Liberalization is a process through which some restrictions, mainly on economic or social policy, of the former government can be relaxed. Liberalization can bring democracy in a country. By the term liberalization we often mean economic liberalization or trade liberalization. Liberalization has also a big role in the economic reform in many countries.

Economic Liberalization:

Economic Liberalization is one of the most important step in economic reform. Many developed countries around the world have adopted economic liberalization through privatization. The government has allowed to privatize, partially or fully, its properties and assets. Economic liberalization is characterised by low corporate tax rates, less restriction on foreign and domestic capital, and labor market flexibility.

In the developing countries, like India, China, Brazil etc, the term economic liberalization focuses more on opening their market to the foreign or national big investors. Through economic liberalization, these countries have achieved a sustained economic and financial growth.
Other underdeveloped countries also have now no choice but to open their market to the foreign investors.
In some countries, for example North Korea, economic liberalization has been implemented in an opposite manner.

Trade Liberalization:

Trade liberalization, or external liberalization, means the removal or relaxation of some restrictions, e.g import – export tariffs, legislation barriers and quotas. Many developed countries, for example, the United States of America, have started trade liberalization as a part of their economic reform.

Liberalization and Privatization:

Privatization is one of the approach to the economic reform and therefore it is also connected with liberalization. Some European countries have liberalized their electricity and gas markets through privatization and a competition between the industries have been established. However, privatized and liberalized public services might be controlled by some business giants and also in some places the legal monopoly may continue.

Liberalization and Economic Reform:

As it is said earlier, liberalization is a feature of economic reform. It is not only a specific policy but also an approach to initiate economic programs open, flexible and responsive to the external market. The concept of liberalization is taken as a policy in many countries to make their market open to the foreign investors as well as to create a friendly environment for trade. The domestic market liberalization deregulates the capital labor market and helps to privatize the state enterprises which are necessary steps of economic reform. Price controls are also removed.

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Last Updated : 23rd June 2015

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