Economic liberalization and poverty in the developing countries

Abstract

In recent years the neoliberal economists have sought to establish the claim that economic liberalization unfailingly promotes growth and reduces poverty in the developing countries. Liberalization of markets in the developing countries, according to them, promotes economic perfection by intensifying competition between domestic and external economic actors and exposing management and workers to improved practices. Thay also claim that liberalization of trade and investment regimes by the developing countries has attracted more direct foreign and portfolio investment which, in turn, has accelerated the rate of economic growth and lifted the poor out of poverty. This article contends this neoliberal claim and argues that the post-Cold War neoliberal regime of global economic liberalization ensures the production of poverty in the developing countries by shrinking their prospects of economic growth. It pursues a structural explanation to explore how the neoliberal regime fosters conditions that make possible the continued production of poverty in the developing South and arrives at the conclusion that the neoliberal regime of economic liberalization was not designed to promote growth in the developing countries, rather it was initiated to facilitate capital accumulation by transnational capitalist class at the global level. As its consequence, the poverty situation has not improved; rather there has been a rise in absolute poverty in many developing countries.