Market-based policies: let markets allocate, with less state control.
Three market-based policies
| Policy | What it means | How it should help |
|---|---|---|
| Trade liberalisation | Cutting tariffs and quotas | Competition, cheaper inputs, bigger markets |
| Privatisation | Selling state firms to private owners | The profit motive cuts costs |
| Deregulation | Removing rules that block competition | New firms enter; prices fall |
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Every Paper 1 essay on them asks you to weigh both sides.
Strengths
- More competition: lower costs and prices, more choice.
- Efficiency raises potential output: LRAS shifts right.
- No cost to the budget; sales of state firms raise money.
- India's growth rose after it opened its economy in 1991.
Limits
- Markets under-provide schools, health care and public goods.
- Gains go to some: inequality and poverty can rise.
- A private monopoly may raise prices: Bolivia's water sale in 2000 led to protests.
- New firms take years to grow, and pollution may rise.
The points to remember
- Growth may rise, but ask: does development follow?
- Compare with interventionist policies (4.10.3).
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Paper 1 asked this in May 2026, as part (b) for 15 marks.
Using real-world examples, evaluate the effectiveness of market-based policies in promoting economic growth and economic development.
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How the 15 marks are given
| Marks | What your answer needs |
|---|---|
| 13–15 | Theory fully explained, terms right all the way through, balanced evaluation, real examples fully developed to support the argument |
| 10–12 | Theory explained, terms mostly right, evaluation mostly balanced, real examples developed |
| 7–9 | Theory partly explained, some evaluation but one-sided, examples partly developed |
| 4–6 | Theory only described, evaluation superficial, examples only named |
| 1–3 | Theory stated but not relevant, no evaluation |