Liberalization or liberalisation refers to the practice of making laws, systems, or opinions less severe, usually in the sense of eliminating certain government regulations or restrictions. In economics, liberalization means minimizing the government’s restrictions and regulations in an economy, in return for higher involvement of private organizations. The following are some key features of liberalization:
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Economic liberalization: This refers to the reduction or elimination of government regulations or restrictions on private business and trade. It is usually promoted by advocates of free markets and free trade, whose ideology is also called economic liberalism. Economic liberalization often involves reductions of taxes, social security, and unemployment benefits.
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Privatization: This is the process of transferring ownership or outsourcing of a business, enterprise, agency, public service, or public property from the public sector to the private sector. For example, the European Union has liberalized gas and electricity markets, instituting a competitive system.
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Reduction of restrictions on international trade and capital: Liberalization is often treated as synonymous with deregulation, which is the removal of state restrictions on business. In principle, the two are distinct, but in practice, both terms are generally used to refer to the freeing of markets from state intervention.
Liberalization is often associated with globalization and has been implemented in many countries around the world. The liberalization of trade progressed through the signing of a succession of free trade agreements such as the General Agreement on Tariffs and Trade (GATT) in 1947, the Single European Act in 1986, and the North American Free Trade Agreement (NAFTA) in 1992. The pros of liberalization include removing tariff barriers and reducing the prices of products or services for consumers, increasing competition from abroad, and encouraging economic development.
