Open Economy
An open economy is the opposite of a managed economy. It is one that is characteristically market-oriented, with free market policies rather than government-imposed price controls. In an open economy industries tend to be privately owned rather than owned by the government. In the area of international trade an open economy is one whose policies promote free trade over protectionism.
On the other hand, a managed or closed economy is characterized by protective tariffs, state-run or nationalized industries, extensive government regulations and price controls, and similar policies indicative of a government-controlled economy. In a managed economy the government typically intervenes to influence the production of goods and services. In an open economy, market forces are allowed to determine production levels.
A completely open economy exists only in theory. For example, no country in the world allows unlimited free access to its markets. Most nations have fiscal and monetary policies that attempt to improve their economies. Many economies that are open in some respects may still have government owned, monopolistic industries. A country is considered to have an open economy, however, if its policies allow market forces to determine such matters as production and pricing.
Chile and Argentina are examples of two countries that have moved or are moving from a managed economy to an open economy. Chile has led the way for South America and Central American countries in adopting open economy and free market policies that have led to greater prosperity. As a result of its open economy, Chile became the fastest-growing economy in Latin America from 1983 to 1993.
Among the steps Chile took to make its economy more open was a reduction of its protective tariffs to a uniform 11 percent, which was one of the lowest rates in the world. Such a reduction in tariffs forced its domestic producers to become more competitive in the international market. As a result Chile
On the other hand, a managed or closed economy is characterized by protective tariffs, state-run or nationalized industries, extensive government regulations and price controls, and similar policies indicative of a government-controlled economy. In a managed economy the government typically intervenes to influence the production of goods and services. In an open economy, market forces are allowed to determine production levels.
A completely open economy exists only in theory. For example, no country in the world allows unlimited free access to its markets. Most nations have fiscal and monetary policies that attempt to improve their economies. Many economies that are open in some respects may still have government owned, monopolistic industries. A country is considered to have an open economy, however, if its policies allow market forces to determine such matters as production and pricing.
Chile and Argentina are examples of two countries that have moved or are moving from a managed economy to an open economy. Chile has led the way for South America and Central American countries in adopting open economy and free market policies that have led to greater prosperity. As a result of its open economy, Chile became the fastest-growing economy in Latin America from 1983 to 1993.
Among the steps Chile took to make its economy more open was a reduction of its protective tariffs to a uniform 11 percent, which was one of the lowest rates in the world. Such a reduction in tariffs forced its domestic producers to become more competitive in the international market. As a result Chile