A free enterprise system is one such economic system where governments place very fewer restrictions on the kinds of business activities or business ownership in which the citizens of the country or the state participate. This kind of system is often categorized by many experts as capitalism or a free market.
In this kind of system, a citizen is allowed to live independently in the sense that they can spend their money the way they want to. In such a system, there can be various companies seen who compete with each other to prove their ability and increase their sales. This in most cases leads to high-quality products as well as lower prices. A person is free to pursue any kind of job or work that they enjoy.
How are they better than a country running by socialist governments?
There are various countries all over the world that do not have the facility of a free enterprise system. Such countries are completely operated by socialist governments. These types of governments directly handle their country’s economic as well as social affairs.
So, it means that they direct what type of work people living in the country have to do as well as limit the chance for most people to start businesses. Hence, these companies themselves limit the growth of their own nation by limiting the type of business that can be done as well as the things that a person can buy.
A free enterprise system is far better than this type of government. When summarized, it can be said that this kind of system provides lots of political as well as social independence to people. They do not provide any limitation to the kind of business that can be formed by people and provide them the complete freedom to do any kind of work as well as live the way they want to.
What are the benefits of a free enterprise system?
- Supply and demand – In such a system, the value of numerous goods as well as services are determined by the market. For example, in the case of particular goods like Gold that is scarce but have a high demand, then their price will be high. On the other hand, if a product is available in plenty and has a lower demand, then their price will be lower. Such a system will produce socially optimal prices as there is enough competition in the market.
- Incentives – A free enterprise system will be able to provide businessmen with huge incentives that will allow them to work hard as well as make successful businesses. This is due to the fact that the owner of a business is able to keep the whole money that they earn. So, the free enterprise system serves to provide people with a good social as well as political independence to people regarding business. With the incentive of earning a lot of money as well as using the money for other futuristic works, the business owners are motivated to start their own business.