Liberalization is a guarantee that civil rights will be respected, supported by the laws in force in the country. The number of punitive operations and repressions is reduced, prohibitions and restrictions are reduced. Less is becoming more control over the individual and groups of people. Find out more information later in the article.
Appointment
When it comes to a centralized system, price imbalances can be observed. Liberalization is a tool designed to balance this discrepancy. Thus, the adjustment of the state economy is carried out.
Price liberalization is a process that was carried out in Yugoslavia and Poland during 1989. The phenomenon was affected by Russia in 1992. Price liberalization was the beginning of economic metamorphoses. In addition to domestic cash flow, the process of conducting foreign trade transactions was corrected.
In addition, economic liberalization has made changes to the work of enterprises within the country. They became independent, free for the production of certain goods, search for counterparties, and were able to sell their goods in their favorite market. The liberalization of the economy, with all its advantages, is a source of some inconvenience, the main of which is inflation. However, ways to combat it are also provided for the market system to be achieved.
Items
Liberalization is a process that involves institutional transformation. Bans and restrictive rules are eliminated. Now economic agents can act freely. Of course, market liberalization also prescribes its own rules.
Mechanisms contributing to change begin to function, backed up by relevant bills. Private entrepreneurs are supervised. Trade liberalization creates an organic environment for competition, monopoly is eliminated, labor legislation is established.
Market institutions are in place, privatization is underway, thanks to which recently appeared business entities can work. These are banks engaged in commerce, stock, commodity exchanges, developing funds with investments. Thanks to these processes and transformations, trade becomes a free and fertile ground for business development. All of them must be carried out in order to stabilize the financial environment.
On the territory of the Russian Federation
Liberalization is a phenomenon that has also occurred in Russia. It began in January 1992. The pricing policy for many services and products has been changed.
Before the Soviet Union collapsed, a large mass of money was accumulated in it, which is also called a canopy. All of these funds were not backed by either services or goods. When price regulation ceased, they increased by 3.3 times already in January 1992. Every month, the picture only worsened and the consumption of goods became more expensive by 10-30% every month.
Over the next three years, everything changed only in the negative direction. So, as of 1993, there was a noticeable increase in the index that estimates consumer prices by 9 times, and in 1994 - by 3 times. Also, 1995 showed an increase of 2.3 times.
What did it spill
What are the consequences of these phenomena?
- Money income per person has declined rapidly.
- The working capital of enterprises decreased sharply.
1992 was distinguished by the fact that, while working as before, a person actually received only half of the wages that had been established earlier. Nothing has changed in numbers, but for the money he could have acquired far fewer benefits.
In 1992, the money supply increased more slowly than inflation, due to which the real amount of money decreased, and a decline in production was observed. Gross domestic product decreased by 20%.
Positive results
As we see, it was a difficult time, which caused a number of inconveniences among the population, but everything that is done is for the better. In this case, just like that.
The positive sides of the process are:
- establishing a balance between the mass of money and goods;
- the deficit of services and products that could be observed during the 80-90s of the last century in a number of positions decreased and subsequently completely disappeared.
This was a painful, but necessary stage, thanks to which it was possible to begin to form a balance in market mechanisms related to the production and sale of consumer goods and services.
When market conditions were established, Russia had to deal with hyperinflation, which was the result of the application of the liberalization mechanism in pricing policy. This destroyed the opportunity to earn income from vouchers, as well as small savings accumulated by people.
Created picture
Thanks free pricing the principle of which began to work in the 90s on the territory of Russia, as well as gradually growing mechanisms by which market self-regulation could take place, enterprises that previously belonged to the state and dominated the vast expanses of the market were limited in their freedom to set prices independently.
Thus, inflation only intensified, trends developed in which the real incomes of people working in social and budgetary organizations fell. The distribution of money supply was not the most profitable way for ordinary workers. They were unprotected and plunged into poverty. An all-Russian study was conducted, according to which more than 2/3 of the people in the country during 1997 could be called poor. Only 3% of the country's values were concentrated in their hands, and 5% of the population were the richest, owning more than 70% of savings. However, in this statistics there may be inaccuracies due to the fact that it does not take into account funds that went abroad.
As we see, during such transformations it was very difficult for a person to open his own business, because he did not know what would happen to the economy tomorrow, whether the invested funds would pay off. Any changes can knock the earth out from under the feet, all the more so striking. But sometimes it is just necessary to destroy old mechanisms in the name of creating new ones.
