What Would Happen Without Free Enterprise? (6 bad things)

If you’ve ever wondered what would happen without a free enterprise system, you have come to the right place.

That’s the purpose of this mini-tutorial, to explore what would happen in a government controlled economic system without free enterprise. 

What would happen without free enterprise?
A lot would change without a free enterprise system, including: 1) The retail environment (prices and quantity on clothes, food, cars, etc) would be controlled by the government, 2) There would be an increase in red tape and restrictions, 3) The government would drive transactions instead of the market, 4) There would be minimal innovation, 5) Profits would no longer be a motivation for success, 6) Government would control jobs and income.

A free enterprise economic system allows individuals to make decisions to run private, profitable businesses free from government constraints. Additionally, a free enterprise system allows individual ownership of businesses, properties, and means of production. 

But possibly the most important key feature of this economic system is that:  

Individuals have the right to make choices in purchasing goods, selling products, providing labor, and fully participating in business structures as they freely want to.

Let’s now explore what would happen without free enterprise.

6 Effects that Would Happen Without Free Enterprise

At its basic level, a free enterprise system is self-regulatory based on the forces of supply and demand. 

In fact, in a free enterprise economy, there's an old adage that provides an answer to all economic problems:

“The market will figure it out”

This can only be done in a free enterprise economy.  One in which there is minimal government control over how customers and businesses interact. 

The main trademark of this economic system is the absence of forced or coerced transactions and conditions. Consumers can literally choose what businesses they want to exchange value with, at any time.

That said, a lot would change without a free enterprise system which would then be called a command economic system. 

Here are nine possible scenarios of a command economic system:

1. The government would control the retail environment without a free enterprise system

The lack of a free enterprise economy would severely affect the retail world. 

The government would have primary control over many things, including the types of clothes that can be sold in stores, available jewelry, cars, electronics, and more. 

The government decides which stores are open, what the hours are, who is allowed to work in those stores, who the suppliers are, what the quality of the products are, and at what price points.

For food, grocery and restaurants, again, the government decides on what kind of food, how many restaurants, the number of types of food, the menus, the prices, the quality, the suppliers, the hours, who can work there. The consumers won’t choose from a variety and their choices would be limited.

2. There will be a lot of red tape and restrictions without a free enterprise system

As mentioned, a free enterprise economy has minimal government interference and bureaucracy. 

The lack of these red tapes and complicated rules significantly lowers the administrative costs faced by companies when manufacturing products or providing services.

Low manufacturing expenses mean that customers can access better products, and businesses can channel more money towards research and product development opportunities. 

That said, all these won’t be possible without a free market economy.

For starters, government restrictions will introduce strict rules and regulations, making it difficult for entrepreneurs to start businesses and innovate new solutions. 

Starting a company or providing services will also be costly.

3. The government is in charge of transactions without a free enterprise system

The customers in a free market economy are always in charge of transactions. 

While companies in a free enterprise economy can pursue profits in various ways, customers primarily determine whether a product succeeds or fails in the market. 

This is where the term, “The Customer is King” came from.

Basically, goods and services that aren’t profitable or not in demand receive little or no attention.

If there are two similar products in the market, customers decide which product best suits their needs, often voting out the lesser product. 

Consumers also ultimately determine the selling price of goods and services in a free market economy.

Unfortunately, the same can’t be said without a free enterprise system. 

Government interference would restrict the production of multiple similar products. Therefore, consumers would likely have limited or no alternatives. 

Customers also won’t have the leverage to determine the final prices of goods and services because that decision would already have been decided.

4. Restricted freedom of innovation without a free enterprise system

A free market provides unmatched freedom of innovation. 

A free market enables companies and businesses to imagine and bring new ideas to life. 

Continuous innovation avails multiple products with long-term value to customers. Entrepreneurs also don’t depend on the government to guide them in developing new products and services required by the public.

Businesses conduct market research to understand demand, trends, and basic needs to provide maximum value products. This creates good competition in the industry, allowing customers to choose what they spend on.

Unfortunately, without a free enterprise system, minimal competition in a market will not spur innovation. 

Businesses won’t focus on providing products with maximum value to consumers, because customers have limited options and businesses have no incentive to produce nor innovate.

5. Profits won’t be a motivation for success without a free enterprise system

The main goal of entrepreneurs and other players in a free enterprise economy is to generate profits. As such, businesses can easily sacrifice employee safety, disregard ethics, or compromise environmental standards because of minimal government control over their behavior. To most companies, the end justifies the means of survival of a business.

However, this isn’t the case with socialism and capitalism. Strict government control and tight regulations on various business practices mean companies won’t overlook important things for profits. These regulations eliminate monopoly, externalities, and monopsony.

6. Controlled jobs and income without a free enterprise system

Without a free enterprise economy, the government controls all jobs available in the economy and how much employees can earn. 

The government would control the hours people can work daily, weekly, monthly, and annually, and children may be forced to work. 

Community members also cannot start their businesses.

If all this sounds bleak, it should! Especially if you have lived in an economy that values free enterprise.

And if you are a marketing professional, free enterprise is literally in your veins.

And you are crucial to communicating value on behalf of the business you represent. 

Why are Entrepreneurs Essential to the Success of a Free Enterprise Economy?

A free enterprise economy typically consists of the business, the government, and the consumer, a.k.a., Household. 

Ideally, there must be a proper balance between the three.

• If the government is too big, business and households suffocate.
• If households get out of hand, there are not enough government and business services to support them.
• And if business gets too unwieldy, businesses can negatively take advantage of households.

Regardless of the balance between government, business and household, which in any economy is a constantly moving set of dynamics, free enterprise is by far superior. Innovating solutions and giving people choices is always better. 

And at the core of this free enterprise system are entrepreneurs.

Entrepreneurs are the catalyst of a free-market economy because they take risks to start new businesses and find answers by asking the right questions. 

While some entrepreneurs fail until they learn to succeed, countless millions of entrepreneurs provide excellent service to humanity, survive and thrive in any economy and many become wealthy through profits because of the service they provide.

Successful entrepreneurs attract and encourage others into the market, ultimately leading to the introduction of new products, increased competition, more products, better quality, and stable pricing.

The world is a better place because of entrepreneurs.

And if we can ever be of assistance, please ask. We are happy to help!