In recent years, developing countries have been transformed from very low economic development to being among the highest ranked economically developed states. Examples include Brazil, Russia, India and China (BRIC). This economic growth has been realized due to the adoption of the market socialism structures from their earlier systems which were centrally planned. Besides, a consensus was arrived at that the countries ought to build democracy whose basis was the rule of law and private ownership.
As a result, these countries have greatly benefited and continued to expand in their economies day in day out. Some of these key success factors in the adoption of the BRIC economic systems are highlighted as under. The adoption of market socialist structures have led to market freedom, consequently making transactions to be monetary, carried out in the market and being reasonably free. Besides, these countries have their inflation rates decreasing, measurably to single digits. This has also been facilitated by the large national output being attained from enterprises that are privately owned.
Market socialism also saved the countries from the slumping output and the resources misallocations that the rent seekers, who were the rivals of the radical reformers, had caused. Additionally, the actions of the rent seekers aimed at amassing wealth to themselves by disorganizing the economy and subsidizing the credits which had adverse effects on the rates of inflation. A radical market system ensured macroeconomic stabilization, deregulation, new social safety formation and privatization.
However, the successes achieved were remarkably diverse in each country resulting from the different choices of policies that these countries implemented. Additionally, these policies have been the determinants of the prevailing conditions in these countries. For instance, the Central European countries adopted privatization and normal market economies and this has seen the elimination of corruption in their economies. Besides, democracy is unimpeachable. Asian countries, the likes of China and Russia realized low rates of taxes, labor markets which were liberal and their social transfers were limited.
The low taxes have hastened the growth rate of the economies of these countries to the current high levels. Additionally, the income taxes are low and flat while the corporate profit taxes are decreasing with time thus the labor markets have proliferated (Aslund, 2007). These factors were a replica in Latin America, specifically in Brazil. China had started her reforms in the agriculture sector that proved to be successful, although this sector was considered to be small in the Soviet economy.
Due to market socialism, deregulation in prices was born and this fostered the growth of the country’s economy. Moreover, her macroeconomic stability still remained even after the hyperinflation that occurred in the Soviet Union. Due to this success in china, Russia sought to follow suit. Privatization is a precondition of both democracy and market economy and this has led to the virtual economic growth. The underlying relationship between privatization and economic growth is the ability of the private enterprises to perform better than their public counterparts.
These countries, by privatizing their enterprises, saved both human and physical capital from irreversible destruction. To add on, market socialism propelled the achievement of macroeconomic policies that are sound, reforms in the market structures, commodity boom and reductions in the public expenditures in all members of the BRIC. Researches by economists have greatly been attracted in these countries, especially China, India and Russia on these countries impact on the global economy and also the factors that led to the realization of this success.
In China, market socialism led to the investment of capital on a large scale basis which is financed by not only the domestic savings that are huge but also by the foreign investors. Through the Special Economic Zones (SEZ) and the Township and Village Enterprises (TVEs), household savings were expanded (Jonathan, 2010). This shift greatly promoted exports, made measurable increment in the country’s Gross Domestic Product (GDP) and fostered the development of infrastructural facilities.
In the case of India, improvement in the productivity of labor was held liable for the economic growth. The registration of the manufacturing companies and privatization brought about positive economic effects. Russia, on the other hand, benefited from the increased international oil prices and the appropriate levels in the exchange rates thus earning high profits from her exports. Brazil, like Russia, benefited from her exports. Socialist’s efforts in Brazil enabled the realization of public policies that led to creation of more jobs and stronger governance (Shikida, 2005).
Although the economic successes in these countries seem to be arising from the adoption of similar market strategies, some divergences are notable. In both India and China, areas with the greatest growth are mainly located in the coastal regions as compared to their landlocked backward regions in the rural areas. In Russia, hydrocarbons are identified as the cause of the divergence and these are mainly concentrated in West Siberia. In addition, all countries adopted the liberalization strategy at different timings.
China first went through a period of pro-market liberalization and reformed through the pro-business approach. India started with privatization and later indulged in international trade while Russia underwent the big bang reforms; characterized with simultaneous economy opening and privatization (Alessandrini & Bucellato, 2008). Russia later simplifies its tax systems, reconstructed the legal, health and pension systems, regulated her natural monopolies and made the land resources tradable. References Aslund, A. (2007). How Capitalism was Built: The transformation of Central and Eastern Europe, Russia and Central Asia.
Cambridge: Cambridge University Press Alessandrini, M. & Bucellato, T. (2008). China, India and Russia: Economic Reforms, Structural Change and Regional Disparities. London: Oxford Press Jonathan (2010). China and the Global Business System. Retrieved on 17 August 2010 from http://www. vub. ac. be/biccs/site/assets/files/apapers/20100202%20-%20Story. pdf Shikida, C. (2005). Brazil from Import Substitution to the 21st Century. What is left to do? Retrieved on 17 August 2010 from http://www. ceaee. ibmecmg. br/wp/wp30. pdf