As I noted in the preface, globalization has thrown development economics into a quagmire. Often arguments in recent growth debates are framed in the context of competitiveness (especially when the speaker or writer wants to appeal to policy makers). This is very problematic because while in the business world the term “competitiveness” has a clear meaning—a firm that is not competitive will lose market share and eventually will go out of business—its counterpart at the aggregate level (a nation) might be a “can of worms.” In this chapter, I will elaborate on some of the implications of competitiveness and globalization, particularly on the policy prescription that developing countries should adopt a liberal policy stance.

At the level of the firm, competitiveness is a question of competition among individual companies, that is, about the mechanisms that help more productive and efficient companies expand and take market share from the less productive ones, which then go out of business or become more efficient. The most effective way for policy makers to help individual firms to increase productivity is to create the conditions in each sector for fierce but fair competition among all participating firms. This means that policy makers in an economy can help speed up growth by enacting regulations that support more competition in each sector and by removing factors that obstruct competition.