The Impact of Liberalism

Several scholars have come up with theories which try to guide countries on how to achieve development. One such theory is Liberalism. This essay aims to explain the theoretical assumptions of the liberal approach to development and to discuss its applicability to the development of modern day developing countries. It begins by defining the key concepts, thereafter, it will discuss the topic at hand and finally, a conclusion on the entire essay will be drawn. Todaro and Smith (2003:15), define development as a multi-dimensional process involving major changes in social structures like, popular attitudes and national institution as well as acceleration in economic growth, the reduction of inequality and eradication of poverty.
Liberalism is the ideological belief in organising the economy on individualist lines, meaning that the greatest possible number of economic decisions is made by individuals and not by collective institutions or organisations. Liberalism also places an extremely important emphasis on individual freedom. It arose to eliminate the intervention of the state in the economy that resulted in poor economic performance in many countries, (Harrison, 2005).
Liberalism has several core assumptions for development. And these assumptions are divided into two groups that are economical and philosophical. It includes a spectrum of different economic policies, such as competitive markets, economic interventionism, fiscal policy, free price system, free market, invisible hand, free trade, privatisation, but it is always based on strong support for a market economy and private property in the means of production. Although economic liberalism can also be supportive of government regulation to a certain degree, it tends to oppose government intervention in the free market when it inhibits free trade and open competition. However, economic liberalism may accept government intervention in order to remove private monopoly, as this is considered to limit the

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