalisation of investment underscores the fact that the private domestic and foreign investors can participate either in production activities or in management of manufacturing /service sector companies as per the procedures laid down by the government.
The liberalisation of capital flows implies an investor (domestic and foreign) can bring in or withdraw his investment on short term current as well as long-term capital account at any point of time. Globalisation, on the other hand, is relatively a broader term which encompasses a wide range of phenomena.
ADVERTISEMENTS:
It refers both to the integration of production facilities in different countries under the aegis or ownership of the multinational corporations (MNCs) and to the integration of product and financial markets facilitated by liberalisation. In simple words, globalisation means expansion of economic activities across the political boundaries of nation states.
It underlines the increasing economic openness and growing economic interdependence between countries. Another term that has gained currency in recent years is privatisation.
It indicates the disinvestment of state assets (i.e. stocks/shares) in government owned enterprises. By doing so, the ownership of public enterprises get transferred to private entrepreneur. Under privatisation, private participation is permitted in management of public sectors undertakings.