Market liberalisation, equity and development

Policies of liberalisation in trade and in capital flows, together with the deregulation of labour markets, have been strongly recommended to many developing countries in order to assist their growth of output and employment.
This major study weighs the arguments in favour of allowing prices to settle at market-clearing levels and assesses what evidence is available on the impact of liberalisation on employment. It dis cusses trade policy, devaluation, financial flows and the reform of interest rates.
If a liberalisation package can successfully lead countries to build up the flexible structure of production needed to withstand external shocks. It certainly merits further review. However, the costs of such a strategy need to be considered. There are costs involved in trusting markets to perform in a competitive manner when they are in any case segmented and monopoly is common, as well as costs (especially in terms of employment) in adjusting from one institutional and policy framework to another. Furthermore, these costs will be increased if, as in many countries, liberalisation is adopted during a period of economic restraint and austerity The study is based on papers commissioned for the ILO's High Level Meeting on Employment and Structural Adjustment, which took place in Geneva in November 1987. The ILO stressed that. whatever the policy framework chosen, the social protection of the poorest and the opportunity for wide-ranging and well-balanced discussion and dialogue were of prime importance.