ABSTRACT
How valid is the logic of the conventional neo-liberal agenda that celebrates the efficiency effects of lower welfare spending in developing countries? The evidence in this chapter challenges the conventional wisdom that government welfare spending in this contemporary era of globalization must be sacrificed for the sake of improving international competitiveness. It therefore contradicts the chorus of scholars and policy-makers who claim that welfare spending is inefficient and erodes a nation's competitiveness in global markets. It agrees instead with the assertion of a growing number of researchers that the fiscal choices of the less developed countries (LDCs) do not in fact adversely affect their competitiveness. Rather, international market conditions and the indiscriminate behavior of foreign investors are found to be the stronger determinants of the LDCs' economic competitiveness.
