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In general, liberalization (or liberalisation) refers to a relaxation of previous government restrictions, usually in such areas of social and economic policy. In some contexts this process or concept is often, but not always, referred to as deregulation. Liberalization of autocratic regimes may precede democratization (or not, as in the case of the Prague Spring).
In social policy liberalization may refer to a relaxation of laws restricting for example divorce, abortion, or drugs. Regarding civil rights, it may refer to the elimination of laws prohibiting same-sex sexual relations, same-sex marriage, interracial marriage, or interfaith marriage
In economy and trade
Privatisation, also spelled privatization, may have several meanings. Primarily, it is the process of transferring ownership of a business, enterprise, agency, public service or public property from the public sector (a government) to the private sector, either to a business that operates for a profit or to a nonprofit organization. It may also mean government outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement, and prison management.
Privatization has also been used to describe two unrelated transactions. The first is the buying of all outstanding shares of a publicly traded company by a single entity, making the company privately owned. This is often described as private equity. The second is a demutualization of a mutual organization or cooperative to form a joint-stock company. liberalization.
Although economic liberalization is often associated with privatization, the two are distinct concepts. For example, the European Union has liberalized gas and electricity markets, instituting a competitive system, but some leading European energy companies such as France's EDF and Sweden's Vattenfall remain partially or completely in government ownership.
Liberalized and privatized public services may be dominated by just a few big companies particularly in sectors with high capital costs, or high water, gas, or electricity costs. In some cases they may remain legal monopolies, at least for some segments of the market (like small consumers).
Liberalization is one of three focal points (the others being privatization and stabilization) of the Washington Consensus's trinity strategy for economies in transition.
There is also a concept of hybrid liberalization as, for instance, in Ghana where cocoa crop can be sold to a variety of competing private companies, but there is a minimum price for which it can be sold and all exports are controlled by the state.
Comparison with democratization
There is a distinct difference between liberalization and democratization, which are often thought to be the same concept. Liberalization can take place without democratization, and deals with a combination of policy and social change specialized to a certain issue such as the liberalization of government-held property for private purchase, whereas democratization is more politically specialized that can arise from a liberalization, but works in a broader level of governmental liberalization.
- Sullivan, Arthur; Sheffrin, Steven M. (January 2002). Economics: Principles in Action. New Jersey: Pearson Prentice Hall. ISBN 0-13-063085-3.
- Marcella Vigneri and Paulo Santos (2007) "Ghana and the cocoa marketing dilemma: What has liberalisation without price competition achieved?", Overseas Development Institute
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