Question: To what extent are Co-ordinated Market Economies converging with Liberal Market Economies? Critically discuss with reference to at least three of the countries covered in the course.

Expert answer

There is no one-size-fits-all answer to this question, as the degree of convergence between Co-ordinated Market Economies (CMEs) and Liberal Market Economies (LMEs) will vary depending on the specific characteristics of each economy. However, it is generally agreed that CMEs are moving closer to LMEs in terms of economic structure and policy. This process of 'convergence' has been driven by a number of factors, including globalisation, the fall of communism, and the rise of neoliberalism.

One key area of convergence between CMEs and LMEs has been in the area of trade policy. In the past, CMEs tended to be much more protectionist than LMEs, but this has changed in recent years. CMEs have increasingly adopted liberal trade policies, and many of them are now members of the World Trade Organization (WTO). This has led to a significant increase in trade between CMEs and LMEs, and has helped to boost economic growth in both types of economy.

Another area of convergence between CMEs and LMEs has been in the area of monetary policy. In the past, CMEs tended to have much more centralised and interventionist monetary policies than LMEs. However, this has changed in recent years, as CMEs have increasingly adopted inflation-targeting regimes. This has helped to bring down inflation rates in CMEs, and has made their economies more stable.

Finally, CMEs have also been converging with LMEs in terms of fiscal policy. In the past, CMEs tended to have much higher levels of government spending than LMEs. However, this has changed in recent years, as CMEs have adopted more austerity-based fiscal policies. This has helped to reduce budget deficits and public debt levels in CMEs, and has made their economies more sustainable in the long term.

Overall, it is clear that CMEs are converging with LMEs in a number of important ways. This process is likely to continue in the future, as globalisation and neoliberalism continue to exert their influence on the world economy.