Why an Overly Open Economy is Bad for a Country


I really have to admit that talking with a person who believes in an overly open economy is almost or just as annoying as talking with a person who believes that the economy should be closed with "protectionism".  So what's wrong with an overly open economy?  Here's what I can think of the disadvantages after discussing them with an economist:

1.) It is pure indiscriminate acceptance without regulations.  A foreign firm that is garbage is always garbage.  For example, should a country accept just any foreign firm that invests?  Absolutely not.  While 60/40 MUST GO but accepting just anyone can corrode the economy.  It may mean too much competition which can lead to too many choices.  A balance of competition is always necessary to spin the economy at the right pace.

2.) To get rid of joint ventures as a whole can be more disadvantageous.  The idea that no foreign firm accepts a joint venture argument is flawed.  One must realize that one of the reasons why the Philippines has low investments is not joint venture agreements.... but because the government only allows 40% ownership for foreign firms while 60% is theirs.  A foreign firm may want a joint venture agreement because they are unfamiliar with the culture and two, to get the resources they need to do business in a foreign land.  A 50/50 and above for foreign/local ownership should be one start to open up the economy but to get rid of joint ventures entirely is stupid.

3.) It sells lands to foreigners.  One misconception of protectionism and an overly open economy is that 100% ownership of business for foreigners means selling land to them.  This again is stupid.  A landlord owns the land but he does not own any shares of the business.  He does not take charge of renewing the business permit of the tenant.  The only power he has over the tenant is the monthly rental.  A tenant who does not pay may be evicted from the land; however the landlord has no deciding power to the intangible assets as a whole.  Selling lands to non-citizens is definitely a no-no even in developed countries..  This will allow exploitation to happen in the process.

One must always make sure that there is balance between freedom and authority.  That is, regulation must be done to benefit society, not just one side over the other.

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