Which of the following public policies is best supported by the notion of free enterprise?

Entrepreneurs are good for the economy and employment. The government supports innovative startups and helps them grow.

Central government’s policy for entrepreneurs

The government's policy for entrepreneurs aims to:

• strengthen the Netherlands’ position as one of the world’s top five most competitive economies;
• increase spending on research and development to 2.5% of the gross domestic product (GDP) by 2020.

Supporting innovative enterprise

The government supports innovative enterprise in a number of ways:

Increasing scope for finance

The government has various financial schemes for:

• entrepreneurs wanting to expand their businesses quickly;
• innovative entrepreneurs.

Promoting cooperation between researchers and the private sector

The government is working with the private sector and knowledge institutions to improve public-private partnership.

Reducing the regulatory burden on entrepreneurs

The government is taking steps to reduce the regulatory burden on entrepreneurs. These include granting permits more quickly – or even automatically – and making greater use of digital technology.

Developing IT tools for entrepreneurs

Providing government services online reduces the regulatory burden on entrepreneurs. IT also offers unlimited scope for new products or for making business processes more efficient.

Helping entrepreneurs access networks

Good networks help businesses grow. The government is using the following tools to help entrepreneurs build solid networks:

• Trade missions abroad. By conducting trade missions abroad, the Netherlands can access new foreign markets. The focus here is on emerging markets like Brazil and India.
• Business.gov.nl: this is the government’s one-stop shop for entrepreneurs, where they can access services from a range of agencies, including the:
  •  ​Chamber of Commerce (KVK); 
  • Tax and Customs Administration;  
  • Netherlands Vehicle Authority (RDW);
  • Statistics Netherlands (CBS);
  • Netherlands Enterprise Agency;
  • Naturalisation Service (IND).

Better links between education and the labour market

The government also wants to establish better links between education and the labour market. It is important for young people who have finished their training to find a job quickly and for there to be enough skilled workers for companies.

Better cooperation with the franchise sector

The government and the franchise sector created a code of conduct. An independent disputes committee will also be established. These measures should improve cooperation in the sector and prevent issues like unfair distribution of income between the entrepreneur (franchisee) and the owner of the trading name (franchisor).

Retail Agenda

Customer behaviour and preferences are changing. More and more purchases are being made online. The government’s 2015 Retail Agenda describes these and other developments in the retail sector. It also lists the 20 agreements reached between the government and the retail sector. These include new ideas on combined zoning for shops, cultural establishments and hospitality businesses, and additional training for shop workers.

Documents

• Letter to Parliament about ambitious enterpreneurship

  Letter by Minister Kamp (Economic Affairs) to the House of Reprensentatives about the policy for ambitious enterpreneurship.

  Parliamentary document | 28-07-2014

• Ambitious enterpreneurship in practice

  The Netherlands already has inspirational examples of ambitious entrepreneurship. Companies such as Tomtom, Ampelman, NXP and ...

  Leaflet | 28-07-2014

What Is Free Enterprise?

Free enterprise, or the free market, refers to an economy where the market determines prices, products, and services rather than the government. Businesses and services are free of government control. Alternatively, free enterprise could refer to an ideological or legal system whereby commercial activities are primarily regulated through private measures.

Free Enterprise

Free Enterprise as Law and Economics

In principle and in practice, free markets are defined by private property rights, voluntary contracts, and competitive bidding for goods and services in the marketplace. This framework is in contrast to public ownership of property, coercive activity, and fixed or controlled distribution of goods and services.

In Western countries, free enterprise is associated with laissez-faire capitalism and philosophical libertarianism. However, free enterprise is distinct from capitalism. Capitalism refers to a method by which scarce resources are produced and distributed. Free enterprise refers to a set of legal rules regarding commercial interaction.

Another definition of free enterprise is in terms of economics and was offered by the Nobel-winning economist Friedrich Hayek. Hayek described such systems as "spontaneous order." Hayek's point was that free enterprise is not unplanned or unregulated; rather, planning and regulation arise from the coordination of decentralized knowledge among innumerable specialists, not bureaucrats.

Key Takeaways

• Free enterprise refers to business activities that are not regulated by the government but are defined by a set of legal rules such as property rights, contracts, and competitive bidding.
• The argument for free enterprise is based on the belief that government interference in business and the economy hampers growth.
• A free enterprise legal system tends to result in capitalism.

The Origins of Free Enterprise

The first written intellectual reference to free enterprise systems may have emerged in China in the fourth or fifth century B.C., when Laozi, or Lao-tzu, argued that governments hampered growth and happiness by interfering with individuals.

Legal codes resembling free enterprise systems were not common until much later. The original home of contemporary free markets was England between the 16th and 18th centuries. This growth coincided with, and probably contributed to the first industrial revolution and birth of modern capitalism. At one time, the English legal code was completely free of international trade barriers, tariffs, barriers to entry in most industries, and limitations on private business contracts.

The United States also used a largely free-market legal approach during the 18th and 19th centuries. In modern times, however, both the United States and the United Kingdom are better classified as mixed economies. Countries such as Singapore, Hong Kong, and Switzerland are more reflective of free enterprise.

Real-World Example

In the absence of central planning, a free enterprise legal system tends to produce capitalism although it is possible that voluntary socialism or even agrarianism could result. In capitalist economic systems, such as that of the United States, consumers and producers individually determine which goods and services to produce and which to purchase. Contracts are voluntarily entered into and may even be enforced privately; for example, by civil courts. Competitive bidding determines market prices.

The U.S. economic system of free enterprise has five main principles: the freedom for individuals to choose businesses, the right to private property, profits as an incentive, competition, and consumer sovereignty.

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