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OPEN MARKET

Definition of an open market

Nowadays many countries have an economic system called an open market. An open market is a form of an economic system without barriers for people, products, travellers and students. A market is a system where people can sell and buy legal things. Everyone can participate and there are no restrictive licensing requirements, even though there are some common standards which have to be respected. For example, there is also an absence of taxes and custom duties, subsidies and tariffs. Because of the fact that everyone is able to participate, there is a lot of competition. Lower costs are the consequences of this. A country with an open market is able to import and export easily, due to a more fair internal competition.

An open market economy is almost the same as an open market. However, an open market economy¹ only applies to goods.

Advantages and disadvantages of an open market system

An open market comes with advantages and disadvantages.

Some important advantages are collaboration, competition and more available jobs. An open market causes more people to exchange goods and services, which leads to more collaboration. An open trade also leads to more competition. Because of competition, companies try to make products with the best quality for the lowest price. That’s stimulating the economy

More jobs will be created when an open market system is used. The economy will be stimulated and more jobs will be needed.

Of course there will also be a few disadvantages. A few examples are market failures, merit goods and expressive firm power. Market failures can spin out of control. For example, The great depression of the 1930s or The real market crash of 2008. These market failures can change the lives of millions of people. Merit goods are goods and services that are not profitable. Therefore, they will not be produced. The last disadvantage² is expressive firm power. This means that large companies can dominate smaller companies.

The open market in EU

The open market, or the single market as it’s called, creates fundament for the EU and makes it possible for everything to work. The single market involves the four freedoms. The four freedoms are the essence of EU and it’s what makes people feel like a part of a bigger community. The four freedoms are the movement of goods, services, capital and people. The freedoms are made to create a harmony between the countries and aim to remove trade barriers³.

The Four Freedoms

The free movement of goods is made to remove any trade barriers, so that everyone living in EU doesn't have to pay customs when buying products from other European countries. Freedom of services provides EU companies to establish services in other countries and right now 70% of economic activity is created that way. Therefore it’s a very important factor when it comes to the single market.

Free services allow people to “use money abroad”. That means that people living in a country of the EU are able to open bank accounts, buying shares in companies and purchasing real estate in foreign countries.

The last freedom and most controversial one of the four is the free movement of people. It makes people able to live, work and study in other countries of the European Union.

In conclusion an open market and open market economy have no government intervention or limitation. Furthermore an open market economy is only focussed on products, whereas an open market is focussed on several other things. The freedom of movement is controversial. Some countries are proponents and some are opponents. Countries like the USA and the UK think their own economy is better than an open market economy. This can cause disagreements.