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Liberalization (or liberalisation) of the economy means to free it from direct or physical controls imposed by the government. This may be similar to 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 psychoactive drugs. Regarding civil rights, it may refer to the elimination of laws prohibiting homosexuality, property rights, private ownership of firearms, same-sex marriage, inter-racial marriage, or inter-faith marriage.
In economy and trade
Economic liberalization is often associated with privatization, which 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. 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 big companies, particularly in sectors with high capital, water, gas, or electricity costs. In some cases they may remain legal monopolies, at least for some segments of the market like consumers. Liberalization, privatization and stabilization are the Washington Consensus's trinity strategy for economies in transition.
There is also a concept of hybrid liberalization as, for instance, in Ghana, cocoa crops can be sold to 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. 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. Democratization is politically specialized; it can arise from a liberalization but works on a broader level of governmental liberalization.
- O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. New Jersey: Pearson Prentice Hall. p. 175. ISBN 0-13-063085-3.
- Marcella Vigneri and Paulo Santos (2007) "Ghana and the cocoa marketing dilemma: What has liberalization without price competition achieved?", Overseas Development Institute
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