A liberal market economy is a type of economic system that provides the ability for companies to interact with other companies, their employees, customers, and suppliers in whatever mechanisms they prefer, within the broad regulations implemented by a government. Usually considered a form of a free enterprise system or at least a mixed economy that includes significant freedoms in how business is conducted, the liberal market economy is a fairly common system used in many nations around the world. As with any of the market economies in current use, this system offers a combination of benefits as well as potential drawbacks.
One of the earmarks of this kind of economy is the free price system that prevails. Companies are free to set prices for their goods and services based on factors such as costs of production and the demand for those products in the marketplace. Any governmental restrictions on pricing normally have to do with limiting the potential for monopolies to charge rates considered out of line with the general state of the economy, effectively making it possible for competition in the marketplace to occur. This same ability to set pricing in order to conform with the general economy and the state of the marketplace also allows companies to negotiate competitive rates with suppliers that make it possible for the business to produce goods and services at costs that encourage the creation of a profit from each sale.
The liberal market economy is often considered an example of a mixed economy that draws on practices found in any free enterprise system while also incorporating some elements of a social market economy into the mix. This creates an economy in which the degree of government intervention is usually kept within a certain range, rather than governments controlling certain sectors of the marketplace. At the same time, a liberal market economy also includes government intervention as a means of creating a basis for both domestic and international commerce between businesses, often in the form of legislation that requires business transactions to only take place within specific boundaries set by those laws.
Since a liberal market economy does provide an environment in which competition is encouraged, the potential of businesses to grow over time is considerable. At the same time, the limitations on the checks and balances imposed by governments can sometimes be viewed as catering to big business at the expense of consumers, especially those who have little to no disposable income. This can sometimes lead to shifts in the degree of government intervention in the marketplace, with legislation sometimes favoring consumers and at other times providing incentives to businesses that are designed to encourage economic growth that ultimately benefits everyone involved.
