- Meaning of term
- Processes of liberalization in a transitional economy
- Traffic directions
- Release price
- Possible contradictions
- Implications of price-release and free markets
In Soviet times, there was a planned economy. Then there were monetary and commodity relations, but there were no real market mechanisms that would regulate purchase and sale transactions, prices, financial flows. There was no equilibrium of prices, no competition, the laws of supply and demand did not affect the cost of goods, since it was formed on the basis of spending and was divorced from the situation on the world market. That is why the liberalization of the economy is the main task for the transition to market capitalist relations.
Meaning of term
Economy liberalization is a system of measures aimed at liberation from restrictions in the form of state pressure on the economy and business. Liberalization is a term derived from the word "libero", which means "freedom" in translation. Thus, the movement towards "free"economy is aimed at creating favorable conditions for the free movement of prices, market turnover of services and goods. Also, the liberalization of the economy is the creation of a more open market, transparent, with fair competition.
Processes of liberalization in a transitional economy
First of all, the creation of market institutions and their transfer to capitalist principles of management are being considered. Liberalization - the policy of the economy of the state and economic development, which covers all spheres of society. It involves the destruction of the state monopoly on the formation of the activities of national economies and enterprises, a decrease in the level of state and municipal control over exchange transactions, the complete abolition of the distribution of resources by central authorities, and the opening of all opportunities for the development of other markets by economic entities. We are talking about the development of specific structures in the sectors of the economy where the monopoly of state bodies was the strongest. The liberalization of the economy in Russia and in many other CIS countries is proceeding precisely in this direction, and it is in this vein that it must be considered. There must be a process of lifting various bans, removing barriers that prevent free access to various markets and complicate competition.
The liberalization of the economy is a process that does not affect the ownership of the state sectors of the businessactivities, but strongly contributes to the formation of new entities that are able to create an active competitive environment. In general terms, the development of a "free" economy goes in three main directions.
- The most important starting point of liberalization is the release of price formation from regulation by central authorities.
- Free trade for all individuals and entities.
- The most difficult and deep moment of liberalization is the subordination of all activities of production entities to the requirements of the market, that is, the ideal model of regulation through the balance of supply and demand.
All of the above transformations radically change the entire system of market relations and management, people's way of thinking and life, give rise to numerous contradictions and problems in society. First of all, the liberalization of the economy is the process of "letting go" of prices, which leads to their sharp increase, and this will naturally start the process of reducing incomes among the population, lowering living standards, changing the entire structure of market consumer relations, and the like. In economic theory, there are two main options for "releasing" the price: "shock" one-dimensional and gradualist gradual. However, economic liberalization is always a mixed process, leaning towards one type or the other at different times. There is also a certain pattern: the less developed market relations within the state, the less effective will be the way"shock" therapy.
Economy liberalization is always a lot of sharp contradictions in the industrial and social spheres. Many enterprises that work in the military-industrial sector with a focus on government orders are losing opportunities to sell their products. Many enterprises in a market economy may turn out to be uncompetitive and go bankrupt, with their subsequent liquidation. Difficulties in the field of marketing can give rise to problems in the procurement of materials and raw materials, that is, in fact, call into question the existence and functioning of companies, firms, factories and enterprises as such. The reduction in demand from the population significantly affects the situation of producers, and without that it is not easy. In the most difficult situation may be the production, which are provided with subsidies and benefits from the state, first of all, this concerns the agricultural and agricultural sectors. The introduction of a "free" economy may in many respects contradict the prevailing stereotypes and mentality, which will give rise to a rejection of this course of movement among the broadest masses of the population. It is precisely these problems that President of the Russian Federation Vladimir Vladimirovich Putin faced. The liberalization of the economy is a multifaceted and extremely complex process, it is difficult to achieve even some initial goals in the medium term.
Implications of price-release and free markets
Liberalization of economic relations between countries –a natural consequence of internal economic processes within a single country. The liberalization of the economy is the creation of market mechanisms with a close connection between the markets of different countries, formed into one single market external economic space. This implies the importance of legal interrelations and adequate regulation of relations between states. Foreign economic liberalization can expand the possibilities of providing assistance in the transition from a planned economy, which significantly speeds up the solution of complex tasks to achieve a "free" market. The main advantages include the expansion of the possibility of entering the country of investments from various foreign institutions, the elimination of foreign economic centralized ties, the removal and abolition of all import restrictions (the abolition of benefits, quotas, duties and licenses), maximum liquidity and currency convertibility.