1.1.1. Liberalisation within nation-states

Substantial deregulation was initiated by the Reagan administration in 1981. It led, inter alia, to a drastic deregulation in the airline and telecommunications industries as well as substantial cuts in welfare programs. Margaret Thatcher in the UK initiated a similar policy. In the UK and continental Europe, it did not only lead to the first steps in deregulation but also to far-reaching privatisation programmes comprising all sorts of utilities such as post and telecommunications, the transport sector, and other utilities such as energy. Many of these had traditionally been state-run in Europe. Privatisation was often accompanied by deregulation leading to the emergence of new suppliers and dramatic changes in prices as well as quality. In order to make one’s location as attractive as possible, attempts at reducing corporate taxes were made in many industrialised countries.

The countries of Central and Eastern Europe have been subject to fundamental transition processes. The creation of an institutional framework for a market economy was often accompanied by mass privatisation programmes as well as the opening of markets to international trade and to foreign direct investment. Both of these factors have led to the rapid integration of the countries of Central and Eastern Europe into the world markets. This development will be even speeded up by their membership in the EU.

Many developing countries fundamentally changed their development strategies since the early 1980ies. Whereas the countries of Eastern Asia had decided relatively early to implement an export diversification strategy, thus trying to get integrated into the world economy by focusing on their respective comparative advantages, the countries of Latin America had stuck to the strategy of import substitution, i.e., trying to prevent integration into the world economy by trying to produce as many goods as possible at home. The result of this natural experiment could not be any clearer: whereas the countries of East Asia have substantially increased their average standard of living and are often called the Asian Tigers, the standard of living has at times even deteriorated in Latin America. This has led to a reorientation towards liberalisation and deregulation in many less developed countries. This reorientation is in no way confined to Latin America but can, e.g., also be observed with regard to India and other important states among the less developed countries. Some figures in the GATT/WTO membership can highlight the recognised importance of integrating one’s economy into the world economy: in 1980, the GATT had 84 members, in 1990 (i.e., before the creation of many new states as a consequence of the demise of the Soviet Union), it had already 95 member states. This number had further increased to 135 by the year 2000 and has reached 146 in 2004. This is a significant development because China is not only the most populous country, but has also been the economy with the largest growth rates for quite a number of years. Among developing countries, it is by far the most important recipient country of foreign direct investment.