Academic journal article Indian Journal of Economics and Business

Prospects for Economic Development in Burma Using the Neo-Classical Model

Academic journal article Indian Journal of Economics and Business

Prospects for Economic Development in Burma Using the Neo-Classical Model

Article excerpt

Abstract

This paper examines the prospects for economic development in Burma using the Neo-classical growth model. From 1988-1997, the State Law and Order Restoration Council implemented market-oriented economic policy reforms. However, following the Financial Crisis in 1997, Burma reverted to controlled market policies, exacerbating its economy. In light of Burma's new civilian government, I offer recommendations to the new President U TheinSein for harnessing equitable economic growth by using the Neo-classical growth model. Section I introduces the paper, Section H gives an overview of the Neo-classical Model, Section III evaluates Burma's economic policies from 1988-20071, Section IV gives a brief analysis of the policies, Section V offers recommendations based on the Neo-classical model, and Section VI concludes the paper.

I. INTRODUCTION

Civil war, egregious human rights abuses, corruption, and political instability have plagued Burma's economy since the ruthless junta took over Burma's government in 1962. From 1962-1997, the military regime implemented the Burmese Way to Socialism, making Burma one of the most isolated nations in the world. Extreme poverty, poor health and education, economic stagnation, and instability resulted from this period of extreme nationalization, or Burmanization, of industries inciting students to take to the streets in what was known as the 8888 Uprising on August 8, 1988. After these demonstrations, the State Law and Order Restoration Council took over from 1988-1997 and implemented a series of liberalizing market-oriented economic policy reforms--leading to economic growth. However, underlying inadequacies in the government and economy caused the Burmese government to reorganize again following the devastation of the Asian Financial Crisis in 1997. Under the new name of the State Peace and Development Council, controlling market policies were utilized, reverting away from the previous open-door policies. Recent economic growth has primarily been attributed to the exploitation of natural gas reserves (export wealth which does not trickle down to the general population) and economic policy reform has been stagnant.

As of late March 2011, Burma's military leaders stripped their uniforms in an effort to appear more legitimate. President U TheinSein recently announced new market economic policies in hopes to bridge the economic and development gap between the rich and the poor. With the recent advent of Burma's new civilian government, it is of due importance that the international community guide Burma's government towards achieving sustainable economic development to ensure the repressed peoples of Burma receive their deserved rights to health, education, security, food, and happiness. Economic development is an essential prerequisite for greater prosperity, equality, stability, and better livelihoods.

Given Burma's brief period of economic growth from the liberalization of policies in the 1990s before its reversion to a centrally planned economy, this paper analyzes the effectiveness of the Neo-classical growth model as a prospect for sustainable economic development in Burma for the future through the analysis of Burma's economy from 1988-2007. The following section analyzes the theories of the Neoclassical model. The third section gives an overview of Burma's major economic policy reforms from 1988-2007. The fourth section briefly analyzes these policy reforms. The fifth section offers recommendations to Burma's new government based on its economic history and the Neo-classical growth model, and finally, the sixth section concludes the findings of this research.

II. THEORY: NEO-CLASSICAL GROWTH MODEL

The 1980s was characterized by the advent of the Neo-classical counterrevolution in economic theory and policy in reaction to the conservative nationalistic governments. Led by Lord Peter Bauer, Deepak Lal, Ian Little, Harry Johnson, Bela Balassa, Jagdish Bhagwati, and Anne Krueger, these Neo-classicalists disagreed with the dependency theorists and said that free markets and laissez-fare economics within the context of permissive governments allow the invisible hand of market prices to guide resource allocation and stimulate economic growth. …

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