Liberalization

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In general, liberalization refers to a relaxation of previous government restrictions, usually in areas of social or economic policy. Liberalization of autocratic regimes may precede democratization (or not, as in the case of the Prague Spring).

In the arena of social policy it may refer to a relaxation of laws restricting for example divorce, abortion, homosexuality or drugs.

Most often, the term is used to refer to economic liberalization, especially trade liberalization or capital market liberalization.

[edit] Liberalization and privatization

Although economic liberalization is often associated with privatization, the two can be quite separate processes. For example, the European Union has liberalized gas and electricity markets, instituting a system of competition; but some of the leading European energy companies (such as EDF and 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 sunk cost, such as water, gas and electricity. In some cases they may remain legal monopolies, at least for some part of the market (e.g. 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. An example of Liberalization is the "Washington Consensus" which was a set of policies created and used by Argentina.

[edit] Liberalization vs 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 government.

[edit] See also

• Electricity liberalization
• Oligopoly
• Marketization