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Management article
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Reference no. 97309
Authors: Bruce R Scott
Published by: Harvard Business Publishing
Published in: "Harvard Business Review", 1997

Abstract

With the failure of foreign aid and similar development projects, many analysts are saying that poor countries should just free up their economies and let markets do the work. The Heritage Foundation''s 1997 Index of Economic Freedom expands on this line of reasoning in a survey of government intervention and economic development. In his review, Harvard Business School Professor Bruce Scott contends that although some of the Index''s claims make sense, the editors have mistaken the chain of causation in many cases. Governments in South Korea and Taiwan, for example, liberalized only after their heavy-handed actions brought their economies a degree of prosperity. Some freedoms, such as an internal market without barriers, promote economic development, but free trade for a developing country can actually get in the way. It is not clear that the magic of the marketplace can take care of everything. Citizens still need government for some things--and a broader framework of analysis than the Index for tackling economic choices.

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Abstract

With the failure of foreign aid and similar development projects, many analysts are saying that poor countries should just free up their economies and let markets do the work. The Heritage Foundation''s 1997 Index of Economic Freedom expands on this line of reasoning in a survey of government intervention and economic development. In his review, Harvard Business School Professor Bruce Scott contends that although some of the Index''s claims make sense, the editors have mistaken the chain of causation in many cases. Governments in South Korea and Taiwan, for example, liberalized only after their heavy-handed actions brought their economies a degree of prosperity. Some freedoms, such as an internal market without barriers, promote economic development, but free trade for a developing country can actually get in the way. It is not clear that the magic of the marketplace can take care of everything. Citizens still need government for some things--and a broader framework of analysis than the Index for tackling economic choices.

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