The main features of the free market - the ideal and the unattainable
There is no country left in the world that would not move to a market economy to one degree or another. Developed countries, which have declared that they have a practically free market, impose sanctions and protective duties. And the last socialist countries (China, Cuba and North Korea) are drifting smoothly towards the freedom of entrepreneurship, gradually removing restrictions and more and more corresponding to the basic features of the free market. But they are all terribly far from the free market.
Free market target
The concept of a market of perfect competition as an ideal construction began to take shape in the 16th century, and the main features of the free market were gradually determined. The model of such an economy provided for ideal conditions for entrepreneurship, with full personal freedom to make decisions, non-interference of the state and full access to information for making consumer decisions.The purpose of this market was to achieve market equilibrium.
The main price regulator was the ratio of supply and demand. Increasing demand for goods causes the seller to increase prices, which further leads to a decrease in demand. Government intervention is undesirable because it distorts both demand and supply.
A free market, perhaps, is a dream that will not be realized in a sufficiently long period, and maybe never. Nevertheless, economists have long decided on the signs of a free market, a list of which is presented below:
- the main type of property is private;
- mobility of labor, goods, services and investment between industries and countries;
- free access to the market, implying an unlimited number of participants, as a result of which everyone’s influence on the market situation is insignificant;
- decision-making by producers and consumers is carried out freely, without coercion or undue influence, and the main incentive is self-interest;
- non-interference of the state in the relationship of economic agents;
- unrestricted and equal access to information that allows you to make informed and rational decisions.
All far from the dream
It is difficult to find in the world a free market, the signs, definitions and examples of the functioning of which would fully correspond to those described in the economic literature. Is that private property in many countries is predominant.
Critics of the model of perfect competition first of all point out that one of the main features of the free market of unlimited competition leads to a concentration of capital. Some companies will go bankrupt, others will dominate the market due to their competitive advantages, they may even become monopolists. The impact on the market of different economic entities, of course, also varies greatly (depending on management methods, production and sales of products). When the main features of the free market were determined, probably no one thought that information would become one of the main and most expensive products. Therefore, equal access to information is becoming an increasing utopia.
There are lees to every wine
While the free market was viewed as an ideal model of the economy of the future, many economists paid attention to the fact that it does not ensure public interests.Unprotected segments of the population who need social security and a more equitable distribution of benefits fall out of the free market. The model does not take into account many modern functions of the state, defense and security (including business management, money circulation, development of strategic areas of science and technology, environmental protection). Nevertheless, the unconditional utility of the free market model is, ideally, to be pursued.