The Five Characteristics of Free Enterprise

It isn’t exactly capitalism, but it’s close. Free enterprise is controlled by supply and demand. It is unrestrained by excessive controls and regulations doled out by a government. The characteristics of a free enterprise economy can be explained with five main features. Each characteristic contributes significantly to the strength of the market, which means that each can contribute to the downfall of an otherwise robust free enterprise.

Features of Free Enterprise

Individuals in a capitalist or free enterprise society provide products or work for corporations or businesses that create products for individuals to purchase. The individuals buy various products to make profits for the companies or individually owned businesses. When products are bought and sold without interference from a government entity through regulation or another form of control, the individuals and companies are operating in a free market. When capitalism, which requires some form of government intervention through regulation, taxes or other involvement, and a free market coexist, it is labeled a free market enterprise.

If any of the five parts of the free enterprise system oversteps the accepted boundaries of the expected duties or fails to meet the requirements to operate successfully, it can tear down a free enterprise society. A main point of a vigorous and successful free enterprise is the right of individuals to make their own choices in the purchase and selling of labor, goods or products and their major contributions to the business structure. A free enterprise system allows for the right of individual ownership of property and the means by which an individual creates a product.

What Is Economic Freedom?

More than just being able to purchase what you want, when you want and basically how you prefer, economic freedom means you have a choice in every aspect of the free enterprise system. Your career choice, choice of employer and desired location for work or raising your children is completely up to you. Businesses are allowed to hire the employees they wish and produce products to sell in the way they deem will be most profitable to the business as well as the workers. Prices are set based on what the consumers as a whole are willing to pay rather than what the government or a corporation can mandate. The difference between capitalism and free enterprise is that the latter has a set of legal rules that control commercial interaction, while the former produces and distributes with fewer resources.

Business and Corporate Roles in Free Enterprise

A user-owner business supports individuals to work with its other team members. The business provides economic benefits to its team members. A corporate characteristic of free enterprise is profit incentive. Its main goal is to gain capital for a cooperative or for investors as well as maintain employee relationships and produce a quality product to further increase its value as it grows.

Free Enterprise Market

A free enterprise is also known as a free market. Three characteristics of the free enterprise system are consumer spending, government purchases and business investments. All are part of a vigorous free enterprise economy. Each plays an important part, with consumers playing the main role as the largest group in the free enterprise market. They push a large portion of the country’s economic growth and can pull back on spending or set market prices with demand.

Advantages and Disadvantages of Free Enterprise

The features of free enterprise include consumers' wants, which drive cost and lead to more research and development without regulations from government and lead to innovation of systems and products to reduce costs. However, this can lead to poor quality of production or a final product if profit incentive is the main goal of a business. Services or goods that don’t benefit a company will be slow in production, leading to the loss of free transportation, medical care and other services for those who can’t otherwise afford it. The largest corporations will have the most control in a free enterprise, which can lead to corruption and exploitation.