The economy is complex when there appears to be contradiction in applying approaches to manage it and ensure stability and prosperity for the common people. A controlled market is similar, providing limited freedom for both consumers and producers. A natural fact is that limiting something causes burdens and difficulty in living with it.
It is another phenomenon in the world. Ask any economist why fluctuations occur, and you’ll get a series of responses that lead to more confusion than clarity and accuracy. Some of them will tell you that crises are the inevitable consequence of government meddling in markets; others will maintain they occur because the government didn’t meddle enough to ensure price stability and achieve satisfactory economic growth.
The same contradictions can emerge if you ask economists what to do once a crisis has hit. Some will maintain that government must intervene, becoming a lender of last resort and providing a massive fiscal management in order to counter the plunge in private demand. Others will dismiss that approach as laughable, arguing that government must never intervene in the machinery of the market. Doing so, they insist, will only prolong the hangover from the crisis and will lead to a dangerous accumulation of public debt.
In the world economies, free market economic approaches emphasize minimal government intervention in the economy, allowing supply and demand to drive growth, pricing, and distribution of goods and services. These approaches have been influential globally, shaping policies that prioritize privatization, deregulation, and trade liberalization. In Pakistan, specifically, the application of free-market principles has been met with mixed results due to various socio-economic challenges.
Despite these reforms, nation’s journey towards a fully free market economy has faced significant hurdles. Structural issues such as corruption, bureaucratic hurdles, political instability, and a weak legal framework have hindered the effectiveness of market-oriented policies. Additionally, other sectors including agricultural sector, which employs a portion of the population, remains heavily subsidized and regulated, limiting the scope of market forces.
Critics argue that the free market approach in the world has often exacerbated income inequality, as benefits have disproportionately favored the urban elite and large corporations, while the rural poor and small businesses have struggled. The lack of robust social safety nets further exacerbates these disparities. This critique might be acknowledged to some extent if free approaches are fully applied, the mentioned issues would be abolished with the economic expansion.
In recent years, many counties including Pakistan (my country) have continued to pursue market-friendly policies, including reducing tariffs, promoting foreign direct investment, and improving the ease of doing business. However, challenges remain, particularly in addressing the needs of the vulnerable populations and ensuring that economic growth is inclusive.
The free market economic approach in Pakistan has led to some positive outcomes, such as increased efficiency and economic growth. However, the journey is far from complete, and the government must address the structural challenges and ensure that the benefits of the free market reach all segments of society. Balancing market freedom with social equity remains a crucial task for other nations, as do Pakistan’s economic policymakers.
In practice, most economies operate with a blend of both approaches, tailoring the level of government intervention to their specific economic, social, and political contexts. The key to successful economic policy lies in finding the right balance—leveraging the strengths of the free market to drive growth while ensuring that government intervention addresses market shortcomings and promotes social equity. Ultimately, the choice between free and non-free market approaches depends on a nation’s goals, challenges, and values, with the most effective strategies often involving a pragmatic mix of both.
