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liberal market economy


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(LME)

is one of the main varieties of capitalism identified by Peter A. Hall and David Soskice. The prime example of a liberal market economy is the USA, but the label is also applied to the form of capitalist economy found in Australia, Britain, Canada, Ireland and New Zealand. In liberal market economies, the problem of coordination between firms and between firms and their financiers, employees, suppliers, and customers is solved through market mechanisms. LMEs are free market economies. They are also characterized by a relatively decentralized system of industrial relations, with collective bargaining taking place at enterprise or workplace level. Because of the dominance of the market, LMEs typically exhibit relatively short-term and adversarial relations between economic actors. In the field of human resource management, there is a tendency for firms to have a poor record in training and development and to have limited systems of employee participation and involvement. Where trade unions are present they are kept at arm's length and the relationship is adversarial, focused mainly on distributive wage bargaining. Although LMEs may be characterized by short-term and adversarial relations, they also possess a high capacity for innovation and economies of this kind secure comparative advantage by developing new products and new industries, particularly science-based industries such as biotechnology and computers.

Subjects: Human Resource Management.


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