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Thought of the classics has brought major changes in the economic field. One of the ideas of the classics has pioneered the idea of liberal economic system. In the classical idea that the macro economy will grow and develop if left to the market economy. The role of government is limited to issues of law enforcement, security and infrastructure development.
This thinking has inspired the classic "Washington Consensus". Under the "Washington Consensus" , the government's role in development is more focused on control of the State Budget, and utilization / use of market forces. According to the "Washington Consensus" (consisting of 10 packages of macroeconomic policy), the role of government in development should be limited and oriented towards infrastructure development, health and education. Excessive government intervention in economic development raises worry about "Government Failure", such as excessive bureaucracy, corruption, and so forth. Limiting the State Budget to reduce the deficit, because it will cause instability in the economy. Utilization of market forces to develop an efficient market, free of monopoly, oligopoly, and external diseconomies. Therefore, government policy must be "Market Friendly".
Interest rates and foreign exchange rate should be determined by the market. Established market price is considered as the actual price. The market is considered more efficient than the government's work on the sectors of the economy, so that the economy would be more optimal. Foreign trade will generate gains from trade, FDI flows more freely will stimulate foreign investors to invest funds, privatization of State Owned Enterprises are considered to streamline the economy. Therefore, the role of government is to deregulate. Here the emphasis of government to protect property rights.
Liberal economic thought is based on the premise that the market alone is better know their needs so that the government should not intervene in the market.
Jean Baptiste Say (1767-1832) argues that "supply creates its own demand" so that there will be no overproduction. Adam Smith (1723-1790) also argues that there are "invisible hand" that will guide individuals to promote the public interest.
It is undeniable that globalization is increasingly driven by the fruit of thought for the classics. Free trade has diperjuangakan by the characters try to break the wall of classic-style mercantilism protectionism. Globalization makes national borders become increasingly apparent and the market is becoming increasingly widespread. Countries that have a competitive advantage can enrich the country. On the other hand, countries that are not ready to face competition in global markets will be worse off. Regardless of the positive and negative sides of globalization, here would not want every country must prepare to have a competitive advantage.
This thinking has inspired the classic "Washington Consensus". Under the "Washington Consensus" , the government's role in development is more focused on control of the State Budget, and utilization / use of market forces. According to the "Washington Consensus" (consisting of 10 packages of macroeconomic policy), the role of government in development should be limited and oriented towards infrastructure development, health and education. Excessive government intervention in economic development raises worry about "Government Failure", such as excessive bureaucracy, corruption, and so forth. Limiting the State Budget to reduce the deficit, because it will cause instability in the economy. Utilization of market forces to develop an efficient market, free of monopoly, oligopoly, and external diseconomies. Therefore, government policy must be "Market Friendly".
Interest rates and foreign exchange rate should be determined by the market. Established market price is considered as the actual price. The market is considered more efficient than the government's work on the sectors of the economy, so that the economy would be more optimal. Foreign trade will generate gains from trade, FDI flows more freely will stimulate foreign investors to invest funds, privatization of State Owned Enterprises are considered to streamline the economy. Therefore, the role of government is to deregulate. Here the emphasis of government to protect property rights.
Liberal economic thought is based on the premise that the market alone is better know their needs so that the government should not intervene in the market.
Jean Baptiste Say (1767-1832) argues that "supply creates its own demand" so that there will be no overproduction. Adam Smith (1723-1790) also argues that there are "invisible hand" that will guide individuals to promote the public interest.
It is undeniable that globalization is increasingly driven by the fruit of thought for the classics. Free trade has diperjuangakan by the characters try to break the wall of classic-style mercantilism protectionism. Globalization makes national borders become increasingly apparent and the market is becoming increasingly widespread. Countries that have a competitive advantage can enrich the country. On the other hand, countries that are not ready to face competition in global markets will be worse off. Regardless of the positive and negative sides of globalization, here would not want every country must prepare to have a competitive advantage.
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