Liberalization (American English) orliberalisation (British English) is a broad term that refers to the practice of making laws, systems, or opinions less severe,[1] usually in the sense of eliminating certain government regulations or restrictions. The term is used most often in relation toeconomics, where it refers toeconomic liberalization, the removal or reduction of restrictions placed upon (a particular sphere of) economic activity.[2] However, liberalization can also be used as a synonym fordecriminalization orlegalization (the act of making something legal after it used to be illegal), for example when describingdrug liberalization.
Economic liberalization refers to the reduction or elimination of government regulations or restrictions on private business and trade.[3] It is usually promoted by advocates offree markets andfree trade, whose ideology is also calledeconomic liberalism. Economic liberalization also often involves reductions of taxes, social security, and unemployment benefits.
Economic liberalization is often associated withprivatization, which is the process of transferring ownership or outsourcing of a business, enterprise, agency,public service or public property from the public sector to theprivate sector. For example, theEuropean Union has liberalized gas and electricity markets, instituting a competitive system. Some leading European energy companies such as France'sEDF and Sweden'sVattenfall remain partially or completely in government ownership.[citation needed] Liberalized and privatized public services may be dominated by big companies, particularly in sectors with high capital, water, gas, or electricity costs.[citation needed] In some cases they may remain legal monopolies, at least for some segments of the market like consumers.[citation needed] Liberalization, privatization and stabilization are theWashington Consensus's trinity strategy for economies in transition.[citation needed]
TheBretton Woods Conference of 1944, which recommended the establishment ofInternational Monetary Fund (IMF)and theWorld Bank, had also recommended the establishment of anInternational Trade Organization (ITO). Although, the IMF and the World Bank were established in 1946, the proposal for ITO did not materialize. Instead, theGeneral Agreement on Tariff and Trade(GATT), a less ambitious institution, was formed in 1948. The primary objective of GATT is to expandinternational trade by liberalizing trade so as to bring about all round economic prosperity. GATT was signed in 1947, came into effect in 1948 and lasted until 1994. It was replaced by theWorld Trade Organization in 1995. The original GATT text (GATT 1947) is still in effect under the WTO framework. Thus liberalization was born.[citation needed]
There is also a concept of hybrid liberalization. For instance, inGhana,cocoa crops can be sold to competingprivate companies, but there is a minimum price for which it can be sold and all exports are controlled by the state.[4]The term liberalization has its origin in the political ideologyliberalism, which took form by the early 19th century.
In social policy, liberalization may refer to a relaxation of laws restricting certain practices or activities, such asdivorce,abortion, orpsychoactive drugs. Regardingcivil rights, it may refer to the elimination oflaws prohibiting homosexuality,private ownership of firearms or other items,same-sex marriage,inter-racial marriage, orinter-faith marriage.[citation needed]
There is a distinct difference between liberalization anddemocratization. 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 highly specialized; it can arise from a liberalization but works on a broader level of governmental liberalization.[citation needed]
